Customs, Excise and Gold Tribunal - Tamil Nadu
Square D Textiles Exports Ltd. ... vs Cc on 11 March, 2003
Equivalent citations: 2003(88)ECC572, 2003(160)ELT246(TRI-CHENNAI)
JUDGMENT Jeet Ram Kait, Member (T)
1. This appeal is directed against the Order-in-Original No. 19/2001 (Commissioner) dated 29.3.2001 by which the Commissioner has confiscated the textile machinery imported by the appellants, under Section 111(o) of the Customs Act, 1962 with an option to redeem the same on payment of fine of Rs. 20,00,000 under Section 125 of the Customs Act, 1962. The Commissioner has also confirmed a duty demand of Rs. 1,27,11,468 under Section 28 of the Customs Act. He has also ordered for recovery of interest at the rate of 24% on the amount of duty foregone under Section 28AA of the Customs Act, with effect from 7.3.1996. Penalty of Rs 10,00,000 has also been imposed on the appellants under Section 112 (a) of the Customs Act, 1962 and has also directed that duty, fine, interest and penalty should be recovered by enforcing the Bank Guarantee and the balance should be recovered from the party.
2. This is the second routed of litigation before the Tribunal as the matter was once remanded for de novo consideration as the adjudicating authority had earlier decided the case ex-parte. The brief facts of the case are that the appellants had obtained Zero Duty EPCG licence No. P/CG/2156076 dated 12.9.95 for import of textile machinery for the CIF value of Rs. 23,40,87,598 with a validity period of two years and the validity period of the licence was extended by one year i.e. up to 12.9.98. The appellants imported textile machinery worth Rs. 8,41,06,842 at nil rate of duty. The DGFT had directed the party to pay Customs duty along with interest. The import of the said machinery was in violation of the Zero duty EPCG licence, Customs Notification No. 111/95 read with para 38 of the Import policy inasmuch as the appellants did not import machinery to the threshold value of Rs. 20 crores as stipulated in the Customs Notification No. 111 /95 dated 5.6.95. They had not done so, even during the extended period of the licence. Out of the import of machineries worth Rs. 8,41,06,842, machineries worth Rs. 3,38,40,845 involving duty of Rs. 1,27,11,468 was imported through Tuticorm Port and the rest through Chennai Port. The show cause notice confined only to the import made through the Tuticorm Port. After considering the submissions made by the party during the personal hearing on 22.3.2001, the present impugned order has been passed against which the appellants have come in appeal on the following grounds:
(1) In terms of para 38 of the Policy 1992-97 capital goods as per the conditions given in the table below, but subject to export obligation to be fulfilled over a period of time. Such export obligation may be reckoned from the date of customs clearance of the first consignment of such imported goods:
Duty Export Obligation Period 25% CIF Value
3 times CIF value 4 Years 15% CIF Value 4 times CIF value 5 Years It would thus be illogical to expect all the items of machinery to be imported within period of two years or within the extended period 12.9.98. Therefore, lesser quantum of machinery of the threshold value within the short span of validity of the licence cannot be construed as an offence/violation of the 0% duty scheme or for that reason the terms and conditions of Customs Notification No. 111/95 dated 5.6.95.
(2) There was no violation of the Exim Policy inasmuch as the EPCG licence in question was issued only against a valid export order which order was cancelled later because of world wide recession. It is not the case of the department that the machines have been diverted for the purpose other than the one intended.
(3) Not only the export of finished product was made but also amounts realised. This forms substantial portion of the total EO fixed on-rata basis commensurate with the value of the machinery imported vis-a-vis the permitted ratio of the machinery.
(4) Because of the world wide recession the export order was cancelled and the appellants could not go ahead with imports to the full value as it would be a dead investment without corresponding export orders. It was after much persuation the DGFT on 19.4.2000 converted the said EPCG licence to 15% by allowing them to opt out of zero duty scheme.
(5) The Commissioner failed to note that issuance of licence under EPCG scheme and the exemption from duty under Notification No. 111/95 co-existed and cannot be isolated or de-linked Therefore, when the licensing authorities have permitted conversion of the EPCG licence under 0% scheme to 15% duty, the prerogative of which vest with the licensing authorities, and that cannot be questioned.
