Customs Act: Relief Granted for Duty Payment, Installment Plan Approved

The Bench allowed the applications to proceed under Section 127C of the Customs Act, directing the Revenue to verify the duty liability and financial status of the applicant. The request for adjusting duty through CENVAT credit was denied, but the installment payment was granted due to financial hardship. The applicant was instructed to report monthly on the installment payments, with the possibility of pleading for immunities at the end of the installment period.

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Issues Involved:
1. Non-fulfillment of export obligations under advance licenses.
2. Demand of customs duty with interest.
3. Request for installment payment of duty liability.
4. Adjustment of admitted duty liability through CENVAT credit.
5. Financial hardship and corporate debt restructuring.

Issue-wise Detailed Analysis:

1. Non-fulfillment of export obligations under advance licenses:
The applicant, a public limited company, obtained advance licenses to import raw materials duty-free for manufacturing Purified Terephthalic Acid (PTA). However, due to financial difficulties, the plant could not commence production as planned, leading to non-fulfillment of export obligations. Consequently, the DGFT authorities issued a show cause notice (SCN) demanding customs duty with 15% interest.

2. Demand of customs duty with interest:
The Kandla Customs issued an SCN on 3-9-2003 demanding duty amounting to Rs. 2,91,95,262/- with interest for imports under the advance license dated 23-2-2000. No SCN was issued for the imports under the advance license dated 20-4-2000. The goods were warehoused and cleared from Mathura, and the bonding period had expired without proper permissions, making the applicant liable for customs duty at the applicable rate.

3. Request for installment payment of duty liability:
The applicant filed an application under Section 127B of the Customs Act, 1962, admitting additional duty liabilities and requested to pay the admitted amounts in 24 installments due to financial hardship. The applicant cited a Gujarat High Court judgment allowing installment payments in similar circumstances. The Revenue initially opposed this request, citing the applicant's prolonged closure and financial uncertainty.

4. Adjustment of admitted duty liability through CENVAT credit:
The applicant sought to adjust the admitted duty liability through available CENVAT credit. However, the Revenue objected, stating that there is no provision under the CENVAT Rules for such adjustments. The Bench concurred, noting the absence of provisions to allow adjustment of duty from CENVAT credits, and directed the applicant to discharge the duty liability from the PLA account or by cash/cheque deposits.

5. Financial hardship and corporate debt restructuring:
The applicant's financial hardship was substantiated by the submission of annual reports and a DRT order restraining them from transferring assets. The applicant's case was referred to the Corporate Debt Restructuring (CDR) Cell for a rehabilitation package, which failed. Considering the financial constraints, the Bench permitted the applicant to pay the admitted duty liability in 20 monthly installments, starting from March 2006, with the plant and machinery at the Mathura factory pledged as security.

Conclusion:
The Bench allowed the applications to proceed under Section 127C of the Customs Act, directing the Revenue to verify the duty liability and financial status of the applicant. The request for adjusting duty through CENVAT credit was denied, but the installment payment was granted due to financial hardship. The applicant was instructed to report monthly on the installment payments, with the possibility of pleading for immunities at the end of the installment period.

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