2017 (3) TMI 630 - AT - Customs

100% EOU - Imposition of penalty u/s 112(b) of the CA, 1962 - auction sale - demand on the ground that auction has completed on 20.03.2006, whereas appellant have stake their claim in the plant and machinery on 23.12.2005, therefore, the appellant did not protect in interest of revenue in the claim of the said plant and machinery - Held that - sale was completed on 09.11.2005, whereas, the Revenue claims their stake on 23.12.2005. Moreover, prior to auction, the appellant had advertised in paper for auction of the said plant and machinery in daily newspaper. In that circumstances, it is held that the Revenue was well aware of the fact of auction of plant and machinery is to take place and the appellant is auctioning the same to recover its dues - the appellant was not known whether M/s perfect Gold Pvt. Ltd. was in default of duty payment to the Revenue or not? - In the absence any knowledge of the appellant, the appellant cannot be penalised - the appellant is Financial Corporation and having no mala-fides intentions - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Imposition of penalty under section 112(b) of the Customs Act, 1962.

Analysis:
The appellant, a financial corporation, advanced a sum of &8377; 250.00 Lacs to M/s Perfect Gold India Ltd. against the mortgaged assets. Subsequently, M/s Perfect Gold Pvt. Ltd. defaulted on the loan, leading to the auction and sale of its assets. The Revenue discovered that the plant and machinery, imported duty-free by M/s Perfect Gold Pvt. Ltd., were sold without fulfilling the export obligation, necessitating duty payment. The appellant was penalized &8377; 2 Lac due to alleged failure to protect the revenue's interest. However, it was found that the auction occurred before the Revenue's claimed stake, and the appellant had publicly advertised the auction, indicating transparency in the process. The appellant, being unaware of M/s Perfect Gold Pvt. Ltd.'s duty default, was deemed not liable for penalty, especially considering its status as a Financial Corporation with no malicious intent. Consequently, the penalty was set aside, and the appeal was allowed with any consequential relief.

This judgment highlights the importance of factual accuracy and transparency in dealings involving duty obligations and auctions. It underscores that penalties under the Customs Act should be imposed judiciously, taking into account the circumstances and intentions of the parties involved. The case also emphasizes the need for clear communication and awareness between entities to avoid unjust penalization. The decision serves as a precedent for cases where penalties are contested based on factual timelines and the absence of malicious intent, particularly in financial transactions involving duty-related matters.