K.G. DENIM LTD. Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) AFTER examining the records and hearing both sides, we are of the view that the appeal itself has to be disposed of at this stage. Accordingly, after dispensing with predeposit, we take up the appeal.

(2.) THE appellant -company is engaged in the manufacture of 'DENIM' fabrics. They had obtained EPCG Licence No. 01500539 dated 11.10.1996 for import of textile machinery in the zero -duty regime of EPCG scheme, wherein the threshold limit for zero duty benefit was CIF value of Rs. 20 crores. The total value of imports made by the appellants under this licence within the stipulated period was Rs. 13.3 crores only, i.e., far below the above limit. The imports were made during December 1996 to May 1998, some of these through Chennai seaport or airport and the rest through ICD, Coimbatore. All the imports were cleared with zero - duty benefit under Customs Notification No. 111/95 dated 05.06.1995 read with para 38 of the Exim Policy 1992 -97. The total assessable value of the machinery cleared through ICD, Coimbatore was Rs. 11,24,25,010/ - and the duty foregone was Rs. 3,35,75,447/ -. The Directorate of Revenue Intelligence (DRI) issued a show -cause notice dated 01.11.1999 to the appellants demanding Customs duty of Rs. 3,35,75,447/ - on the ground of non -fulfilment of the conditions laid down in the above Notification and proposing to confiscate the goods under Section 111(o) of the Customs Act as also to impose penalty on the noticee under Section 112 (a) of the Act. In their reply to this notice, the appellants submitted inter alia that they had requested the Director -General of Foreign Trade (DGFT, for short) for relaxation of the relevant condition, under para 4.14 of the Exim Policy and, therefore, they should be given some more time to qualify for the benefit of zero -duty EPCG scheme. In their further written submissions submitted to the Commissioner of Customs, they averred that they had obtained from the Hon'ble High Court stay of operation of the DGFT's order dated 11.04.2000 declining reduction of the threshold limit of CIF value of imports for zero duty benefit. They submitted that they were in a comfortable position to export DENIM fabrics worth Rs. 120 crores (six times the CIF value of imports) by 2004 in terms of the EPCG licence, even without importing the remaining capital goods. They informed that they had prayed to the Hon'ble High Court for extension of the validity period of the licence beyond 31.10.2000. They requested the Commissioner not to go ahead with adjudication proceedings during the pendency of their case before the High Court. It appears from the records that the Commissioner kept the matter pending for some time. After the appellant's writ petition was dismissed as withdrawn vide order dated 23.12.2004 passed by the Hon'ble High Court in Writ Petition No. 13875 of 2000, the Commissioner took up the show -cause notice for adjudication. Ultimately, after hearing the party and considering their submissions, learned Commissioner passed the impugned order, wherein (a) the demand of duty was confirmed under Section 28(2) of the Customs Act read with Notification No. 111/95 -Cus. read with para 38 of the Exim policy 1992 -97; (b) interest @ 24% on the duty amount was demanded in terms of the above Notification; (c) confiscation of the machinery was ordered under Section 111(o) of the Act with option for redemption against payment of fine of Rs. 85 lakhs; and (d) a penalty of Rs. 33 lakhs was imposed on the party under Section 112(a) of the Act.

(3.) IT appears from the records and the submissions of learned senior advocate that the appellant -company had obtained Licence No. 3230000069 dated 31.03.2000 under EPCG (EOU) scheme for import of capital goods for another unit of theirs, a 100% EOU. The appellants imported capital goods worth Rs. 8,46,40,402.16/ - (CIF) for their EOU under the said licence. These goods were cleared on payment of countervailing duty @ 10% in terms of Notification No. 29/97. Subsequently, they submitted a representation to the DGFT for clubbing of these imports with those made under the earlier EPCG licence dated 11.10.1996 for the purpose of zero -duty benefit under Notification No. 111/95 -Cus. for the imports made under licence dated 11.10.1996. It is claimed that this representation was favourably considered and the appellants were permitted to avail themselves of zero -duty benefit for the machinery imported under EPCG Licence No. 01500539 dated 11.10.1996. In this connection, learned senior advocate has referred to the DGFT's communication dated 30.01.2002 which is reproduced below: -