3. They have also stated in the miscellaneous petition submitted on 8.4.2002 that the DGFT vide their letter F. No. 18/104/AM 96/EPCG II/896 dated 21.2.2002 has communicated that conversion of the EPCG licence No. P/CG/2156076 dated 12.9.1995 into 15% duty licence is in order and is retrospective and that 24% interest need not be insisted upon by the Customs since the same is not payable by the firm in the present case.
3.1 They have also submitted written submission in which they have reproduced certain finding portion of the learned Commissioner which reads as under:
"So far as their having produced a letter from the DGFT converting 0% licence to 15% licence is concerned, it is seen from the letter of DGFT that the said amendment has retrospective effect. The amendment is for the prospective import only. It does not cover the goods already imported. The amendment is not applicable to the goods already imported. As the goods had already been cleared at NIL rate of duty as per Notification No. 111/95 the condition of the amended licence are not applicable to the present import."
3.2 They have also stated in the written submission as under:
(a) That such conversions were permitted by the Chennai Custom House and one such example is the Order No. C3/483/0/2001 (Sea)-Cus. 601/08 dated 26.9.01 passed by the Commissioner (Appeals) in the case of M/s Ambal Precisions, Tirupur.
(b) When the matter was left for action under the Customs Act, 1962 the decisions already, made by the EPCG Committee have not been withdrawn and is therefore valid.
4. Shri M.S. Kumaraswamy, learned Consultant appearing for the appellants while reiterating the grounds of appeal and the written submissions made and as noted above, has submitted that since the appellants could not import the capital goods to the fullest extent they wanted to pay the duty and converted the licence from 0% duty to 15%. He has also invited our attention to DGFT's letter bearing F. No. 18/104/AM 96/EPCG-II wherein it was confirmed by the DGFT that conversion of Zero duty licence into 15% duty licence is in order and is retrospective and that 24% interest need not be insisted by the Customs. He also invited our attention to para 2 of Order-in-Original No. 3/2000 dated 21.2.2000 (the order in original prior to remand) and the Show cause notice dated 12.7.99. He has submitted that in this case order of confiscation of the goods is not legal and proper. The appellants have paid duty on conversion of the licence from Zero duty to 15% duty. He, therefore, prayed for setting aside the order in original and allowing their appeal.
5. Smt. Bhagyadevi, learned SDR appearing on behalf of the Revenue on the other hand defended the impugned order and submitted that the impugned order has been passed correctly and the order needs to be sustained. She has also invited our attention to the Communication of the DGFT bearing F. No. 18/104/AM96/EPCG-II/988 dated 2.7.2002 addressed to the Commissioner of Customs, Chennai, a copy of which is placed in the file, wherein the DGFT has clearly stated that the Commissioner of Customs is at liberty to take further necessary action as warranted under the Customs Act, in such cases. She has also invited our attention to the finding portion in the order impugned and submitted that the order impugned is a well reasoned one. She has also invited our attention to letter dated 4.4.2000 from the Commissioner to the Chairman, CBEC wherein the facts and circumstances which culminated the order in original have been explained. It was also mentioned therein that the DGFT's communication that no interest was payable was not correct, and a request was made to take up the matter with the DGFT to issue necessary clarification. Accordingly, the request of the Customs was considered by the DGFT and it was clarified by the DGFT that in view of the fact that order of adjudication has already been passed by the Customs necessary action as warranted un4er the Customs Act, 1962 can be taken against the party. She has invited our attention to the letter bearing F. No. 18/104/AM 96/ECGII/96 dated 19.4.2000 by which it was made clear to the appellants that since they have imported capital goods of CIF value of less than Rs. 20 crores, they cease to be Zero Duty beneficiary and they were required to pay Customs duty with 24% interest. She also invited our attention to the letter bearing F. No. 18/104/AM/96/EPCGII/1665 dated 22.8.2000 addressed to the appellants by the DGFT wherein under para 2 it has been clearly stated that the licence will be amended to provide for 15% duty, after payment of Customs duty with interest of 24%. She further submitted that the licence in question has not been amended by the authority competent to do so. She, in the circumstances, prayed for rejection of the appeal.
