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2009 (12) TMI 396 - AT - CustomsConfiscation and Penalty- . The EOU commenced commercial production from 19-11-1995 but failed to fulfill the export obligation. As such the assessee appeared to have contravened the conditions (3) & (4) of the Notification No. 13/81-Cus. dt. 9-2-1981 as amended and contravened the conditions of Notification No. 1/95-CE dated 4-1-1995 as amended for duty free procurement of indigenous goods. Appellant submitted that they were fored to close down the business owing to problems such as lack of orders internal competition low prices and working capital. Held that- order confiscating the capital goods and raw material and imposing redemption fine and penalty on EOU set aside.
Issues Involved:
1. Non-allowance of depreciation on capital goods up to the date of payment of duty or up to the date on which capital goods were sold by DRT. 2. Confirmation of duty without giving allowance for exports made. 3. Wrong demand of duty on raw materials (both imported and indigenous) on the ground that only 60% of the raw materials were consumed. 4. Illegal confiscation of capital goods as well as raw materials (both imported and indigenous). 5. Wrong imposition of penalty and redemption fine, which are totally not sustainable under the law. Detailed Analysis: 1. Non-allowance of Depreciation on Capital Goods: The assessee contended that depreciation should be allowed up to the date of payment of duty or the date when the Debt Recovery Tribunal (DRT) took possession of the capital goods. The Commissioner allowed depreciation only up to 31-3-1999, the date when the unit ceased operations. The Tribunal referenced various case laws, including Suvarna Aqua Farm & Exports Ltd., which held that depreciation should be granted till the date of payment of duty. The Tribunal concluded that the depreciation should be computed from the date the manufacturing operations commenced until the date the DRT took possession. The admissible depreciation would be calculated as per Circular No. 46/98. 2. Confirmation of Duty Without Allowance for Exports Made: The Commissioner demanded duty without considering the exports made by the assessee. The Tribunal noted that the assessee had fulfilled 60% of its export obligation and thus, the entire duty demand was not justified. The Tribunal cited Premier Granites Ltd. and Natural Stone Exports Ltd., which held that partial fulfillment of export obligation should be considered. The Tribunal ordered that the duty demand should be recalculated, considering the proportion of export obligation fulfilled. 3. Wrong Demand of Duty on Raw Materials: The Commissioner presumed that only 60% of the raw materials were consumed based on the export obligation fulfilled. The Tribunal found no evidence to counter the assessee's claim that all raw materials were consumed in the production of exported goods. Consequently, the demand for customs and excise duties on the remaining 40% of raw materials was set aside. 4. Illegal Confiscation of Capital Goods and Raw Materials: The Commissioner confiscated the capital goods and raw materials, offering their redemption on payment of fines. The Tribunal referenced Pal Industries Ltd. and Taurus Novelties Ltd., which held that confiscation and penalties are not justified when the failure to fulfill export obligations was beyond the control of the assessee. The Tribunal set aside the confiscation and the associated fines and penalties. 5. Wrong Imposition of Penalty and Redemption Fine: The penalties and fines imposed by the Commissioner were challenged. The Tribunal, referencing Hindustan Steel Ltd. v. State of Orissa, emphasized that penalties should not be imposed merely because it is lawful to do so, especially when the failure was due to circumstances beyond the assessee's control. The Tribunal set aside the penalties and redemption fines. Conclusion: The Tribunal allowed the appeal and remanded the matter to the Commissioner for re-determining the liability of the assessee on the capital goods after re-assessing the value based on the guidelines provided. The Tribunal emphasized the need for a fresh hearing before a new decision is taken. The appeal was thus allowed by way of remand.
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