TaxTMI 
TaxTMI 
2026 (8) TMI 1151
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....26.09.2005 and saved Customs duty of Rs.9,75,116/-. The appellant also furnished a Bond of Rs.24,50,000/- along with a Bank Guarantee for Rs.1,50,000/- in terms of the above Notification. 1.1 Similarly, M/s. Hans Creation Pvt. Ltd. (Appellant No.2), GIDC-Sachin, also obtained EPCG License No. 5230000559 dated 09.08.2005 from DGFT-Surat for import of capital goods under Notification No.97/2004-Cus. dated 17.09.2004. They imported identical embroidery machine under Bill of Entry No.248/2005 dated 24.10.2005 and saved customs duty of Rs.9,59,808/-. They also furnished a Bond of Rs.24,00,000/- along with Bank Guarantee of Rs.1,50,000/- in terms of the above Notification. 1.2 As per Notification No.97/2004-Cus, the appellants were required to fulfil export obligation on FOB basis equivalent to eight times the duty saved on imported goods, out of which 50% obligation was to be fulfilled in the block of 1st to 6th year and the remaining 50% in the block of 7th to 8th year. It transpired that the appellant(s) after importing the said machinery, installed the same in their premises but did not fulfil the export obligation. The Customs Authorities at ICD, Sachin made correspondence wit....
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....of the Customs Act, 1962, he reduced the redemption fine from Rs.1,25,000/- to Rs.1,00,000/- and also reduced penalty on both the appellants to Rs.50,000/- under Section 112(a) of the Customs Act, 1962. Aggrieved with the above order, both the appellants filed appeal before this Tribunal. As both the cases have identical issue, facts in the case of appellant No.1 are discussed for the sake of brevity. 2. The appellant(s) took the following grounds in their appeals and prayed for the setting aside the impugned order by allowing their appeals- * The Appellate Authority has not considered their contentions that they could not fulfil the export obligation due to unforeseen circumstances/ reasons of historic floods of 2006. Their case for waiver of export obligation is allowable in terms of Clause 4 of Notification No.97/2004Cus as amended vide Notification 72/2007-Cus dated 21.05.2007. * EPCG License is a contract between the appellant and DGFT which became unenforceable in terms of Section 56 of the Indian Contract Act, due to unprecedented floods of 2006. Therefore, the order is ab initio void and illegal. For this proposition, they rely on the decision of Hon'bl....
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....s. 3.1 Learned Counsel further explained the circumstances which led to filing of, and settlement of insurance claim in respect of damaged imported machine(s) as well as grant of Flood Relief assistance from the State Government. He highlighted various case laws to plead that the insurance claim so received by them, does not include Customs duty and therefore, receipt of insurance claim cannot be a ground for demanding customs duty from them. On enquiry, regarding waiver of export obligation by the committee, learned Advocate admitted that the Deputy Director DGFT has already issued order in their case imposing penalty of Rs.47,43,810/-for non-fulfilment of export obligation against which they had filed appeal with the office of Additional Director, DGFT, Mumbai Learned Advocate also submitted a copy of CESTAT order dated 01.06.2026 in the case of Rajdarbar Heritage Ventures Limited Vs. Additional Director General (Adjudication) reported at 2026 (SCC) Online CESTAT 1357 wherein CESTAT has granted waiver of interest and set aside the redemption fine and penalty imposed on the appellant. He submits that the facts in their case are similar to Rajdarbar Heritage case, where also the....
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....rter, including fulfilment of export obligation. The relevant conditions as given in para (2) of the above notification, are reproduced below:- "2. The exemption under this notification shall be subject to the following conditions, namely :- (1) that the goods imported are covered by a valid licence issued under the Export Promotion Capital Goods Scheme in terms of Chapter 5 of the Foreign Trade Policy permitting import of goods at the rate of five percent duty and the said licence is produced for debit by the proper officer of customs at the time of clearance : Provided that for import of spare parts specified at S. No. 4 of the said Table, the validity period of the licence shall be deemed to be the period permitted for fulfilment of the export obligation in full; (2) that the importer executes a bond in such form and for such sum and with such surety or security as may be specified by the Deputy Commissioner of Customs or Assistant Commissioner of Customs binding himself to fulfil export obligation on FOB basis equivalent to eight times the duty saved on the goods imported as may be specified on the licence, or for such higher sum as may be fi....
