DUNLOP (INDIA) LTD. Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) THE appellants are manufacturers of tyres and tubes for motor vehicles. They had imported various inputs for these products under 53 Value -Based Advanced Licences (VABALs) under DEEC Scheme and cleared the goods duty -free under Customs Notification No. 203/92 dated 19.5.1992. The scheme mandated the importer to export their final products in discharge of the export obligation set out in the licences. One of the conditions laid down under the above notification for exemption from payment of duty on the imported inputs was Condition No. V, which reads as follows: That the export obligation is discharged within the period specified in the said certificate or within such extended period as may be granted by the Licensing Authority by exporting the goods manufactured in India in respect of which

(2.) SUBSEQUENTLY , the Government announced an Amnesty Scheme on 3.1.1997 allowing exporters under the VABAL scheme to expunge any Modvat credit availed by them in respect of the goods imported under the scheme and to pay interest @ 20% on the amount of credit from the date of export to the date of reversal of credit, by 31.1.1997 so that any proceedings for demanding duty on the imported inputs and / or imposing penalty on the importers on the ground of breach of Notification No. 203/92 -Cus. could be dropped. Later on, in a letter dated 22.10.1997, the appellants informed the Commissioner that they had reversed Modvat credit in terms of the Amnesty Scheme and that the matter was being examined by the Central Excise authorities. On this basis, they wanted the adjudication of the show -cause notices to be kept in abeyance. In a subsequent letter, the party informed that the Commissioner of Central Excise, Chennai - II had appointed a Cost Accountant to conduct special audit of accounts under Section 14AA of the Central Excise Act. On this basis, the party requested the Commissioner of Customs to keep the case in abeyance till the Cost Accountant's report was available. One year later, the Commissioner of Customs directed the appellants to submit the Cost Accountant's report duly certified by the Assistant Collector of Central Excise concerned. The Cost Accountant had submitted his report on 15.7.1998, which was received by the Commissioner of Customs directly from the Commissionerate of Central Excise towards the end of March 2000. This report pertained to the Ambattur factory of the appellants. No report was received in respect of their Sahaganj factory. As per the Cost Accountant's report, the total amount of Modvat credit to be reversed in terms of the Board's formula was Rs. 232.75 lakhs for the period 1992 -93 to 1994 -95. The credit amount actually expunged was Rs. 143.50 lakhs only. The balance amount which was yet to be expunged was Rs. 89.25 lakhs. Thus, a shortfall in the amount required to be reversed as per the Board's circular laid down in the Amnesty Scheme was found. No evidence was found of any interest having been paid by the party in terms of the said scheme. Therefore, learned Commissioner held that the benefit of the Amnesty Scheme was not available to the appellants and they were liable to pay the duty demanded in the show -cause notices, with interest thereon @ 2496 per annum. She also held the imported goods to be liable for confiscation under Section 111(o) of the Customs Act and imposed a penalty of one crore on the appellants under Section 112(a) of the Act. Hence the present appeal.

(3.) AFTER examining the records and hearing both sides, we note that the following issues arise for consideration: