2013 (3) TMI 92 - HC - Customs

Violation of condition of notification 53/97 customs 03.06.1997 - order passed u/s 28(1) of the Customs Act demanding customs duty along with interest and also penalty - petitioner company is 100% EOU engaged in manufacture of recycled non-ferrous & ferrous metals started commercial production w.e.f.09.03.2001 for which imported mixed metal scrap - Held that - Tribunal after taking note of the financial status of the petitioner company which was given at the stage when rectification application was filed and also taking note of the submissions made was of the view that the appellant requires no indulgence for exemption regarding condition of pre-deposit and accordingly considered it appropriate to review the customs duty to be deposited at the stage for maintaining the appeal and observed that rest of the duty and penalty & other charges levied by the assessing authority shall remain stayed and be looked into at the time of hearing. After going through the order impugned of the learned Tribunal, no manifest error being committed while passing order impugned exercising discretion which may require interference by this Court under its limited scope of judicial review U/Art.226 & 227 of the Constitution.

Summary

Issues:
Petitioner company's entitlement for exemption from import custom duty, validity of exemption, compliance with conditions of notification, application for exemption from pre-deposit under Customs Act, rejection of rectification application, financial status consideration by Tribunal, judicial review under Art. 226 & 227 of the Constitution.

Entitlement for Exemption from Import Custom Duty:
The petitioner, a 100% export-oriented unit, imported mixed metal scrap for processing, claiming exemption under notification-53/97-customs. The assessing authority issued a show cause notice for customs duty violation, leading to a demand of approx. Rs.2.06 crores. The authority ordered recovery of the duty, interest, and penalty. The petitioner contended no central excise duty was payable and exemption was valid. The Tribunal observed that compliance with pre-deposit conditions was necessary for appeal admission, granting waiver of balance dues upon depositing Rs.1.25 crores.

Application for Exemption from Pre-Deposit under Customs Act:
The Tribunal, while considering the application for exemption from pre-deposit under Customs Act, examined the financial status of the petitioner and rejected the application. The Tribunal emphasized that full waiver of pre-deposit could enable the petitioner to evade liabilities and negatively impact revenue interests. The Tribunal decided to review the customs duty to be deposited for maintaining the appeal, while staying the rest of the duty, penalty, and charges levied by the assessing authority.

Rejection of Rectification Application:
The petitioner filed a rectification application challenging the Tribunal's observation on goods cleared into Domestic Tariff Area (DTA) at concessional duty rates. The Tribunal, upon re-examination, rejected the rectification application, citing concerns about the petitioner's financial status and potential evasion of liabilities. The Tribunal emphasized the need to prevent any further relaxation in pre-deposit conditions that could be detrimental to revenue interests.

Judicial Review under Art. 226 & 227 of the Constitution:
Upon review, the High Court found no manifest error in the Tribunal's exercise of discretion in the impugned order. The Court held that the Tribunal appropriately considered the financial status of the petitioner and the need to balance pre-deposit conditions with the right to appeal. The Court dismissed the petition, emphasizing that compliance with pre-deposit conditions would enable the appeal to be heard on merits independently, without influence from the Court's observations.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing the importance of complying with pre-deposit conditions for appeal admission while considering the petitioner's financial status and the potential impact on revenue interests. The Court's limited scope of judicial review under Art. 226 & 227 of the Constitution led to the dismissal of the petition, with a directive for the appeal to proceed if the petitioner complies with the pre-deposit condition within the specified timeline.