2012 (9) TMI 678 - AT - Customs

Revenue appeal dismissed, no further amount due. Penalties not justified under Condition 4. Commissioner's order upheld.

The Tribunal dismissed the Revenue's appeal, concluding that no further amount was due from the respondent. The penalties and additional duty demand were ... Import of second hand knitting machine – goods imported under EPCG licence – alleged that appellant had not produced the installation certificate as required – Held that:- When the importer approached for discharge from obligations that he undertook at the time of import the concerned Superintendent has worked out the liability as per terms of Condition 4 - SCN just wants to ignore condition 4 for the reason that installation certificate was not produced and export obligation was not fully discharged. When the importer did not produce installation certificate prompt action should have been taken. If any penalty was required to be imposed it should have been done at least when the importer approached the department for de-bonding - At that time also no action was taken - it was not a violation serious enough to be acted upon - Appeal dismissed. Issues Involved:1. Non-fulfillment of export obligation.2. Non-production of installation certificate.3. Alleged non-existence of factory.4. Applicability of time limit for demand of duty.5. Validity of penalties imposed.Issue-wise Detailed Analysis:1. Non-fulfillment of export obligation:The respondent imported a second-hand knitting machine under Bill of Entry No. 958, dated 19-3-1996, and availed concessional customs duty under Notification No. 110/95-C.E., which required them to export goods valued at four times the CIF value within five years. The Revenue contended that the respondent failed to meet this obligation, fulfilling only a portion of it as per the provided table. Consequently, a show cause notice was issued demanding customs duty of Rs. 15,03,941/- and proposing confiscation of the machinery. The adjudicating authority confirmed the demand and imposed penalties.2. Non-production of installation certificate:Condition 6 of the Notification mandated the importer to install the machinery in its factory and produce an installation certificate within six months. The Revenue argued that the respondent did not produce such a certificate, which was a prerequisite for availing the concessional duty. The investigation revealed that the respondent did not submit any installation certificate or evidence of fulfilling the export obligation, thus violating Condition 6.3. Alleged non-existence of factory:The investigation report from the Central Excise Division, Chandigarh, indicated that no unit named M/s. Bestway Enterprises existed at the specified address. The respondent's director, in his statement, mentioned that production commenced in 1997, and the machinery was later divided and relocated. The Revenue's contention was that the exported goods prior to 1997 could not have been produced using the imported machinery, thus not counting towards the export obligation.4. Applicability of time limit for demand of duty:The Revenue argued that Notification No. 110/95 itself provided for the demand of duty in case of default, without prescribing any time limit. The Commissioner (Appeals) had held that the relevant date for demanding additional customs duty was 8-5-01, the date on which the respondent remitted Rs. 10,856/-. The Revenue contended that this finding was incorrect as the demand was not time-barred due to the absence of a prescribed time limit in the notification.5. Validity of penalties imposed:The adjudicating authority imposed a penalty of Rs. 5 lakhs on the respondent company and Rs. 2 lakhs on its director under Section 112 of the Customs Act, 1962. The Commissioner (Appeals) set aside the balance of the demand, penalty, and interest, confirming only the duty already deposited by the respondent. The Revenue appealed against this order, seeking to reinstate the penalties and the full duty demand.Judgment Analysis:The Tribunal examined the show cause notice and the charges against the respondent. It concluded that the primary charge was the incomplete discharge of the export obligation rather than the non-existence of the factory or non-installation of the machinery. The Tribunal noted that the penal consequences confirmed by the adjudication order conflicted with Condition 4 of the notification, which provided a method for calculating the duty payable in case of partial fulfillment of the export obligation.The Tribunal observed that when the respondent approached the department for discharge from obligations, the liability was worked out as per Condition 4, and no further action was taken despite the absence of an installation certificate. The Tribunal held that the failure to produce the installation certificate and the incomplete export obligation did not warrant the severe penalties imposed, especially since the department did not act promptly when the respondent approached for de-bonding.Conclusion:The Tribunal dismissed the Revenue's appeal, concluding that no further amount was due from the respondent. The penalties and additional duty demand were not justified given the circumstances and the provisions of Condition 4 of the notification. The order of the Commissioner (Appeals) was upheld, and the appeal was dismissed.