TMI Blog2011 (10) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... indal, Shri P.R. Chandrasekharan, JJ. Appearance: Shri T. Viswanthan, Advocate for the appellant Shri Sanjay Kalra, Authorised Representative (JDR) for the respondent Per: P.R. Chandrasekharan: These appeals are taken up for consideration and disposal in pursuance to the order dated 13/10/2010 of the Hon'ble High Court of Bombay in Customs Appeal No. 49 of 2006. In the said order the Hon'ble observed and directed as follows: "Perused Appeal. 2. This Appeal, filed at the instance of the Revenue, is directed against the order dated 25.11.2005 passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench at Banglore whereby and whereunder fine, penalty and interest imposed on the Respondent/Assessee were set aside pursuant to the adjudication of the show cause notice, for the reasons mentioned herein below: "On a careful consideration, we notice from the cited judgments that the Tribunal, in all the cited judgments, clearly held that fine, penalty and interest is not leviable in similar cases were the export obligation could not be fulfilled due to Global Economic crisis in Asia and particularly in South East Asia. All these judgments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Commerce vide Public Notice No. 5 dated 06/04/1999 for getting the export obligation period extended even though the same was intimated to the appellant by the DGFT vide letter F. No. 20/1004/93/EPCG/IV dated 10/05/1999. The DGFT vide letter of even No. dated 08/09/2000 informed the appellant that the import licence No. P/CG/2101249 dated 09/12/1992 was issued to them with export obligation of US $ 1,14,39,200/- to be completed within a period of 5 years from the date of first clearance of the imported machinery. They have not applied for extension of export obligation period as per Public Notice No. 5(RE-99) 1997-2002 dated 06/04/1999 with requisite Bank Guarantee as per the condition laid down therein. The letter also intimated the appellant that they are liable to pay the duty saved amount with 24% interest to be calculated right from the date of first clearance of the imported machinery. 2.2. Inasmuch as the appellant did not fulfill the conditions of the EPCG licence and Notification No. 160/92-Cus, a show cause notice dated 22/02/2001 was issued to the appellants asking them to show cause as to why differential customs duty amounting to Rs. 1,81,72,257/- should not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the said order of this Tribunal, the Revenue preferred an appeal before the hon'ble High Court of Bombay and the High Court passed the order cited supra. 3. The learned counsel for the appellants makes the following submissions: 3.1. When the goods were imported under the aforesaid Bills of entry, the assessments were made provisional as can be seen from the Bills of Entry available on record. The impugned order has been passed by the learned Commissioner without finalising the assessments and, therefore, it is not sustainable. He relied on the judgment of this Tribunal in ITC Ltd. Vs. CCE reported in 2004 (170) ELT 33 (LB) which was affirmed by the Hon'ble apex court in 2006 (203) ELT 532. He also relied on a similar decision of this Tribunal in Nitco Tiles Ltd. Vs. CC (Export Promotion) case decided on 20-8-2008. 3.2. The next contention of the appellant is that interest being a substantive liability is not automatic but should be authorised by law. It is their contention that Section 28AA of the Customs Act providing for interest on short-levy was brought into the statute w.e.f. 12/05/1995 by the Finance Act, 1995 and Section 28AB providing for interest in cases w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eviable. 3.4. The next argument of the learned counsel is that at the time of importation of the goods, bonds were executed before the DGFT and it is in the bond executed before the DGFT the condition for payment of interest @ 24% was stipulated. Inasmuch as the condition relating to interest was not provided for under Notification No. 160/92-Cus, the Customs Department cannot demand interest at all and if at all can be demanded, it can be done only by the DGFT under the provisions of FTDR Act, 1992 and under the said Act there was no provision for levy of interest on Customs duty saved on imported goods under the EPCG scheme. 3.5. Learned counsel also relies on the following judgments wherein it has been held that no interest is payable on Customs duty on account of non-fulfillment of export obligation: a) Decap Electronics Pvt. Ltd. vs. Commissioner of Central Excise 2004 9174) ELT 241 (Tri.-Bang.) b) Taurus Novelties Ltd. vs. Commissioner of Customs 2004 (173) ELT 100 (Tri.-Bang. c) Philips India Ltd. vs. Commissioner of Customs 2001 (137) ELT 697 (Tri.-Mum) d) Meirs Pharma (India) Pvt. Ltd. vs. Commissioner of Customs 2004 (167) ELT 53 (Tri.