2018 (5) TMI 268 - AT - Customs

Violation of import conditions - As the imported goods were not used for manufacturing of the goods which are to be exported therefore, duty is sought to be demanded - N/N. 93/2004-Cus dated 10.09.2004 - Held that - 50MT of Coco Butter was lost during transit from the port to their factory and the same has been intimated to the department but the lost quantity has been replaced by the appellant by purchasing the Cocoa Paste from the local market to fulfil their export obligation and appellant has not claimed any rebate or draw back in respect of the locally procured Coco Butter. Advance authorisation has been discharged by DGFT (licensing authority) as export obligation has been fulfilled by the appellant. As the appellant has discharged the export obligation, in that circumstance, it is not open for the Revenue to initiate proceedings against the appellant that they have not fulfilled the condition of the advance authorisation. The appellant has not violated any condition of the N/N. 93/2004-Cus dated 10.09.2004. As per the condition of said notification, the appellant shall not transfer or sale the imported goods. Admittedly, in this case, appellant has neither transferred nor sold the imported goods but the said goods were lost in an accident in transit. The appellant has discharged their export obligation and to that effect, they have redeemed their bond executed with the licensing authorities i.e. DGFT. In that circumstance, Customs authorities cannot initiate proceedings against the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against customs duty, penalty, and redemption fine imposition.

Analysis:
1. The appellant imported Cocoa Paste under an advance authorization for duty-free clearance, with an obligation to export Coco Butter. Due to an accident, 50MT of Cocoa Paste was lost in transit, and the appellant replaced it from the local market to fulfill the export obligation without claiming any benefits. The appellant informed the department about the loss, and the advance authorization was redeemed by the licensing authority after export obligation fulfillment.

2. The appellant argued that once the export obligation was met and the licensing authority did not question the transaction, Customs authorities cannot demand duty or impose penalties. Citing legal precedents, the appellant contended that they did not violate any conditions and should not be held liable for duty payment. The appellant emphasized that the licensing authority should address any misrepresentations, not the Customs authorities.

3. The Customs authority insisted on duty payment as the imported goods were not used in manufacturing the exported goods as required by the advance authorization. The authority maintained that the duty demand, redemption fine, and penalty were rightly imposed due to the admitted non-use of imported goods in export manufacturing.

4. The Tribunal found that the appellant fulfilled the export obligation, replaced the lost goods, and did not violate the conditions of the advance authorization or the customs notification. Citing legal precedents, the Tribunal concluded that once the export obligation was met, Customs authorities could not demand duty or penalize the appellant. The Tribunal set aside the impugned order, allowing the appeal with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, holding that they fulfilled their export obligation, redeemed the bond with the licensing authority, and thus Customs authorities could not proceed against them. The decision was based on the legal principles that once the export obligation is met, Customs authorities cannot demand duty or impose penalties, especially when there is no violation of conditions.