TaxTMI 
TaxTMI 
2026 (10) TMI 23
X X X X Extracts X X X X
X X X X Extracts X X X X
....1 following was held: "ORDER 1. I hereby confiscate goods imported as per EPCG License No.0530159454 dated 10.10.2012 of Rs.14,05,000/- (Rupee Fourteen Lakhs Five Thousands only) under Section 111 (o) of the Customs Act, 1962 for alleged violations as discussed above. 2. I hereby redeem confiscated goods on payment of redemption fine of Rs.2,81,000/- (Rupees Two Lakhs Eighty One Thousands only) under the provisions of Section 125(1) of the Customs Act, 1962. Noticee is also directed to pay in addition, assessed Customs duty and any other charges payable in respect of goods as per the provisions of Section 125(2) of Customs Act, 1962. 3. I hereby order for recovery of Duty foregone amounting to Rs.3,79,350/-(Rupee Three Lakhs Seventy Nine Thousand Three Hundred Fifty only) along with applicable interest. I also appropriate amount of Rs.57,000/-already encashed by the department from Bank Guarantee as discussed above. 4. I also impose a Penalty of Rs.14,05,000 /- (Rupee Fourteen Lakhs Five Thousands only) on Importer under Section 112 (a) of the Customs Act, 1962. 5. I also order to Enforce Bond furnished by the importer at the ti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to why: (i) The CIF value of imported goods as per license of Rs.14,05,000/-(Rupee Fourteen Lakhs Five Thousands only), should not be held liable for confiscation under Section 111 (o) of the Customs Act, 1962 read with conditions of Bond executed in terms of Section 143 of the Customs Act, 1962 read with Notification No.102/2009-Customs dated 11.09.2009 read with conditions of EPCG License. (ii) Duty foregone amount of Rs.3,79,350/- (Rupee Three Lakhs Seventy Nine Thousand Three Hundred Fifty only) alongwith applicable interest (from the date of clearance of goods to the date of payment of duty) should not be recovered in terms of conditions of Bond executed in terms of Section 143 of the Customs Act, 1962 read with Notification No.102/2009-Customs dated 11.09.2009 read with conditions of EPCG License, As the amount of Rs.57,000/- has already been encashed by the department from Bank Guarantee submitted by the importer, why the same should not be appropriated against duty demanded. (iii) Penalty should not be imposed on the importer under Section 112 (a) of the Customs Act, 1962 (iv) Bond furnished by the importer should not be enforced for reco....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of penalty in such case would be in violation of the principles of natural justice. It seems from the orders impugned that the adjudicating authority initially imposed penalty under clause (i) and the first appellate authority confirmed the penalty under clause (ii) of section 112(a). Neither the Adjudicating Authority nor the Appellate Authority indicated under which particular clause such penalty has been imposed. • The Hon'ble Supreme Court in the matter of Jaswal Neco Ltd. Versus Commissioner of Customs, Visakhapatnam 2015 (322) E.L.T. 561 (S.C.) that in case of failure to fulfil the export obligation in a bona fide case, no penalty is imposable. • The show cause notice merely alleged that the duty foregone under the notification has not been paid and there were no allegation that duty was evaded. That is for the reason that the appellant was bound to pay the duty in terms of the bond. Further, such notification as well as the FTP/EXIM contemplate a business situation where an importer may fail to fulfill the obligation to export the goods so manufactured from the imported capital goods and accordingly, it provides for regularization of such EPCG....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ods imported as per license of CIF value Rs.14,05,000/- (Rupee Fourteen Lakhs Five Thousands only) under Section 111 (o) of the Customs Act, 1962. (ii) Recovery of Duty foregone. (iii) Imposition of Penalty on Importer under Section 112 (a) of the Customs Act, 1962 (iv) Enforcement of Bond furnished by the importer. 9. The issue before me is in respect of denial of exemption by the Customs department on non compliance of obligations prescribed under Notification No.102/2009-Customs dated 11.09.2009 of the Government of India, Ministry of Finance against EPCG License No.0530159454 dated 10.10.2012. 10. In the present case, the importer has imported goods involving Customs duty amounting to Rs.3,79,350/- (Rupee Three Lakhs Seventy Nine Thousand Three Hundred Fifty only) under the said EPCG License in terms of the above said Notification and as per para (2) of the said notification conditions have been prescribed to be fulfilled by the importer for availing such exemption. I find that in the Show cause Notice it has been alleged that importer was required to produce proof of fulfillment of export obligation within the period as prescribed i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fails, and therefore, the importer is liable to pay the amount of duty foregone of Rs.3,79,350/- (Rupee Three Lakhs Seventy Nine Thousand Three Hundred Fifty only) on the said imported goods along with interest at the applicable rate. The department has rightly encashed the Bank Guarantee No.2534ILG002312 dated 13.10.2012 of Rs.57,000/-. 