Commissioner Of Customs (Exports) vs Akbar Knitting Company

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH CHENNAI

Appeal No.C/40582/2013

[Arising out of Order-in-Appeal No.C.Cus.No.1452/2012 dt. 1.12.2012 passed by the Commissioner of Customs (Appeals), Chennai]

Commissioner of Customs (Exports) Chennai Appellant

Versus

Akbar Knitting Company Respondent

Appearance:

Shri M. Rammohan Rao, DC (AR) For the Appellant

Shri Hari Radhakrishnan, Advocate For the Respondent

CORAM :

Honble Shri R. Periasami, Technical Member

Date of Hearing : 16.1.2015 Date of Pronouncement: 10.4.2015

FINAL ORDER No.40373/2015

Per R. Periasami

Revenue filed appeal against Order-in-Appeal dt. 11.12.2012 passed by Commissioner (Appeals).

2. The respondent who is a regular exporter of cotton garments had imported Polyurethane Spandex Yarn/Lycra Spandex Yarn under 2 DEEC Advance licences and claimed duty free exemption under Notification No.204/92 dt. 19.5.92. As there was a short fall in the export obligation, the adjudicating authority by his order dt. 31.7.2000 confirmed the demand of Rs.3,83,990/- along with interest @ 24% and also imposed a penalty of Rs.34,000/-. The respondent's appeal was rejected by the Commissioner (Appeals) and on appeal before Tribunal, the case was remanded to the original authority vide Tribunal's Final Order No.1386-1387/2008 dt. 8.12.2008 for recomputation of duty and penalty. The adjudicating authority in the de novo proceedings vide order dt. 11.5.2013 re-worked out the shortage quantity and re-determined the duty of Rs.3,44,210/- and also demanded interest @ 15% along with penalty. Respondent preferred an appeal before Commissioner (Appeals) contesting only the interest demanded. In the impugned order, LAA has set aside that portion of the order demanding interest. Hence Revenue filed appeal against that portion of the order of Commissioner (Appeals) setting aside interest.

3. Heard both sides.

4. Ld. A.R for Revenue reiterated the grounds of appeal and the findings of the adjudication. He submits that they have not fulfilled the conditions of the Notification No.204/92 and also they have not fulfilled the condition as per the bond executed before the licensing authority. Part "G" of Part-I of the Annexure to the notification clearly stipulated a situation where the conditions of the notification are not complied, duty and interest has to be paid. At column No.5 of Part "G" clearly shows an amount of duty and interest paid by the licence holder. Therefore, the Commissioner (Appeals) erroneously held that there is no provision in the notification for demand of interest. He further submits that once they have executed the bond that they failed to fulfil the obligation, duty and interest is rightly demanded as per the bond condition. Therefore, it is a clear case of violation of Notification No.204/92 read with Annexure Part-I and Part-G by which it is established that respondent has not complied with the conditions of the notification. He relied on the following case laws :-

(1) Rexnord Electronics and Controls Ltd. Vs UOI 2008 (224) ELT 184 (SC) (2) Pratibha Syntext Ltd. Vs UOI  2003 (157) ELT 141 (Bom.) (3) Sheshank Sea Foods Pvt. Ltd. Vs UOI  1996 (88) ELT 626 (SC) (4) Delta Paper Mills Ltd. Vs CCE Guntur 1995 (77) ELT 544 (A.P.)

5. On the other hand, Ld. Advocate for the respondents reiterated the findings of the impugned order. He submits that Commissioner (Appeals) has rightly set aside the interest as there is no authority to recover interest. The words mentioned at clause (ii) (b) of the notification No.204/92 clearly says only demand amount equal to the duty is leviable. There is no mention of interest. He also submits that there is no charging section to demand interest on the non-fulfillment of DEEC licensing condition. He relied on the following decisions :-

(1) Whirlpool of India Ltd.

