2012 (7) TMI 144 - AT - Customs

Tribunal Overturns Penalties for EOU Directors Importing Duty-Free Goods

The Tribunal set aside penalties imposed on individuals, directors of a 100% EOU trading unit, under Sections 112 and 117 of the Customs Act for violating ... Personal penalty liability of directors under the Customs Act - liability where 100% EOU trading unit supplies to another EOU against advance licence - effect of bond permitting removal to another EOU/SEZ or against advance licence - CBEC clarification on entitlements of EOU trading units permitting supplies to other EOU/STP against advance licences - absence of customs duty liability as bar to imposition of penaltiesPersonal penalty liability of directors under the Customs Act - liability where 100% EOU trading unit supplies to another EOU against advance licence - effect of bond permitting removal to another EOU/SEZ or against advance licence - CBEC clarification on entitlements of EOU trading units permitting supplies to other EOU/STP against advance licences - absence of customs duty liability as bar to imposition of penalties - Whether the appellants, as directors of a 100% EOU trading unit, are liable to penalties under Sections 112 and 117 of the Customs Act for removal of duty free imported goods to another EOU against advance licence - HELD THAT: - The tribunal found as undisputed that the company was a 100% EOU trading unit which imported goods duty free after executing a bond that expressly permitted removal of the imported goods to another EOU/SEZ unit or against advance licence/specific duty free entitlements. The CBEC Circular No. 49/2000 Cus (para 3) clarifies that trading units are allowed to supply goods to other EOU/EPZ/EHTP/STP units or to DTA against valid advance licences, and that notifications governing duty free procurement/import were amended accordingly. Given the bond authorising such removals and the CBEC clarification, there was no duty liability on the company for the supplies made to the advance licence EOU. In the absence of any duty liability on the company, the statutory provisions for imposing personal penalties on the directors under the Customs Act could not be invoked. Applying this reasoning, the tribunal concluded that the penalties imposed on the appellants must be set aside. [Paras 6, 7, 8, 9]Penalties imposed on the appellants (directors) under Sections 112 and 117 are set aside because the company had no customs duty liability for supplies made to another EOU against advance licence.Final Conclusion: Appeals allowed to the extent of setting aside the personal penalties imposed on the appellants; the tribunal held that the company's bond and the CBEC clarification authorised removal to another EOU/against advance licence, resulting in no duty liability and precluding imposition of penalties on the directors. Issues:Imposition of penalties under Sections 112 and 117 of Customs Act, 1962 on individuals for violation of Para 9.21 of Export Import Policy by a 100% EOU trading unit.Analysis:The judgment involves two appeals against an order imposing penalties on individuals under Sections 112 and 117 of the Customs Act, 1962 for violating Para 9.21 of the Export Import Policy. The appellants, as Directors of a company registered as a 100% EOU trading unit, imported duty-free goods under Notification No. 53/1997-Cus and subsequently sold these goods against an advance license to another 100% EOU. The adjudicating authority held that this sale violated Para 9.21, leading to duty recovery, penalties on the company, and personal penalties on the appellants.The appellants argued that they cleared the goods by executing a B-17 Bond, permitted by the Deputy Commissioner of Customs, indicating compliance with the conditions of Notification No. 53/1997-Cus. They relied on a Board Circular and tribunal decisions to support their position that penalties should not apply to them. The Revenue contended that the EOU trading unit could not supply goods to another EOU under Para 9.21, thus justifying the penalties under Sections 112 and 117 of the Customs Act.Upon review, the Tribunal found that the appellant, a 100% EOU trading unit with a valid license, had imported duty-free goods and supplied them to another EOU against an advance license. The key issue was whether penalties under Sections 112 and 117 were warranted. The Tribunal noted that the bond executed by the company before customs clearance allowed for such transactions. Additionally, a CBEC Circular clarified that EOU trading units could supply goods to other EOU units against valid licenses or duty-free entitlements.Based on the Circular and the facts of the case, the Tribunal concluded that the penalties imposed on the appellants were unwarranted. As there was no duty liability on the main company, the provisions of Sections 112 and 117 for penalizing the directors could not be invoked. Therefore, the Tribunal set aside the penalties imposed on the appellants, allowing their appeals.In conclusion, the judgment clarifies the permissible actions of EOU trading units under Para 9.21 of the Export Import Policy and emphasizes compliance with Circulars and relevant provisions to determine the applicability of penalties under the Customs Act.