12. Under these circumstances, the aforesaid goods are also liable for confiscation under Section 111 (o) of the Customs Act, 1962. Section 111 (o) of Customs Act, 1962 reads as under:- Section 111. Confiscation of improperly imported goods, etc. The following goods brought from a place outside India shall be liable to confiscation:- (0) any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer; 3[(p) any notified goods in relation to which any provisions of Chapter IVA or of any rule made under this Act for carrying out the purposes of that Chapter have been contravened.] 13.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lso been paid by the appellant only after issuance of impugned OIO. 7. Having observed so, I now take the issues raised by the appellant one by one. As far as confiscation of the goods is concerned, argument of the appellant is that under Notification No. 102/2009 read with FTP 2009-2014, under EPCG authorization an importer has to option either to fulfil the export obligation or on failure to do so pay duty along with applicable interest. Since in the present case they have discharged their duty liabilities along with interest they have fulfilled the conditions of Notification No. 160/92. Accordingly, no violation of law and procedure is done by them and consequently the goods are not liable to confiscation under Section 111 (o) of the Act. I find this argument of the appellant devoid of merit and without any legal footing.. Demand of duty and confiscation of the goods are two totally different aspects under the Customs law. Demand of duty arises on importation of the goods and if goods have been imported at a concessional rate of duty subject to fulfilment of certain conditions and such conditions are violated, then the duty concession would not be available at all. In t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessment is finalized subsequently, even if the goods are not available for confiscation, redemption fine in lieu of confiscation has been rightly imposed by the adjudicating authority. Therefore, I find no infirmity or illegality in the confiscation of the goods in question and imposition of redemption fine thereof by the adjudicating authority. 10 Now coming to the imposition of penalty on the appellant under Section 112(a) is concerned, appellant has stated that since no mensrea was there, penalty can not be imposed upon them under Section 112(a) of the Act. In this regard, as chronicled supra, I find that the appellant failed to deposit the duty and interest thereof on their own even after expiry of more than 2 years of the stipulated time limit. Appellant approached the DGFT for extending time limit and (or) regularizing the delay only after issuance of show cause notice and duty in question was deposited by them only after confirmation of demand vide impugned OIO. This conduct of the appellant shows that they had no intention to deposit the duty liability and interest on their own and it is only when the department started the ball rolling, left with no op....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the present case was en-cashed before the issuance of the show cause notice. Appellant has after the issuance of show cause notice approached the DGFT for • conversion of EPCG license issued for Zero duty EPCG Scheme to Concessional 3% EPCG Scheme; • extension of Export obligation period for two years upto 09.11.2020; • Regularization of the imports made against the payment of duty forgone along with interest. Adjudicating authority without waiting for any response from the DGFT on the request made proceeded to adjudicate the matter. Beofre the Commissioner (Appeal) appellant have produced the Final Duty Regularization Letter dated 26.09.2022, however Commissioner (Appeal) after taking cognizance of the said letter proceeded to uphold the confiscation, redemption fine and penalty imposed upon the appellant, though he modified the quantum of redemption fine and penalties imposed. 4.5 We find that imports made by the appellant against EPCG Authorization No 05301959454 dated 10.10.2012 were regularized by the DGFT. The "Final Duty Paid Regularization Letter" dated 04.01.2022 which was issued by DGFT is reproduced below: 4.6 Thus the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the Counsel for non-imposition of penalty and redemption fine and interest are as follows: (i) Meirs Pharma (India) Pvt. Ltd. v. CC, Chennai - 2004 (167) E.L.T 53 (Tri. - Chennai) (ii) Dyna Lamps & Glass Works Ltd. v. CCE, Chennai - 2003 (157) E.L.T. 73 (Tri. - Chennai) (iii) Fal Industries Ltd. v. CC, Chennai - 2003 (159) E.L.T. 215 (T) = 2002 (53) RLT 86 (CEGAT-Chennai)] (iv) Philips (India) Ltd. v. CCE, Mumbai - 2001 (137) E.L.T. 697 (Tri. -Mumbai) (v) Metropoli Overseas Ltd. v. CC, Bangalore - 2003 (154) E.L.T. 86 (Tri. - Kolkata) (vi) CCE, Mangalore v. Shree Krishna Pipe industries - 2004 (165) E.L.T. 508 (Kar.) = 2004 (61) RLT 17 (Karnataka) 2. The learned SDR reiterated the departmental view. 3. On a careful consideration of the submissions, we notice that the appellants had imported capital goods under concessional rate of duty under EPCG Notification No. 110/95, dated 5-6-1995. But, they could not set up the industry to fulfil the export obligation due to total collapse of Korean economy and hence could not procure the order for manufacture and export of ceramic goods. The value of Korean company fel....