1994 (3) TMI 225 - AT - Customs

Issues Involved:
1. Consolidation of stay applications.
2. Imposition of additional duty on imported polyester filament yarn.
3. Alleged ITC violations and manufacturing agreements.
4. Financial hardship and penalty imposition.
5. Financial position and liquidity of appellants.

Detailed Analysis:

1. Consolidation of Stay Applications:
The appellants requested the consolidation of all four stay applications arising from a common order for judicial propriety and convenience. The respondent agreed to this request. The tribunal accepted the request and proceeded to hear all four stay applications together.

2. Imposition of Additional Duty on Imported Polyester Filament Yarn:
The appellants imported 150 metric tonnes of polyester filament yarn under OGL in 1982, which was initially subject to a 200% duty. Subsequently, an additional duty of Rs. 15 per kg was levied by Notification No. 248 of 1982-Cus., dated 23-11-1982. The appellants argued that this additional duty made it unviable to use the yarn for domestic manufacturing and selling. Consequently, they decided to export the fabrics made from the imported raw materials, clearing 47 MTs without payment of duty against an advance license.

3. Alleged ITC Violations and Manufacturing Agreements:
The appellants contended there was no ITC violation at the time of import and that they lacked the facilities for quality manufacturing. Consequently, they entered into agreements with M/s. Maruti Yarn Trading Company and Saree Niketan for processing. They argued that the duty involved, Rs. 63,88,465, had been fully paid, and the goods cleared against the advance license were used for manufacturing converted texturized yarn. The only technical violation was that the manufacturing process was conducted in another party's factory. The appellants claimed that the agreement was never implemented and that they paid the full duty amount voluntarily from 1987 to 1990.

4. Financial Hardship and Penalty Imposition:
The appellants argued that their company, declared a sick unit by the BIFR, faced significant financial hardship. The total capital was about Rs. 15 lakhs, with a total loss of Rs. 5,74,54,201 as of 31-3-1993. They claimed that depositing the penalty amount would cause undue hardship. Penalties imposed were Rs. 4 lakhs on the appellants' company, Rs. 10 lakhs each on M/s. R.L. Toshniwal and Shri Murarilal Dalmia, and Rs. 50,000 on Shri B.L. Sharma.

5. Financial Position and Liquidity of Appellants:
The appellants' financial hardship was further detailed, highlighting that M/s. R.L. Toshniwal and Shri M.L. Dalmia had significant investments but poor liquidity, and Shri B.L. Sharma, an employee earning Rs. 4,000 per month, supported a family and could not afford any penalty. The respondent argued that the appellants had violated the terms of the advance license and that the BIFR status did not warrant exemption from penalties. The tribunal considered the appellants' financial positions and liquidity, referencing the Supreme Court's decision in the case of M/s. Spencers Co. Ltd., Madras v. Union of India, which emphasized liquidity as a factor in determining undue hardship.

Judgment:
The tribunal accepted the appellants' offer to deposit reduced penalty amounts due to financial hardship. M/s. Banswara Fabrics Ltd. was ordered to deposit Rs. 2 lakhs, M/s. R.L. Toshniwal and Shri M.L. Dalmia were each ordered to deposit Rs. 50,000, and Shri B.L. Sharma was exempted from any pre-deposit. The tribunal ordered the appellants to report compliance within five months, failing which the stay order would be vacated. The stay applications were partly allowed, with the stay application of Shri B.L. Sharma fully allowed.

Conclusion:
The tribunal balanced the need for penalty imposition with the financial hardship of the appellants, reducing the penalties significantly and providing relief from immediate financial burdens.

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