Customs, Excise and Gold Tribunal - Calcutta
Metropoli Overseas Ltd. vs Commissioner Of Customs on 11 December, 2002
Equivalent citations: 2003(154)ELT86(TRI-KOLKATA)
ORDER S.S. Sekhon, Member (T)
1. The appellants obtained licences to import capital goods under EPCG Scheme for a total GIF value of Rs. 9,10,53,498/- and the export obligation was fixed at four times this value. The licence was valid up to 12-5-01 and was registered with Assistant Commissioner (Customs), Bangalore and import of capital goods valued at Rs. 8.23 crores CIF under the said licences were effected and cleared after claiming exemption of duty under Notification 110/95-Cus., dated 5-5-95. The Officers of Headquarters (Preventive), Bangalore visited and searched the factory premises on 3-8-2000 and noticed that machinery under import valued at Rs. 8.23 crores was installed. However no exports were effected by the Company towards fulfilment of export obligation. The said imported articles were seized and enquiries were launched and a show cause notice was issued.
2. The Commissioner, Bangalore heard the party and issued the order impugned in these proceedings. The Commissioner found that the provisions of Exim policy permits an importer to import capital goods at concessional rates against a fulfilment of export obligation within the stipulated period of 5 years or as specified in the EPCG licence. The provision for such exports to be effected were as follows :
Sl. No Period from the date of issue of licence Proportion of total export obligation
1.
1st Year NIL
2. 2nd year 10%
3. 3rd Year 20%
4. 4th Year 30%
5. 5th Year 40% The policy also stipulates that where a licensee fails to discharge a minimum 25% of the export obligation in any particular year for fresh execution of orders, he shall be liable to pay whole of duties of customs, along with 24% interest on the goods imported, as per Notification 110/95-Cus. after execution of bond with the AC Customs binding the fulfilment of export obligation. Condition No. 5 incorporates the stipulation of the Customs duty a failure to discharge minimum 25% of export obligation as recorded herein above. The policy also requires the importer to submit to the licensing authorities progress made and fulfil all the exports.
3. The Commissioner found that on verification and investigation, it is evident that the importers did not make any exports whatsoever and they had completely failed to meet the export obligation stipulated in the Exim Policy and the customs notification which was admitted by their MD. Nor they have produced any certificate from the licensing authorities to have ap-preached them for extension of export obligation. Therefore it is concluded that information was suppressed by the importers about the non-fulfilment of export obligation with an intention to evade duty and held "They have shown scant regard to the concerned Department" and also the not having observed the requirements of law and procedure. He thereafter concluded that the goods under seizure viz. capital goods valued at Rs. 8.23 crores CIF were liable for confiscation under Section 111(o) of the Customs Act for non-fulfilment of the conditions of Notification 110/95, dated 5-6-95 and ordered their confiscation offering them to redeem on a fine of Rs. 1 lakh. He imposed a penalty of Rs. fifty lakhs on the importers under Section 112A and Rs. 10 lakhs on Shri Ashok Kumar Mohta, MD under Section 112A. He also demanded duty foregone to the extent of Rs. 2,07,18,076/- along with interest @ 24% per annum and ordered the appropriation of an amount of Rs. 1,08,44,546/- deposited with the Government vide challan dated 16-8-2000 (realised by enforcing the BGs) to be appropriated against the duty demand being now made. He also demanded interest at the rate of 24% per annum of Rs. 98,75,530/- (Rs. 2,07,18,076/- - Rs. 1,08,44,546/-) ordered the confiscation of the imported goods and gave an offer of Rs. 1 crore to redeem the same. The present appeals are against this order.
4. After hearing both sides and considering the matter, we find :
(a) The issue of confiscation and liability for penalty under Sections 111(o) and 112 of Customs Act, 1962 EPCG Scheme imports and non-fulfilment of Export obligation is no longer res Integra, having been decided by the Tribunal in a catena of decisions including Philips India Ltd. v. CC, Mumbai [2001 (137) E.L.T. 1267 (Tri. - Mumbai)] which has been followed by the Tribunal in the case of Fal Industries Ltd. v. CC, Chennai - 2002 (53) RLT 86 (CEGAT). Though these decisions have been arrived at in the context of Notification 160/92 and not Notification No. 110/95, dated 5-6-95. The law laid down therein would be equally applicable to this case. Therefore, following these decisions, we find that in the case of Notification 110/95 also, the drastic measures of ordering confiscation under 111(o) of the Customs Act and penalty under 112A of Customs Act, 1962 is totally uncalled for.
(b) We find that in the present case, licence was for Rs. 9,10,53,498/-and the appellants have admittedly imported only Rs. 8.23 crores worth of goods i.e. they have not imported the full value during the period November, 96 to December, 97, there is no finding arrived at whether imports of entire goods as permissible were effected when the entire imports value-wise which were permissible have not been effected. It is also not clear from the order the EPCG export performance period has been reckoned i.e. from first import or the last import. A reading of the Notification No. 110/95 reveals that Clause 7 thereof prescribes that the capital goods imported are installed and a certificate from the jurisdictional Assistant Commissioner of Central Excise is produced within 6 months from the date of completion of the imports has to be produced; it is therefore imperative that before the failure of Clause 5 of this notification is established, a certificate prescribed by Clause 7 thereof has to be on record, as regard completion of imports and installation. Show cause notice and the impugned order do not show the date of this certificate. Therefore, the action taken by the Officers to confiscate plant and machinery and initiate recovery proceedings appears to be pre-mature in absence of this completion of installation certificate and its date to be from the AC Central Excise. Therefore the condition of not fulfilling the exports and attracting the confiscation clause of Section 111(o) has not arrived or fulfilled. The confiscation under 111(o) order has to be set aside.
(c) Since the appellants have taken a plea that they were unable to compete with the foreign suppliers because of the high price of the raw material and the manufacturing cost, rendering them not able to export their goods and these circumstances are beyond their control and they have approached BIFR for rehabilitation, we find that the penalties as imposed were not, called for. The notification under which EPCG imports have been effected are effected on a licence, if exports could not be made due to conditions beyond the control of the appellants or they have not imported or and utilized the full value of this license, the penalties imposed are not called for. In any case no requirement of producing export obligation to the Customs Authorities have been shown to us. The Commissioner's finding of 'Scant Regard shown to Concerned Department' therefore cannot be a cause to visit penalty of Rs. 50 lakhs and Rs. 10 lakhs as arrived at. CBEC has issued warning to Officers in the field formations (Ref. Circular No. 75/2002-Cus., dated 12-11-2002} appreciating that exporters are corner stones of the Indian Economy in the existing era of globalisation and Government has been consistently endeavouring trade facilitation for promoting the trade in general and exports in particular. Procedures are being decided in consultation with various Ministries and other Export Promoting Organizations to make exports hassle free and instructions are issued to the field formations to remove confusion and doubts. Administrative heads were directed to obviate any harassment to the trade and lapses in this regard were to be viewed seriously. The penalties imposed are 'harassments' to an intending exporter. It is for CBEC to take such steps as they deem fit. We can only set aside the penalties, which to our minds give wrong signals to exporters in general.
(d) Since the imports of machinery and capital goods are otherwise permissible without a licence on payment of full duty and no reason to contrary are pleaded, the differential duty as demanded along with interest in this case is upheld as the appellants admit that they cannot meet the export fulfilment contracts and for such purposes, the EPCG in the policy and the notification itself provides the recovery of duty with interest at a rate of 24%. We therefore confirm the liability of duty as arrived at along with interest of 24%.
(e) Since we do not find any attempt by the appellants to misuse the imported goods brought on record we cannot uphold the liability of confiscation and heavy penalties as arrived at by the learned Commissioner only on the ground that the appellants have shown scant regard to the "concerned department" that to our mind cannot be a cause to visit the importers with heavy fiscal liabilities as arrived at in this case.
5. In view of our findings we confirm the duty demands along with interest at 24% and set aside the confiscation and consequential redemption fine and penalties as arrived at. The appeals disposed of in the above terms.