6. We have considered the rival submissions and gone through the entire case records. We observe that in this case, the appellants were issued with Zero duty licence for importation of textile machineries of the CIF value of Rs. 23,40,87,598 (Twenty three crores forty lakhs, eighty seven thousand, five hundred and ninety eight). Out of this 'sum, they have imported only machineries worth Rs. 8,41,06,842 (Eight crores, forty one lakhs six thousand, eight hundred and forty-two) and out of this sum, they have imported machineries worth Rs. 3,38,40,845 (Three crores, thirty eight lakhs, forty thousand, eight hundred forty five) involving duty of Rs. 1,27,11,468 (One crore, twenty seven lakhs, eleven thousand, four hundred and sixty eight) through Tuticorin Port and the balance was imported through Madras Port. The present dispute is in regard to import of machinery valued at 3,38,40,845 (Three crores, thirty eight lakhs, forty thousand eight hundred forty five) involving a duty of Rs. 1,27,11,468. Before we proceed to decide this case it is necessary to appreciate condition No. 6 of Notification No. 111/95-Cus, dated 5.6.95 and for this purpose, we reproduce below condition No. 6 of the said Notification:
"The importer shall, if he fails to import goods for a minimum value of twenty crores of rupees within the validity period of the import licence, be liable to pay forthwith, the whole of the duties of customs leviable on the goods imported but for the exemption contained in this notification together with interest at the rate of 24% per annum from the date of clearance of the goods."
Inasmuch as the importer has not imported the goods of the specified minimum CIF value of Rs. 20 crores, within the validity period, the conditions of the Exim Policy as envisaged under Notification No. 111/95 dated 5.6.95 were not fulfilled. Inasmuch as they have not fulfilled the condition of the Notification, they are not eligible for the Zero duty and are liable to pay duties of customs together with interest. @ 24%. We also observe that at the time of clearance of the goods the importer produced only the original licence for zero duty. On a later date, i.e. after clearance of the goods, the appellants approached the DGFT for conversion of the Zero duty licence into 15% duty licence and the DGFT ultimately converted the Zero duty licence into 15% duty licence with effect from 29.4.1999, on a condition that the appellants are liable to pay Customs duty plus 24% interest. The appellants have been making correspondence with the DGFT to treat the conversion of the Zero duty licence into 15% duty licence and also for non-payment of interest. From the records it is seen that DGFT had acceded to their request vide communication bearing F. No. 18/104/AM96/EPCG-II dated 21.2.2002 by which the DGFT has informed the appellants that conversion of the zero duty licence into 15% duty licence is in order and is retrospective and 24% interest need not be insisted upon by the Customs as the same is not payable by the appellants. In the mean while, the present impugned order demanding duty, confiscation of the goods and imposition of redemption, imposition of penalty and ordering interest etc. as noted above came to be passed. We observe that upon failure on the part of the importer to import goods of the minimum value of 20 crores, the importer was liable to pay duties of customs leviable thereon together with 24% interest. This is a condition precedent in the Notification No. 111/95 down 5.6.95 issued by the Ministry of Finance, Department of Revenue and any amendment to the said Notification can only be issued by the issuing authority and not by any body else. Unfortunately in the present, the DGFT chose to issue a communication bearing F No. 18/104/AM/96/EPCG II/96 dated 21.2.2002 informing the appellants-importer that conversion of the EPCG licence is retrospective and the 24% interest envisaged by the Notification need not be paid by the importer. The DGFT is not vested with the power to issue such communication altering the very condition of the Notification itself and hence they have exceeded their brief. Therefore, no cognizance can be taken of such illegal and unauthorised communication issued by the DGFT. The records also reveal that after the communication issued by the DGFT to the appellants-importer that the conversion of the Zero duty licence into 15% duty licence is retrospective and that the appellants need not pay interest @ 24% Customs vide their letter dated 4.4.2002 took up the matter with the DGFT informing among inter alia that the order of adjudication demanding duty, redemption fine, penalty etc. as noted above has already been passed and that when the licence was converted initially, the same was on a condition of payment of interest @ 24% and further that the question of retrospective conversion of the licence does not arise.
