Export obligation default under Notification 160/92-Cus/EXIM para 38: duty demand upheld, but penalty, confiscation, 24% interest set aside.

Failure to fulfil export obligation under Notification No. 160/92-Cus. read with para 38 of the EXIM Policy was held not to warrant confiscation and penalty where the importer had furnished a bank guarantee and sought extension, and the lapse did not justify penal action as a matter of judicial discretion; confiscation and penalty were set aside. Demand of interest at 24% was held impermissible in the absence of any statutory provision in the Customs Act, 1962 or the notification authorising interest recovery; the interest demand was set aside. Demand of customs duty consequent to non-fulfilment of export obligation was upheld, and the appeal was partly allowed with consequential relief.

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Issues involved: Appeal against order-in-original for confiscation of goods, demand of duty, interest, and penalty u/s 111(o) and 112(a) of the Customs Act, 1962.

Confiscation of Goods & Imposition of Penalty: The appellants failed to fulfill export obligations due to uncontrollable reasons, exporting only 1% of the obligation. No deliberate misuse of Customs Notification was alleged. Despite efforts and submission of bank guarantee for extension, they could not comply. CEGAT cited a similar case where confiscation and penalty were set aside under the same Notification. Referring to Hindustan Steel Ltd. v. State of Orissa, CEGAT ruled that penalty should be imposed judiciously. Consequently, confiscation of goods and penalty were overturned.

Demand of Interest: Commissioner of Customs in a previous case held that interest cannot be demanded without a statutory provision in the Customs Act. CEGAT concurred, setting aside the interest demand of 24% as per the impugned order.

In conclusion, the impugned order was upheld only regarding the demand of duty, while the confiscation of goods, penalty, and interest demand were set aside. The appeal was partially allowed, with the appellants entitled to any consequential relief as per the law.

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