The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) ruled that the Customs Department has the authority to recover escaped duty when post-importation conditions of an exemption notification are not fulfilled.
Pentafour Solec Technologies Ltd., the appellant, imported capital goods valued at Rs. 20,01,60,280 in 1997 under the zero-duty Export Promotion Capital Goods (EPCG) scheme. The company was obligated to fulfill certain export obligations under the scheme.
The Directorate General of Central Excise Intelligence (DGCEI) initiated investigations and issued a show cause notice in 2005, alleging failure to meet export obligations and violations of the EPCG scheme.
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The department issued a customs duty demand of Rs. 7,89,45,622 along with confiscation of the imported machinery and penalties on the company and its officials. The adjudicating authority confirmed the duty demand and imposed penalties in 2008.
The appellants challenged the order, and the CESTAT remanded the matter for reconsideration in 2012, recommending leniency due to external economic factors. In 2014, during de-novo proceedings, the Commissioner recalculated the penalties, reducing them but reaffirmed the duty demand, confiscation of goods, and penalties under Section 112(a) of the Customs Act.
Aggrieved, the appellants filed the current appeals before the CESTAT. The appellant’s counsel argued that the duty demand exceeded the bond amount and that the non-fulfillment of obligations was due to external economic crises, not deliberate intent.
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The appellant’s counsel argued confiscation was invalid as the goods were no longer available for seizure and that penalties on officials were unwarranted under Section 112(a) of the Customs Act.
The revenue counsel countered, citing violations of the EPCG scheme, and upheld the confiscation and penalties based on the terms of Customs Notification No. 111/95-Cus and case precedents. The revenue counsel argued that duty demands were valid under Section 12 of the Customs Act and that penalties were justifiable given the active roles of the company’s officials.
The two-member bench comprising P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) observed that the duty was payable as assessed at the time of import, irrespective of the bond amount.
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The tribunal upheld the confiscation of goods under Section 125 of the Customs Act, explaining that the physical availability of goods is not necessary for imposing redemption fines. Penalties were deemed reasonable considering the company’s violations and the involvement of its officials. The appeal was dismissed.
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