Export obligation breach under EOU import exemption sustains confiscation and penalty, with destruction request affecting duty liability.
Non-fulfilment of the export obligation under a 100% EOU import exemption can attract confiscation and consequential penalty under the Customs Act, while the redemption fine may be reduced if the facts show bona fide efforts affected by market and technology changes. Fully depreciated capital goods were treated as attracting nil duty, but duty on unutilized raw materials and consumables depended on consideration of a destruction request under the Export Import Policy. The matter on destruction and the resulting duty liability was remanded for limited reconsideration, while confiscation and penalty were maintained.
Issues: (i) Whether customs duty was payable on the imported capital goods after depreciation and on the unutilized raw materials/consumables; (ii) whether confiscation of the imported goods and the penalty were sustainable and whether the redemption fine required reduction; and (iii) whether the request to destroy the raw materials/consumables in terms of the Export Import Policy required consideration.
Issue (i): Whether customs duty was payable on the imported capital goods after depreciation and on the unutilized raw materials/consumables.
Analysis: The capital goods were taken to be fully depreciated in accordance with the applicable customs exemption framework, and the duty on such capital goods was worked out as nil. As regards the unutilized raw materials and consumables, the goods were admittedly lying in the factory premises, and the policy permitted destruction of such goods after intimation to, or permission from, the Customs Authorities. The request to consider destruction of the goods therefore had a bearing on the duty liability.
Conclusion: The duty demand on the capital goods was not sustainable beyond nil, while the question of duty on the unutilized raw materials/consumables was left open for fresh consideration on the destruction request.
Issue (ii): Whether confiscation of the imported goods and the penalty were sustainable and whether the redemption fine required reduction.
Analysis: Non-fulfilment of the export obligation amounted to breach of the exemption conditions attached to the import of the goods, attracting confiscation under the Customs Act. The consequential penalty was also upheld. At the same time, the circumstances showed that the appellant had made efforts to meet the obligation but failed because of market and technology changes, so the redemption fine was considered excessive.
Conclusion: Confiscation and penalty were sustained, but the redemption fine was reduced substantially.
Issue (iii): Whether the request to destroy the raw materials/consumables in terms of the Export Import Policy required consideration.
Analysis: The policy specifically contemplated destruction of capital goods, raw materials, consumables, and related goods within or outside the unit with Customs intimation or permission. Since the appellant asserted that the goods had become obsolete and unfit for use, this plea required examination by the adjudicating authority.
Conclusion: The matter was remanded for limited consideration of the destruction request and the consequent duty liability.
Final Conclusion: The order of confiscation and penalty was maintained, the redemption fine was reduced, and the question of duty on the raw materials/consumables was sent back for limited reconsideration.
Ratio Decidendi: Breach of exemption conditions attached to import by a 100% EOU attracts confiscation and consequential penalty under the Customs Act, while the adjudicating authority must also consider a permissible claim for destruction of obsolete goods under the governing export policy before finally determining duty liability on such goods.
TaxTMI 
AI Drafter ✕
TaxTMI 
