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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 ..... 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/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IA, 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 No. 8905, dated 22-4-1994, demanding the total duty foregone of Rs. 19,63,325/- plus interest @ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 obligation and waiver of interest, prosecution and penalty. From the total duty liability of Rs. 23,64,066/- they agree to pay Rs. 2,64,066/- and balance in two instalments as indicated in Col. 12 of their application dated 7-6-2000. When this manner of payment was however not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 001, 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 extent of 8.13% against one import whereas they have additional liabilities against the said licence, that as the Export Obligation fulfilled is against the licence and not against one partial import, the principle of prorate benefit would be applicable in this case. 18. In their reports dated 14-9-2000 and 4-1-2001 the Office of the DGFT, New Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) that the interest liability has come up for decision before the Hon ble Courts on number of occasions and the decision of Delta Paper Mills Ltd. v. Collector of Central Excise, Guntur would be relevant in this case. (6) that at the time of clearance of their goods there was no provision for demand of interest till issue of Circular No. 49/2000-Cus. dated 27-4-2000, amending Notification No. 160/92-Cus., dated 20-4-1997. (7) that, as per judgment of Hon. Tribunal, West Regional Bench, Mumbai in the case of Mukand v. CCE, Mumbai-I, it has been held that the liability of interest does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 terms of the provision of S 3(1)(o) of the Sick Industrial Company (Special Provisions Act), 1985. Accordingly on reference the BIFR has appointed ICICI as an operating agency for the purpose of preparing a revival scheme. Accordingly it is prayed that the Settlement Commission be pleased to invoke the provision of Section 127H irrespective of the legal submission made on the validity of the demand of interest on the duty liability and in order to support the revival scheme which is struggling hard for survival. 22. On the other hand, Revenue reiterated that applicant is liable to pay the disputed interest for the reasons inter alia : (i) EPCG Scheme, as other export promotion schemes, is an outcome of two different legal enactme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 EPCG scheme was being done by DGFT. But when onus of monitoring was shifted from DGFT to the customs, the interest clause was incorporated in the customs notification, now the beneficiaries were required to execute a Bond with bank guarantee with customs, instead of DGFT, having interest clause therein. (vi) Notification 49/2000-Customs, dated 27-4-2000 is not an amending Notification to earlier Notification No. 160/92-Cus., dated 20-4-1992. Both the notification are not interrelated in any way. Hence no inference can be drawn, as contended by the applicant, that there was a legal lucuna in Notification No. 160/92-Customs, which was subsequently rectified by the Government in the Notification 49/2000-Customs. (vii) The applicant were fully aware, of their obligation to pay the interest in case of default for which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (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 the outset and the remaining accepted amount of Rs. 21,00,000/- by bank guarantee, which was required to remain in force till the final order to settle this issue is executed. This order however, was subsequently modified vide another order dated 20-10-2000 permitting execution of the bank guarantee for a period of one year with instructions to renew the same annually to the satisfaction of Commissioner of Customs (Export Promotion) Mumbai. 25. It is seen from the submission made by the Advocate as well as by the revenue on the issue of levy of interest, the stand is divergent. The revenue has taken the stand that Notification No. 160/92-Cus. enables the department to demand interest at the rate of 24% p.a. when the EPCG licence holder is a defaulter in his export obligation. In this connection, the department has referred to provision in the Export and Import Policy, the relevant provisions in the Handbook of Procedure, legal undertaking a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BEC, 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. 79/95-Cus. vide Notification No 145/95 to 149/95 dated 19-9-1995. The effect of the amendment as conveyed in the said circular were : (a) The requirements of execution of Bond/legal Undertaking with the Licensing authorities and production of evidence in this regard has been done away with. (b) In case of non-fulfillment of the conditions of the Notifications interest at the rate of 24% per annum on the duty becoming payable shall also be recoverable from the date of clearance of imported goods till the date of payment; and (c) The exporter will be required to produce evidence to the satisfaction of the Assistant Commissioner of Customs regarding discharge of export obligation (other than the certificate from the Licensing Authority) and compliance with other conditions of the notifications. Though all the aforesaid notifications were amended, the Notification No. 160/92-Cus. was not amended. From this the intention of the legislature is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hra Pradesh v. Mothey Gangaraju - 1963 (14) S.T.C. 112 Ballarpur Industries Ltd. v. UOI - AIR 1990 Bom. (D.B.) 239 M.P. Mittal v. State of Haryana -AIR 1984 S.C. 1888 CIT v. Lalit Prasad Rohini Kumar - 1979 (117) I.T.R. 603 CIT v. Mahabir Prashad - 1980 (125) I.T.R. 165 Collector v. Samaj Biri Co. - 1987 (29) E.L.T. 590 29. Since these cases have been referred to by the Hon ble High Court, while deliberating the facts in issue, we do not think it is necessary refer once again to these cases. Thereafter the Hon ble High Court has held as below : The payment of interest in case of default in payment of tax is a means of compelling an assessee to pay tax by a prescribed date. Interest is made payable on that amount of tax which ought to have been paid earlier, i.e., within the prescribed time or the specified period and which has not been paid; that interest is made payable because Government to that extent is deprived of the use of money which otherwise it could have got at an early point of time and that on the contrary, provision for payment of interest being a method for collecting or recovering its revenue, it is for the State to decide what is most efficacious for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PCG licence. This undertaking provides a clause that the importer shall pay full amount of Customs duty saved, and 24% interest thereon, for the total CIF value of imported goods from the date of import, in the event that the capital goods are not used for the purpose for which they were imported. There is clearly a conflict between what is contained in the undertaking and what is contained in the notification. The undertaking provides for recovery of proportionate duty, that is the duty other than full amount of customs duty saved. The meaning of words occurring in the undertaking will only be that the duty is payable in case the export obligations is not completed has to be in proportion to the extent of shortfall in that export obligation. The notification, however, is clear that it is the entire duty that is to be paid. It requires the importer to pay duty leviable on such capital goods but for the exemption contained therein. That duty is obviously is the entire duty that has been exempted. As we have noted, there is no provision in the notification for recovery of interest, while there is no provision in the case of the undertaking. 31. From the aforesaid it is apparen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f compliance among the tax paying public and the morale of the administration, observed, inter alia; This does not mean that the door for compromise with an errant taxpayer should remain forever closed. In the administration of fiscal laws, whose primary objective is to raise revenue, there has to be some room for compromise and settlement. A rigid attitude would not only inhibit a one time tax-evader or an unintending defaulter from making a clean breast of his affairs, but would also unnecessarily strain the investigation resources of the Department in cases of doubtful benefit to revenue while needlessly proliferating litigation and holding up collections. We would therefore, suggest that there should be a provision in law for a settlement with a tax payer at any stage of the proceedings. TERMS OF SETTLEMENT 34. In view of the aforesaid the term of settlement is as follows : 1. The duty liability of the applicant comes to Rs. 25,73,271/- (Rs. Twenty Five lakhs Seventy Three Thousand Two hundred and Seventy One Only) which is his true and correct amount of duty in discharge of his duty liability in the case before the Commission. In compliance of Interim Order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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