2004 (9) TMI 161 - AT - Central Excise

Summary

Issues: Challenge to imposition of penalty under Section 112 of the Customs Act for non-fulfillment of export obligation due to economic crisis and other reasons.

Analysis:
1. The appellant contested the penalty imposed in the O-I-O No. 6/2000 for failing to meet export obligations under an EPCG License dated 10-9-1997 due to the Global Economic crisis in Asia, specifically South East Asia. The appellant's unit closed in May 1999, leading to an inability to fulfill obligations. Despite expressing their difficulties to comply with the license terms, they faced demands and a show cause notice. The impugned order confiscated goods, imposed a Redemption Fine of Rs. 10,00,000/-, demanded differential duty of Rs. 21,81,700/-, and imposed a penalty of Rs. 2,00,000/- under Section 112 of the Customs Act.

2. The appellant's counsel argued against the penalty, citing various Tribunal judgments, including Meirs Pharma (India) Pvt. Ltd. v. CCE, Chennai, which referenced Philips (India) Ltd. v. Commissioner and Dyna Lamps & Glass Works Ltd. v. CC, Chennai. The counsel contended that there was no mens rea in failing to fulfill obligations, making the penalty under Section 112 inapplicable as per established judgments. The counsel requested setting aside the penalty based on the legal precedents cited.

3. The Senior Departmental Representative (SDR) acknowledged the settled law in the judgments cited by the appellant's counsel.

4. After careful consideration, the Tribunal noted that the issue had been settled in previous judgments, indicating that penalty under Section 112 is not applicable in cases where there is no mens rea to evade duty by not fulfilling obligations. Consequently, the Tribunal set aside the penalty imposed on the appellant, allowing the appeal and modifying the impugned order solely to that extent.