ORDER
Gowri Shankar, Member (T)
1. M/s. Maruti Udyog Limited, the appellant, has sought exemption from Customs duty on goods to be imported by them for expansion of manufacturing capacity for introduction of a model YE2 of its car primarily for export. After protracted discussions held with the Chairman and officials of the Central Board of Excise and Customs in this regard, the Government issued, under Section 25(2) of the Act, an order 207, dated 2-11-1993. This order exempted specified capital goods, toolings and spares, for a total value of Rs. 332.89 crores from payment of the basic and additional duty of customs. The substantive conditions subject to the grant of exemption were these. Maruti should export 11000 YE2 cars during the financial year 1995-96 and 21500 cars during each of the next six financial years, this obligation being in addition to any other obligations for export imposed on the company except for obligations under the Duty Exemption Entitlement Certificate Scheme. If there was shortfall in export in any year, Maruti was to pay that proportion of I/7th of the duty corresponding to the extent of the shortfall. In other words, the duty liability was spread over the seven years in which the exports were to be made, and duty payable for failure to export was made proportionate to the shortfall in export. The notification also provided that in the event of failure to discharge the export obligation, the goods would be liable to confiscation under the Act and the company liable to fine and penalty as may be advised. It is the applicability of this condition that we are concerned with in this appeal.
2. The company was not able to fulfil its export obligation in any of the four years commencing from 1995-96 to 1998-99. It paid proportionate duty shortly after the close of each financial year.
3. The Commissioner of Customs, adjudicating on a notice issued to Maruti proposing confiscation of the imported capital goods and spares under Clause (o) of Section 111, and penalty under Clause (a) of Section 112 on the company, has found that the imported goods were liable for confiscation, but not available for such confiscation. He has therefore imposed a penalty on the appellant of Rs. 15.15 crores. He has, in addition to the penalty, imposed a penalty of Rs. 1.00 lakh under Clause (a) of Section 112 of the Act. Hence this appeal.
4. After having heard both sides at great length, we confess our inability to understand the basis for the penalty of Rs. 15.15 crores. The Commissioner’s conclusion that the imported goods were not available for confiscation is patently wrong. What was imported was plant, machinery, tooling and their spares. Such goods would have been installed in the appellant’s factory. The notification also contained the condition that the importer shall not part with the goods, and contravention of this condition was not alleged in the notice. In reply to our question, Counsel for the appellant emphatically stated that after clearance from Customs, the imported goods were installed in its factory at Gurgaon, where they continue to be used for production of cars. He emphasised that they had to be there at least till 2001-2002, when the seven years prescribed in the exemption notification ends. The departmental representative’s answer, that the goods were not available before the Commissioner, is obviously unacceptable. The Commissioner had the power and jurisdiction to order confiscation of the goods at Gurgaon and the means, if necessary, to physically acquire control over these goods.
5. We also do not find it possible to agree that the provisions of Section 112 of the Act can be used as a substitute for those of Section 111. Sections 111 and 112 deal with two very different things. Section 111 provides for confiscation of imported goods for reasons specified in each of the sub-sections. Section 112 provides for penalty upon the importer or any other person for his acts or omissions in respect of the goods which are liable to confiscation under Section 111. Therefore, while that the provisions of Section 112 cannot be invoked unless some goods are first held liable to confiscation under Section 111, the converse does not follow. Goods can be confiscated under Section 111 without necessarily imposing a penalty under Section 112. We do not find anything in Section 112 to support the view that Section 112 can be used as a substitute for confiscation under any of the clauses of Section 111 in cases where goods are not available for confiscation.
6. The show cause notice proposed penalty under Section 112(a) on the ground that the conditions of the notification had not been complied with and the goods were liable to confiscation under Clause (o) of Section 111. The Commissioner has expressly imposed a penalty of Rs. 1.00 lakh under Section 112(a). The penalty of Rs. 15.15 crores was obviously not imposed under Section 112 of the Act. You cannot impose two separate penalties in the same order on the same person for the same contravention. The Commissioner does not cite the provision of law under which he has imposed the penalty of Rs 15.15 crores.
7. The emphasis by the departmental representative that failure to discharge the export obligation, shall render the goods liable to confiscation and the appellant to penalty, and that the payment of duty shall be in addition of the fine and penalty under the Act, is not of any help. Whether the goods are liable to confiscation or not cannot be determined by confiscation under Section 25 of the Act. That confiscation can only be ordered to exempted goods from duty. The liability to confiscation of the goods and to penalty on an importer is contained in the provisions of the Customs Act, 1962, independently of any notification. No notification under Section 25(1) cannot add to such liability or take them away.
8. The liability to confiscation of the goods, and to penalty of the appellant has to be tested against the provisions of Clause (o) of Section 111 and Section 112 of the Act. Clause (o) of Section 111 provides for confiscation of the goods exempted from duty or prohibition subject to any conditions. If the condition is not observed or unless the non-observance of the condition may sanction by the proper officer. We are concerned with the exemption from duty. For the goods to be confiscated under Clause (o), it must be exempted from duty on such conditions. That condition must have been observed and its non-observance not sanctioned by the proper officer. The exemption notification contained the exemption subject to nine conditions, of which we have reproduced the material condition. Condition 4 which is the one we have referred to in paragraph 1, provided, inter alia, as follows : “In case of shortfall in export in any of the financial year, M/s. Maruti Udyog Ltd. shall be liable to pay to the Collector of Customs, Kandla within a period of 30 days from the close of the financial year, a sum which shall be in the same proportion of the duty foregone for each year as the proportionate shortfall in meeting the export commitment, calculated in the following manner: “(Not reproduced.)”
9. One of the conditions of the exemption itself was that the duty was to be paid within the period specified. It cannot therefore said that there is breach of the condition of the exemption. We have to distinguish this kind of exemption from an unconditional exemption, or an exemption to which no conditions are attached requiring payment of any duty within a specified period. In such cases, the duty to be recovered either by recourse to Section 28 or by enforcing any bond or undertaking that the importer has executed. In the case before us, such a step might have been necessary, if Maruti Udyog Ltd. had not paid the amount within 30 days from the close of the financial year. It could then be said that one of the conditions of the exemption have not been complied with. That is not the case. It is not in dispute that Maruti Udyog Ltd. paid the amount within this period. Therefore, there in fact has been no breach in the condition of the exemption. The goods were therefore not liable to confiscation under Clause (o) of Section 111 and the importer not liable to penalty.
10. We have also taken note of another factor. There is no allegation in the notice that the appellant wilfully sought to avail of the notification so as to gain financial benefit, without ever intending to complete the export obligation. The record shows that the exemption order was issued following discussions between the representatives of the appellant, and the officials of the Central Board of Excise and Customs. It is reasonable to conclude from this that the officers of the Board would have examined, at least to some degree, the viability of the proposal that the appellant made to them, that, in order to stimulate export to a particular level the exemption was necessary. This was therefore not a case where the appellant set out to avail of a notification fully knowing, or believing that the condition in the notification was not capable of being fulfilled. In that situation, it would not be correct to impose a penalty under Section 112 of the Act.
11. The appeal is accordingly allowed and the impugned order set aside.