2013 (12) TMI 1301 - AT - Customs

Confiscation of goods - Penalty u/s 112 - Conditional release of goods - Duty free import of goods - Notification No. 203/92 - Held that - goods were cleared for home consumption under Section 47 of the Customs Act without payment of duty subject to fulfilment of the conditions set out in the exemption notification - post clearance conditions of the exemption notification have been violated. Therefore, the goods have been confiscated under Section 110(o) with an option to redeem the same by imposing fine in lieu of confiscation under Section 125(1). In such a case, the duty becomes payable on confiscation and in terms of Section 125(2) the assessee who is admittedly the owner of the goods is liable to discharge the duty liability on imposition of fine in lieu of confiscation, even if the assessee chooses not to redeem the confiscated goods. duty-free imported materials were cleared under Advance Licence accompanied with DEEC Book vide exemption Notification No. 203/92 and 204/92. DEEC book is part of the exemption notification, wherein the information would be recorded for monitoring the clearance of duty free import material, export of resultant product, name and address of the factories and its ancillaries when resultant products are manufactured and details of materials on which condition of notification are not complied with etc. It is pertinent to note that there is a time limit prescribed for fulfillment of export obligation in Advance Licences - penalty imposed under Section 114A and demand of interest under Section 28AB are liable to be set aside. But, penalty to the extent of 50% of the duty demanded is liable to be imposed under Section 112 of the Act on Appellant. Goods were released to the appellant on an application made by it and on the appellant executing a bond. Under these circumstances if subsequently it is found that the import was not valid or that there was any other irregularity which would entitle the customs authorities to confiscate the said goods, then the mere fact that the goods were released on the bond being executed, would not take away the power of the customs authorities to levy redemption fine - Decided partly in favour of assessee.

Issues Involved:
1. Fulfillment of Export Obligation under DEEC Scheme
2. Limitation Period for Demand of Duty
3. Imposition of Penalty under Section 114A and Interest under Section 28AB
4. Confiscation of Goods and Imposition of Redemption Fine
5. Enhancement of Penalty in Denovo Adjudication

Detailed Analysis:

1. Fulfillment of Export Obligation under DEEC Scheme:
The primary issue revolves around whether the appellant, a manufacturer and exporter of silk sarees, fulfilled their export obligation under the Duty Exemption Entitlement Certificate (DEEC) scheme. The adjudicating authority found that the appellant failed to fulfill the export obligation and instead sold the duty-free imported raw silk locally through their sister units. This was a clear violation of the conditions of the advance licenses obtained under Notification No. 203/92-Cus. and 204/92-Cus.

2. Limitation Period for Demand of Duty:
The appellants argued that the demand for duty was barred by limitation under Section 28(1) of the Customs Act, 1962. They contended that the demand notice issued on 10.3.1999 was beyond the five-year limitation period for imports made between 12.4.1993 and 28.2.1994. The Tribunal agreed with this argument, citing the case of Shilchar Electronics Ltd., and held that the demand of Rs.48,03,968/- was time-barred. However, for the remaining demand of Rs.34,96,777/-, the Tribunal upheld the duty demand, as the appellant had suppressed facts regarding the local sale of duty-free imported materials, invoking the extended period of limitation.

3. Imposition of Penalty under Section 114A and Interest under Section 28AB:
The appellants contended that the imposition of penalties under Section 114A and the demand for interest under Section 28AB were not sustainable, as these sections were introduced after the imports were made. The Tribunal agreed, referencing the case of Ram Khazana Electronics, and set aside the penalties under Section 114A and the interest under Section 28AB. However, a penalty of 50% of the duty demanded was imposed under Section 112 of the Customs Act on Appellant No. 1.

4. Confiscation of Goods and Imposition of Redemption Fine:
The adjudicating authority had imposed a fine of Rs.20,00,000/- in lieu of confiscation under Section 125 of the Customs Act, as the goods were not physically available for confiscation. The Tribunal found that in the earlier adjudication order, there was no order for confiscation or fine, and since the Revenue had not appealed against that order, the imposition of a fine in the denovo adjudication was not sustainable. The Tribunal set aside the confiscation and the redemption fine.

5. Enhancement of Penalty in Denovo Adjudication:
The Tribunal noted that in the earlier adjudication, penalties were imposed on Appellant Nos. 2, 3, and 4, and no appeal was filed by the Revenue for enhancement. Therefore, in the denovo adjudication, the enhancement of penalties was not sustainable. The Tribunal reduced the penalties to Rs.1,00,000/- on Appellant No. 4 and Rs.25,000/- each on Appellant Nos. 2 and 3.

Conclusion:
The Tribunal modified the impugned adjudication order by upholding the demand of Rs.34,96,777/- on Appellant No. 1 and setting aside the demand of Rs.48,03,968/- and the levy of interest. The penalty under Section 114A was set aside, but a penalty of 50% of the duty demanded was imposed under Section 112. The confiscation and imposition of fine were set aside, and the penalties on Appellant Nos. 2, 3, and 4 were reduced. The appeals were partly allowed on these terms.

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