CX - De-bonding - CG imported under EPCG Scheme - impossible to assume that a generating set could be left out from the list of capital goods without any intent or purpose - mis-declaration was an act which attracted penalty - Appeal dismissed: HC
BY TIOL NEWS SERVICE
MUMBAI, JUNE 15, 2016: THE appellants are a 100% EOU. They applied for setting up another plant for manufacture and export of the product and they were granted permission. They commenced commercial production in the year 2000-2001 in which year they were granted a status as “Star Export House” by the Central Government.
Thereafter, the appellants invoked clause 6.18 of the Foreign Trade Policy 2004-2009 and sought to de-bond from its 100% EOU status. The appellants addressed a letter to the Development Commissioner dated 4th June 2008, followed by another letter signifying it's intent to de-bond. The appellants while seeking such permission sought to debit their imported / indigenous goods as procured duty free into the EPCG / Advance Authorisation Scheme in terms of the Foreign Trade Policy, which fact was made known to the Deputy Commissioner.
After all these procedures were complied with, what the appellants are aggrieved by is the fact that they were called upon, in terms of certain audit objections, to show cause as to why the issue raised and the demands in the show cause notice should not be taken to their logical conclusion.
An order-in-original was passed whereby the adjudicating authority appropriated the duty paid on imported capital goods against the total demand; interest was also adjusted. Penalty was also imposed u/s 11AC of the CEA, 1944.
The CESTATdismissed the appeal by the assessee.
While challenging this order before the High Court, it is submitted that the Tribunal could not have taken any cognizance of non-payment of customs duty as that cannot be made subject matter of proceedings under section 11AC of the CEA, 1944.
Secondly, it is submitted that the Tribunal should not have confirmed penalty when there is an invitation by the appellant itself in writing so as to enable the Departmental officials to come and inspect the records and verify and scrutinize the same.
Thirdly,Tribunal had failed to notice that there was a clear argument of any lack of mensrea or deliberate or intentional act on the part of the appellants to evade customs duty. Inasmuch as the appellants had cleared other capital goods imported by it under the EPCG Scheme on payment of concessional duty and only a “small portion”of capital goods was left out and which could not be taken to be a deliberate or intentional act so as to subject the appellants to penalty.
The High Court observed -
++ The appellants did not challenge the demands that were confirmed under the Customs Act and the Central Excise Act. Upon a composite show cause notice and the letters being addressed to the Assistant Commissioner of Central Excise and Customs, now it is too late in the day to urge that insofar as non-payment of customs duty is concerned, the authorities under the Central Excise Act could not have initiated any proceedings. The issue that remained before the Tribunal was of confirmation of that part of the order of the adjudicating authority where penalties were imposed.
++ The same argument as has been canvassed, namely, there is no deliberate omission or suppression, came to be canvassed. The absence of mensrea also was an issue raised. In dealing with all this, the Tribunal found that the appellants did not give a complete list of capital goods which were procured without payment of duty and the items, including generating set. Now, it is impossible to assume that an item such as a generating set or a generator could be left out and without any intent or purpose. The omission, therefore, was found to be deliberate. It is only during the audit that the conduct of the appellant came to notice and that is why the mis-declaration was termed as an act which attracted penalty.
++ Investigation reveals that the complete list of capital goods is not procured or not handed over at the time of de-bonding. It is only when further steps were taken that the Department / Revenue noticed these serious lapses. Once the nature of the capital goods enabled the adjudicating authority and the Tribunal to arrive at a finding of fact that this was a deliberate or intentional act that we do not think that the appeal raises any substantial questions of law.
The case laws cited by the appellant were held to be inapplicable.
The High Court concluded that Tribunal's finding could not be termed as perverse or vitiated by any error of law apparent on the face of the record.
The appeal was dismissed.
(See 2016-TIOL-1156-HC-MUM-CX)
