2018 (7) TMI 1604 - AT - Customs

Penalties u/s 112 (a) of the Customs Act, 1962 - EPCG Scheme - destruction of the material obtained by the appellant against the provisions of EPCG scheme, which was subsequently converted into 100% EOU - Held that - It is a fact that Ld. Adjudicating Authority has ignored the decision taken by the High Powered Committee/Grievance Committee which was subsequently converted into 100% EOU to fulfill the export of the finished goods with the value addition and acting upon that permission was granted for the destruction of the old and obsolete machinery - It has also been clarified by the CBEC Circular No. 21/95-CUS dated 10.3.1995 that the adjudicating authority should proceed in conformity with the clarification issued by the Development Commissioner under Ministry of Commerce. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Confirmation of demand under Section 28 of the Customs Act, 1962.
2. Destruction of material obtained by the appellant against the provisions of EPCG scheme.
3. Ignoring permission granted by the High Powered Grievance Committee.
4. Compliance with CBEC circular No. 21/95-CUS dated 10.3.1995.
5. Primacy of decision by Development Commissioner under Exim policy.

Confirmation of Demand under Section 28:
The appellant appealed against the confirmed demand of ?1,12,02,659 under Section 28 of the Customs Act, 1962. The Ld. Adjudicating Authority imposed a penalty of ?10.00 Lacs on the appellant under the provisions of Section 112 (a) of the Customs Act, 1962 along with applicable interest. The issue revolved around the destruction of material obtained by the appellant against the provisions of the EPCG scheme, subsequently converted into 100% EOU. Despite permission granted by the High Powered Grievance Committee for scrapping obsolete machinery, the Adjudicating Authority confirmed the demand, leading to the appeal.

Destruction of Material and Ignoring Permission:
The core issue was the destruction of material obtained by the appellant against EPCG scheme provisions, later converted into 100% EOU. The High Powered Grievance Committee permitted the scrapping of obsolete machinery to fulfill obligations. However, the Adjudicating Authority disregarded this permission and confirmed the demand. The appellant argued that the decision should align with the CBEC circular No. 21/95-CUS, requiring reference to the Development Commissioner in such cases. The appellant cited relevant case laws emphasizing the need for Development Commissioner's consent before confirming demands in such situations.

Compliance with CBEC Circular and Development Commissioner's Decision:
The Ld. Advocate for the appellant highlighted the importance of the Development Commissioner's decision having primacy in policy matters under the Exim policy. Citing various judgments, including Ginni International Ltd., it was emphasized that Customs authorities must not contradict the Development Commissioner's orders. The Tribunal agreed that the Adjudicating Authority overlooked the High Powered Committee's decision and the permission granted for machinery destruction. Referring to CBEC Circular No. 21/95-CUS, the Tribunal stressed the need for adjudication in line with the Development Commissioner's clarifications.

Primacy of Development Commissioner's Decision:
The Tribunal acknowledged the significance of the Development Commissioner's decision in policy matters under the Exim policy. Upholding the appellant's arguments and considering the permissions granted, the Tribunal set aside the impugned order. It was emphasized that the Adjudicating Authority should adhere to the clarifications issued by the Development Commissioner under the Ministry of Commerce. The Tribunal allowed the appeal, emphasizing the importance of aligning decisions with the permissions granted by relevant authorities.

This comprehensive analysis covers the issues involved in the legal judgment, detailing the core arguments, relevant legal provisions, and the Tribunal's decision in each aspect of the case.