2003 (158) ELT 791 (Settlement Commission) (2) FEMCO Filters (P) Ltd. Vs CC Bangalore 2006 (203) ELT 494 (Tri.-Bang.) (3) Delta Paper Mills Ltd. Vs CCE Guntur 1995 (77) ELT 544 (A.P.)

(4) CC of Customs, Chennai Vs Shakshambana Silks Exports (P) Ltd.- 2009 (237) ELT 419 (Tri.-Chennai)

6. I have carefully considered the submissions made by both sides. Revenue filed this appeal against impugned order wherein LAA set aside the interest demanded by the adjudicating authority. I find that the present appeal is second round of litigation. The respondent imported Polyurethane Spandex Yarn/Lykra under DEEC Advance Licences and cleared duty free under Customs Notification No.204/92-Cus. dt. 19.5.92. The DRI registered the case that the respondent failed to comply with the condition of the notification. Adjudicating authority in his de novo proceedings re-determined the quantity of imported goods not utilised and confirmed the customs duty and interest @ 15% and also imposed penalty. The respondents admitted duty liability and contested only the interest before LAA and he allowed their appeal and set aside the interest only on the ground that Notfn. No.204/92 did not specify any interest clause.

7. The revenue's contention is that adjudicating authority had rightly confirmed customs duty and interest as the respondent failed to comply with the conditions of the notification as per bond executed. Part-G of Part-I of the Schedule annexed to the said notification clearly indicated duty and interest to be paid in respect of quantity of duty free materials when condition not complied. I find that when the adjudicating authority had discussed the issue of non-fulfilment of obligation in detail in the OIO, whereas LAA has not brought out any clear findings but merely said that in the absence of any provision in the said notification, interest is not demandable and he relied Tribunal's decisions.

8. There is no dispute on the facts that the respondent imported goods and cleared duty free and violated the conditions of DEEC Advance licence and the conditions of Notification No.204/92. Therefore, adjudicating authority confirmed the customs duty and also demanded the interest. The demand of interest for violation of conditions of Notfn.204/92 stands settled by the Hon'ble Apex Court and Hon'ble High Court of Bombay. In the case of Pratibha Syntext Ltd. Vs UOI (supra), the Hon'ble High Court of Bombay held that customs authorities are entitled to recover customs duty and interest for the breach of Notification No.204/92. The relevant portions of Hon'ble High Court's order is reproduced as under :-

?"16.Exemption Notification No. 204/92 issued under Section 25 of the Customs Act clearly provides that before clearance of the imported goods, the petitioners shall produce proof of having executed a bond or a legal undertaking before the concerned Licensing Authority, for complying with conditions of the said Notification. Therefore, the terms and conditions of bond and legal undertaking executed before the Licensing authorities agreeing to pay customs duty with interest in case of breach, became part and parcel of the conditions of the exemption notification issued under Section 25 of the Customs Act, 1962. Since, there was breach of the terms of the Exemption Notification, the customs authorities were entitled to recover the duty with interest. Merely, because the Commission erroneously or otherwise had not levied interest in his order, it cannot be said that the Customs authorities had no jurisdiction to recover interest. If the petitioners were satisfied with the order of the Commissioner of Customs, there was no need for them to approach the Settlement Commission. Once the petitioners have voluntarily chosen the jurisdiction of the entire issue by the Settlement Commission afresh, in the light of the disclosure made by them it was open to the Settlement Commission to direct the petitioners to pay the customs duty with interest. Although the Settlement Commission has levied interest at a percentage, much less than what was agreed to pay by the petitioners in their bond and legal undertaking, the same being not an issue in this petition, we are not expressing any opinion in that behalf. Therefore, we have no hesitation in holding that once the petitioners committed breach of the terms of the exemption Notification No. 204/92, the Customs authorities were entitled to enforce the declaration with bond and legal undertaking given by the petitioners and recover customs duty with interest. If the customs authorities were entitled to recover duty with interest, then no fault could be found with the Settlement Commission in directing the petitioners to pay customs duty with interest.

... ... ...