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... obligation for reasons beyond the control of the respondent. A demand noticed was served on the respondent seeking to recover duty foregone after the expiry of the obligation period. The Tribunal upheld the order passed by the Commissioner (Appeals) for waiver of interest and penalty as the principal amount towards duty had been paid. The relevant observations are: "5. xxxxxxxx. The fact that the respondents could not discharge their export obligation and hence failed to meet the export commitments leading to nonissue of the EODC is understandably beyond the control of the respondent. It is also on record that the respondent did approach the department to permit them to make the payment of duty foregone in terms of the EPCG Licence issued, in installments and waive the requirement/imposition of interest and penalty as was proposed in the show cause notice. It is on record that the respondent has paid the total duty due in terms of the EPCG in two installments Rs.18,00000/- (Rupees Eighteen lakh only) before filing of the appeal before the Commissioner (Appeals) and the balance amount of Rs. 9,396/- (Rupees Nine thousand three hundred ninety six only) on 2nd November 2017,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xcise Settlement Commission examined this issue at length and this Tribunal in Taurus Noveltiesand B R Marbles also held that interest could not be levied and penalty could not be imposed if the fulfillment of export obligation became an impossibility. 37. It is not possible to accept the contention advanced by the learned authorised representative appearing for the department that the aforesaid three decisions cited by the appellant will not apply to the facts and circumstances of the case. The decisions deal with situation where the export obligation could not met because of impossibility. In the present case, also the export obligation could not be met because the goods imported and the premises of the hotel were auctioned. The appellant, therefore, could not have fulfilled the export obligation within the period prescribed in the first block. The bona fides of the appellant are also clear as the appellant did carry out some exports through group companies to the extent of 50% which was permissible under the Notification. The appellant had requested for grant of 100% obligation, but this plea was rejected. 38. The decision of the Delhi High Court in DSJ Communi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....toms Act, 1962. We have noted above that in the instant case, there was sincere efforts on the part of the appellants to fulfil the export obligations but the circumstances were beyond their control and they could not fulfil the export obligations in spite of their best efforts. It is not the case of the Department that appellants have made any deliberate attempt to avail of the benefit of Notification. The machinery was in fact installed at the factory, as noted by the adjudicating authority, in Para 4 of the impugned order. Production of the goods was also started some time in March, 1994 and they could only meet the export obligation to the extent of 1.5% only. There is no material to doubt their bona fides." (emphasis supplied) 43. The confiscation of goods under section 111(o) of the Customs Act cannot also be justified as the appellant had reasons beyond his control for not fulfilling the terms of the Notification. Once the goods are not held liable to confiscation, penalty under section 112(a) of the Customs Act cannot be imposed. 44. Thus, for all the reasons stated above, the confiscation of goods under section 111(o) of the Customs Act is set as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t cannot be disputed that fixing the quantum of EO under the Advance Authorizations, which are the subject matter of the dispute, was the prerogative of the DGFT alone. The fulfillment of EO in terms of quantity and value having been accepted by the DGFT in the present case, the Customs Commissioner was wrong in holding that there was a violation of conditions No. (viii) and (ix) of Notification Nos. 96/2009-Cus. and 99/2009-Cus. on the part of the Appellant. It is also difficult to countenance that the reasoning of the Respondent to the effect that EO for the purposes of Customs could be different for the purposes of licensing authority, especially when the clause relating to fulfillment of EO in the Customs notification envisages fulfillment of EO with reference to the quantity and value as per the Advance Authorization. In fact, the FTP also allows clubbing of Authorizations for fulfillment of EO, even though the Notification is silent on the same. 18. It is nobody's case that where the Advance Authorizations are clubbed, the fulfilment of EO against an individual Authorization can be separately examined by the Customs authorities and demands be raised in cases wher....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ity to take steps in that behalf. ...." 