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TMI Blog2001 (3) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... om the date of the licence. The licence also mandated that before clearance of the first consignment but not later than six months from the date of issue of the licence, the Applicant would execute a Legal Undertaking and Bank Guarantee in the manner indicated in para 102 of the Handbook of Procedures as amended from time to time, with the concerned Export Obligation Cell of the DGFT. 3. The Applicant imported the capital goods, viz. stream equipment for foamed PVC sheets and availed exemption under the Notification No. 160/92-Cus., dated 20-4-1992 as amended, which extended concessional customs duty of 15% to such capital goods imported under the EPCG Scheme subject to condition specified therein. The capital goods were imported and cleared in three consignments as under : No. Bill of Entry Details Assessable Value (Rs.) Duty paid at concessional rate 15% (Rs.) Duty saved Rs. 1. 9309, dated 27-1-1994 (Thoka No. 20/2 dated 12-1-1994) 1,28,66,358/- 19,29,954/- 27,73,271/- 2. 2844, dated 7-4-1994 83,879/- 2,582/- 69,619/- 3. 8905, dated 22-4-1994 84,16,469/- 12,62,470/- 18,93,706/- 2,13,66,706/- 32,05,006/- 45,37,596/- 4. As per one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... House, Ballard Estate, Mumbai-400 038 issued a Duty Demand Notice No. 5/40-SPL-121/94 IIA, dated 20-8-1998 to the Applicant asking them to show cause why an amount of Rs. 25,73,271/- being the duty foregone on the goods cleared by them against the Bill of Entry 20/2, dated 12-1-1994 at concessional rate of duty of 15% under exemption Notification No. 160/92-Cus. as amended, should not be demanded from the applicant, plus interest @ 24% per annum from the date of clearance till the date of payment of the duty in as much as the applicant has not submitted any valid proof/evidence of having fulfilled the export obligation as undertaken by them and having not complied with the terms and conditions of the said exemption notification. 7. It is in connection with the above proceedings initiated under the Customs Act, 1962, that the Applicant has filed an application to the Settlement Commission on 20-6-2000, to have the case settled. 8. The said office of the Commissioner of Customs (Export Promotion) have subsequently issued on 4-11-2000, a demand notice on similar lines w.r.t. imports made by the Applicant vide the other two Bills of Entry viz. No. 2844, dated 7-4-1994 and N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustrial Companies Act (SICA) and was declared sick unit by BIFR Under Section 19 of SICA at its hearing on 5-12-1997, the BIFR appointed ICICI as the Operating Agency (OA) to formulate a scheme for rehabilitation of the company. (3) that meanwhile the company received a Duty Demand Notice from the Asst. Commissioner of Customs (EPCG) Group, demanding Rs. 25,73,271/- dated 20-8-1998. (4) that the applicant's company is being taken over by M/s. Rajshri Production, which is a limited company and is not a subsidiary of Rajshri Plastiwood and that they are not inter-linked in any manner. (5) that the applicant had executed a bank guarantee on 7th February, 1994 with the Bank of Rajasthan to DGFT for Rs. 22,00,000/- for a period of 5 years, but on receipt of notice of payment in terms of the said bond, the Bank has intimated that the guarantee has since expired and that a copy of the said letter written to DGFT has been endorsed to the applicant. (6) that their prayer is that duty liability be reduced to Rs. 23,64,066/- from Rs. 25,73,270/- as they have partially fulfilled export obligat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t complied with the Orders of the Commission w.r.t. payment of admitted liability. They deposited Rs. 2,64,066/- on 28-9-2000 by way of pay order and also submitted the Bank Guarantee for a sum of Rs. 21,00,000/- valid for one year i.e. from 31-10-2000 to 31-10-2001 to the Jurisdictional Commissioner. 17. In the reports dated 24-7-2000 and 5-1-2001, the Office of the Commissioner of Customs (Export Promotion), submitted, inter alia, various facts related to the importation/clearance of the said capital goods by the applicant, the Demand Notices issued to them and arguments against admitting the application, payment of duty in instalments and waiver of interest. It was also conveyed by the Jurisdictional Commissioner that as the Applicant had not submitted shipping bills endorsed with the said EPCG Licence number, Chartered Accountant's and Bank Realisation Certificates and other documents prescribed in Appendix 10C of the Exim policy, in support of their having fulfilled export obligation to the extent of 8.13%, their claim could not be cross-verified. It was also submitted that the applicants were seeking to get benefit of partial fulfilment of their export obligation to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment of dues to the Govt. due to breach of conditions/agreement entered by the Applicant with the Govt. (DGFT/Customs authorities). 