?22.In the present case, duty liability has been admitted by the petitioners. As a matter of fact, duty liability has been recovered from the petitioners. Petitioners have not challenged this part of the impugned order which directs recovery and adjustment of the duty liability from the petitioner. It was thus clear that the petitioners have committed breach of the exemption notification as well as the terms of the licences. In this view of the matter, no further opportunity was required to be given to the petitioners. The admission of the petitioners would bind them. Therefore, recovery of duty liability and adjustment thereof with interest was well within the jurisdiction of the Settlement Commission. Such order cannot be said to be in breach of principles of natural justice as sought to be faintly canvassed by the learned Counsel for the petitioners.

?23.The rival parties addressed us on extenso so far as the absence of substantive provision under the Act authorising Customs authorities to levy interest on duty liability in the peculiar facts of this case. We do not think it necessary to examine those contentions in view of the terms of bond executed by the petitioners wherein petitioners held themselves liable to pay duty with interest. The terms and conditions of bond are very much binding on the petitioners. In the absence of legislative guidelines it was well within the jurisdiction of the Settlement Commission to direct recovery of duty with interest as the bond prescribes recovery of duty with interest from the licence holder. So far as rate of interest determined by the Settlement Commission is concerned, the same cannot be said to be arbitrary looking to the prevailing bank rate on deposits. It is not in dispute that rate of interest awarded by the Settlement Commissions is much below rate prescribed in the bond. In the circumstances, no fault can be found with order of the Settlement Commission."

The ratio of the above Hon'ble High Court order is squarely applicable to the present case.

9. Further the Hon'ble Supreme Court in the case of Rexnord Electronics and Controls Ltd. Vs UOI (supra) clearly held that interest payable under bond is not interest payable under the Act and upheld the Hon'ble Bombay High Court's order. The relevant portion of the Apex Court order is reproduced as under :-

"16.?The core question which, therefore, arises for consideration is as to whether the term interest used therein would include within its fold interest payable under the bond furnished by the appellant before the Director General of Foreign Trade.

17.?The statutory scheme for the purpose of approaching the Settlement Commission and the mode and manner in which appropriate order is to be passed thereupon, are governed by Chapter XIVA of the Act. With a view to enable the Settlement Commission to pass an order, an applicant is required to make a full and true disclosure of his liability. As noticed hereinbefore, in the event his application is accepted, an immunity is granted from prosecution of any offence under the Customs Act or under the Indian Penal Code or under any other Central Act for the time being in force and also either wholly or in part from imposition of any penalty, fine and interest under the said Act, with respect to the cases covered by the settlement. The same has nothing to do with payment of any interest under any other Act. If any interest became payable under the Act, indisputably the Settlement Commission, will have the requisite jurisdiction to grant immunity in respect thereof either wholly or in part. All penalties, fine and interest, it goes without saying, must, however, be enforceable under the Act. The Scheme for charging interest under the Act has been noticed by us hereinbefore. No other provision has been brought to our notice in terms whereof interest is payable under the Act.

17.?We, therefore, agree with the High Court that interest payable under the bond is not an interest payable under the Act."

The Hon'ble Apex court in the above order has referred and considered the decision of Hon.Bombay High Court of Pratibha Syntex case; By virtue of above High Court and Supreme Court orders, the demand of interest for non-fulfilment of condition under Notfn. No.204/92 has attained finality. The respondents and LAA placing reliance of Tribunal decision in the case of FEMCO Filters (P) Ltd. Vs CC Bangalore (supra) and the other decisions as referred in OIA have no relevance as these decisions are rendered prior to the Hon'ble High Court and Apex Court's order. By respectfully following the orders of Hon'ble High Court & Apex Court, the interest @ 15% demanded in the original adjudication order is restored and the impugned order to the extent of giving relief on interest is set aside. The revenue appeal is allowed.

(Pronounced in open court on 10.4.2015)

(R. PERIASAMI) TECHNICAL MEMBER

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