20. In Autolite (India) Ltd. Vs Union of India [2003 (157) ELT 13 (Bom.)], the Hon'ble High Court of Bombay had held that: "7. Having heard the Counsel on both the sides, we are of the opinion that the Customs authorities below were not justified in refusing to allow the duty free clearance of the goods on the ground that die steel imported by the petitioner is capital goods and capital goods did not fall within the scope of the Notification No. 116/1988. Admittedly, under the advance licence issued, the petitioner was entitled for duty free import of die steel as a material required in the manufacture of export product. Once the Licensing Authority has accepted that die steel is a material required in the manufacture of the export product, it is not open to the Customs Authorities to go behind the licence and deny duty free clearance of the goods. The exemption Notification No. 116/1988, dated 30th March, 1988 specifically states that the materials that are required to be imported for the purpose of manufacture of resultant products shall include such items as are imported into India against the advance licence for subs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Co-ordinate Bench in the case of Hindustan Lever Limited vs. CC (EP) Mumbai [2012 (281) ELT 241 (Tri Mum)] has followed the ratio in Titan Medicals [supra] and has held as under: " -- 6.3 The next issue for consideration is whether once the licensing authority certified that export obligation has been fulfilled whether such certification is final and binding on the Customs authorities? This issue came before this Tribunal in the case of Navjyothi International v. Commissioner of Customs, Chennai, cited supra. In that case the Revenue sought to deny the benefit of Customs duty exemption under Notification No. 30/97-Cus., dated 1-4-1997 and 51/2000-Cus., dated 27-4-2000 under DEEC scheme wherein the importer had undertaken imports under seven quantity based advance licences issued by the DGFT and had fulfilled the export obligation. This Tribunal in that case held as follows: "With regard to licence conditions, the licensing authority has certified full discharge of export obligation by the appellants. The adjudicating authority under the Foreign Trade (D&R) Act has found no violation of licence conditions on their part and its order has been accepted by the Revenue. Hence t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ifications governing the advance licensing scheme. If at all they felt that the appellant had violated any of the terms and conditions of the licences, they should have referred the matter to the licensing authority for appropriate action rather than taking action suo motu. 22. Further, a Co-ordinate Bench has in the case of Goldfinch Hotels Pvt. Ltd. vs. CC (ACC & Exports) Mumbai [2015 (328) ELT 282 (Tri.-Mumbai)] has held that Customs authorities cannot deny benefit of exemption by adopting an interpretation of the FTP different from what is being applied by the Licensing authority. This has been rendered by applying the ratio laid down by the Apex Court in the case of Vadilal Chemicals Ltd. Vs State of Andhra Pradesh - 2005 (192) E.L.T. 33 (S.C.), relevant extract of the observations of the Tribunal are reproduced herein below: " --- 25. It is settled law as held by the Hon'ble Supreme Court in Vadilal Chemicals Ltd. o. State of Andhra Pradesh, 2005 (192) E.L.T. 33 (S.C.) that the State, which is represented by the Departments, can only speak with one voice. The Hon'ble Supreme Court observed thus - "23. There is another reason why the action o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Policy, it is the view expressed by the Ministry of Commerce, which must be taken to be that voice. Para 2.4 of the FTP reads thus - "Procedure. 2.4 DGFT may, specify procedure to be followed for an exporter or importer or by any licensing or any other competent authority for purpose of implementing provisions of FT (D&R) Act, the Rules and the Orders made thereunder and FTP. Such procedures shall be published by means of a Public Notice, and may, in like manner, be amended from time to time." It is evident from the above provision of the FTP issued by Central Government by way of a Notification in the Official Gazette, that an exporter or importer or any licensing or any other competent authority (which shall necessarily include the officers of Ministry of Finance/Customs Authorities), would be bound by the procedure specified by DGFT for implementing the provisions of FT (DER) Act, the Rules, the Orders made thereunder and FTP, published by means of a Public Notice. Thus all procedural aspects whether or not notified by the Ministry of Finance, if contrary to what is specified in Public Notice/Handbook of Procedure, would give way to those specified i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e fact that the Government of India have issued Exts. P17 and P18, do not think it will be reasonable to require the petitioner to wait until any notification is issued by the Customs Department to get the benefit. Therefore, there is no substance in this objection." 23. The undisputed fact that EODC is an evidence of fulfillment of EO for all purposes, has been acknowledged and accepted by the CBIC through its Circular No.16/2017- Cus dated 02.05.2017, wherein the Board itself has clarified that any recovery proceedings is to be initiated only if the Assessee fails to submit the EODCs, clearly implying that in case the Assessee submits EODCs, it is to be accepted that the EO stood fulfilled and no proceedings ought to be initiated against such Assessee. The impugned proceedings are contrary to the clarifications issued by the CBIC and thus, the demand so raised is untenable on this count also. 24. In the light of the above factual matrices of the case on hand, we find that the reliance placed by the Commissioner on the judgment of the Hon'ble Supreme Court in the case of Sheshank Sea Foods Pvt. Ltd. Vs. Union of India - 1996 (88) ELT 626 (SC)] is misplaced as....