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TMI Blog2011 (10) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal, in all the cited judgments, clearly held that fine, penalty and interest is not leviable in similar cases were the export obligation could not be fulfilled due to Global Economic crisis in Asia and particularly in South East Asia. All these judgments set aside the penalties, interest and fine. The prayer of the appellants for setting aside the same is allowed. The fine, penalty and interest are set aside in the light of the cited judgments on the same issue." 3.On the above canvas of the findings recorded by the Tribunal, the Revenue has raised a contention as to whether global crisis could be a ground to exonerate the Respondent from its export obligation. 4. The learned counsel appearing for the Respondent/ Assessee could not support the impugned order. 5. In our considered view, the view taken by the CESTAT quoted above is absolutely untenable and perverse. The view taken could not be said to be a legal and valid in absence of any foundation in support thereof. It was not a defence taken by the Respondent before either of the authorities below. 6. In the circumstances and also looking to the consensus between the parties, we are constrained to set aside the impugned o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant did not fulfill the conditions of the EPCG licence and Notification No. 160/92-Cus, a show cause notice dated 22/02/2001 was issued to the appellants asking them to show cause as to why differential customs duty amounting to Rs. 1,81,72,257/- should not be demanded from the appellant in terms of the legal undertaking and the declarations furnished by the appellant to the Assistant Collector of Customs under Notification No. 160/92-Cus dated 20/04/1992. The show cause notice also proposed to demand interest @ 24% on the differential duty as per the legal undertaking executed by them with DGFT. The show cause notice further proposed to confiscate the imported capital goods valued at Rs. 9,08,61,287/- under the provisions of Section 111(o) of the Customs Act, 1962 and also to impose a penalty under Section 112(a) of the said Customs Act. 2.3. The case was adjudicated by the Commissioner of Customs (Export Promotion), Mumbai vide order dated 04/10/2002 wherein the said Commissioner,- i) confiscated the capital goods valued at Rs. 9,08,61,287/- under Section 111(o) of the Customs Act, 1962. However, he gave the appellant an option to redeem the same on payment of fine of Rs, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity is not automatic but should be authorised by law. It is their contention that Section 28AA of the Customs Act providing for interest on short-levy was brought into the statute w.e.f. 12/05/1995 by the Finance Act, 1995 and Section 28AB providing for interest in cases where the short-levy or non-levy is due to fraud, collusion, suppression, willful mis-statement, etc. came into the statute book in 1996 and the said Section was amended vide Finance Act, 2001 w.e.f. 11/05/2001 providing for levy of interest in all cases. Interest under Section 28AB or 28AA can be levied only when duty amount is determined under Section 28 and, therefore, no interest can be demanded from the appellant under the aforesaid provisions in the instant case. 3.3. The learned counsel further argues that in the present case the imports were made in 1993. The Customs Notification No. 160/92-Cus did not provide for payment of customs duty along with interest in case the importer did not fulfill the export obligation. After the introduction of Section 28AA and 28AB, the Government amended various Notifications granting export incentives in or around 19/09/1995 providing for recovery of int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tri.-Bang.) b) Taurus Novelties Ltd. vs. Commissioner of Customs 2004 (173) ELT 100 (Tri.-Bang. c) Philips India Ltd. vs. Commissioner of Customs 2001 (137) ELT 697 (Tri.-Mum) d) Meirs Pharma (India) Pvt. Ltd. vs. Commissioner of Customs 2004 (167) ELT 53 (Tri.-Chennai) e) Dyna Lamps & Glass Works Ltd. vs. Commissioner of Customs 2003 (157) ELT 73 (Tri-Chennai) f) Fal Industries Ltd. vs. Commissioner of 2003 (159) ELT 215 (Tri-Chennai) g) South India Corpn. vs. Commissioner of Customs 2009 (244) ELT 581 (Tri.) h) Rajshri Plastiwood 2001 (130) ELT 295 (Sett. Comm.) 3.6. With regard to the confiscation of the goods, the learned counsel argues that the confiscation under Section 111(o) of the Act is not sustainable in law. Section 111(o) is applicable only when condition of exemption is violated by the importer. As per Notification No. 160/92, the condition stipulated is as follows: "The importer at the time of clearance of the said capital goods shall make declaration before the Assistant Collector 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 herei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rejected outright. The learned AR also submits that Notification No. 160/92-Cus dated 20/04/1992 prescribes a number of conditions. The condition (i) specifies that the capital goods are imported under EPCG scheme in terms of Exim Policy. Conditions (ii) and (iii) stipulate