2006 (10) TMI 21 - AT - Customs

EXIM -EPCG Scheme - A subsidiary company demanded for granting exemption from bank guarantee- Unit already defaulted ,so appeal infructuous and not survives.

Summary

Issues:
1. Interpretation of conditions of EPCG licence for import of extrusion production line.
2. Request for waiver of bank guarantee based on parent company's export performance.
3. Applicability of Circulars 71/98, 123/95, and 45/96 in relation to bank guarantee requirement.
4. Consideration of appeal in the absence of respondent's representation.

Analysis:
1. The case involved the interpretation of the conditions of an EPCG licence for the import of an extrusion production line. The respondents, a subsidiary company, sought permission to execute a bank guarantee for a reduced amount due to financial difficulties. The licence required a bond supported by a 100% bank guarantee. The respondents' parent company held 99.9% equity share in the subsidiary, leading to an amendment in the licence to reflect the relationship between the two entities.

2. The respondents requested a waiver of the bank guarantee based on their parent company's export turnover exceeding Rs. 1 Crore, as per Circular No. 71/98. The Deputy Commissioner initially rejected the request, but the Commissioner (Appeals) allowed it, considering the parent company's export performance as that of the subsidiary. The issue arose whether the export clearances of the parent company could be equated to those of the subsidiary for the purpose of waiving the bank guarantee requirement.

3. The Departmental Representative contended that Circular No. 71/98 was misapplied by the Commissioner (Appeals) in treating the export performances of the parent and subsidiary companies as one entity. It was argued that the two companies were distinct legal entities with separate financial standings and liabilities. The applicability of Circulars 123/95 and 45/96 was also discussed, emphasizing that the requirement for a bank guarantee could not be waived if mandated by a Customs Notification.

4. Despite the absence of representation from the respondents, the Tribunal considered the submissions and noted that the goods had already been cleared in 1999, with a significant time lapse since then. The Tribunal highlighted that the exemption from bank guarantee under Circular 71/98 could be withdrawn in case of export defaults, especially if the company approached the BIFR to be declared a sick unit. Given the circumstances, the appeal was deemed infructuous and dismissed.

Overall, the Tribunal's decision was based on the specific facts of the case, the interpretation of relevant Circulars, and the impact of the company's financial situation on the bank guarantee requirement, ultimately leading to the dismissal of the appeal due to its becoming infructuous over time.