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....export obligation together with interest at the rate of 15 per cent per annum from the date of clearance of the goods; (4A) where the importer fulfils 75% or more of the export obligation as specified in condition (2) within half of the period specified for export obligation as mentioned in condition (2), his balance export obligation shall be condoned and he shall be treated to have fulfilled the entire export obligation. (5) that the capital goods imported, assembled or manufactured are installed in the importer's factory or premises and a certificate from the jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be, is produced confirming installation and use of capital goods in the importer's factory or premises, within six months from the date of completion of imports or within such extended period as the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, may allow : Provided that if the importer is a service provider, he may produce said certificate of installation and usage issued by an independent chartered engineer : Provided further that in....
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....Dhannad Rau (District Indore), Kheda (Pithampur, District Dhar) ^8[Patli (Gurgaon), Irugur Village (Tamil Nadu), Thudiyalur (Tamil Nadu), Chettipalayam (Tamil Nadu) ^5[Veerapandi (Tamil Nadu) ^9[Marripalem Village in Taluk of Edlapadu, District Guntur ^10[Tondiarpet (TNPM), Chennai and Irungattukottai, SIPCOT Industrial Park, Kattrambakkam Village, Sriperumbudur Taluk, Kanchipuram District, Tamil Nadu]]]]] Anaparthy (Andhra Pradesh), Salem, Malanpur, Singanalur, Jodhpur, Kota, Udaipur, Ahmedabad, Bhiwadi, Madurai, Bhilwara, Pondicherry, Garhi Harsaru, Bhatinda, Dappar (Dera Bassi), Chheharata (Amritsar), Karur, Miraj, Rewari, Bhusawal, Jamshedpur, Surajpur, Dadri, Tuticorin, Kundli, Bhadohi, Raipur, Mandideep (District: Raisen), Durgapur (Export Promotion Industrial Park), ^15[Babarpur, Loni (District Ghaziabad) and Melapakkam Village (Arakkonam Taluk, Vellore District)]or through the Land Customs Station at Ranaghat, Singhabad, Raxaul, Jogbani, Nautanva (Sonauli), Petrapole, Mahadipur, Nepalganj Road, Dawki, Agartala, Sutarkhandi, Amritsar Rail Cargo and Attari Road, Hilli, Ghojadanga and Changrabandha or Special Economic Zone as specified in the notification issued under section ....
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....surance claim as well as flood relief assistance from State Government. There is also no dispute that the appellant(s) have failed to fulfil export obligation. As per Condition No.4 of para 2 of the above notification, if the importer fails to fulfil export obligation within the stipulated time, then he is required to pay the customs duty. However, as per condition 7 of para 2, the importer could request DGFT authorities for grating extension of time for completing the export obligation. The provisions regarding waiver of export obligation by a committee comprising of representatives of the Department of Commerce and Department of Revenue under DGFT came into force only w.e.f 21.05.2007. Learned Advocate could not produce any waiver of export obligation either from the above committee or from DGFT authorities. It is also on record that the DGFT authorities have taken cognizance of non-fulfilment of export obligation by the appellant and after following necessary processes, the Deputy Director, DGFT decided the matter by invoking Section 11(2) of the Foreign Trade (Development & Regulation) Act, 1992. Vide order issued from F. No.52/36/021/0155/AM06 dated 06.02.2019, the Deputy Dire....
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....n of the importer, waived payment of interest which was challenged by the Union of India on the ground that the Settlement Commission has no powers to grant immunity from payment of interest. While dismissing the petition filed by Union of India, Hon'ble High Court held that the contract in this case stands frustrated and therefore, no useful purpose will be served by setting aside the order of the Settlement Commission and resorting the petition to the file of the settlement commission for consideration of the case. Another decision of CESTAT Mumbai in the case of Welspun Terri Towels reported at 2002 (149) E.L.T. 593 has been cited by the appellant, wherein, the issue was demand of duty on machines which were not used for intended purpose for which was granted. The commissioner had allowed party's request against which revenue filed appeal; same was dismissed on the ground that appeal was filed beyond the period of one year from the date of Commissioner's order. 5.5 Learned Advocate also cited several decisions relating to imposition of penalty by DGFT authorities which are not relevant to the present matter demanding customs duty, interest and penalty. Learned Counsel further....