that the importer binds himself to pay on demand the duty leviable on such capital goods by executing a bond under para 45 of the Exim Policy. Para 45 of the said Policy read with Para 41 ibid and para 102(i)(a) of the Handbook of Procedures stipulates that in the case of non-fulfillment of export obligation, the importer has to pay duty with interest @ 24% per annum. In the bond executed by the importer, it has been stipulated that in the event of default in meeting the export obligation condition, the importer is liable to pay interest @ 24% per annum on the amount of duty saved from the date of import of first consignment till the payment of duty. Therefore, the importer cannot escape from the payment of interest when duty liability is confirmed. The learned AR relies on the following judgments in support of the above contentions: (a) Parasrampuria Synthetics Ltd. vs. Commissioner of Customs 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores imposed is only 20% of the CIF value of the goods which is very reasonable. 4.7. In respect of penalty imposed, the learned AR submits that in the instant case the importer did not avail of the opportunity for extending the export obligation period offered by DGFT during May, 1999 and September, 2000. They also did not honour the interim order of the Settlement Commission for deposit of duty. After losing all the opportunities and also after losing the appeal in the Hon'ble High Court of Bombay, the appellant have paid the differential duty only on 05/09/2011. From the above sequence of events, it is amply clear that the importer had mala fide intention to evade payment of duty and, therefore, imposition of penalty of Rs. 1 crore on the importer and Rs. 20 lakhs each on the Directors of the company are fair and reasonable and needs to be upheld. 5. In his rejoinder, the learned counsel for the appellant submits that in the case of Parasrampuria Synthetics Ltd. relied upon by the Revenue, there was no provision for charging of interest at the time of import but the same was existing at the time of fulfillment of export obligation whereas in the insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the same outright. 6.2. The next issue relates to leviability of interest in the instant case. The appellants, contention is that interest under Section 28AA or 28AB can be levied only when the short-levy is determined under the provisions of Section 28. In the instant case, duty has been confirmed and demanded under the provisions of Notification No. 160/92-Cus in terms of the bond and LUT executed by the appellant with the Customs and DGFT authorities. Since interest liability is not under the provisions of the Customs Act and such liability is a substantive liability, interest cannot be demanded under the provisions of the Notification or the bond and bank guarantee executed by the appellant before the authorities. The appellant has also relied on the judgment of the Settlement Commission in the case of Rajshri Plastiwood Ltd. 2001 (130) ELT 295 in support of the above contention. We are not impressed with this argument. In the case of Parasrampuria Synthetics Ltd, cited supra, this Tribunal while dealing with the imports under Notification No. 160/92-Cus held as follows: "we hold that as the Appellants have not fulfilled the export obligation they ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Export Import Policy 1992-97. The capital goods in the instant case have been imported under the said provision. Vide Para 45 of the Exim Policy 1992-97, the importer was required to execute with the licensing authority a legal undertaking supported by a bank guarantee wherever necessary for the fulfillment of the export obligation as per the details specified in the Handbook of Procedures. As per the para 102 of the said Handbook of Procedures, the requirements were as under: "102 Execution of Bank Guarantee and Legal Undertaking: (i) Before clearance of goods through Customs, but not later than six months from the date of issue of the licence, the importer shall execute a Legal Undertaking and Bank Guarantee in the manner indicated below, for fulfilment of the export obligation with the licensing authority in whose jurisdiction the licensee is situated or the Export Obligation Cell II in the Directorate General of Foreign Trade, Udyog Bhawan, New Delhi:- (a) A Legal Undertaking 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 ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 1997 published vide Public Notice of the Government of India in the Ministry of Commerce, No. 1-ITC (PN) 92-97, dated the 31st March, 1992; (iii) 'Licensing Authority' means an authority competent to grant a licence under the Import (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947 (18 of 1947)." 