2014 (9) TMI 290 - HC - Customs

Waiver of pre-deposit - tribunal directed that the Bank Guarantee may be encashed for collecting the demand of duty - Misuse of BMW cars under Export Promotion Capital Goods (EPCG) Scheme - vehicles imported should be used for tourist purposes only - Held that - there are two important expressions in Section 35-F. One is undue hardship. This is a matter within the special knowledge of the applicant for waiver and has to be established by him. - As the encashment of bank guarantee as ordered by the Tribunal has been effected, we uphold the order of the Tribunal with regard to waiver of pre-deposit of interest and penalty of both the appellants and recovery thereof. The Tribunal shall take up the appeals in the usual course and dispose of the same on merits and in accordance with law. Since the conditional order of stay passed by the Tribunal has been complied with by the appellants and we are directing the Tribunal to dispose of the appeals or merit - Decided against the assessee.

Summary

Issues:
Challenge to Tribunal's order on pre-deposit of duty under EPCG Scheme, Contravention of scheme terms, Confiscation of imported cars, Financial hardship plea, Compliance with Tribunal's order, Application of Section 35-F of Customs Act.

Analysis:
1. Pre-deposit of Duty under EPCG Scheme:
The appellants imported BMW cars under the EPCG Scheme for tourist purposes but were found to be used privately. The Tribunal directed pre-deposit of the entire duty amount, with partial encashment of bank guarantee. The appellants challenged this order, questioning its compliance with the EPCG Scheme's export obligation period of eight years. They also argued that there was no evidence of tourist use and violation of exemption notification. The High Court upheld the Tribunal's order on pre-deposit but directed waiver of interest and penalty upon encashment of the bank guarantee.

2. Confiscation of Imported Cars:
The Tribunal had ordered confiscation of three BMW cars due to the contravention of the EPCG Scheme terms. The appellants contended that the Tribunal failed to consider the exemption notification and the use of cars for tourist purposes. The High Court did not express an opinion on the confiscation issue but directed the Tribunal to dispose of the appeals on merits and in accordance with the law.

3. Financial Hardship Plea:
The appellants pleaded financial hardship, citing a major fire accident at their premises. The High Court acknowledged this hardship and emphasized the need for the Tribunal to consider undue hardship and safeguard the Revenue's interests while deciding on pre-deposit under Section 35-F of the Customs Act. The Court highlighted the importance of balancing undue hardship and Revenue protection in such cases.

4. Compliance with Tribunal's Order:
The appellants complied with the Tribunal's order by encashing the bank guarantee as directed. The High Court noted this compliance and upheld the Tribunal's decision on the waiver of interest and penalty. The Court directed the Tribunal to proceed with the appeals' disposal without expressing any opinion on the substantial legal questions raised.

In conclusion, the High Court upheld the Tribunal's order on pre-deposit while emphasizing the need for a balanced approach considering undue hardship and Revenue protection. The Court directed the Tribunal to adjudicate the appeals on their merits and in accordance with the law, acknowledging the financial difficulties faced by the appellants and the compliance with the Tribunal's order.