2019 (10) TMI 1114 - AT - Customs

100% EOU - Demand of Interest - principles of of promissory estoppel - Benefit of N/N. 52/2003-Cus denied - duty short/ not paid by the Appellants demanded alongwith the interest - Section 28 of the Customs Act, 1962 - case of appellant is that once they had been allowed registration as EOU, and clearance of the goods by allowing the exemption under Notification No 52/2003- Cus, the demand made under Section 28 and demand of interest under Section28AA/ 28AB will be hit by the principles of promissory estoppel. HELD THAT - Hon ble Supreme Court in the cases of ELSON MACHINES PVT. LTD. VERSUS COLLECTOR OF CENTRAL EXCISE 1988 (11) TMI 107 - SUPREME COURT , PLASMAC MACHINE MFG. CO. PVT. LTD. VERSUS COLLECTOR OF CENTRAL EXCISE 1990 (11) TMI 142 - SUPREME COURT and in COMMISSIONER OF CUSTOMS, CALCUTTA VERSUS INDIAN RAYON INDUSTRIES LTD. 2008 (7) TMI 401 - SUPREME COURT has constantly held that there is no estoppel against the operation of law. In view of the specific provisions Section 28 of Customs Act, 1962, providing for the demand of duty short/ not paid at the time when the same was due, we are not in agreement with the submissions made by the appellant by invoking the principle of promissory estoppel. It is also settled law that in case of exemption, it is responsibility of the person claiming the exemption to satisfy that the said exemption is available to him - demand of interest upheld. Permitting the debit of the duty demanded in cash from SFIS Scrips - HELD THAT - It is not in dispute that during the relevant period when the imports were made such debits from the SFIS Script was not permitted. Had the appellants claimed the duty exemption against the EPCG Licenses issued to them in 2005, at the time of import, they would have paid duty @ 5.1% in cash. Now when the benefit of inadmissible exemption has been denied to them, and as special measure benefit of debit against EPCG license has been allowed by the EPCG Committee against the licenses issued in 2005, appellants could not be placed in better position then what they would have been in if they had cleared these goods against these license - there are no infirmity in the order of Commissioner denying the debit from SFIS Scrip/ License specifically for the reason that no one should be allowed to take benefit of his own wrongs. Appeal dismissed - decided against the appellant.

Issues Involved:
1. Cancellation of EOU Registration.
2. Cancellation of Customs Bonded Warehousing License.
3. Demand of Duty under Section 28 of the Customs Act, 1962.
4. Utilization of EPCG Licenses for Duty Payment.
5. Demand of Interest under Sections 28AA and 28AB.
6. Permitting Debit from SFIS Scrips.

Issue-wise Detailed Analysis:

1. Cancellation of EOU Registration:
The Commissioner of Customs cancelled the EOU registration of the appellant ab-initio based on the finding that the imports made by the appellant were not exempt under Notification No 52/2003-Cus dated 31.03.2003. The notification excluded goods imported by a service sector export-oriented undertaking that does not directly export services out of India. The Board of Approval (BoA) had already cancelled the EOU status ab-initio on 13.11.2007. Consequently, the customs bonding license issued for in-bond port handling services also stood cancelled ab-initio.

2. Cancellation of Customs Bonded Warehousing License:
The Customs Bonded Warehousing License issued under Section 58 of the Customs Act, 1962, was also cancelled ab-initio. This cancellation was interlinked with the EOU registration, as the license was issued for permitting in-bond port handling services under the EOU scheme. The customs bonding license did not have an independent existence and became null and void following the ab-initio cancellation of the EOU status.

3. Demand of Duty under Section 28 of the Customs Act, 1962:
The Commissioner confirmed the demand of duty amounting to ?78,81,61,176/-, ?3,59,418/-, and ?1,28,025/- under Section 28 of the Customs Act, 1962, along with applicable interest under Section 28AB (Section 28AA w.e.f. 08.04.2011) on the appellant in respect of the three Show Cause Notices (SCNs) dated 02.11.2006, 22.01.2007, and 29.01.2007. The duty was demanded because the appellant was not eligible for the exemption under Notification No 52/2003-Cus.

4. Utilization of EPCG Licenses for Duty Payment:
The EPCG Committee's decision dated 19.09.2014 allowed the appellant to debit the duty demanded against the various EPCG Licenses issued in 2005. The Commissioner permitted the debit of ?67,91,49,875/- against EPCG licenses and required the remaining duty of ?10,94,98,744/- to be paid in cash. The appellant's request to debit the duty against the SFIS licenses was rejected.

5. Demand of Interest under Sections 28AA and 28AB:
The Commissioner demanded interest on the duty short/not paid under Sections 28AA and 28AB of the Customs Act, 1962. The appellant contested the demand of interest by invoking the principle of promissory estoppel, arguing that they acted in good faith based on the EOU registration and the exemption granted under Notification No 52/2003-Cus. However, the Tribunal referred to the Hon'ble Bombay High Court's decision in Valecha Engineering Ltd [2010 (249) ELT 167 (Bom)], which held that interest is compensatory for the failure to pay duty on the due date and is not penal in character. The Tribunal also cited the Supreme Court's rulings that there is no estoppel against the operation of law.

6. Permitting Debit from SFIS Scrips:
The Tribunal upheld the Commissioner's decision to deny the appellant's request to debit the duty from SFIS Scrips. During the relevant period, such debits were not permitted. The Tribunal reasoned that allowing the appellant to debit duty from SFIS Scrips would place them in a better position than if they had cleared the goods against the EPCG licenses at the time of import, which required duty payment in cash. The Tribunal emphasized that no one should be allowed to benefit from their own wrongs.

Conclusion:
The Tribunal dismissed the appeal, finding no merit in the appellant's arguments. The orders of the Commissioner were upheld, including the cancellation of EOU registration and Customs Bonded Warehousing License, the demand of duty and interest, and the denial of duty debit from SFIS Scrips. The Tribunal concluded that the appellant was liable to pay the duty and interest as adjudicated under Section 28 of the Customs Act, 1962.

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