-Chennai) e) Dyna Lamp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be pleaded again and the appellant cannot be allowed to plead a new case at the appellate stage and relies on the following judgments in this regard: (a) Warner Hindustan Ltd. vs. Commissioner of Central Excise 1999 (113) ELT 24 (SC) (b) A.M. Handicraft vs. Union of India 2007 (212) ELT 315 (Del.) (c) Hindustan Lever Ltd. vs. Commissioner of Central Excise, Chandigarh 2001 (138) ELT 31 (P H) 4.2. Learned AR further submits that though the goods were provisionally assessed at the time of importation, the assessment was finalised when the learned Commissioner passed the order in October, 2002. The order passed by the Commissioner wherein the duty demand has been confirmed is an order of assessment, finalizing the determination of duty. Therefore, the appellants, plea that the order has been passed without finalising the assessment has no basis whatsoever and has to be rejected outright. The learned AR also submits that Notification No. 160/92-Cus dated 20/04/1992 prescribes a number of conditions. The condition (i) specifies that the capital goods are imported under EPCG scheme in terms of Exim Policy. Conditions (ii) and (iii) stipulate that the importer binds himself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /EB/C-II dated 21/04/2011 in Appeal No. E/1391/2007. 4.5.As regards confiscation, the learned AR submits that inasmuch as the importer has failed to comply with the conditions of the exemption Notification, he has rendered the imported goods liable for confiscation and relies on the following judicial pronouncements: (a) Commissioner of Central Excise, New Delhi vs. Hari Chand Shri Gopal 2010 (260) ELT 3 (SC); (b) Om Prakash Bhatia vs. Commissioner of Customs, Delhi 2003 (155) ELT 423 (SC). 4.6. Regarding imposition of redemption fine, the learned AR contends that once the goods are liable to confiscation, fine in lieu of confiscation can be imposed in view of the judgments of the Tribunal in the case of Parasrampuria Synthetics Ltd. and Rai Agro Industries vs. DGFT cited supra. In the instant case, redemption fine of Rs. 1.80 crores imposed is only 20% of the CIF value of the goods which is very reasonable. 4.7. In respect of penalty imposed, the learned AR submits that in the instant case the importer did not avail of the opportunity for extending the export obligation period offered by DGFT during May, 1999 and September, 2000. They also did not honour the interim ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... post importation conditions were not fulfilled, show cause notice was issued to the importer proposing to deny benefit of Notification No. 160/92-Cus and also demanding differential duty under the provisions of the said Notification itself and the adjudication order was passed vide order dated 04/10/2002. In the said adjudication order, the Commissioner denied benefit of the exemption under Notification No. 160/92-Cus and confirmed differential duty liability. In fact what the Commissioner has done is to finalise the provisional assessment resorted to at the time of importation of machinery and quantified / determined the duty liability on the import of the capital goods. Therefore, the contention that no duty liability can be fastened without finalising the assessment has no basis whatsoever and we reject the same outright. 6.2. The next issue relates to leviability of interest in the instant case. The appellants, contention is that interest under Section 28AA or 28AB can be levied only when the short-levy is determined under the provisions of Section 28. In the instant case, duty has been confirmed and demanded under the provisions of Notification No. 160/92-Cus in terms of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovember, 1998. Therefore, the liability to pay the differential duty arose in 1998, when the period for fulfilling the export obligation expired and the obligation was not fulfilled. Section 28AA and 28AB came into the statute book in 1996 itself and, therefore, in the light of the decision of this Tribunal in the case of Parasrampuria Synthetics Ltd. (cited supra) the provision for charging interest was in the statute book. Secondly, interest has been demanded not under the provisions of the above Sections, but in terms of the bond and LUT executed by the appellant before the Customs and the licensing authorities and in terms of the Policy provision governing EPCG scheme. At the relevant time, Export Promotion Capital Goods Scheme was governed by Chapter VI of the Export Import Policy 1992-97. The capital goods in the instant case have been imported under the said provision. Vide Para 45 of the Exim Policy 1992-97, the importer was required to execute with the licensing authority a legal undertaking supported by a bank guarantee wherever necessary for the fulfillment of the export obligation as per the details specified in the Handbook of Procedures. As per the para 102 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty (1) (2) (3) 1. Importer undertaking an export obligation equivalent to three times the CIF value of the said capital goods over a period of four years under paragraph 38 of the Policy 25% ad valorem 2. Importer undertaking an export obligation equivalent to four times the CIF value of the aforesaid capital goods over a period of five years under paragraph 38 of the Policy 15% ad valorem Explanation. - In this notification, - (i) 'capital goods' means any plant, machinery, equipment or accessories required by an importer for manufacture of goods and shall includes machinery for packing goods, testing equipment and equipment required for Research and Development activity; (ii) 'Export and Import Policy' means the Export and Import Policy, 1 April 1992 - 31 March 1997 published vide Public Notice of the Government of India in the Ministry of Commerce, No. 1-ITC (PN) 92-97, dated the 31st March, 1992; (iii) 'Licensing Authority' means an authority competent to grant a licence under the Import (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947 (18 of 1947)." 