2018 (3) TMI 1443 - HC - Customs

High Court Upholds Tribunal Decision on Duty Demand & Penalty for Export Company

The High Court upheld the Customs, Excise and Service Tax Appellate Tribunal's decision to set aside duty demand, confiscation of capital goods, and ... 100% EOU - debonding obligation - not achieving value addition - Whether the order of confiscation of the capital goods and imposition of penalty was fully justified in the facts and circumstances of the case? - Whether the Tribunal erred in law in setting aside the order of confiscation of the capital goods and imposition of the penalty against the respondent? - Held that: - It always remained open for the authority to refuse debonding and at the same time initiate action for payment of duty which the respondent was exempted at the time of import of capital goods for the EOU Unit. The resultant effect of allowing de-bonding and holding that value addition has been achieved by the respondent is that there was no willful attempt to evade duty by importing duty free goods for EOU without ever intending to operate and manufacture the goods in the EOU Unit. Once the element of intention to evade duty is absent and as a matter of fact there is no such allegation in the SCN, demand of duty, confiscation of capital goods and imposition of penalty ought not to have been fastened on the respondent. It is not a laconic order or perfunctory in that sense of the term which has not dealt with the facts and law applicable. Confiscation and penalty set aside - decided against Revenue. Issues:- Appeal by Revenue against Tribunal's order- Duty demand, confiscation of capital goods, and penalty- Export Obligations and De-bonding- Show cause notice for duty imposition- Tribunal's decision setting aside duty demand, confiscation, and penalty- Substantial questions of law raised- Arguments by both parties- Observations by the Court- Decision on confiscation and penalty- Conclusion and dismissal of appealAnalysis:The High Court judgment involves an appeal by the Revenue against the Customs, Excise and Service Tax Appellate Tribunal's decision to set aside duty demand, confiscation of capital goods, and penalty imposed on the respondent Company. The respondent, a hundred percent Export Oriented Unit (EOU), faced challenges in meeting export obligations due to falling prices in the International Market, leading to de-bonding in 1994. Despite this, a show cause notice was issued in 1996 seeking duty imposition. The Tribunal, in its order, directed the respondent to pay applicable duty on the capital goods on the written down value along with interest, which was not contested by the respondent.The substantial questions of law raised in the appeal questioned the justification of confiscation of capital goods and imposition of penalty. The Revenue argued that non-fulfillment of export obligations warranted the duty demand and penalty. However, the respondent contended that the impugned order was well-reasoned and no interference was necessary. The Court noted that no challenge was made to the penalty imposed on the respondent, limiting the scope of the challenge to confiscation of capital goods.The Court observed that the show cause notice lacked specificity regarding the default leading to confiscation of capital goods. It highlighted that the respondent's de-bonding application and value addition verification were accepted by authorities, indicating no willful evasion of duty. The Court emphasized that the absence of intent to evade duty was crucial in determining the liability for duty and penalties.Regarding the Revenue's reliance on a previous judgment, the Court found the impugned order to be detailed and reasoned, addressing all relevant issues. Consequently, the Court upheld the Tribunal's decision to set aside confiscation of capital goods and penalty, ruling in favor of the respondent company. Both substantial questions of law were answered against the Revenue, leading to the dismissal of the appeal.In conclusion, the High Court dismissed the appeal, affirming the Tribunal's decision to set aside the duty demand, confiscation of capital goods, and penalty, based on the lack of willful evasion of duty and the reasoned nature of the impugned order.