2022 (12) TMI 1066 - AT - Customs

Confiscation of the imported machinery under the EPCG scheme (Export Promotion Capital Goods Scheme) with option to pay redemption fine - levy of penalty - It appeared to Revenue that the appellant have not fulfilled the export obligations and have not complied with the undertaking given in the bond, accordingly, the duty foregone at the time of import of the capital goods seems to be recoverable - HELD THAT - There was a disruption in business both due to fire and due to shifting of the machinery to the new address, for a period of more than 2 years. Further, I find that the DGFT, by granting extension for fulfilment of export obligation, have condoned the delay in achieving the export obligations and have also regularised the shifting of the machinery to the new address. However, such extension remained mere formality or an eye wash, as the appellant did not have any opportunity to manufacture and export pursuant to granting of extension in March, 2018, as the machines were admittedly lying sealed by the Customs Department since 2016. The impugned orders are set aside - appeal allowed.

Summary

Issues:
Appeal against confiscation of imported machinery under EPCG scheme, imposition of penalties.

Analysis:
1. The appellant, a manufacturer of wooden furniture, imported machinery under the EPCG scheme for manufacturing and exporting finished products at a concessional duty rate.
2. After a fire incident in 2013, the appellant shifted the imported machinery to a new location without prior permission from DGFT or Customs Department.
3. Customs Department issued show cause notices in 2016 for not fulfilling export obligations and not informing about the machinery's relocation, proposing duty recovery, confiscation, and penalties.
4. Appellant submitted replies, stating efforts to inform authorities about the relocation, seeking extension for export obligations due to business disruptions, and applying for permission post-relocation.
5. DGFT granted an extension for export obligations till 2017, acknowledging the business disruptions and regularizing the machinery's relocation.
6. Commissioner (Appeals) upheld the duty demand and confiscation but dropped penalties except on the Director.
7. Appellant appealed to the Tribunal, arguing inability to fulfill obligations due to disruptions, despite DGFT's extension, as machinery remained sealed since 2016.
8. Revenue argued lack of evidence of exports and failure to fulfill obligations, supporting dismissal of appeals.
9. Tribunal noted the business disruptions, DGFT's extension, and regularization of relocation, deeming the extension futile due to sealed machinery.
10. Tribunal allowed the appeals, ordering the machinery's immediate unsealing and granting a 2-year period for fulfilling export obligations.

Conclusion:
The Tribunal allowed the appeals, setting aside the orders, directing the machinery's unsealing within 30 days, and granting a 2-year period for fulfilling export obligations, providing consequential benefits.