O.T. INASU Vs. COMMISSIONER OF CUSTOMS, COCHIN

JUDGEMENT

(1.) M /s. Otee Frini (India) Ltd., Cochin Export Processing Zone, Cochin had set up a unit in the Cochin Export Processing Zone for the manufacture of telescopic antennae for radios and televisions after due approval by the Ministry of Commerce. They imported capital goods valued at Rs. 1,09,23,681/ - vide various Bills of Entry and claimed the benefit of the erstwhile Notification No. 340/86, dated 13 -6 -1986. Various other materials valued at Rs. 35,20,837/ - were also imported by them availing the benefit of the above mentioned notification. They executed a bond for Rs. 5 crores undertaking to comply with all the conditions in the notification. In terms of the notification, capital goods imported should have been installed within a period of one year from the date of importation for the production of goods for export out of India or in connection with the production or packing of such goods. The other goods should have been used for similar purpose within a period of one year from the date of importation or such extended period. It was reported that neither the capital goods nor the raw materials and other goods were used in the production of goods for export in terms of Notification No. 340/86, dated 13 -6 -1986 and in terms a show cause notice was issued to M/s. Otee Frini (India) Ltd. and Shri O.T. Inasu, Managing Director to show cause why all the goods imported and cleared duty free and all the finished goods manufactured out of such imported goods and lying within the premises of the unit without being exported, should not be confiscated in terms of Section 111(o) of the Customs Act, 1962 and in terms of the bond executed by them and why a penalty should not be imposed on the company as well as its Directors under Section 112 of the Customs Act, 1962.

(2.) NO formal reply was received from the company and its Directors. However, Shri O.T. Inasu, Managing Director and Shri T.E. George, Director of M/s. Otee Frini (India) Ltd. appeared for a personal hearing and stated that they were not able to carry on the business due to certain financial difficulties of their Italian collaborations. Their attempt to hand over the company to certain other parties also did not succeed. They requested that they are in financial difficulties and therefore should not be further penalised.

(3.) SINCE M/s. Otee Frini (India) Ltd. and its Directors did not contest the allegations in the show cause notice and have admitted that they are unable to carry on the business or fulfill the export obligation undertaken by them in terms of the bond executed by them. Therefore the Collector found that in terms of the erstwhile Notification No. 340/86 goods cleared free of duty have been rendered liable to confiscation under Section 111(o) of the Customs Act, 1962. Similarly, the stock of the finished goods lying in the bonded premises, manufactured out of the imported non -duty paid raw materials were also found liable to confiscation in terms of the bond executed by them. Accordingly, confiscation of the capital goods valued at Rs. 1,09,23,681/ - and raw materials valued at Rs. 35,20,837/ - and the finished goods lying in the bonded premises under Section 111(o) of the Customs Act, 1962 was ordered. Since the Directors of the company had not shown any interest in redeeming the goods on payment of fine and appropriate duty, no option to redeem the goods was granted. Penalty of Rs. 1,00,000/ - on Shri O.T. Inasu, Managing Director of M/s. Otee Frini (India) Ltd. under Section 112 of the Customs Act, 1962 was imposed. Since the other Directors were not actively involved in the management of the company, no penalty was imposed on them.