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TMI Blog2012 (11) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... ational Knitting Ltd. is a 100% EOU, situated in Nashik. They were granted permission to function as an EOU vide Letter of Permission (LOP) No. PER/440/(1994)/EOU/402/1994 dated 23-11-1994. They were also granted a private bonded warehouse licence No. WH/CUS/01/NSK-I/1995 dated 30-3-1995 under Section 58 of the Customs Act, 1962 and also sanction for manufacture in bond under Section 65 of Customs Act. As per the LOP granted to the appellants, the appellant had an annual capacity of 24,92,000 pairs of socks and they were required to export 100% of the production for a period of 10 years. They were also required to achieve value addition to the extent of 40%. The appellant imported duty free capital goods and spares valued at Rs. 2,51,61,089/- involving Customs duty amounting to Rs. 1,77,22,464/- under Notification No. 13/1981-Cus., dated 9-2-1981 and No. 53/1997-Cus., dated 3-6-1997. They also procured the said goods indigenously valued at Rs. 35,76,762/- involving Central Excise duty amounting to Rs. 5,83,730/- under Notification No. 1/1995-C.E., dated 4-1-1995. The unit was functional only for a period of 2½ years from August 1996 and stopped their manufacturing activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along with interest thereon and also ordered confiscation of seized goods under Section 111(o) of the Customs Act, 1962 and under Central Excise Rules. However, he gave an option to the appellant to redeem the same on payment of redemption fine of Rs. 50 lakhs in lieu of confiscation. He also imposed a penalty of Rs. 25 lakhs on the appellant firm under Section 72 read with Section 112 of the Customs Act and Rule 209 of Central Excise Rules, 1944 read with Rule 25 of Central Excise Rules, 2002. He also imposed a penalty of Rs. 10 lakhs on Shri Sharad Singhania, Director of the appellant firm under Section 112 of the Customs Act, read with Rule 209A of Central Excise Rules, 1944 and Rule 26 of Central Excise Rules, 2002. Hence, the appellants are before us. 4. The ld. Counsel for the appellant submits that licence under Section 58 of the Customs Act was initially granted for a period upto 31-3-1999 and subsequently it was extended upto 31-3-2001. The LOP granted by the Development Commissioner was also valid till 31-3-2001. Thereafter, the same was not renewed or extended. Therefore, for the purpose of demand of duty, 31-3-2001 should be taken as the date of de-bonding of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further argues that interest is also not imposable in the instant case for the following reasons. Interest liability would arise only if there is a specific provision in the Act for levy of interest and in the present case Section 61(2) of the Customs Act provides for levy of interest of warehoused goods which remains in the warehouse beyond the warehousing period. Since the capital goods are deemed to have been removed on 31-3-2001, they are no longer warehoused goods after 31-3-2001 and, therefore, the provisions of Section 61(2) would not apply for the period after 31-3-2001. As far as the period prior to 31-3-2001 is concerned, there was a Notification No. 67/1995-Cus., dated 1-11-1995 exempting 100% EOUs from payment of interest on the warehoused goods and this exemption would apply. 4.3 The ld. Counsel also relies on the decision of this Tribunal in the case of Fal Industries Ltd., reported in 2008 (231) E.L.T. 524 (Tri.-Chennai) in support of his contention that they are not liable to pay any interest in the instant case. He also relies on the judgment of the Tribunal in the case of Pudumjee Plant Laboratories Ltd. v. C.C.E. Pune, vide Order No. A/161/CSTB/C-I/2012, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'warehoused goods' on the date of deemed removal and, therefore, the provisions of Section 61 would not apply. Section 61(2) provides that where any warehoused goods remained in a warehouse beyond the period specified in the sub-section (1) by reasons of extension of the warehousing period or otherwise, interest at such rates as is specified in Section 47 shall be payable, on the amount of duty payable at the time of clearance of such goods in accordance with the provisions of Section 15, for the period from the expiry of the warehousing period till the date of payment of duty on the warehoused goods. As per Section 2(44) of the Customs Act, 1962 "warehoused goods" has been defined as goods deposited in a warehouse. A combined reading of both these provisions make it clear that the place where the goods are deposited should be a warehouse at the time of deposit of the goods. On the date of removal, it is not necessary that the place where the goods have been deposited remains a warehouse. Therefore, reading the provisions of Section 61 with Section 2(44) of the Customs Act, the goods are liable to interest on the delayed payment of duty. Further the appellant has executed a warehou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no dispute that the petitioner had unequivocally undertaken to pay the differential amount of duty saved on the import, if it failed to comply with its export obligations. The provisions of para 105 of the Handbook and the legal undertaking/agreement executed by the petitioner created in no uncertain terms a legal and enforceable obligation against the petitioner to pay interest on the amount of duty saved by it on the import of the equipments. That position was not disputed before us as indeed the same could not be disputed in the light of the terms of the policy and the provisions of the Handbook of Procedures to which it made a reference and the undertaking contained in the agreement executed between the parties. It is also not in dispute that the condition subject to which the petitioner could have availed of a reduced rate of duty, namely, performance of the export obligation has not been complied with. The question then is whether a party who has availed of a benefit on a solemn assurance and a legal undertaking 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 conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imports made by it. A concessional rate was, however, applied to the said imports subject to the petitioner's satisfying the requirements stipulated for the said benefit. No sooner it is found that the petitioner has failed to perform its export obligation which was one of the conditions for applying a concessional rate of duty, the exemption would cease to be effective and the liability to pay the duty at the rate ordinarily applicable re-emerge. Consequently non-payment of the differential would attract payment of interest in terms of the statutory provisions referred to above. The provisions of the Handbook of Procedures would in such situations step in to provide for what may appear to be a grey area as to the period for which interest on such duty would be recoverable. A reading of para 105 of the Handbook which happens to be the stipulation incorporated even in the legal undertaking furnished by the petitioner would show that the liability to pay interest at the stipulated rate arises from the date of import of 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, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions are violated, then the duty concession would not be available at all. In the case under consideration, the demand of duty has arisen under the Notification itself in terms of 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 specified goods achieving certain value addition within a specified period. When the importer failed to fulfil 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he time of importation under a bond executed by the appellant. The clearance of the goods was thus provisional. Therefore, when the assessment is finalized subsequently, even if the goods are not available 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 permissible under the law and we hold accordingly. 7. In the instant case the duty demand has to be re-computed as discussed above; therefore, we remand the matter back to the adjudicating authority for re-computation of the duty demand as discussed above. The appellant is also liable to interest on the said duty demand under the provisions of Section 61(2) and in terms of the bond executed by them. Other penal consequences, namely, fine and penalty, on account of non-fulfilment of export obligation would automatically follow but their quantum again will depend on amount of duty demand. Therefore, we set aside the impugned order and remand the matter back to the adjudicating authority for consideration afresh of the issues involved in the light of the decisions and gui ..... X X X X Extracts X X X X X X X X Extracts X X X X
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