9911796707
TMI Blog2001 (5) TMI 919X X X X Extracts X X X X X X X X Extracts X X X X ..... an export obligation to export polyethylene and polypropylene foam profiles, like sheets, hoses, rods, net, pad etc. worth US $ 3708000/- within a period of 5 years from the date of issue of 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 Procedure or amended from time to time, with the concerned export obligation cell of the DGFT. 3. The applicant imported the capital goods viz. complete custom built plant for manufacturing of polyethylene and polypropylene and availed exemption under Notification No. 160/92-Cus., dt. 20-4-1992 as amended, which extended concessional customs duty at 15% to such capital goods imported under EPCG Scheme subject to conditions specified therein. The capital goods were imported vide B/E No. 125, dt. 15-9-94. The goods were assessed and CIF value as taken at Rs. 2,89,54,286/- on which the applicant paid the duty at concessional rate of 15% amounting to Rs. 43,86,574/- and duty saved was Rs. 65,79,872/-. 4. As per one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be recovered by the department and why action under Section 111(o) of the Customs Act, 1962 should not be initiated for having failed to fulfil the export obligation within the export obligation period of 5 years, and thus contravened the conditions of the notification No. 160/92-Cus./124/93-CUS. The show cause notice also proposed initiation of penal action under Section 112(a) of the Customs Act, 1962. 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 7-7-2000, to have the case settled. 8. In their application dated 7-7-2000 seeking settlement of the said case, the applicant disclosed and admitted as payable an amount of Rs. 29,24,383/- out of Rs. 65,79,872/- demanded in the said show cause notice dt. 15-7-99. The applicant sought the following issues to settled : (i) The show cause notice, besides seeking to recover additional duty, also seeks to recover interest. There is no provision for recovery of interest either on the relevant Notification No. 160/92-CUS. or in the import policy. Further no interest can also be charged under Section 28AB of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire accident and the entire factory was gutted in the fire and the total damage was to the tune of Rs. 7 Crores. However, they could get only Rs. 5.11 Crores on insurance amount. The amount received from insurance company was paid to IDBI who had lent a large sum to the applicant. In the meanwhile, the export obligation period expired in July, 1999. During these two years they could not revive the unit. They therefore, approached the DGFT, New Delhi, for extension of the export obligation period in June, 1993, so that the export obligation could be effected. But the said application was rejected by DGFT. They also approached the Grievance Committee of DGFT, New Delhi for reconsideration of extension of the export obligation period in March, 2000, but the said application was also rejected by the said Committee. (vi) That in the meanwhile, they were issued a show cause notice by Customs for non fulfilment of export obligation, within the stipulated period. (vii) That they have availed exemption from CVD of Rs. 36,55,478.63. While clearing the final product to the domestic market under the facility of Modvat, they had to pay duty of Rs. 18,11,600/- from the PLA. They had imported t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice issued to them and arguments against admitting the application payment of duty in full and waiver of interest and penalty. 16. In their report dt. 20-11-2000 the office of the DGFT, New Delhi submitted, inter alia, (i) that the actual liability on the part of importer as per legal undertaking executed with DGFT's office was : 100% duty saved : Rs. 65,80,541/- Interest @ 24% p.a. Rs. 98,00,499/- From 15-9-94 to 30-11-2000 Total Rs. 1,63,81,040/- 17. The Office of the DGFT, requested the Commission to consider the recovery of the full custom duty with interest as per terms of legal undertaking. 18. In the hearing held on 9-2-2001, the applicant, represented by learned Shri A. Jankiraman, Chartered Accountant, Navin C. Shah and Ajay B. Shah, Directors of the company, made the following submissions : (i) there was a delay in payment of admitted liability due to the slow and delayed processing of their request for disbursement by IDBI. Hence they could make the payment only on 20-11-2000 and same was credited to Customs treasury on 23-11-2000. , (ii) that the Misc. application regarding extension of time/condonation of delay was filed on 6-12-2000. The le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licy, that no interest can also be charged under Section 28AB of the Customs Act, 1962 for the reasons that the goods were imported in 1994 whereas Section 28AB was inserted in the Customs Act, 1962 for the first time by the Finance Act, 1996 and it was made applicable only from 29-9-96. In this particular case, interest has been demanded on the duty foregone by the applicant as per Section 47 of the Customs Act, 1962. Had the applicant not availed the benefit of the Notification No. 160/92-Cus., dt. 20-4-92, the duty foregone amounting to Rs. 65,79,872/- would have been accrued to the Government. The Government lost the interest on this amount as a result of the applicant is liable to pay interest as per Section 47 of the Customs Act, 1962. (iii) That the action proposed by the department under Sections 111(o) and 112 (a) of Customs Act, 1962 is fully justified in this case. Findings/Conclusions 22. Commission has gone through the case records, submissions made by the applicant and his consultant and the submissions made by the Revenue. The admitted position of facts is that the applicant had imported capital goods for manufacture of polyethylene and polypropylene foam pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Para 45 of Exim Policy provides for the execution of a legal undertaking by the importers with the licensing authority supported by a bank guarantee for the fulfilment of the Export obligation. As per para 102(I)(a) of Handbook of Procedures Vol. I (1992-1997), a legal undertaking is valid for six years for an amount equal to the value of the export obligation imposed plus the value of duty saved plus the interest at the rate of 24% per annum for a period of six years be executed by the importer with the licensing of authority. 