2003 (3) TMI 218 - AT - Customs

Issues Involved:
1. Confiscation of textile machinery under Section 111(o) of the Customs Act, 1962.
2. Duty demand under Section 28 of the Customs Act, 1962.
3. Recovery of interest under Section 28AA of the Customs Act, 1962.
4. Imposition of penalty under Section 112(a) of the Customs Act, 1962.
5. Validity of conversion of Zero Duty EPCG licence to 15% duty licence.
6. Applicability of interest waiver by DGFT.

Detailed Analysis:

1. Confiscation of Textile Machinery:
The Commissioner confiscated the textile machinery imported by the appellants under Section 111(o) of the Customs Act, 1962, with an option to redeem the same on payment of a fine of Rs. 20,00,000/-. The machinery was imported under a Zero Duty EPCG licence but did not meet the threshold value of Rs. 20 crores as stipulated in Customs Notification No. 111/95.

2. Duty Demand:
The Commissioner confirmed a duty demand of Rs. 1,27,11,468/- under Section 28 of the Customs Act, 1962. The appellants had imported machinery worth Rs. 8,41,06,842/- at a nil rate of duty, but the import was in violation of the Zero duty EPCG licence and the stipulated conditions.

3. Recovery of Interest:
The Commissioner ordered the recovery of interest at the rate of 24% on the amount of duty foregone under Section 28AA of the Customs Act, effective from 7-3-1996. The appellants had failed to import goods of the minimum value of Rs. 20 crores within the validity period of the licence, thus violating the conditions of the Notification No. 111/95.

4. Imposition of Penalty:
A penalty of Rs. 10,00,000/- was imposed on the appellants under Section 112(a) of the Customs Act, 1962. The penalty was imposed due to the violation of the import conditions under the Zero Duty EPCG licence.

5. Validity of Conversion of Zero Duty EPCG Licence:
The appellants argued that the DGFT had converted their Zero Duty EPCG licence to a 15% duty licence retrospectively and that 24% interest was not payable. However, the Tribunal observed that the DGFT is not vested with the power to alter the conditions of the Customs Notification No. 111/95. The conversion communicated by the DGFT was not applicable to goods already imported, and the Customs authorities were correct in demanding duty and interest.

6. Applicability of Interest Waiver by DGFT:
The Tribunal noted that the DGFT's communication waiving the 24% interest was unauthorized and exceeded its brief. The Customs authorities had already adjudicated the matter, and the DGFT's subsequent clarification allowed Customs to take necessary action under the Customs Act. The Tribunal held that the appellants were liable to pay the interest as per the original conditions of the Notification.

Conclusion:
The Tribunal upheld the confiscation of goods and imposition of duty and interest but showed leniency by reducing the redemption fine to Rs. 10,00,000/- and the penalty to Rs. 2,00,000/-. The appeal was otherwise dismissed, affirming the legal and proper enforcement of the Customs Act provisions and the conditions of the relevant Notification.

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