Conditional customs exemption and export obligation default may still trigger penalty despite duty payment, with later discharge proof relevant on remand.

Non-fulfilment of the conditions of Notification No. 80/95-Customs and the export obligation under an import licence can still attract confiscation and penalty under the Customs Act, even if duty and interest have been paid, where the governing policy preserves independent customs action notwithstanding regularisation. At the same time, subsequent redemption and export-obligation discharge documents may be relevant to assess whether the default was bona fide and whether confiscation and penalty should be sustained on the facts. The matter was therefore considered fit for fresh examination on remand, while the view that payment of duty and interest alone barred penalty was rejected.

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Issues: (i) Whether failure to comply with the conditions of Notification No. 80/95-Customs and the export obligation under the import licence still attracted confiscation and penalty under the Customs Act despite payment of duty and interest. (ii) Whether the matter required remand in view of subsequent redemption and export-obligation discharge documents produced by the importer.

Issue (i): Whether failure to comply with the conditions of Notification No. 80/95-Customs and the export obligation under the import licence still attracted confiscation and penalty under the Customs Act despite payment of duty and interest.

Analysis: The import was made under a conditional exemption notification, and the policy governing regularisation of bona fide default expressly preserved the power of the customs authorities to take action under the Customs Act without prejudice to regularisation. The payment of duty and interest under the exemption conditions did not, by itself, extinguish liability under the confiscation and penalty provisions where the policy reserved independent customs action. The legal position supported the view that non-fulfilment of the exemption condition could still attract action under the Customs Act.

Conclusion: The finding of the Tribunal that no penalty was leviable merely because duty and interest had been paid was set aside, and the issue was answered in favour of the Revenue.

Issue (ii): Whether the matter required remand in view of subsequent redemption and export-obligation discharge documents produced by the importer.

Analysis: The importer produced subsequent documents showing redemption and discharge of export obligation, which had not been fully considered by the original adjudicating authority and the appellate authorities. Those documents were relevant to the question whether the default was bona fide and whether confiscation and penalty should be sustained on the facts. In light of that later material, a fresh examination by the adjudicating authority was necessary.

Conclusion: The matter was remanded to the adjudicating authority for reconsideration of confiscation and penalty afresh.

Final Conclusion: The appellate order was interfered with on the legal issue of penalty, but the substantive levy was left open for fresh adjudication in light of the subsequently produced redemption material.

Ratio Decidendi: Payment of duty and interest under a conditional exemption scheme does not bar customs action for confiscation or penalty where the governing policy expressly reserves such action, but later proof of export-obligation discharge may warrant reconsideration on remand.

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