2005 (7) TMI 399 - Commission - Customs

Issues Involved:
1. Failure to fulfill export obligations under EPCG Scheme.
2. Demand for customs duty and interest.
3. Encashment of bank guarantees by Revenue.
4. Application for settlement and request for immunity from interest, penalty, and prosecution.
5. Jurisdiction of Settlement Commission over the case.

Issue-wise Detailed Analysis:

1. Failure to Fulfill Export Obligations under EPCG Scheme:
The applicant was issued an EPCG Licence for importing capital goods with an obligation to export 50% of de-oiled cake worth four times the CIF value of the imported goods. The applicant failed to fulfill the 10% export obligation in the second year, 20% in the third year, and 70% in the fourth and fifth years. Consequently, Show Cause Notices were issued demanding duties and interest for non-fulfillment of these obligations.

2. Demand for Customs Duty and Interest:
Show Cause Notices were issued demanding duties: Rs. 5,78,296/- for the second year, Rs. 11,56,592/- for the third year, and Rs. 40,48,072/- for the fourth and fifth years, along with interest at 24% per annum. The demands were confirmed by the Assistant Commissioner of Customs and upheld by the Commissioner (Appeals). Appeals were filed before CEGAT, which waived the pre-deposit but did not stay the recovery. The applicant admitted the entire duty demand of Rs. 57,82,963/- in their settlement application.

3. Encashment of Bank Guarantees by Revenue:
The Revenue encashed the applicant's bank guarantees amounting to Rs. 11,79,700/- and Rs. 16,29,300/-. Despite the Bombay High Court directing the Revenue to return the encashed amount, it remained with the Revenue. The applicant was directed to pay the balance duty of Rs. 29,73,963/- after adjusting the encashed amounts.

4. Application for Settlement and Request for Immunity from Interest, Penalty, and Prosecution:
The applicant filed for settlement under Section 127B of the Customs Act, admitting the duty liability. The Commission noted that the applicant fulfilled the conditions for settlement and allowed the application to proceed. The applicant requested immunity from interest, penalty, and prosecution, citing the company's efforts to revive and its registration with BIFR.

5. Jurisdiction of Settlement Commission over the Case:
The Revenue opposed the settlement, arguing that the case involved no additional disclosure and fell outside the Commission's jurisdiction. However, the Commission referred to previous decisions, including M/s. Bell Granito Ceramica Ltd., and held that such cases were within its purview. The Commission allowed the application to proceed under Section 127C(1) of the Act.

Interest Liability:
The Commission examined the applicant's contention against the Calcutta High Court's decision, which held that the interest was contractual and not waivable by the Commission. The Commission followed the Calcutta High Court's ratio, noting no contrary decision was presented. The applicant was directed to pay interest as prescribed under Notification No. 110/95-Cus., considering the reduced rate of 15% effective from October 2002.

Final Settlement Terms:
The Commission settled the case with the following terms:
- Customs Duty: Settled at Rs. 57,82,963/-, with the balance of Rs. 29,73,963/- to be paid within 30 days.
- Interest: To be calculated by the Revenue and paid by the applicant as per the prescribed rates.
- Immunity: Granted from penalty and prosecution under Section 127H(1) of the Act.

The order emphasized that the settlement would be void if obtained by fraud or misrepresentation and informed all concerned parties accordingly.

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