28. The Customs Notification No. 160/92-Cus., dt. 20-4-1992 issued under Section 25(l) of Customs Act, 1962 exempts capital goods imported under the Capital Goods for Export Promotion in excess of 15% leviable as basic Customs duty. The additional duty leviable as per Section 3 of the CTA, 1975 was also exempted from payment subject to the conditions that - (iv) the capital goods imported are covered by a valid licence issued under the export promotion capital goods (EPCG) scheme in terms of Exim Policy and the said licence is produced for debit at the time of clearance, (v) the importer at the time of clearance, shall produce to the Assistant Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N is silent about the provisions under which the interest is chargeable. However in the course of hearings before this Bench, the Revenue have submitted that interest has been demanded on the duty foregone as per Section 47 of the Customs Act, 1962. We find ourselves unable to agree with this stand of Revenue. Section 47 of the Customs Act, 1962 provides for the proper officer of Customs to allow clearance of goods entered for home consumption if he is satisfied that the goods are not prohibited and the importer has paid the import duty, if any, assessed thereon and any charges payable under the Act. Sub-Section (2) of Section 47 lays down that the importer shall pay interest at the rate fixed if he fails to pay the import duty in a specified number of days, excluding holidays, from the date on which the bill of entry is returned to him for payment of duty. 35. In the import under discussion, the Applicant filed Bill of Entry No. 125, dt. 15-9-94 on which duty of Rs. 43,86,574/- was assessed on an assessable value of Rs. 2,92,43,829/-. The provisions of Section 47 regarding liability to pay interest would apply if the Applicant had failed to pay the import duty so assessed wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duce 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. 37. Though all the aforesaid notifications were amended, the Notification No. 160/92-Cus., was not amended. From this the intention of the legislature is apparent. In this connection it is difficult to ignore the following judicial pronouncements in relation to levy of interest : (1) Tan India Ltd. v. Collector of Central Excise, Madras [1996 (82) E.L.T. 448 (Mad.)] (2) Mukand Ltd. v. Commissioner of Central Excise, Mumbai-I [1996 (88) E.L.T. 725 (Tribunal)] (3) Delta Paper Mills Ltd. v. Collector of Central Excise, Guntur [1995 (77) E.L.T. 544 (A.P.)] (4) Philips (India) Ltd. v. Commissioner of Customs, Export Promotion, Mumbai order No. C.I/4307, dt. 19-12-2000 [2001 (137) E.L.T. 697 (Tri. - Mumbai). 38. In the case of Tan India Ltd. the Hon'ble High Court, Madras held, inter alia, that in the absence of any statutory provision, the department cannot claim interest on delayed payment only on the basis of CBEC Circular. In the case of D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed 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 this purpose, and the defaulter has no moral right to make any grievance in this behalf. The provision by which the authority is empowered to levy and collect interest, even if construed as forming part of the machinery provisions, is substantive law for the simple reason that in the absence of contract or usage interest can be recovered under law and it cannot be recovered by way of damages for wrongful detention of the amount. Any provision made in a statute for charging or levying interest on delayed payment of tax must be construed as a substantive law and not adjective law. The tax is levied in exercise of a sovereign power, therefore, the analogy of a creditor and debto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leted 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. Provides for recovery of proportionate duty, that is the duty other than full amount of customs duty saved. The meaning of the words occuring in the undertaking will only be that the duty is payable in case the export obligation is not completed has to be in the proportion to the extent of short fall 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 cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount of duty liability viz. Rs. 65,79,862/-. On the issue of interest liability, the arguments of Revenue - that interest is legally recoverable do not hold much water as discussed above, on the other hand, as discussed above a whole gamut of case laws support the opposite view. The revenue has also not disputed the claim of the applicant with reference to the devastating fire that broke out in there factory which damaged the installed machinery. The fire and the subsequent industrial dispute were events beyond the Applicant's control, which was to an extent responsible for the Applicant's failure to fulfil the required export obligation. A sympathetic consideration is therefore warranted. The Commission thus finds sufficient grounds for granting immunity to the Applicant from payment of any fine, or penalty under the Customs Act, 1962. 45. However, the Commission finds itself unable to agree with the Applicant's request to permit availment of Modvat of the amount of Rs. 36,55,479/- paid towards CVD portion of the duty liability. For one thing, even as per the erstwhile Modvat rules as existed at the time of the import of the capital goods, the Applicant could have be av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the (CVD) portion of total duty liability is no doubt payable by the Applicant, nonetheless there is no provision in the presently applicable Cenvat Rules to enable him to take Cenvat credit equivalent to such (CVD) portion amount that would be paid by him now. 48. It is noticed that the applicant did not pay the amount admitted as payable in col. No. 12 of his application, that was allowed to be proceeded with in terms of Section 127C(1) of the Customs Act, 1962, within 30 days as required under Section 127C(3) ibid. However, considering the mitigating factors put forth by the Applicant, we find that there is a case for waiver of interest for such delayed payment. For the same reasons the Commission is also inclined to favourably grant of instalment facility in respect of payment of settlement amount, though the 12 month spread out instalment plan requested for by the Applicant does appear to bit too optimistic. Terms of Settlement 49. In view of the aforesaid the terms of settlement are as follows : 1. The duty liability of the applicant comes to Rs. 65,79,862/-. The applicant has paid Rs. 29,24,383/- as per interim order dt. 8-9-2000. The balance amount of Rs. 36 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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