Raj Television Network And Ors. vs Commissioner Of Customs on 7 June,

2007

Equivalent citations: 2007 (120) ECC 426, 2007 ECR 426 Tri Chennai

Bench: P Chacko, K T P.

ORDER

P.G. Chacko, Member (J)

1. M/s. Raj Television Network Ltd. (appellants in Appeal No. C/293/2005) had

imported certain telecommunication equipments under 2 EPCG licences dated

30.5.2003 and 18.7.2003 issued by the Directorate-General of Foreign Trade and

had cleared the goods under 11 Bills of Entry during June to October 2003. The

clearance was obtained against payment of duty on concessional rate in terms of

Customs Notification No. 55/2003 dated 1.4.2003. The goods so cleared included a

DSNG (Digital Satellite News Gathering) system, a satellite communication

equipment, covered by Bill of Entry No. 6394 dated 6.8.2003. The remaining

equipments were covered by the other 10 Bills of Entry. The EXIM Policy relevant to

the period of subject imports had stipulated that satellite communication

equipments (like DSNG equipment) classifiable under CTH 8525 20 92 could be

imported only against an import licence issued by the WPC (Wireless Planning &

Coordination) wing of the Department of Telecommunications under the Ministry of

Communications and Information Technology (hereinafter referred to as WPC

licence). A Separate licence from the same authority was required for establishing

and operating the equipment. For obtaining this licence (called operating licence)

the applicant was required to satisfy the licensing authority that the equipment

conformed to the technical parameters such as frequency, emission, bandwidth etc.

laid down by the said authority. Under the EPCG scheme, the appellant-company

was required to fulfill their export obligation in relation to the imported capital

goods within a period of 8 years from the date of issue of EPCG licence. Within this

period, export obligation should be discharged in the following proportions:

Block of 1^st and 2^nd years - Nil

Block of 3^rd and 4^th years - 15%

Block of 5^th and 6^th years - 35%

Block of 7^th and 8^th years - 50%

The benefit of concessional rate of duty under the Customs Notification was

available to the imported goods, subject to the further condition that certificates

from the jurisdictional Deputy Commissioner of Central Excise or Assistant

Commissioner of Central Excise confirming installation and use of the capital goods

in the importer's premises be produced within six months from the date of

completion of imports or within such extended period as might be allowed by the

Customs authorities. Of course, the importer had also to comply with other usual

conditions attached to EPCG scheme in respect of the goods cleared under all the

11 Bills of Entry.

2. The goods were cleared by the appellant-company after final assessments on the

Bills of Entry by the assessing authority, followed by payment of the duty assessed

(at concessional rate in terms of the Customs Notification), by the company.

3. In November 2004, the Special Intelligence and Investigation Branch (SIIB) of the

Department launched investigations into the above imports and found that the

DSNG equipment had been imported and cleared without producing WPC licence.

SIIB searched the importer's premises and seized documents such as copies of the

Bills of Entry, copies of EPCG licences, proforma invoice, correspondence between

the importer and the Ministry of Information and Broadcasting etc. They found that

the importer had misclassified the goods and misdeclared its description in Bill of

Entry No. 6394 dated 6.8.2003 with intent to secure clearance of the goods with the

benefit of the Notification without WPC licence. The DSNG system was seized under

a mahazar dated 23.11.2004 under Section 110 of the Customs Act. A scrutiny of

the seized documents revealed that the appellant-company had classified the DSNG

system under CTH 8529 90 90 as freely importable goods. Visual examination of the

equipments and study of technical data available with it disclosed that the DSNG

system was a complete set of equipments classifiable under CTH 8525 20 92 as

'other satellite communication equipment', which was restricted for import and

could be imported only under WPC licence in terms of Customs Notification No.

71/53 dated 25.9.1953. SIIB also found that the appellant-company had obtained a

permission from the Ministry of Information & Broadcasting to use DSNG

equipment for getting live feeds from the States of Tamilnadu, Andhra Pradesh,

Kerala and Karnataka to be downlinked at their earth station in Chennai for

permitted TV channels. This permission was seen to have been communicated in the

Ministry's letter dated 5.8.2003. SIIB did not accept this permission as substitute

for WPC licence. Further, they found that the appellant-company had applied for

such licence on 16.10.2003 only and were yet to receive the licence. Statements

were recorded from Shri M. Raajhendran, Managing Director of the company

(appellant in Appeal No. C/294/2005), Shri M. Raveendran, Director of the Company

(appellant in Appeal No. C/295/2005) and Shri E. Kirubakaran, Senior Engineer -

Maintenance of the Company under Section 108 of the Customs act. Any WPC

licence or installation certificate was not produced by the appellants even during

the course of investigations.