6.5. In the case of export promotion scheme, the Exim Policy and the Customs Notification form an integrated scheme as a whole and they have to be interpreted and applied in a harmonious manner so that the Policy objectives are achieved. At the relevant time while the importer was required to execute the bond and bank guarantee with the Customs for payment of duty, in case export obligations are not fulfilled, in respect of interest on the duty amount saved on failure to fulfill the export obligation, bond and bank guarantee was executed before the licensing authorities. Merely because two separate bonds and bank guarantees have been executed, one with the Customs authorities and another with the licensing authorities, it does not imply that these cannot be invoked together when there is a failure to fulfill the terms and condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaking that it shall perform certain acts necessary for the enjoyment of the benefit being extended in its favour could continue enjoying those benefits while the conditions subject to which the benefit was extended are violated. Our answer is in the negative. No party can avail of a benefit which was available subject to its performing conditions prescribed for the same, without performing such conditions. If the conditions fail, the party cannot retain the benefit. There is no equity in favour of a person who has availed of a benefit but failed to perform the obligation subject to which alone it could take such benefit. If that be so, as it indeed is, we see no reason why this court should come to the rescue of a party who fails to do equity in exercise of our equitable jurisdiction. It is trite that one who seeks equity must do equity. The petitioner having failed to discharge its part of the obligation despite the assurance and undertaking furnished cannot be granted any relief in the equitable jurisdiction of this court. 17. That brings us to the second aspect of the matter, namely, whether there is any illegality in the demand made by the respondent for payment of interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first consignment till the date of payment. Regardless therefore of which, the failure of the export obligation is noticed or established against the importer, once a failure is established or admitted the obligation to pay the differential duty along with interest at the stipulated rate arises and the period for which such payment has to be made will be reckoned from the date when the first consignment was cleared till the date of actual payment. There is in that view sufficient legal sanction for the demand of interest raised against the petitioner on the amount of differential duty. Reliance upon the decisions of the Supreme Court in Indian Carbon Ltd. v. State of Assam, AIR 1997 SC 3054, JK Synthetics Ltd. v. Commercial Taxes Officer, AIR 1994 SC 2393, M/s. VVS Sugars v. Government of Andhra Pradesh and Others, AIR 1999 SC 2124 and York Knitwear Ltd. v. Asst. Collector of Customs & Ors., 2006 (206) E.L.T. 86 (Del.) = 2005 (117) DLT 554 are of no avail to the petitioner. Claim for interest, it is fairly settled, can arise either on the basis of a statute or a contract or trade usage. In the instant case, the claim for payment of duty is supported not only by the statutory p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the bond executed by the importer at the time of importation of the goods. Confiscation of the goods arise under Section 111 of the Customs Act in certain specified situations. Section 111(o) reads as follows: "Any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer." In such an eventuality, the goods imported shall be liable to confiscation. In the instant case the goods were imported availing a concessional rate of duty on the condition that the goods will be put to use for manufacture and export of certain products up to certain value within a specified period. When the importer failed to fulfill the condition by not exporting the goods of required value within the stipulated period, then he was no longer eligible for the concessional rate of duty and the duty liability has to be discharged in full without availing the benefit of the exemption. For the same conduct, the goods also became liable to confiscation under the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable for confiscation, redemption fine in lieu of confiscation can be imposed as has been held in a number of judicial pronouncements on the subject. Therefore the imposition of redemption fine in the instant case is fully justified and is quite legal and we hold accordingly. 6.9. We further note that in the instant case the duty liability was confirmed by this Tribunal vide order dated 25/11/2005. However, in spite of such confirmation the appellant failed to discharge differential duty liability and made payment towards duty liability only on 05/09/2011 after a period of more than six years from the date of passing of the order and after a period of 9 years from the date of order of the adjudicating authority and almost two decades after the importation of the goods. Such deliberate defiance of law needs to be dealt with in an exemplary manner so that respect for law is maintained and people do not take the law for granted. 6.10. In the instant case, we find that a fine of Rs. 1.8 crore have been imposed in lieu of confiscation on the goods imported and the assessable value of the imported goods was Rs. 9,08,61,287/-. Thus, the fine imposed works out to about 20% of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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