2003 (6) TMI 89 - AT - Customs

Show cause notice - Confiscation - Demand - Export obligation not fulfilled - HELD THAT - We observe that here is a case where the appellants have come out truthfully as to how they were disabled from fulfilling the export obligations and they have not hidden anything from the Department. They have also stated that in view of the cut throat competition in the market, they had to resort to undertaking job work for the companies such as Philips, Bajaj, Anchor etc. There is no allegation in the show cause notice that the appellants have intentionally sought to avail of the benefit of Notification No. 169/90, dated 3-5-90. In the backdrop of the facts and circumstances, as narrated above, now we proceed to answer the various questions posed before us. Whether Show cause notice was issued in time and confiscation of the goods was in order - In view of the fact that in the instant case, admittedly, the show cause notice has not been served on the appellants within the six months, the confiscation of the goods is not legal and proper and so also the demand of redemption fine. We, therefore, set aside the order of confiscation of the goods and demand of redemption fine. Whether duty of Rs. 3,05,11,954 with interest @ 24% from the date of import is demandable or not and whether imposition of penalty is warranted or not - In the present case the Notification involved is 169/90-Cus. dated 3-5-90. We have gone through the Notification and we find that there is no stipulation in the Notification in regard to payment of interest along with duty. Para (b) (ii) of the said Notification prescribes that the importer shall make declaration before the Assistant Commissioner binding himself to pay on demand an amount equal to the duty leviable on such capital goods but for the exemption contained therein. Therefore, in the absence of any provision in the Notification regarding recovery of interest, the Revenue authorities cannot demand interest. Thus, we set aside the order of demand of interest. In view of the fact that we have set aside the order of confiscation of the goods imported, we hold that there is no warrant for imposition of penalty in this case and we set aside the order of imposition of penalty. Whether Bank Guarantee can be enforced by the Customs - The appellants were fully aware of the commitments undertaken by them while obtaining the licence and having breached the same, they cannot clothe themselves with their plea that their Unit has been declared as a Sick Unit. In any case, the appellant cannot be extricated from the duty liability which has arisen and for which they had executed Bank guarantee. Therefore, we are of the considered opinion that the Commissioner was right in proceeding against the appellants under the Customs Act. In any case the thrust of the plea of the appellants vide para 6 of the grounds of appeal was that the order of confiscation of the capital goods was not legal. We have held above that the order of confiscation of the goods was not legal and proper and we have set aside the order of confiscation of the goods. The appeal is thus disposed in the above terms.

Issues Involved:
1. Timeliness of the show cause notice and legality of confiscation of goods.
2. Demand for duty and interest, and imposition of penalty.
3. Enforcement of the Bank Guarantee by Customs.
4. Requirement of BIFR consent before initiating proceedings under the Customs Act.

Detailed Analysis:

(i) Timeliness of the Show Cause Notice and Legality of Confiscation of Goods:
The primary issue was whether the show cause notice was issued within the statutory time limit. The goods were seized on 6-10-98, and the show cause notice was dated 1-4-1999 but dispatched only on 15-4-1999, received by the appellants on 21-4-1999. According to the judgment of the Hon'ble High Court of Allahabad in the case of Overseas Paints Linkers v. UOI, "given" means service of the notice, not mere issuance. Consequently, the show cause notice was deemed untimely, making the confiscation of goods and the demand for redemption fine illegal. The Tribunal relied on the Supreme Court's decision in Chaganlal Gainmull v. CCE, which states that if the show cause notice is not issued within six months from the date of seizure, the person from whom the goods were seized is entitled to their return, negating the possibility of confiscation.

(ii) Demand for Duty and Interest, and Imposition of Penalty:
The appellants failed to fulfill the export obligations stipulated in their EPCG licenses, thus making the duty demand of Rs. 3,05,11,954 valid. However, the demand for interest at 24% from the date of import was contested. The Tribunal referenced the case of FAL Industries v. CC, Chennai, which held that interest is not demandable in the absence of statutory provisions in the relevant notification. Notification No. 169/90 did not stipulate interest payment, leading the Tribunal to set aside the demand for interest. As confiscation of goods was deemed illegal, the imposition of a penalty was also unwarranted and thus set aside.

(iii) Enforcement of the Bank Guarantee by Customs:
The appellants argued that the DGFT, not the Commissioner of Customs, was the proper authority to enforce the Bank Guarantee. However, the Tribunal held that since the Bank Guarantees were furnished towards Customs duty in case of failure to meet export obligations, and Customs duties are collected by Customs authorities, the Commissioner of Customs was correct in enforcing the Bank Guarantees.

(iv) Requirement of BIFR Consent Before Initiating Proceedings:
The appellants contended that the Commissioner needed BIFR consent before initiating proceedings under the Customs Act, citing the Supreme Court's decision in Tata Davy Ltd. v. State of Orissa. The Tribunal noted that while the cited case involved the recovery of state sales tax arrears, the present case involved Customs duty due to the breach of EPCG license conditions. The Tribunal concluded that the Commissioner of Customs was right to proceed under the Customs Act without BIFR consent, as the facts and circumstances differed significantly. However, since the confiscation of goods was already set aside, this issue did not affect the final outcome.

Conclusion:
The appeal was disposed of with the following conclusions:
1. The confiscation of goods and the demand for redemption fine were set aside due to the untimely show cause notice.
2. The demand for duty was upheld, but the demand for interest was set aside.
3. The enforcement of the Bank Guarantees by the Commissioner of Customs was upheld.
4. The Commissioner of Customs did not need BIFR consent to initiate proceedings under the Customs Act, but the confiscation order was still set aside.

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