2004 (6) TMI 413 - AT - Central Excise

Tribunal overturns duty demands, penalties in export obligation case, stresses deference to DGFT findings

The Tribunal set aside duty demands, confiscations, and penalties imposed on various parties, including M/s. PML Industries Ltd., in a case involving ... Demand - EOU - Export obligation - Order - Self-contradiction Issues Involved:1. Demand of duty and interest.2. Confiscation and redemption of imported and indigenously procured capital goods.3. Confiscation of seized goods and trucks.4. Imposition of personal penalties on various parties.5. Allegation of failure to meet export obligations.Detailed Analysis:1. Demand of Duty and Interest:The order demanded Rs. 3,97,08,666/- from M/s. PML Industries Ltd. under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A(2) of the Central Excise Act, 1944, directing immediate payment. Additionally, interest at 20% per annum under Section 11AB of the Central Excise Act, 1944 was also directed until the amount was paid.2. Confiscation and Redemption of Imported and Indigenously Procured Capital Goods:The adjudication order did not confirm the demand for customs duty of Rs. 21,55,28,397/- and Central Excise duty of Rs. 9,76,682/- on capital goods, allowing M/s. PML Industries Ltd. to continue as a 100% EOU pending the Development Commissioner's decision. However, duty-free imported capital goods valued at Rs. 26,31,93,429/- were confiscated under Section 111(o) of the Customs Act, 1962, with a token redemption fine of Rs. 10,00,000/-. Similarly, indigenously procured capital goods valued at Rs. 81,31,335/- were confiscated under Rule 9(2) read with Rule 173Q of the Central Excise Rules, 1944, with a token fine of Rs. 50,000/-.3. Confiscation of Seized Goods and Trucks:Goods weighing 38,884 kgs and 85,527 kgs, valued at Rs. 55,36,290/-, were liable for confiscation under Rules 9(2), 151, and 226 read with Rule 173Q of the Central Excise Rules, 1944, but were released provisionally. Trucks No. HR-38-D 0470 and HR-38-C 6286 were also liable for confiscation under Section 115 of the Customs Act, 1962, but were released provisionally. The bonds and bank guarantees provided were ordered to be enforced and appropriated.4. Imposition of Personal Penalties:Personal penalties were imposed on various parties, including Rs. 4,00,00,000/- on M/s. PML Industries Ltd. under Section 11AC of the Central Excise Act, 1944, and Rs. 10,00,000/- under Section 112(a) of the Customs Act, 1962. Additional penalties ranging from Rs. 1,00,000/- to Rs. 5,00,000/- were imposed on other associated companies and individuals under Rule 209A read with Rule 225 of the Central Excise Rules, 1944. However, no penalties were imposed on M/s. Shallu Enterprises and M/s. S.K. Enterprises.5. Allegation of Failure to Meet Export Obligations:The proceedings originated from allegations that M/s. PML Industries Ltd. failed to meet its export obligations as a 100% EOU and sold part of its production domestically. The appellant contended that its export obligations were met through arrangements with other firms, and the Development Commissioner accepted this performance. The customs authorities, however, alleged that the appellant's supplies to these firms were domestic sales, not exports. The Tribunal noted that the customs authorities should not have investigated the export obligations independently of the DGFT, which had already accepted the appellant's compliance.Conclusion:The Tribunal found the impugned order self-contradictory and not based on evidence. It held that the findings were unsustainable, set aside the duty demands, confiscations, and penalties, and allowed the appeals with consequential relief to the appellants. The Tribunal emphasized the need for customs authorities to defer to the findings of the DGFT regarding export obligations to avoid multiplicity of proceedings and confusion.