2012 (8) TMI 29 - AT - Customs

Penalty 100% EOU imported goods duty free by availing benefit of Notification No. 53/1997-Cus - these duty free goods against the advance license to another 100%EOU - adjudicating authority has held that the company, being 100%EOU trading unit could not have sold the goods under advance license as per the provisions of Para 9.21 of the Export Import Policy Held that - According to CBEC Circular No. 49/2000-Cus dated 22.5.2000 that EOU trading units were allowed to supply the goods to other EOU/STP units against valid advance license or specific customs entitlements - company had cleared the goods imported by them on which the customs duty was foregone to advance license holders EOU penalty set aside Regarding penalties on the Directors Held that - In the absence of any duty liability on the main Company, the provisions of Section 112 and 117 for imposition of penalties on the Directors cannot be invoked - to that extent it imposes penalty on the appellants herein, is liable to be set-aside

Summary

Issues:
Imposition of penalties under Sections 112 and 117 of Customs Act, 1962 on directors of a company for violation of provisions of Para 9.21 of Export Import Policy regarding sale of duty-free goods against advance license to another 100% EOU.

Analysis:

1. Facts Leading to Penalties:
The two appellants, as directors of a company registered as a 100% EOU trading unit, were penalized for selling duty-free goods against an advance license to another EOU, which was deemed a violation of Para 9.21 of the Export Import Policy. The adjudicating authority imposed penalties on the company and the individual appellants under Sections 112 and 117 of the Customs Act, 1962.

2. Appellants' Arguments:
The appellants argued that they had cleared the imported goods without payment of duty by executing a B-17 Bond, which permitted the removal of goods to another EOU/SEZ unit against the advance license. They relied on a Board Circular and Tribunal decisions to support their position that penalties were not applicable to them.

3. Revenue's Position:
The Revenue contended that as per Para 9.21 of the Export Import Policy, the EOU trading unit was not allowed to supply goods to another EOU, thus violating the provisions of Notification No. 53/1997. Therefore, the directors were held liable for penalties under Sections 112 and 117 of the Customs Act, 1962.

4. Judgment and Analysis:
Upon reviewing the records, it was established that the company had the authority to dispose of imported goods to another EOU/SEZ unit against an advance license or specific duty-free entitlements. A CBEC Circular clarified that EOU trading units could supply goods to other EOU/STP units against valid licenses. Since the main company had no duty liability, penalties under Sections 112 and 117 could not be imposed on the directors. The Tribunal set aside the penalties imposed on the individual appellants, ruling in their favor.

5. Conclusion:
The Tribunal allowed the appeals of the individual appellants and overturned the penalties imposed on them, as there was no duty liability on the main company, thereby negating the basis for imposing penalties under Sections 112 and 117 of the Customs Act, 1962.