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of <h1>Tribunal upholds Customs Act penalties, reduces fines for duty-free clearance breach.</h1> <h3>MAHALAKSHMI JEWELLERY LTD. Versus COMMISSIONER OF CUSTOMS, COCHIN</h3> MAHALAKSHMI JEWELLERY LTD. Versus COMMISSIONER OF CUSTOMS, COCHIN - 2006 (193) E.L.T. 118 (Tri. - Bang.) Issues:Violation of conditions of duty-free clearance under notification 256/87-Cus, applicability of Circular No. 21/95 and 122/95, premature show cause notice, failure to achieve export obligation within stipulated time, authority of Development Commissioner in EOU cases, imposition of confiscation, redemption fine, and penalty under Customs Act.Analysis:1. Violation of Duty-Free Clearance Conditions:The appellant company imported capital goods under notification 256/87-Cus, clearing them without duty payment on the condition of using them for jewelry production for export. Allegations arose as the appellant failed to fulfill this condition, leading to confiscation of goods, a redemption fine of Rs. 25 lakhs, and a penalty of Rs. 5 lakhs on the Managing Director under Sections 111(o) and 112 of the Customs Act.2. Applicability of Circulars and Premature Show Cause Notice:The appellant argued that Circular No. 21/95 and 122/95 mandate intimation to the Development Commissioner, CEPZ before adjudication. Citing precedents, the appellant contended that the show cause notice was premature as commercial production began before the notice issuance. However, the department asserted its right to act upon violation of notification conditions, emphasizing that the Circulars do not restrict recovery of duty foregone.3. Failure to Achieve Export Obligation and Development Commissioner's Authority:The appellant highlighted the export policy's five-year target, suggesting that the notice alleging non-compliance should have been issued after five years from commercial production commencement. The Development Commissioner's involvement in eviction proceedings against the appellant was noted, questioning the need for prior intimation before Customs Act proceedings.4. Confiscation, Redemption Fine, and Penalty Imposition:The Tribunal observed that the Development Commissioner had already adjudicated the case, imposing penalties for policy violations. The Circular aimed to prevent premature actions, but as no extension was granted, the Revenue's initiation of proceedings under Section 111(o) was deemed appropriate. Despite upholding the orders, considering the appellant's financial state, the Tribunal reduced the redemption fine to Rs. 5 lakhs and the personal penalty on the Managing Director to Rs. 25,000.5. Conclusion:Ultimately, the appeals were partly allowed, acknowledging the Revenue's competence to proceed with confiscation under the Customs Act. The modifications in the orders reflected a balance between enforcement and the appellant's circumstances, reducing the financial burden while upholding penalties for non-compliance with duty-free clearance conditions.This comprehensive analysis delves into the core issues surrounding the legal judgment, addressing the nuances of the violation, procedural aspects, and the balancing act between enforcement and mitigating factors in the penalty imposition.
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