2017 (3) TMI 1347 - AT - Customs

Benefit of N/N. 159/90-Cus dated 30th March 1990 - actual user condition - DEEC scheme - denial of notification on the ground of failure to use sodium cyanide and dimethyl urea imported without payment of duty in manufacture of specified export goods - confiscation - penalty - interest - Held that - Normally such diversion to uses that are not permitted are a consequence of the premium commanded in the domestic market for such imported inputs - The penalty should have been of such magnitude as to erase any benefit accrued by the appellant-importer from the liberal regime of import under the two notifications. This has apparently not been borne in mind while imposing the penalties that were upheld in the impugned order. Likewise the penalty on the Managing Director is equally harsh and must be tempered - Any offence relating to misuse of the imported goods is regularised by confiscation and release of confiscated redemption fine. The non-availability of the imported goods renders this impossible requiring recourse to the penalties for appropriate corrective - matter is remanded back to the original authority for reconsideration of the charging of interest and imposition of penalty - appeal allowed by way of remand.

Summary

Issues:
1. Appeal against order upholding demand of duty, interest, and penalty for failure to use imported goods in manufacture of specified export goods.
2. Applicability of interest charge under section 28AB on goods imported before 28th September 1996.
3. Imposition of penalty when proceedings are long delayed.

Analysis:
1. The appellant challenged the order upholding the demand of duty, interest, and penalty for not using imported goods in the manufacture of specified export goods. The appellant had imported 'sodium cyanide' and 'dimethyl urea' under an advance license for manufacturing and exporting 'choline theophyllinate.' Allegedly, only a portion of the imported goods was used in the exports, while the rest was utilized for local sales after the license period expired. Additionally, some imported goods were used to manufacture ineligible products, leading to duty demands and penalties.

2. The appellant contended that specific submissions regarding the applicability of interest charge under section 28AB on goods imported before 28th September 1996 were not considered. The argument raised concerns about the delayed imposition of penalties and the applicability of penalties under section 112 of the Customs Act, 1962. The appeal highlighted the need for a fair assessment of interest charges and penalties based on the circumstances of the case.

3. The Tribunal noted the confiscation under section 111 of the Customs Act, 1962, and the imposition of penalties under section 112. While the penalties seemed to adhere to the prescribed limits, the Tribunal found the penalties to be harsh considering the circumstances. The appellant's explanation for the misuse of imported goods due to market conditions and limited shelf-life was taken into account. The Tribunal emphasized the need for penalties to negate any benefits gained from the liberal import regime. Consequently, the Tribunal set aside the impugned order and remanded the matter for a fresh consideration on interest charges and penalty imposition in the interest of justice.