2004 (3) TMI 112 - AT - Customs

Benefit of Customs Notification - Demand - Export obligation not fulfilled - bank guarantee enforcement - goods confiscation - extension of export obligation period - HELD THAT - Though the machinery imported were installed in the factory of the appellants in December 1991 itself the actual production could be started only in March 1994. As could be seen from the copies of various communications filed in the paper book the appellants have made sincere efforts to fulfil their export obligation but the circumstances were beyond their control and they could not fulfil the export obligation. Further we find that the Customs Department has not been made a party in the Writ Petition before the Hon ble High Court and there is no direction to the Customs Department not to enforce the Bank Guarantee. Further it is to be noted that the appellants gave an undertaking to the concerned Assistant Commissioner of Customs binding themselves to pay the differential duty on demand in case of non-fulfilment of export obligation. Therefore the argument of the appellants that the lower authority has passed the order without jurisdiction cannot be countenanced. So far as the confiscation of the goods and imposition of penalty is concerned it is settled law that mens rea is a necessary requirement for imposition of penalty u/s 112 of the Customs Act 1962. We have noted above that in the instant case there was sincere efforts on the part of the appellants to fulfil the export obligations but the circumstances were beyond their control and they could not fulfil the export obligations in spite of their best efforts. It is not the case of the Department that appellants have made any deliberate attempt to avail of the benefit of Notification. The machinery was in fact installed at the factory as noted by the adjudicating authority in Para 4 of the impugned order. Production of the goods was also started some time in March 1994 and they could only meet the export obligation to the extent of 1.5% only. There is no material to doubt their bona fides. In view of above while we uphold the duty liability on the goods we set aside the order of confiscation of the goods and imposition of redemption fine and penalty and so also the order for charging interest. The impugned order is modified to the extent indicated above. The appeal is thus partially allowed in the above terms.

Summary

Issues:
The case involves denial of benefit of Customs Notification, duty confirmation, goods confiscation, interest demand, bank guarantee enforcement, penalty imposition, and extension of export obligation period.

Customs Notification Benefit Denial:
The appeal was against the denial of benefit under Customs Notification No. 169/90 on imported goods against an EPCG license. The appellants imported machinery but failed to fulfill the export obligation within the specified period, leading to duty confirmation, goods confiscation, and other penalties.

Extension of Export Obligation Period:
The appellants argued for an extension of the export obligation period, citing efforts made to obtain it. However, the request was denied, and the lower authority proceeded with the order. The appellants also referenced relevant case laws in their defense.

Adjudication and Defense:
The JDR defended the lower authority's order, stating that the non-fulfillment of license terms was admitted by the appellants. The Tribunal noted the appellants' failure to meet the export obligation and their efforts to do so, but circumstances hindered them. The plea regarding the Bank Guarantee enforcement and jurisdiction was rejected.

Duty Demand and Interest Charge:
The Tribunal held that duty payment is required for importers failing to meet export obligations under Customs Notification. While duty liability was upheld, interest was deemed not chargeable based on previous rulings.

Confiscation and Penalty Imposition:
Regarding confiscation of goods and penalty imposition, mens rea was considered necessary. The Tribunal found the appellants made sincere efforts to fulfill obligations, with no deliberate attempt to misuse benefits. As a result, the order for confiscation, redemption fine, penalty, and interest charge was set aside.

Conclusion:
The impugned order was partially allowed, upholding duty liability but overturning confiscation, penalty imposition, and interest charge. The appellants' efforts and lack of deliberate wrongdoing were acknowledged in the judgment.