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Issues: Challenge to penalty imposition under Section 112(a) of the Customs Act for non-fulfillment of export obligation due to extenuating circumstances beyond control.
Analysis: The appellants, who were directors of a company importing raw materials under the DEEC Scheme for manufacturing and exporting final products, faced challenges in fulfilling the export obligation due to factors like unit closure and canceled export orders. The duty on seized goods was confirmed, but the penalty imposition was contested. The appellants argued lack of mens rea, emphasizing their inability to fulfill obligations due to uncontrollable circumstances and absence of intent to profit from goods disposal. They relied on precedents like Dencap Electronics Pvt Ltd. v. CCE, Goa, which set aside penalties in similar scenarios due to lack of mens rea. The defense contended that non-fulfillment of export obligation warranted penalties. However, upon thorough review, it was evident that extenuating circumstances, such as the goods' shelf life and canceled export orders, hindered the appellants. The investigating authorities were provided with all necessary details, and the High Court's order for company liquidation further supported the appellants' position. The absence of mens rea in failing to meet export obligations, as highlighted in previous rulings, led to the setting aside of the penalty. The judgment aligned with precedents that overturned penalties in comparable situations, ultimately resulting in the penalty being revoked and the appeals allowed.
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