Director held liable for duty recovery as surety when EOU company fails Net Foreign Exchange requirements under section 117

CESTAT New Delhi dismissed the appeal concerning duty recovery from a surety and penalty imposition. The appellant, a whole-time director, executed a bond as surety for a 100% EOU company that imported goods under customs exemption. When the company failed to achieve Net Foreign Exchange requirements and couldn't pay duties upon de-bonding, CESTAT upheld duty recovery from the appellant as surety only to the extent unrecoverable from the main importer. The tribunal also confirmed Rs. 1,00,000 penalty under section 117 of Customs Act, finding the director responsible for company operations and misleading the department.

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Issues:
1. Recovery of duties and penalty against the appellant.
2. Imposition of penalty under section 117 of the Customs Act on the appellant.

Issue 1: Recovery of duties and penalty against the appellant

The appeal was filed to challenge the Order-in-Original passed by the Commissioner confirming demands of Customs duty and Central excise duty against the main noticee. The appellant, a director of the company, was held liable for a penalty under section 117 of the Customs Act and for the recovery of dues if not fully recoverable from the main noticee. The appellant argued that he cannot be held responsible for the duties as he was only a director during the relevant period. The authorized representative contended that the recovery from the appellant was fair as he had signed bonds as a surety for the company. The Tribunal found that the duties were recoverable from the appellant only to the extent they could not be recovered from the main noticee, thus upholding the order.

Issue 2: Imposition of penalty under section 117 of the Customs Act on the appellant

The impugned order recorded that the main noticee violated section 58 of the Customs Act by not renewing the bank guarantee, leading to the removal of goods without payment of duty. It was noted that the appellant, as the whole-time director, was responsible for the affairs of the company and had executed a bond on its behalf. Section 117 of the Customs Act provides for penalties for contraventions not expressly mentioned, with a maximum penalty of four lakh rupees. Considering the facts that the appellant was aware of the violations and misled the department, the Tribunal found no reason to interfere with the penalty imposed under section 117. The appeal was rejected, and the impugned order was upheld.

This detailed summary provides a comprehensive analysis of the judgment, covering all the issues involved and the arguments presented by both parties, leading to the Tribunal's decision.

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