Imported scrap export obligation dispute settled with waived interest under Customs Act

The case involved issues of failure to fulfill export obligations, demand for customs duty and interest, adjustment of Central Excise duty, waiver of interest, and statutory sanction for interest demand. The applicant, M/s. Ganapathi Smelters Limited, imported scrap but failed to meet the full export obligation, leading to a demand for duty and interest. After negotiations, the duty liability was fixed at Rs. 22,42,269/-, with no interest required under the Customs Act, 1962. The applicant paid the duty, and the bond was returned with a certificate for Modvat benefit, subject to Section 127H(3) of the Customs Act, 1962.

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Issues Involved:
1. Failure to fulfill export obligation.
2. Demand for customs duty and interest.
3. Adjustment of Central Excise duty against additional customs duty.
4. Request for waiver of interest.
5. Provision of statutory sanction for interest demand.

Detailed Analysis:

1. Failure to Fulfill Export Obligation:
The applicant, M/s. Ganapathi Smelters Limited, imported 1500 MT of shredded scrap under a value-based advance licence and cleared them without payment of customs duty. The applicant was obligated to export resultant products but only utilized 100 MTs for export, failing to meet the full export obligation. Consequently, a Show Cause Notice (SCN) was issued demanding duty and interest.

2. Demand for Customs Duty and Interest:
The Commissioner of Customs issued an SCN demanding Rs. 24,02,431/- along with interest at 24% per annum due to the applicant's failure to fulfill the export obligation. The applicant admitted to utilizing 1400 MTs of imported scrap locally and acknowledged an additional liability of Rs. 8,42,269/- proportionate to the unfulfilled export obligation, later revised to Rs. 22,42,269/-.

3. Adjustment of Central Excise Duty Against Additional Customs Duty:
During hearings, the applicant was asked to explain the legal provision for adjusting Central Excise duty paid on ingots against additional customs duty. The applicant admitted there was no legal provision for such adjustment and revised the additional duty liability accordingly.

4. Request for Waiver of Interest:
The applicant requested a waiver of interest, citing correspondence delays with JDGFT that could have reduced the interest burden. The Revenue conceded that MS Flats were permitted for export and acknowledged the applicant had exported 81.475 MTs of MS Flats and CTD bars, with the difference representing burning loss permitted under SION norms. Consequently, no duty was demandable on the 100 MTs used for export.

5. Provision of Statutory Sanction for Interest Demand:
The SCN did not cite provisions for interest demand. The DEEC book allowed import under Customs Notification No. 159/90, which, along with Notification No. 203/92, did not contain provisions for demanding interest. Interest could only be demanded under Sections 28AA or 28AB of the Customs Act, 1962, if duty was determined and not paid within three months. Since the duty was determined by this order and paid in instalments, no interest was due under the Customs Act.

Conclusion:
The application was settled with the following terms:
1. Duty liability fixed at Rs. 22,42,269/-, already paid by the applicant.
2. No interest required under the Customs Act, 1962.
3. Return of the bond executed by the applicant.
4. Issuance of a certificate evidencing payment of Customs Duty for Modvat benefit.

The settlement would become void if obtained by fraud or misrepresentation of facts, as per Section 127H(3) of the Customs Act, 1962.

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