Thereupon the DGFT again issue another communication bearing F. No. 18/104/AM96/EPCG-II/288 dated 27.2002 that in view of the fact that adjudication order has already been passed, necessary action as required under the Customs Act, can be taken against the appellants. Therefore, the position as it stands today is that in view of the fact adjudication order has already been issued by the Commissioner of Customs, the communication issued by the DGFT earlier to the effect that the conversion of the zero duty licence into 15% duty licence shall have retrospective effect and that the appellants need not pay 25% interest, stands nullified, otherwise also.
7. Appellants have taken a plea that the earlier communication issued by the DGFT informing that they need not pay 24% interest has not been withdrawn and hence the same is valid. We are not able to countenance this plea firstly because we have already held that the DGFT is not vested with the power to waive payment of interest when it is a specific condition envisaged in the Notification issued by the competent authority and secondly the DGFT itself by its latest communication dated 2.7.2002 clarified the position that Customs Department is free to take action as warranted under the Customs Act, as decided by the EPCG Committee in its meeting held on 24.5.2002.
8. Now coming to the question as to whether confiscation of the goods and imposition of redemption and penalty is proper and legal, we are of the considered opinion that in the present case, it is an admitted fact that there is clear violation of para 38 of the Import & Export Policy for the year 1992-97 dealing with Zero duty licence as well as Customs Notification No. 111/95 dated 5.6.95 inasmuch as appellants have only imported textile machinery worth Rs. 3,38,40,845 (Three crores, thirty eight lakhs, forty thousand, eight hundred forty five) through the Tuticorin port as against the Zero duty licence of the threshold value of Rs. 20 crores. (Rupees twenty crores). They have thus not fulfilled the condition of the licence and of the Notification within the validity period and even after the validity period of the licence was over. In this case, the EPCG licence produced by the party at the time of clearance of the goods was for 0% duty and the goods had already been released at Nil rate of duty. They have cited the ratio of the judgment in the case of Suncity Syntentics Ltd v. CC, 2001 (132) ELT 684 in support of their plea for setting aside the interest. We observe that the ratio therein is not applicable to the present case, inasmuch as the facts and circumstances are different. That was a case dealing with fulfilment of Export Obligation in terms of Notification No. 110/95, whereas in this case, the appellants have not fulfilled the Import obligation cast upon them under Notification No. 111/95 (supra). It was later on that they applied for conversion of the zero duty licence into 15% duty licence. Appellants have also cited the judgment of the Hon'ble High Court of Delhi in the case of C.L. Jain Woollen Mills v. UOI, 1995 (79) ELT 196 (Del) in support of their plea. This decision is also not applicable to the facts of the present case, inasmuch as this judgment is on the issue of jurisdiction of the Tribunal. Appellants have also cited the order passed by the Commissioner in the case of Ambal Processors v. Dy. Commissioner of Customs, vide Order in Appeal No. C. Cus No. 601/2001 dated 26.9.2001 wherein the Commissioner (Appeals) has passed an order for reconsidering the request of the party for reassessment, in view of the amendment permitted by the DGFT, if otherwise in order. This order also is not applicable to the present case, inasmuch as the issue dealt with in the present relates to violation of import condition envisaged under Notification No. 111/95 (supra). We, therefore, hold that the confiscation of the goods and imposition of redemption fine is legal and proper- However, in view of the peculiar facts and circumstances of this case, we are inclined to think that some leniency is called for in the matter of imposition of fine and penalty and accordingly we hold that interests of justice would be met if the redemption fine is reduced to Rs. 10,00,000 (Rupees Ten lakhs) and the penalty is reduced to Rs. 2,00,000 (Rupees Two lakhs) and we order accordingly. Except for the above modifications, the appeal is otherwise dismissed.