2010 (3) TMI 413 - HC - Customs

Duty on capital goods- Whether the Tribunal was right in holding that the duty on capital goods is payable only on clearance from the Bonded Ware House ? Whether irrespective of the clearance from the bonded premises the respondent are eligible for benefit of the Notification in spite of non-fulfillment of the conditions therein as held by the Tribunal? Whether the Tribunal was right in concluding that penalty was not imposable for the reason that the non-fulfillment of export obligation was beyond the control of the unit? Whether the Tribunal was right in setting aside the duty and penalty in spite of the fact that the export obligation was not fulfilled by the Respondent? Held that- if an order is passed based on the consent and the matter is remanded at the instance of the Revenue that the Revenue cannot maintain an appeal. Therefore dismiss the appeal only on the ground of maintainability. Accordingly the appeal is dismissed

Summary

Issues:
1. Legality and correctness of the order passed by CESTAT
2. Duty on capital goods payable only on clearance from Bonded Warehouse
3. Eligibility for benefit of Notification despite non-fulfillment of conditions
4. Imposition of penalty for non-fulfillment of export obligation
5. Setting aside duty and penalty despite unfulfilled export obligation
6. Maintainability of appeal filed by Revenue based on consent order

Analysis:
1. The case questions the legality of the order passed by CESTAT, Bangalore, in Appeal No. C/156/04. The key issues raised include whether duty on capital goods is payable only on clearance from the Bonded Warehouse and if the respondent is eligible for notification benefits despite non-fulfillment of conditions. Additionally, the imposition of penalty for unfulfilled export obligations and the setting aside of duty and penalty despite the unfulfilled export obligation are under scrutiny.

2. The respondent, holding a customs license to manufacture and export car stereos, claimed duty exemption on imported materials but failed to fulfill export obligations, resulting in a negative Net Foreign Exchange. The respondent argued that the failure was due to the foreign buyer's breach of contract, leading to arbitration and eventual compensation. Subsequently, the respondent exported the goods, earning foreign exchange. The Original Authority levied penalty and directed duty payment, which led to appeals and the case reaching CESTAT.

3. During the CESTAT proceedings, a representative of the Revenue suggested remanding the matter for duty computation based on a previous order. The Tribunal remanded the case for duty re-computation and issued additional directions. The respondent contended that the Revenue's appeal was not maintainable as the order was based on consent. The Court agreed, dismissing the appeal on the grounds of maintainability, emphasizing that if an order is passed based on consent and remanded at the Revenue's instance, an appeal cannot be maintained.

4. The respondent's counsel highlighted that the Revenue's appeal against a related judgment had been dismissed for non-prosecution, further supporting the argument against the maintainability of the appeal. The Court, considering the circumstances, upheld the dismissal of the appeal solely on the grounds of maintainability, emphasizing the impact of consent orders on appeal rights.