2013 (8) TMI 689 - AT - Customs

Import without Payment of Duty for export - failure to export - Confiscation of Goods u/s 111(o) Penalty u/s 114A - Import of capital goods took place without payment of duty in terms of Notifications No. 13/81-Cus., dated 9-2-1981 - Department was of the view that the extension of the period were not in accordance with the provision of Section 61 of Customs Act, 1962 and duty should have been demanded unconditionally - Held that - The goods had been allowed for export as per the procedure for clearance of the warehoused goods, the goods are not liable for confiscation as per Section 111(o) - Penalty u/s 114A was imposable in case duty had not been levied or had been short-levied, etc., by reason of fraud, collusion or wilful mis-statement or suppression of facts or contravention of Central Excise Act or Rules, 1944 with intent to evade payment of duty - No such ingredients had been brought out by the department - penalty imposed u/s 112 of Customs Act, 1962 and Rule 173Q of Central Excise Rules, 1944 was also not sustainable the order was sustainable barring the penalty imposed u/s 112 of Customs Act, 1962 and penalty imposed under Rule 173Q. Extension of Warehousing Period - Whether the Extension of the warehousing period was not proper - Held that - Extension of warehousing period cannot be found fault with - The Unit was not having any control on the circumstances wherein the technology had undergone changes and new Montreal Protocol and they could not cope up with new protocol in this kind of industry - the circumstances in this case were not exceptional in nature - Further Section 69 of Customs Act, 1962, provided for export of warehousing goods without payment of import duty subject to certain conditions - It was not the case of the department that the Unit had not fulfilled the said condition - The export/removal of the goods had been as per the provision of Chapter IX of the Warehousing and the department could not bring out the condition which were not fulfilled or any provision had been contravened - the goods were not liable for confiscation Decided against Revenue.

Summary

Issues Involved:
1. Non-fulfillment of export obligations by the 100% EOU.
2. Extension of warehousing period and re-export of goods.
3. Imposition of penalties under Section 112 of the Customs Act, 1962, and Rule 173Q of the Central Excise Rules, 1944.
4. Confiscation of goods under Section 111(o) of the Customs Act, 1962.
5. Applicability of Section 114A of the Customs Act, 1962 for imposing penalties.

Issue-Wise Detailed Analysis:

1. Non-fulfillment of Export Obligations by the 100% EOU:
The unit was granted an industrial license to set up a 100% EOU for manufacturing marine cargo containers with the condition that the entire production would be exported for ten years, and a minimum value addition of 36% was required. The unit failed to commence manufacturing activities in the bonded premises, leading to proceedings against them for non-fulfillment of export obligations and conditions of exemption notifications.

2. Extension of Warehousing Period and Re-export of Goods:
The unit requested an extension for the warehousing period to re-export the goods due to changes in technology and financial constraints. The Commissioner extended the warehousing period for three months to facilitate re-export. The department contended that the extension was not in accordance with Section 61 of the Customs Act, 1962, and argued that duty should have been demanded unconditionally. However, the Tribunal found that the unit was not in control of the circumstances leading to the delay and that the extension was justified under Section 69 of the Customs Act, 1962, which allows re-export of warehoused goods without payment of import duty.

3. Imposition of Penalties under Section 112 of the Customs Act, 1962, and Rule 173Q of the Central Excise Rules, 1944:
The unit challenged the penalties imposed under Section 112 of the Customs Act, 1962, and Rule 173Q of the Central Excise Rules, 1944. The Tribunal held that since the goods were allowed to be re-exported as per the provisions, the penalties were not sustainable. The penalties were set aside, and the impugned order was modified to that extent.

4. Confiscation of Goods under Section 111(o) of the Customs Act, 1962:
The department argued that the goods should have been confiscated under Section 111(o) of the Customs Act, 1962, as the conditions of the exemption notifications were not fulfilled. However, the Tribunal found that the unit had complied with the provisions of Chapter IX of the Warehousing and that the goods were not liable for confiscation.

5. Applicability of Section 114A of the Customs Act, 1962 for Imposing Penalties:
The department contended that the Commissioner erred in not invoking the mandatory penalty under Section 114A of the Customs Act, 1962. The Tribunal held that penalties under Section 114A are applicable only in cases of fraud, collusion, or willful misstatement or suppression of facts, none of which were brought out by the department in this case. Therefore, the penalties under Section 114A were not applicable.

Conclusion:
The Tribunal dismissed the Revenue's appeal and allowed the unit's appeals, setting aside the penalties imposed under Section 112 of the Customs Act, 1962, and Rule 173Q of the Central Excise Rules, 1944. The extension of the warehousing period for re-export was upheld, and the goods were not liable for confiscation as per Section 111(o) of the Customs Act, 1962.