6.5. In the case of export promotion scheme, the Exim P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the petitioner created in no uncertain terms a legal and enforceable obligation against the petitioner to pay interest on the amount of duty saved by it on the import of the equipments. That position was not disputed before us as indeed the same could not be disputed in the light of the terms of the policy and the provisions of the Handbook of Procedures to which it made a reference and the undertaking contained in the agreement executed between the parties. It is also not in dispute that the condition subject to which the petitioner could have availed of a reduced rate of duty, namely, performance of the export obligation has not been complied with. The question then is whether a party who has availed of a benefit on a solemn assurance and a legal undertaking that it shall perform certain acts necessary for the enjoyment of the benefit being extended in its favour could continue enjoying those benefits while the conditions subject to which the benefit was extended are violated. Our answer is in the negative. No party can avail of a benefit which was available subject to its performing conditions prescribed for the same, without performing such conditions. If the conditions fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s one of the conditions for applying a concessional rate of duty, the exemption would cease to be effective and the liability to pay the duty at the rate ordinarily applicable re-emerge. Consequently non-payment of the differential would attract payment of interest in terms of the statutory provisions referred to above. The provisions of the Handbook of Procedures would in such situations step in to provide for what may appear to be a grey area as to the period for which interest on such duty would be recoverable. A reading of para 105 of the Handbook which happens to be the stipulation incorporated even in the legal undertaking furnished by the petitioner would show that the liability to pay interest at the stipulated rate arises from the date of import of the first consignment till the date of payment. Regardless therefore of which, the failure of the export obligation is noticed or established against the importer, once a failure is established or admitted the obligation to pay the differential duty along with interest at the stipulated rate arises and the period for which such payment has to be made will be reckoned from the date when the first consignment was cleared till the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty. Thus by paying the duty, the appellants have fulfilled the conditions of Notification No. 160/92 and, therefore, there is no violation and consequently the goods are not liable to confiscation under Section 111(o) of the Act. This argument is totally irrational and illogical. 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 fulfillment of certain conditions and such conditions are violated, then the duty concession would not be available at all. In the case under consideration, the demand of duty has arisen under the Notification itself in terms of the bond executed by the importer at the time of importation of the goods. Confiscation of the goods arise under Section 111 of the Customs Act in certain specified situations. Section 111(o) reads as follows: "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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods are liable to confiscation under Section 111(o), penalty under section 112(a) is attracted. In this case, penalty has been imposed under Section 112(a) and there is no illegality or infirmity in imposing penalty apart from demanding differential duty and we hold accordingly. When the goods are liable to confiscation, the adjudicating authority has the power to allow the redemption of the goods on payment of fine in lieu of confiscation under section 125 of the Customs Act. The goods were released to the appellants at the time of importation under a bond executed by the appellant. The release of the goods was thus provisional. Therefore, when the assessment is finalized subsequently, even if the goods are not available for confiscation, redemption fine in lieu of confiscation can be imposed as has been held in a number of judicial pronouncements on the subject. Therefore the imposition of redemption fine in the instant case is fully justified and is quite legal and we hold accordingly. 6.9. We further note that in the instant case the duty liability was confirmed by this Tribunal vide order dated 25/11/2005. However, in spite of such confirmation the appellant failed to disch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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