TaxTMI 
TaxTMI 
2025 (5) TMI 2141
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Act. 2. Customs Appeal No. 50979 of 2021 has been filed by D.S. Kasare against that part of the order dated 22.01.2019 passed by the Commissioner that imposes a penalty upon him under section 112(a)(ii) of the Customs Act. 3. It is under a Tripartite Agreement executed between the Central Silk Board, Ministry of Textile (Govt. of India), Govt. of Chhattisgarh and the appellant that the appellant set up a composite silk mill at Bhanpuri Industrial Area, Raipur, Chhattisgarh, to manufacture and export goods relating to Sericulture Industry, namely, Natural Silk Fabrics, Silk Yarn and Ready Made Garments of Silk. 4. Under the said Tripartite Agreement, the Central Silk Board was to provide the appellant a subsidy of Rs. 182.950 lakhs towards various components of the project like handlooms, twisting unit, arm dyeing unit, fabric processing unit and the Chhattisgarh State was to provide a subsidy of Rs. 60.92 Lakhs. 5. The appellant procured zero duty EPCG Authorization Nos. 6330000073 dated 09.12.2011 from the Joint Director, DGFT, Raipur. At the instance of the appellant the said Authorization was amended on 14.03.2012 to allow the appellant to import second hand capital....
X X X X Extracts X X X X
X X X X Extracts X X X X
....one (in Rs.) 1. 129/12.12.11 Woolen Comber PB29 NSC/8 Nos 7169965 1713254 2. 48/16.03.12 Woolen Comber PB29 NSC/1 No. 847093 202412 3. 49/16.03.12 Two For One Murata Model 368, YOC 1994 alongwith standard Accessories/ 3 Nos 4879253 1165892 4. 7712074.21.08.12 OBEM second hand Steamer YOC 1995/ 1 No 2197359 568072 5. 7712089/21.08.12 1 NSC Roving Frame Mod BM14 YOC 1981/ 1 No 11482974 2968634 6. 7712104/21.08.12 1X NSC Model GN6 Gill/3 Nos 2410007 623047 72,41,311 Capital goods at Sr. No. 4 above was not found installed in the factory premises of Noticee No. 1. Thus, diverted/sold with payment of Customs Duty of Rs. 568072/-. Hence, it is excluded from duty foregone of Rs. 72,41,311/-. (-) 5,68,072 Actual duty foregone on goods mentioned at sr. no. 1, 2, 3, 5 & 6. 66,73,239 50% of duty foregone, which is recoverable from them alongwith interest. 33,36,620 8. However, short paid customs duty of Rs. 5,68,072/- was sought to be recovered from the appellant under section 28(4) of the Customs Act. This apart, in respect of two Bills of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....also the State Government of Chhattisgarh. It is not the case of the department that the appellant concealed or suppressed anything from the department or had diverted the imported capital goods. The appellant was all along pursuing the project with full hope that with the support, both financial and otherwise, from the Central and State Governments, the project would succeed; (ii) There are no grounds for invoking the extended period under section 28 of the Customs Act. Demand, if any, should have been raised only within the normal period; (iii) The first show cause notice dated 28.02.2017 was issued on the ground that the appellant had not met the average level of export i.e. the appellant had not fulfilled 50% of the export obligations within the first four years. As per the second proviso to paragraph 2(1) of the 'Explanation' relating to 'Export Obligations' to the Exemption Notification, it is mentioned that in case of export of goods relating to 'Sericulture' the importer shall not be required to maintain the average level of exports. In this view of the matter, the show cause notice dated 28.02.2017 was premature as the time pe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd the control of the appellant, confiscation of imported capital goods is not justified. Penalty could also not have been imposed either on the appellant or the Director. 13. Shri Shashikant Sharma, learned authorized representative appearing for the department, however, supported the impugned order and made the following submissions: (i) The appellant was issued EPCG license on 09.12.2011 under the Exemption Notification dated 11.09.2009 permitting duty-free import of capital goods contingent upon fulfilling the export obligations. The appellant imported various second-hand machinery and the first block of the export obligation period expired on 08.12.2015 with a grace period ending on 09.03.2016. The appellant failed to submit the required documents for fulfillment of 50% of the export obligation after the first block expired; (ii) Condition 8 of Notification mandates that the importer must provide evidence of export obligation fulfillment within 30 days of each block's expiry or pay the proportionate customs duty with 15% interest from the clearance date if the obligation is not met. The appellant did not submit the required details after the first bloc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tification, the appellant also executed a surety bond with a Bank Guarantee. The terms of the Exemption Notification and the relevant Foreign Trade Policy required the appellant to export goods valued at six times the duty saved on the capital goods imported under the EPCG scheme over a period of six years from the date of issue of the licence. This six years period was divided into two blocks. The appellant was required to fulfill 50% of the export obligation within the first four years and the balance of 50% within the next two years. 16. The relevant portions of the Exemption Notification dated 11.09.2009 is reproduced below: Notification dated 11.09.2009 "In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts goods specified in the Table annexed hereto, from,- (i) the whole of the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), and (ii) the whole of the additional duty leviable thereon under section 3 of the said Customs Tarif....