2007 (11) TMI 105 - AT - Customs

Penalties Overturned: EOU Unit Exempt Due to Viral Attack & Court Ban

The Tribunal set aside penalties imposed on an EOU unit for non-fulfillment of export obligations due to a viral attack and a Supreme Court ban on ... Aquaculture – production & export of shrimps was banned by SC as it was harming environment – due to this export obligation could not be fulfilled by appellants – no any other reason – penalty not imposable – but interest shall be deposited Issues:Confirmation of duty demands with interest and penalty under Customs Act and Central Excise Rules for contravention of conditions of Notifications; Imposition of penalties for non-fulfillment of export obligation by EOU unit due to viral attack and Supreme Court's direction banning aquaculture.Analysis:The appeal in this case arose from an Order-in-Original confirming duty demands, interest, and penalties imposed by the Commissioner of Customs and Central Excise. The appellants, an EOU unit, had imported capital goods and raw materials under an exemption Notification to set up an aquaculture sector for frozen shrimp production and export. However, due to a viral attack and the Supreme Court's direction banning aquaculture, the appellants could not fulfill the export obligation. The Revenue proceeded to recover amounts and imposed penalties, which the appellants contested. They argued that the penalties should be set aside as the non-fulfillment was beyond their control. The Tribunal considered similar cases and held that penalties were not applicable in such circumstances, citing judgments like Taurus Novelties Ltd. v. CC, Bangalore and Suvarna Aqua Farm and Exports Ltd. v. CC, Guntur.The learned Counsel presented judgments from various Tribunal benches where penalties were waived due to impossibilities faced by the appellants in meeting export obligations. The appellants, in this case, agreed to pay interest but sought relief from penalties. The learned SDR argued that each case should be examined individually to determine the applicability of penalties based on the facts. However, the Tribunal noted that in cases involving the production and export of shrimps, the Supreme Court had banned aquaculture due to environmental concerns. The appellants' failure to fulfill the export obligation was attributed to these circumstances, including the viral attack. Citing the judgment in Suvarna Aquafarm v. CC, the Tribunal set aside the penalties imposed, emphasizing that the non-fulfillment was due to external factors beyond the appellants' control.In conclusion, the Tribunal found that the penalties imposed on the appellants were unwarranted given the circumstances surrounding the non-fulfillment of the export obligation. Relying on precedents and considering the environmental and external challenges faced by the appellants, the Tribunal allowed the appeal to the extent of setting aside the penalties. The appellants were directed to deposit the interest amount promptly, and the appeal was allowed on these terms.