2018 (2) TMI 1424 - AT - Customs

Tribunal Dismisses Revenue's Appeal on Duty Demand, Emphasizes Fair Penalty Imposition

The Tribunal dismissed the Revenue's appeal against dropping duty demand, holding that penalizing the Managing Director without penalizing the main ... Violation of import condition - The department entertained the view that respondent having not fulfilled the export obligation and having diverted the duty free imports into the domestic market are not eligible for exemption under Customs N/N. 204/92 and 80/95 and was liable to pay duty - Held that: - the Tribunal had given specific direction to the adjudicating authority to take cognisance of the EODC issued by JDGFT and to consider the matter on the basis of such documents. When the authority who granted the license has rendered a finding and issued certificate that the respondent-company has fulfilled the export obligation, the contention of the Revenue that the respondents are liable to pay duty as well as penalty cannot sustain - appeal dismissed - decided against Revenue. Issues:1. Duty-free import under DEEC scheme2. Alleged diversion and mis-utilization of imported material3. Duty demand, penalty, and confiscation4. Adjudication by the Commissioner and subsequent appeals5. Remand by the Tribunal and de novo adjudication6. Imposition of penalty on the Managing Director7. Appeal by Revenue against dropping of duty demand8. Arguments regarding export obligation fulfillment and penalty imposition9. Consideration of EODCs by the adjudicating authority10. Legal basis for penalty impositionAnalysis:1. The respondent had obtained advance licenses under the DEEC scheme for duty-free import of Cocoa Beans and FPK Oil with an obligation to manufacture and export specific products. However, upon inspection, it was discovered that the company had not fulfilled the export obligations and had allegedly diverted the imported material into the domestic market, leading to duty demand, penalty, and confiscation.2. The Commissioner, through an order, confirmed the duty demand, interest, and penalties against the respondent and the Managing Director. Subsequently, appeals were filed before the Tribunal challenging the penalties imposed.3. The Tribunal remanded the case back to the Commissioner with directions to consider new evidence and EODCs granted by JDGFT. It also set aside the penalty on the Managing Director, stating that without penalizing the main offender, the company, holding another party liable for penalty was unjust.4. The Revenue, dissatisfied with the dropping of duty demand by the Commissioner in the de novo adjudication, appealed to the Tribunal, arguing that the respondent's violation of notification conditions warranted penalty imposition under the Customs Act.5. The Revenue contended that despite EODCs issued by JDGFT, since the export obligations were not initially fulfilled, duty demand and penalty should be upheld. However, the Tribunal held that when the authority issuing the license had certified export obligation fulfillment, demanding duty and penalty was unjustified.6. The Tribunal further reasoned that the absence of penalty imposition on the respondent-company in the initial adjudication, coupled with the Tribunal's decision to set aside the penalty on the Managing Director, precluded the imposition of penalties in subsequent proceedings. Therefore, the Revenue's appeal was dismissed.This detailed analysis highlights the legal intricacies surrounding duty-free imports, export obligation fulfillment, penalty imposition, and the Tribunal's role in remanding and deciding on penalty liabilities in the given judgment.