ORDER
C.N.B. Nair, Member (T)
1. The first appellant M/s. Oswal Paper & Allied Indus, imported Second Hand Paper Machine in 1996 under EPCG Scheme. Importers of capital goods are under obligation to export finished products. However, the project failed and the appellant was neither able to set up the manufacturing plant fully, nor produce and export any goods.
2. In the above said circumstances, Customs authorities proceeded to confiscate the imported machinery and impose penalty on the first appellant and second appellant (the Managing Director of the first appellant). The reason for confiscation is that goods did not meet the export condition and for that reason are liable to confiscation under Section 111(o) of the Customs Act. The present appeals are directed against that order.
3. The submission of the Ld. Counsel for the appellants is that, in terms of exemption Notification No. 111/95-Cus dt. 3.6.95, under which the import was earned out, he only requirement, in the event of failure to carry out export, is to pay the whole of the duty of Customs on the imported goods as well as payment of interest (Clause 5 & 6 of the notification). It is the contention of the Ld. Counsel that imposition of penalties is not contemplated in law and the penalties are required to be set aside.
4. Ld. JCDR contended that the goods become liable to confiscation and the appellant is liable to penalty in as much as the import was subject to export condition and since me appellant failed to carry out export obligation, penalty and confiscation are also attracted.
5. The confiscation in the present case is under Section 111 of the Customs Act. The heading of the Section reads “confiscation of improperly imported goods, etc.”. In the present case, imports were under a Govt. Sponsored Scheme to promote exports. It was also in terms of an exemption notification which was issued to bring into effect the export promotion scheme. There was no impropriety at the time of import. Therefore, confiscation of the goods and imposition of penalty were not attracted.
5. Consequence of failure to carry out export obligation is made clear in the notification itself in Clause 4,5&6 of the notification. They may be read:
4. The importer produces within 30 days from the expiry of each block of two years from the date of issue of licence from the second block or within such extended period as the Asstt. Commissioner of Customs may allow, evidence to the satisfaction of the Asstt. Commissioner of Customs showing the extent of export obligation fulfilled, and where the export obligation of any particular block of two years is not fulfilled in terms of the preceding condition, the importer shall within three months from the expiry of the said block pay duties of customs of an amount equal to that portion of duties leviable on the goods but for the exemption contained herein which bears the same proportion as the unfulfilled portion of the export obligation bears to the total export obligation together with interest at the rate of 24% per annum from the date of clearance of the goods.
5. The importer, shall, if he failes to discharge a minimum of 25% of the export obligation prescribed for any particular block of two years for two consecutive blocks, be liable to pay forthwith, the whole of the duties of customs leviable on the goods imported but for the exemption contained in this notification together with interest at therate of 24% per annum from the date of clearance of the goods.
6. The importer shall, if he fails to import goods for a minimum value of twenty crores of rupees within the validity period of the import licence, be liable to pay forthwith the whole of the duties of customs leviable on the goods imported but for exemption contained in this notification together with interest at the rate of 24% per annum from the date of clearance of the goods.
6. Thus, the notification is a self contained code. It mentions benefits, obligations and consequence. In this legal position, no action outside of the notification is attracted and called for, in regard to the imports made. This is a case of business failure and the penalty is financial loss.
7. In view of what is stated above, the confiscation and imposition of penalties under the impugned order are set aside and appeals are allowed to that extent. Both the appeals are ordered in the above terms.
Order dictated in the above terms.