LUCAS TVS LTD. Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) THE appellants had imported raw materials under two advance licences, No. 3440864 dated 16.5.90 and No. 3235983 dated 24.7.91, under DEEC Scheme, with obligation to export their final products. The goods were cleared duty -free under Notification No. 116/88 -Cus. dated 30.3.1988 as amended. Scrutiny of DEEC books by the Customs authorities revealed that there were shortfalls in exports under both the licences. When queried about this, the importers admitted that they could not fulfil their export obligation under the first licence within the stipulated period due to cancellation of export order and that DGFT had also directed them to pay the duty foregone with interest. In respect of the second licence also, they admitted that they had not completed discharge of export obligation. Subsequently, they voluntarily paid an amount of Rs. 7,02,795/ - towards duty and interest thereon on the imports made under the first advance licence and an amount of Rs. 7,08,515/ - towards duty and interest in respect of the imports made under the second licence. Later on, the department issued a show -cause notice to the party for appropriating the above payments in terms of the undertaking given by them under Customs Notification No. 116/88 ibid and for imposing penalty on them under Section 112(a) of the Customs Act. The proposals were contested. In adjudication of the dispute, the Commissioner of Customs passed the following order:

(2.) HEARD both sides. Learned Counsel for the appellants conceded the duty liability in relation to the imports made under the first advance licence inasmuch as the export obligation was not fully discharged. The duty on the imported goods was paid with interest prior to issue of show -cause notice. On these facts, the decision of the Commissioner with regard to the appellants' liability to pay duty with interest, in relation to the imports covered under the first licence has to be sustained and it is ordered accordingly. Though, on the ground of breach of export obligation under the Notification, learned Counsel conceded the liability of the goods for confiscation under Section 111 of the Customs Act, he resisted imposition of redemption fine on the ground that the goods were not physically available for redemption. In this connection, reliance was placed on the decision of this Bench in Associate Marketing Services0Commissioner of Customs (Airport), Chennai 2006 (195) ELT 287 (Tri. Chennai), wherein it was held that, where the goods were not available for confiscation, they were not redeemable and hence there was no question of imposition of fine. On this basis, we have to accept learned Counsel's plea for setting aside the fine imposed on his clients in respect of the imports covered under the first licence. As regards penalty, learned Counsel submitted that, as the entire amount of duty had been paid with interest prior to issue of show -cause notice, any penalty was not imposable. We have to reject this plea inasmuch as the penalty under Section 112 of the Customs Act is not duty -related but confiscation -related. Where the goods were held liable for confiscation, under Section 111, the appellants, who, by their conduct, rendered it so liable, would invite the penalty under Section 112. Learned Counsel pointed out that the quantum of penalty imposed by the Commissioner was unreasonably high. We find that the Commissioner imposed a composite penalty of Rs. 1.40 lakhs on the appellants under Section 112(a) of the Customs Act in relation to the imports covered under both the licences. No break -up of this penalty is available and hence we are unable to get the exact amount of penalty imposed on the party in relation to the imports covered under the first licence. In the facts and circumstances of the case, we are of the view that even 50% of the amount of penalty imposed by the Commissioner is on the higher side in relation to the imports covered under the first licence. In our judgement, a penalty of Rs. 15,000/ - would be enough to match the offence found against the appellants in relation to the imports covered under the first licence.

(3.) AS regards the imports covered under the second licence, learned Counsel submitted that export obligation was completed albeit after expiry of the time limit allowed by the licensing authority. It was pointed out that, under Public Notice No. 35/1997 -2002 dated 1.9.97., the belated exports were liable to be regularized by the licensing authority upon payment of a penalty by the appellants. It was submitted that, given an opportunity, the appellants would pay this penalty and obtain extension of export obligation period for the purpose of regularisation of the exports already made under the second licence. After hearing learned SDR, who has not contested the eligibility of the appellants for the benefit of the above Public Notice, we are of the view that a reasonable opportunity should be given to the party to obtain appropriate orders from the DGFT in terms of Clause (ii) of para 2 of the above Public Notice, extracted below: