2004 (1) TMI 694 - AT - Customs

Summary

Issues Involved:

1. Admissibility of benefit of exemption in terms of Notification Nos. 13/81-Cus., 53/97-Cus., and 1/95-Cus. on DG sets and fuel imported by the company and fuel indigenously procured by the company.
2. Alleged misuse of duty-free imports and indigenous procurements by generating and selling surplus electricity.
3. Compliance with conditions of the Export and Import Policy, Letter of Permission (LOP), and other statutory requirements.
4. Validity of penalties and interest imposed on the company and its officers.

Issue-Wise Detailed Analysis:

1. Admissibility of Benefit of Exemption:

The primary issue was whether the company was entitled to the benefit of exemption under Notification Nos. 13/81-Cus., 53/97-Cus., and 1/95-Cus. for DG sets and fuel used for generating electricity. The Tribunal relied on the precedent set in the case of Indian Charge Chrome Ltd. v. Commr. of Customs, Bhubaneswar-I [2001 (138) E.L.T. 609 (Tri-Kolkata)], which was upheld by the Supreme Court. The Tribunal found that there was no restrictive clause in the notification that the imported goods should be used solely for manufacturing goods for export. Therefore, the sale of surplus power did not disentitle the company from the benefit of exemption.

2. Alleged Misuse of Duty-Free Imports:

The Commissioner's order was based on findings that the company planned and purchased higher capacity DG sets than required, sold 68% of the generated electricity to a Domestic Tariff Area (DTA) unit, and did not maintain proper accounts of fuel consumption. The Tribunal noted that the company had faced unforeseen circumstances like fire and labor strikes, which reduced their power consumption needs. The Tribunal held that the sale of surplus electricity did not violate the conditions of the exemption notifications, as the DG sets and fuel were used for generating power for export production, albeit partly.

3. Compliance with Conditions of Export and Import Policy:

The Tribunal found that the company had complied with the conditions of the LOP, the Export and Import Policy, and other statutory requirements. The company had informed the relevant authorities about the sale of surplus electricity and sought necessary permissions. The Tribunal noted that the company had achieved the required Net Foreign Exchange Earnings as a Percentage of exports (NFEP) and export performance, which was not disputed by the Commissioner.

4. Validity of Penalties and Interest:

The Tribunal set aside the penalties and interest imposed on the company and its officers. It held that the duty demands were unsustainable in law, as the company had not violated the conditions of the exemption notifications. The Tribunal also found that the adjudicating authority had not established the role of the officers in the alleged evasion of duty.

Majority Decision:

The majority decision, including the Third Member's opinion, concluded that the duty demands and penalties were unsustainable. The Tribunal allowed the appeals, setting aside the impugned order. The decision was based on the precedent set in the Indian Charge Chrome Ltd. case and the finding that the company had not violated the conditions of the exemption notifications. The Tribunal emphasized that the sale of surplus electricity did not disqualify the company from the benefit of the exemptions.