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2019 (8) TMI 336 - AT - CustomsProject imports - Levy of interest for duty foregone - failure to fulfil the export obligation - classification of imported machinery - whether classified under heading 9801 of First Schedule to Customs Tariff Act, 1975 or otherwise - HELD THAT - It cannot be disputed that the EXIM policy pertaining to the scheme did provide for furnishing of an undertaking on the part of the importer/licensee to commit themselves to payment of interest in addition to the duty foregone at the time of import in the event of failure to fulfil the obligation - The divergence between the notification and the Policy on the consequences of failure to fulfil the export obligation was held to favour the implementation of the former but such is not the issue in the present circumstances owing to there being no incongruity. Confiscation of goods - HELD THAT - A plethora of decisions of the Tribunal have held that the notifications issued in pursuance of the EXIM Policy, having provided for the alternative of payment of duty in the event of failure to fulfil the export obligation, renders the discharge of either of these option to be sufficient compliance with the condition to be fulfilled in the relevant notification issued under Customs Act, 1962, thus eliminating the scope for invoking section 111(o) of Customs Act, 1962 to confiscate the imported goods. Section 111(o) of Customs Act, 1962 empowers confiscation for non-fulfilment of post-importation conditions which have not been regularised by the appropriate authority - With the recovery of duty, the requirement to comply with the post-importation condition does not exist. Consequently, the imports stand regularised and section 111(o) of Customs Act, 1962 becomes inapplicable. With negation of section 111(o) of Customs Act, 1962, the imposition of penalty is not sustainable - Confiscation and penalty set aside. The recovery of differential duty and charging of interest in the impugned order are sustained and the order modified to set aside the confiscation and penalty - Appeal allowed in part.
Issues Involved:
1. Confiscation of goods under Section 111(o) of the Customs Act, 1962. 2. Imposition of penalty on the appellant. 3. Chargeability of interest on the differential duty. Issue-wise Detailed Analysis: 1. Confiscation of Goods under Section 111(o) of the Customs Act, 1962: The appellant challenged the confiscation of goods valued at ?10,65,42,915/- under Section 111(o) of the Customs Act, 1962. The goods were initially imported under the 'Export Promotion Capital Goods' (EPCG) scheme, which required fulfillment of export obligations by December 1997. The appellant failed to meet these obligations. The Tribunal referenced the decision in *Sanghi Industries Ltd* which stated that failure to meet conditions of importation leads to confiscation under Section 111(o). However, the Tribunal also considered the precedent set in *Philips (India) Ltd*, which held that recovery of duty for failure to meet export obligations regularizes the import, making Section 111(o) inapplicable. Consequently, the Tribunal concluded that with the recovery of duty, the requirement to comply with post-importation conditions does not exist, thus setting aside the confiscation. 2. Imposition of Penalty on the Appellant: The penalty of ?10,00,000/- was imposed on the appellant for failure to fulfill the export obligation under the EPCG scheme. The Tribunal, while considering the penalty, referenced *Sanghi Industries Ltd*, which justified penalty imposition for non-fulfillment of import conditions. However, the Tribunal also considered the decision in *Philips (India) Ltd*, which negated penalty imposition once the duty is recovered, as the import stands regularized. Therefore, the Tribunal set aside the penalty imposed on the appellant. 3. Chargeability of Interest on the Differential Duty: The appellant contended that the demand for interest was unenforceable due to the absence of a specific provision in the Customs Act, 1962, or the relevant notification. The Tribunal examined various decisions, including *Philips (India) Ltd* and *VBC Industries Ltd*, which supported the appellant’s view that interest cannot be charged without statutory provision. However, the Tribunal also considered the legal undertakings under the EXIM policy, which contractually bound the appellant to pay interest in case of failure to fulfill the export obligation. The Tribunal cited *Sanghi Industries Ltd* and *Rai Agro Industries Ltd*, which upheld the chargeability of interest based on such undertakings. The Tribunal concluded that interest is leviable on the delayed payment of duty or recovery of duty by invoking the Customs Act, 1962, due to the contractual obligation under the EXIM policy. Thus, the Tribunal sustained the chargeability of interest on the differential duty. Conclusion: The Tribunal upheld the recovery of differential duty and the chargeability of interest, while setting aside the confiscation of goods and the penalty imposed on the appellant. The decision emphasized the importance of fulfilling contractual obligations under the EXIM policy and clarified the applicability of Section 111(o) of the Customs Act, 1962, in cases of duty recovery.
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