2024 (1) TMI 471 - AT - Customs

100% EOU - confirmation of demand and appropriation of the amount of duty and interest already paid and in addition, equal amount of penalty was also imposed - issuance of SCN as per proviso to sub-section (2) to Section 28 of CA - HELD THAT - Despite the fact that appellant did not have the EPCG license and they got their 100% EOU de-bonded without payment of duty, therefore it will be well within the knowledge of the appellant that duty is payable and they avoided to pay the duty. Therefore, it is clearly a malafide on the part of the appellant. As regards the submission of the learned Counsel that their case is covered by proviso to sub-section (2) to Section 28 and show cause notice cannot be issued, it is observed that the provision for non-issuance of show cause notice is applicable only when the assessee paid the duty and interest and informed in writing to the department. Whereas, in the present case, firstly the extended period was informed on the ground that there is suppression of facts and malafide on the part of the appellant and secondly, the appellant have not declared to the department that they want to close the case on payment of duty and interest and therefore, the appellant is not entitled for relief as provided under sub-section (2) of Section 28 of the Customs Act, 1962. However, as the appellant have admittedly paid duty and interest but the option for payment of reduced penalty under sub-section (5) of Section 28 of Customs Act has not been extended either by the Adjudicating Authority or by the Commissioner (Appeals) therefore, only for limited purpose of option for reduced penalty in terms of sub-section (5) of Section 28, the matter needs to be remanded. The Adjudicating Authority may reconsider the redemption fine imposed against the confiscation of capital goods. As regards the payment of duty and interest, since the same is not contested, it is maintained. The appeal is allowed by way of remand to the Adjudicating Authority.

Summary

Issues involved:
The issues involved in the judgment are related to the de-bonding of a 100% EOU unit, payment of customs duty, imposition of penalty, and confiscation of capital goods.

De-bonding of 100% EOU unit and payment of customs duty:
The appellant, a 100% EOU, de-bonded their unit without paying customs duty, claiming to be in the process of obtaining an EPCG license. Subsequently, audit objections were raised regarding the lack of the EPCG license, leading to a show cause notice for the demand of customs duty and interest. The Adjudicating Authority confirmed the demand, imposed penalties, and confiscated capital goods with an option for redemption upon payment of a fine.

Legal considerations and findings:
The Tribunal noted that the appellant de-bonded the unit without paying duty, indicating malafide intentions. The argument that the case falls under a proviso to Section 28 was considered, but the Tribunal observed that the provision for non-issuance of show cause notice applies only if the duty and interest are paid and informed to the department in writing. As the appellant did not declare their intent to close the case by paying duty and interest, relief under Section 28 was not applicable. However, since duty and interest were paid, the option for reduced penalty under sub-section (5) of Section 28 of the Customs Act was not extended, necessitating a remand for reconsideration of the penalty and redemption fine on the confiscated capital goods.

Decision:
The appeal was allowed for remand to the Adjudicating Authority specifically for the limited purpose of considering the reduced penalty under Section 28 of the Customs Act. The payment of duty and interest, being uncontested, was maintained.

This judgment highlights the importance of compliance with customs duty obligations and the implications of de-bonding a 100% EOU unit without fulfilling necessary requirements.