100% EOU lacks EPCG license, gets de-bonded without duty payment, penalty remanded for reconsideration under Section 28(5)

CESTAT Ahmedabad ruled on a 100% EOU case where duty demand was confirmed with penalty imposed. The appellant, lacking EPCG license, got de-bonded without duty payment, constituting malafide conduct. CESTAT held that relief under Section 28(2) proviso was unavailable as appellant failed to inform department about voluntary duty payment. However, since duty and interest were paid but reduced penalty option under Section 28(5) wasn't considered by lower authorities, the matter was remanded for reconsideration of penalty amount only. Duty and interest payment was upheld.

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Issues involved:
The issues involved in the judgment are related to the de-bonding of a 100% EOU unit, payment of customs duty, imposition of penalty, and confiscation of capital goods.

De-bonding of 100% EOU unit and payment of customs duty:
The appellant, a 100% EOU, de-bonded their unit without paying customs duty, claiming to be in the process of obtaining an EPCG license. Subsequently, audit objections were raised regarding the lack of the EPCG license, leading to a show cause notice for the demand of customs duty and interest. The Adjudicating Authority confirmed the demand, imposed penalties, and confiscated capital goods with an option for redemption upon payment of a fine.

Legal considerations and findings:
The Tribunal noted that the appellant de-bonded the unit without paying duty, indicating malafide intentions. The argument that the case falls under a proviso to Section 28 was considered, but the Tribunal observed that the provision for non-issuance of show cause notice applies only if the duty and interest are paid and informed to the department in writing. As the appellant did not declare their intent to close the case by paying duty and interest, relief under Section 28 was not applicable. However, since duty and interest were paid, the option for reduced penalty under sub-section (5) of Section 28 of the Customs Act was not extended, necessitating a remand for reconsideration of the penalty and redemption fine on the confiscated capital goods.

Decision:
The appeal was allowed for remand to the Adjudicating Authority specifically for the limited purpose of considering the reduced penalty under Section 28 of the Customs Act. The payment of duty and interest, being uncontested, was maintained.

This judgment highlights the importance of compliance with customs duty obligations and the implications of de-bonding a 100% EOU unit without fulfilling necessary requirements.

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