Exemption-condition breach on imported crude palm oil led to confirmed duty, interest, and reduced penalty at the appellate stage.

Concessional customs duty under the exemption notification was available only if imported crude palm oil was used for refining. Because the oil was sold in the open market, the duty and interest demand was accepted and confirmed. The Tribunal noted that duty and interest had already been paid before the show cause notice and that 25% of the penalty had been deposited within 30 days of the order-in-original. On that basis, it held that the penalty could be restricted to 25% even at the appellate stage, and reduced the penalty accordingly while leaving the duty and interest demand intact.

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Issues: Whether the penalty imposed on import of crude palm oil, on violation of the exemption condition under Notification No. 21/2002-Cus, warranted reduction to 25% where duty, interest, and part of the penalty had already been paid.

Analysis: The exemption notification allowed concessional duty subject to use of the oil for refining. Since the imported oil was sold in the open market, the demand of duty and interest was not contested. The assessee stated that duty and interest had been paid even before issue of the show cause notice and that 25% of the penalty had been deposited within 30 days of the order-in-original. The Tribunal also noted that the option to limit the penalty to 25% could be extended at the appellate stage.

Conclusion: The penalty was reduced to 25%. The demand of duty and interest stood confirmed, and the appeal was otherwise rejected.

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