2004 (4) TMI 156 - AT - Customs

Summary

Issues:
1. Whether the respondents violated conditions of Notification No. 203/1992-Cus. by availing input credit on indigenous raw materials?
2. Whether the respondents are eligible for amnesty under the DEEC scheme?
3. Whether interest can be levied on the demand of customs duty under Section 28 of the Customs Act?
4. Whether penalties under Section 112 and Section 114(i) of the Customs Act are applicable to the respondents?
5. Whether the quantum of duty on imported goods should be reduced pro rata based on the reversal of Modvat credit?

Analysis:

1. The respondents imported raw materials under the DEEC scheme, declaring compliance with all relevant conditions. However, it was found that they had availed input credit on indigenous raw materials used in exported final products, violating a condition of Notification No. 203/1992-Cus. The department issued show cause notices demanding customs duty, interest, and penalties.

2. The respondents requested leniency, and the Commissioner of Customs dropped the proposals, granting amnesty as the party had 'substantially complied' with the notification conditions. However, the Revenue contended that the respondents were not eligible for amnesty based on a Supreme Court judgment in a similar case.

3. The Tribunal held that interest could not be levied on the demand of customs duty as there was no provision in the Customs Act authorizing such levy during the relevant period.

4. The Tribunal found that penalties under Section 112 and Section 114(i) were not applicable to the respondents. The absence of specific allegations in the show cause notices regarding actions leading to confiscation of goods under Section 111 rendered any penalty under Section 112 unsustainable.

5. The Tribunal rejected the contention to reduce the quantum of duty pro rata based on the reversal of Modvat credit, emphasizing that the Modvat Scheme under the Central Excise Act is distinct from the DEEC scheme under the Customs Act, and the duty of customs cannot be altered based on Modvat credit transactions.

In conclusion, the Tribunal held the respondents liable to pay the demanded customs duty without interest, while penalties under Section 112 were deemed unwarranted. The order did not hinder the respondents from seeking restoration of Modvat credit through the appropriate channels. The impugned order was set aside, and the appeal was allowed in favor of the Revenue.