19. In the hearing held on 11-1-2001 the Applicant, represented by, learned Advocate Shri A.K. Chatterjee, made the following submissions; (1) that they have admitted the duty liability of Rs. 23,64,066/- as against the Demand Notice of Rs. 25,73,271/-. (2) that they have paid Rs. 2,64,066/- and for the balance of Rs.21 lakhs they have executed Bank Guarantee to the Commissioner of Customs (Export). (3) that for the proof of export fulfilment they could produce only a fax copy of AR4, that they could not readily trace out the shipping Bill as a proof of export fulfilment hence agree to make the differential duty payment; without any installment facility within 30 days. (4) that hey have executed a Bond for differential duty at the time of importing the goods in terms of Notification No. 160/92, the said Notification does not talk about any payment of interest hence the Bond which they executed does not mention of interest. (5) &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y does not accrue to them for the reasons, inter alia : (1) that the Notification No. 160/92, dated 28-4-1992 in terms of which the clearance was allowed is a self contained Notification but which did not empower the department to demand interest on the duty liability in case of a default in export performance. (2) the levy of interest is a part of collection of tax and therefore it is covered by the second limb of Article 265 of the Constitution of India and should be an authority of law. Notification 160/92 is an subordinate legislation and the notification is statutory in nature. The authorities under the Act are bound to act on this notification and there is no dispute that the notification does not provide for claiming interest. (3) DGFT could not lay down a law in the matter of taxation and levy of import duties including interest which partakes the character of duty. In any case of conflict the notification should prevail and the Notification No. 160/92 was issued under Section 25 of the Customs Act in the law. (4) The company has been declared as a Sick industrial company in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 of Foreign Trade (Development and Regulation) Act, 1992. (iv) The Handbook of Procedure, which is again a legal document issued under paragraph 16 of Export and Import Policy, 1992-97 AM at page 29 under paragraph 102 (I)(a) prescribes that the importer shall execute a legal undertaking before clearance of goods through customs. The legal undertaking would be for an amount equal to the value of export obligation imposed plus the value of duty saved plus the interest at the rate of 24% per annum for the export obligation period plus six months. The form of Legal Agreement - undertaking in clause (h) and (x) binds the applicant irrevocably to pay interest @ 24% per annum on the amount of customs duty saved from the date of import of the first consignment. The applicant has followed the procedure laid down statutorily in the policy and Handbook of Procedures. (v) It emerges from the above discussion that when the above provision is read with Notification No. 160/92-Cus., the differential duty is secured by the customs notification and the interest by the LUT executed by the applicants. The position remained same till the monitoring of EPC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported capital goods for manufacture of PVC sheets etc and availed the benefits under Custom Notification No. 160/92-Cus., dated 20-4-1992 as amended. The Applicant had a valid EPCG licence as mentioned elsewhere. The Applicant had imported goods under 3 bills of entries but the application for settlement is relating to only one bill of entry. At the time of importation the Applicant had saved duty of customs of Rs. 25,73,271/-. The Applicant has also accepted in full the said duty liability as payable by them for settling the case. 24. The Applicant has made the following prayer : (i) Immunity from payment of any further duty of Customs/Excise in respect of the consignment in question; (ii) Immunity from payment of interest @ 24% from the date of clearance to the date of payment of the duty demanded; (iii) Immunity from payment of any fine and penalty under the Customs Act or any allied Act, and (iv) Immunity from prosecution under the Customs Act or any other allied Act. With reference to the aforesaid prayer of the applicant the Commission vide order dated 23-8-2000 allowed the Applicant to pay an amount of Rs. 2,64,066/- at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of clearance of the goods." 