2019 (5) TMI 721 - AT - Customs

Duty Drawback - re-export of goods - rejection on the ground that the duty on the imported goods along with interest has not been paid - HELD THAT - The appellant has already made payment of redemption fine and penalty and is requesting for re-export of the goods. Even if the Appellant is made to make payment of duty on such imported goods but he is eligible for drawback of 98% of the duty payable on the importation of the goods in terms of Section 74 of the Customs Act. The facts of importation of goods due to awarding of contract by ONGC and cancellation of same which led to seizure of goods is not in dispute. It is not a deliberate intention case of non payment of duty on imported goods and the Appellant after payment of redemption fine and penalty has option either to pay duty if he wants to keep the goods in India or to re-export the same - In case of re-export for which he is eligible, the net effect of duty payable by him would be 2% i.e. difference between the duty payable and drawback amount under Section 74 of the Customs Act. It is also clear that he is eligible for 98% duty drawback of the duty paid by them. The Hon ble Bombay High Court in case of CIPLA LIMITED VERSUS UNION OF INDIA 1995 (6) TMI 23 - HIGH COURT OF JUDICATURE AT BOMBAY has allowed the assessee to re-export the goods on payment of differential duty of 2% after adjusting the drawback of 98% of duty admissible to them in terms of Section 74 of the Customs Act, 1962. The impugned order is not sustainable and the appellants are allowed to re-export the impugned imported goods on payment of 2% differential duty, which shall be adjusted against the pre-deposit of 7.5% which was made by them as mandatory pre-deposit while filing the appeal before the Tribunal against the OIO dated 23.11.2016 - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Denial of re-export of goods due to non-payment of duty.
2. Eligibility for duty drawback under Section 74 of the Customs Act.
3. Adjustment of pre-deposit against differential duty.
4. Liability for interest on duty payable under Section 125(2) of the Customs Act.

Issue-wise Detailed Analysis:

1. Denial of Re-export of Goods Due to Non-payment of Duty:
The appellant's application for re-export of goods was denied by the Commissioner of Customs (Preventive) on the grounds that the duty on the imported goods, along with interest, had not been paid. The appellant had imported a Mobile Offshore Drilling Rig and spare parts under an exemption, which was later seized and confiscated due to non-use following the termination of a contract by ONGC Ltd. Despite paying the redemption fine and penalty, the request for re-export was denied, leading to the present appeal.

2. Eligibility for Duty Drawback under Section 74 of the Customs Act:
The Tribunal found that the appellant is eligible for a 98% duty drawback on the imported goods under Section 74 of the Customs Act since the goods were not used and are being re-exported. The Tribunal referenced the Bombay High Court's decision in Cipla Ltd., which allowed re-export on payment of a 2% differential duty after adjusting the 98% duty drawback. The Tribunal upheld that the appellant's case was similar and thus eligible for the same treatment.

3. Adjustment of Pre-deposit Against Differential Duty:
The appellant argued that they had deposited 7.5% of the total duty as a mandatory pre-deposit while filing an appeal against the order dated 23.11.2016. The Tribunal agreed that since the goods are being re-exported, the 2% differential duty payable should be adjusted against the pre-deposit made by the appellant. This adjustment aligns with the provisions under Section 74 of the Customs Act.

4. Liability for Interest on Duty Payable under Section 125(2) of the Customs Act:
The appellant contended that interest should not be payable as the duty demand was not confirmed under Section 28 but under Section 125(2) of the Customs Act. The Tribunal cited the case of Armaity S. Patel, which held that no interest is payable when duty is demanded under Section 125(2). Consequently, the Tribunal ruled that the appellant is not liable for interest on the duty payable.

Conclusion:
The Tribunal set aside the impugned order, allowing the appellant to re-export the imported goods on payment of 2% differential duty, which would be adjusted against the pre-deposit made. The appellant was also relieved from paying interest on the duty, as the demand was not under Section 28. The appeal was allowed with consequential reliefs, and the matter was disposed of accordingly.