2023 (12) TMI 791 - AT - Customs

EPCG Scheme - fulfillment of export obligation partly - evasion of customs duty - denial of benefit of Notification No. 160/1992-Cus dated 20.04.1992 - Scope of the order passed in remand back proceedings - HELD THAT - There is no provision in the notification for giving any such benefit. Notification 160/92 dated 20.04.92 stipulates that the importer undertaking an export obligation equivalent to 4 times the CIF value of the capital goods over a period of five years shall import the goods at concessional rate of 15% . The Tribunal in Ajawat Industries Ltd. Versus Commissioner Of Customs, Bangalore 2006 (6) TMI 448 - CESTAT, BANGALORE on appeal against this order had clearly observed that the extent of export obligation fulfilled should be taken into consideration towards the duty liability in view of the amendment to the notification No.160/92 dated 20.04.92 with retrospective effect by section 115 of the Finance act read with entry No.2 of the eighth schedule . When the respondents filed an appeal against this order of the Tribunal, the Hon'ble High Court of Karnataka held that if the revenue is aggrieved by the order of the Tribunal, the revenue has to file an appeal before the Hon'ble Supreme Court since the dispute is in relation to the rate of duty leviable on the assessee in view of two different notifications . The Tribunal in its final order had categorically observed that there is no justification for holding the goods liable for confiscation as there was no willful non-compliance of the notification, the order of confiscation by the Commissioner is not justifiable when the remand order was purely for re-quantification of demand of duty. Therefore, confiscation of the goods along with the redemption fine set aside. Further regarding interest and penalty, this Tribunal had taken a clear view and held that there is no provision for interest at that relevant time and set aside the demand for interest. The adjudication authority ought to have followed the findings given by this Tribunal by quantifying the extent of duty without ordering confiscation of goods, imposing interest and penalty. Hence the Adjudication Authority violated the terms of the remand order. Regarding non-consideration of the extent of export obligation, once the Tribunal has given a finding that the appellant complied with the export obligation, Adjudication authority ought to have quantified the duty liability of 40% against goods imported under License No. 3031914 dated 04.07.1994 as the appellant fulfilled export obligation to the extent of 60% and quantify the duty liability of 85% against goods imported under license No. 2183783 dated 04.01.1994 as the appellant completed export obligation of 15%. The appeal is allowed so far it exceeds the re-quantification of duty liability with consequential relief if any as per law. Confiscation and redemption fine along with interest and penalty also set aside.

Summary

Issues Involved:
1. Compliance with Export Obligation under EPCG Scheme.
2. Validity of Customs Duty Demand and Interest.
3. Legality of Confiscation and Imposition of Penalty.

Summary:

Compliance with Export Obligation under EPCG Scheme:
M/s A & A Zippers imported capital goods under the EPCG scheme, paying 15% customs duty with the obligation to export goods worth four times the CIF value. The appellant fulfilled 60% of the export obligation and sought an extension for the remaining 40%. However, they failed to meet this obligation, leading to proceedings by DRI for evasion of customs duty.

Validity of Customs Duty Demand and Interest:
A Show Cause Notice (SCN) was issued demanding duty of Rs. 2,38,23,605/- with 24% interest and imposing penalties. The appellant contested this, citing financial constraints and partial fulfillment of export obligations. The Adjudicating Authority confirmed the demand and penalties. On appeal, this Tribunal remanded the case for re-quantification of duty, considering the fulfilled export obligations and effective customs duty rate, and set aside the interest and penalties.

Legality of Confiscation and Imposition of Penalty:
The High Court of Karnataka dismissed the respondent's appeal as not maintainable. The Adjudicating Authority, upon de novo adjudication, again confirmed the duty demand, imposed penalties, and ordered confiscation with a redemption fine. The appellant argued that this violated the remand order, which only allowed for re-quantification of duty, not the imposition of penalties or interest. The Tribunal noted that there was no provision for interest under the relevant notification and that penalties were unjustified as there was no willful non-compliance.

Final Judgment:
The Tribunal set aside the confiscation, redemption fine, interest, and penalties, directing the Adjudicating Authority to re-quantify the duty based on the fulfilled export obligations. The appeal was allowed, providing consequential relief as per law.