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... use of capital goods imported in terms of this notification. The export obligation shall be over and above the average level of exports achieved by the importer in the preceding three licensing years for the same and similar products within the overall export obligation period including the extended period, if any. Such average shall be the arithmetic mean of export performance in the last 3 years for the same and similar products: Provided that upto 50% of the export obligation may also be fulfilled by export of other good(s) manufactured or service(s) provided by the importer or his group company or managed hotel, which has the EPCG authorization subject to the condition that in such cases, additional export obligation imposed shall be over and above the average exports achieved by the importer or his group company or managed hotel in preceding three years for both the original and the substitute product(s)/service(s): Provided further that in case of export of goods relating to handicraft, handlooms, cottage, tiny sector, agriculture, animal husbandry, floriculture, horticulture, pisciculture, viticulture, poultry and sericulture, the importer shall not b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....om the date of issue of authorization to the Deputy/Asstt. Commissioner of customs the extent of export obligation fulfilled, and where the export obligation of any block is not fulfilled in terms of preceding condition, the importer shall within three months from the expiry of said the block pay duties of customs equal to an amount which bears the same proportion to the duties leviable on the goods together with interest at the rate 15% per annum from the date of clearance of goods. The Noticee No. 1 did not submit details of fulfillment of 50% of total export obligation after completion of block of 4th year from the date of issue of license which expired on 08.12.2015. It is also observed by me that the Deputy Director of Foreign Trade, Raipur vide their letter dated intimated that the Noticee No. 1 have not submitted documents for discharge of export obligation. Under the circumstances it is obligatory on the part of the Noticee to pay applicable customs duty together with interest. xxxxxxxxxxxx I find that Noticee No. 1 have violated the condition of Notification No. 102/2009-Customs, dated 11.09.2009 and Hand book of Procedure by not exporting even a sin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erred by sale or lease or any other manner till export obligation is complete. The Noticee have mislead the department and suppressed the facts that they have diverted/sold out the machinery without fulfillment of export obligation and without payment of duty. Thus Customs duty amounting to Rs.5,68,072/- is recoverable from them under section 28(4) read with section 143 of the Customs Act, 1962. As they have contravened the provision of provision of Customs Act I find that the goods are also liable for confiscation under section 111 (j) and 111(o) of the Customs Act, 1962. 27. xxxxxxxxxxx. It can be seen from above facts that Shri D. S. Kasare, the Noticee No. 2 is a Director of the Noticee No. 1 and also responsible of the all day to day activity. He executed the bond and submitted bank guarantee and was fully aware of the condition of the bond. He did not extend the Bank guarantee even knowing that the export obligation has not been fulfilled. He secretly got encashed the BG. Furthermore, he after knowing the provision of EPCG license scheme and foreign Trade Policy started importing machinery. Being the Director of the Unit he was fully aware that since they have import....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ieved by the importer in preceding three years. The second proviso further stipulates that in case of exports of goods relating to Sericulture, the importer shall not be required to maintain the average level of exports. This definition of 'Export Promotion' contained in the Explanation has no connection with the requirement of fulfilling the requirements contained in clause (7) of the Exemption Notification. The submission advanced by the learned counsel for the appellant is, therefore, misconceived. As would be seen from the calculation chart relating to duty foregone, an amount of Rs. 5,68,072/- towards duty forgone has been deducted as the said machine was not installed in the factory premises. The duty foregone thus, came to Rs. 66,73,239/-. 50% of this amount has been confirmed for the first four years and the remaining 50% for the next two years with interest at the rate of 15% as per the provisions of the Exemption Notification read with section 143 of the Customs Act and the conditions enumerated in the surety bond executed by the appellant at the time of importation of the said machine. The Commissioner was, therefore, justified in confirming the demand of customs duty pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r penalty under section 114A of the Customs Act could have been imposed nor the goods could have been confiscated under section 111(o) of the Customs Act. 23. The impugned order also confiscates the machinery valued at Rs. 2,67,89,292/- shown at serial numbers 1, 2, 3, 5 and 6 of the Table under section 111(o) of the Customs Act. There is no discussion in the impugned order as to why the machinery valued at Rs. 2,67,89,292/- should be confiscated under section 111(o) of the Customs Act. This confiscation, therefore, deserves to be set aside. 24. In respect of the second show cause notice dated 18.09.2018, penalty of Rs. 3,33,662/- has been imposed both upon the appellant and D.S. Kasare under section 112(a)(ii) of the Customs Act for violating the condition of the Exemption Notification and the Foreign Trade Policy. 25. Penalty under section 112(a)(ii) of the Customs Act can be imposed for improper importation of goods by any person who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation. In the present case, confiscation of goods has been set aside. Penalty under section 112(a)(ii) of the Customs Act ....