26. In the Notification No. 160/92-Cus. there is no provision to the extent as indicated supra. On the contrary conditions (ii) and (iii) of the Notification read as below : (ii) "The importer, at the time of clearance, shall produce to the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] a certificate from the licensing authority for having executed a bond under paragraph 45 of the Policy; and (iii) The importer at the time of clearance of the said capital goods shall make a declaration before the [Assistant Commissioner of Customs or Deputy Commissioner of Customs], in such form as he may specify, binding himself to pay on demand an amount equal to the duty leviable on such capital goods but for the exemption contained herein in respect of which the conditions specified in Column (2) of the Table have not been complied with." 27. In this connection, reference may be invited to CBEC, Circular No. 131/95-Cus. (F. No. 605/166/95-BBK, dated 20th Dec. 1995) conveying the amendments effected to the Notification Nos. 107/95-Cus., 80/95-Cus., 106/95-Cus., 107/95-Cus., 128/94-Cus., 111/95-Cus., 110/95-Cus. & 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed upon the following decisions : Whitney v. Commissioners of Inland Revenue - 1926 Appeal Cases 37 R. Constructions v. Dy. Commercial Tax Officer - AIR 1959 Madras 382 Asstt. Collector v. N.T. Co. of India - 1978 (2) E.L.T. (J416) (S.C.) Khazan Chand v. State of J & K - 1984 (56) S.T.C. 214 Ujagar Prints v. U.O.I. - 1989 (39) E.L.T. 493 (S.C.) Ashok Singh v. Asstt. Collector - AIR 1992 S.C. 1756 Ashapura Mineral Co. v. State of Gujarat - 1993 (89) S.T.C. 289 J.K. Synthetics Ltd. v. Commercial Tax Officer - 1993 (68) E.L.T. 246 (Tribunal) Venkata Subbarao v. State of A. P. - AIR 1965 S.C. 1773 H.L. Mehra v. State of Maharashtra - AIR 1971 S.C. 1130 M. Gangaraju & Sons v. State of A. P. - AIR 1965 A.P. 60 Ferro Alloys Corpn. Ltd. v. A. P. State Electricity Board - AIR 1993 S.C. 2005 Narinder Chand v. V.T. Him Pra - AIR 1971 S.C. 2399 B.C. Banerjee v. State of M. P. - AIR 1971 S.C. 517 Prem Nath Khandelwal v. Asstt. Collector - 1970 (77) I.T.R. 949 I.T.O. v. Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. - 1975 (101) I.T.R. 457 Gulbanu Razack v. Asstt. Commissioner of I.T. - 1990 (186) I.T.R. 226 State of Andhra Pradesh v. Mothey Gangaraju - 1963 (14) S.T.C. 112 Ballarpur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption provided by Notification No. 160/92-Cus. the importer could not fulfill the export obligation. The notice was issued by Customs for recovery of duty and interest. The Tribunal has held as below : "The notification itself does not provide for payment of interest by the importer. The undertaking by the importer referred to in condition (3) of the notification was only to "pay on demand an amount equal to the duty leviable on such capital goods but for the exemption." The provisions of the Customs Act, 1962 also do not justify demanding interest. Section 28AA of the Act only applies where the duty demanded under Section 28 is not paid within three months from the date of the confirmation of the duty. Section 28 AB will not be attracted in this case, the demand for duty not having arisen as a result of any of the factors specified in the proviso under sub-section (1) of Section 28. The departmental representative points to the provisions of Paragraph 45 of the Policy, and Paragraph 103 of the Handbook of Procedures referring to the legal undertaking required to be furnished by the importer and applying for a EPCG licence. This undertaking provides a clause that the importer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence No. 2131015, dated 15-9-1993 vide their letter RFL MD : 99.2000, dated 27-11-1999 detailing therein, various force majeure reasons which were beyond their control on account of which they could not fulfil their export obligation; however the DGFT had rejected their request. 32. We further note the applicant's submission that they have been declared as a sick industrial company in terms of the provisions of Section 3(1) (o) of the Sick Industrial Company (Special Provisions) Act, 1985 and that the Board of Industrial and Financial Reconstruction has appointed ICICI as per operating agency for the purpose of preparing a revival scheme. On perusal of the Draft Rehabilitation Scheme dated 26-5-2000 of the ICICI, we find that one of the term of settlement proposals envisages waiver of interest and liquidated damages on the concessional duty of equipment imported under the EPCG Scheme. 33. The Commission finds it proper to refer to the Wanchoo Committee Report, the genesis of Settlement machinery for taxation laws in India, which, while commenting on the deleterious effect of frequent disclosure schemes on the level of compliance among the tax paying public and the moral ..... X X X X Extracts X X X X X X X X Extracts X X X X
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