4. On the basis of investigative results, the Department issued show-cause notice

dated 8.2.2005 to the appellant-company, its Managing Director and 3 other

Directors viz. S/Shri M. Raveendran, M. Rajarathinam (appellant in Appeal No.

C/296/2005) and M. Raghunathan (appellant in Appeal No. C/297/2005) proposing:

(a) to classify the DSNG system covered by Bill of Entry No. 6394 dated 6.8.2003

and valued at Rs. 1,26,11,222/-, under CTH 8525 20 92;

(b) to confiscate the said goods under Section 111(d) and (o) of the Customs Act and

read with Section 11(U) of the said Act and Section 3(2) of the Foreign Trade

(Development & Regulation) Act, 1992;

(c) to enforce the bank guarantee executed by the company at the time of clearance

of the said goods, towards duty of Rs. 57,75,940/- on such goods on the ground of

breach of Condition No. (4) of Customs Notification No. 55/2003 dated 1.4.2003;

(d) to confiscate the goods covered by the remaining 10 Bills of Entry and valued at

Rs. 1,40,44,270/- under Section 111(o) of the Customs Act and to realize duty of Rs.

64,32,275/- in respect of the said goods by enforcing the bank guarantee executed

by the company at the time of clearance of the goods, on the ground of non-

fulfilment of Condition No. (4) of the above Customs Notification; and

(e) to impose penalties on the noticees under Section 112(a) of the Customs Act.

These proposals were contested. In adjudication of the dispute, learned

Commissioner of Customs (Airport & ACC) passed the following order:

(a) I order that the imported goods cleared under Bill of Entry No. 6394 dated

6.8.2003 should be treated as a complete set of Digital Satellite News Gathering

system and appropriately classifiable under CTH 85252092 which is restricted for

import and permitted for import only on production of a WPC licence;

(b) Since no WPC licence is produced, I order absolute confiscation of the seized

goods imported vide Bill of Entry No. 6394 dated 6.8.2003 valued at Rs.

1,26,11,222/- under Section 111(d) and (o) of the Customs Act, 1962 read with

Section 3(2) of the Foreign Trade (Development & Regulation) Act, 1992 and the

provisions of Indian Wireless Telegraphic Act, 1933; since absolute confiscation is

ordered demanding duty on the same does not arise;

(c) I order that the imported goods covered under 10 Bills of Entry totally valued at

Rs. 1,40,44,270/- are ineligible for the exemption of duty and accordingly the

importers are liable to pay the differential duty of Rs. 64,32,275/- alongwith

interest. After adjusting the duty amount of Rs. 57,75,940/- paid on 21.5.2005, the

remaining amount of Rs. 6,56,335/- and interest as applicable shall be paid within

10 days from the date of receipt of this order, failing which the bank guarantee and

bond executed in their behalf is enforceable;

(d) I order that the goods imported vide 10 Bills of Entry valued at Rs. 1,40,44,270/-

is held liable for confiscation under Section 111(o) of the Customs Act, 1962.

However, I impose a redemption fine of Rs. 70,00,000/- (Rupees Seventy lakhs only)

in lieu of confiscation;

(e) I impose a penalty of Rs. 1,90,00,000/- (Rupees One crore ninety lakhs only) on

M/s. Raj Television Network Ltd. under Section 112(a) of the Customs Act, 1962;

(f) I impose a penalty of Rs. 50,00,000/- (Rupees Fifty lakhs only) on Shri M.

Raajhenndran, Managing Director of M/s. Raj Television Network Ltd. Under

Section 112(a) of the Customs Act, 1962;

(g) I impose a penalty of Rs. 10,00,000/- (Rupees Ten lakhs only) on Shri M.

Raveendran, Director of M/s. Raj Television Network Ltd. Under Section 112(a) of

the Customs Act, 1962;

(f) I impose a penalty of Rs. 10,00,000/- (Rupees Ten lakhs only) on Shri M.

Rajarathinam, Director of M/s. Raj Television Network Ltd. Under Section 112(a) of

the Customs Act, 1962; and

(f) I impose a penalty of Rs. 50,00,000/- (Rupees fifty lakhs only) on Shri M.

Ragunathan, Director of M/s. Raj Television Network Ltd. Under Section 112(a) of

the Customs Act, 1962;

5. The appellants are aggrieved by the above order. One of their grievances is that

the Commissioner did not give them sufficient time to produce WPC licence. It is

their further case that importation of goods under the EPCG licences is not

complete and a long period upto the year 2011 remains for fulfilment of export

obligation under the said licences and therefore the Commissioner's proceedings

are premature and preposterous. It is also contended by the appellants that they are

not required, under Customs Notification No. 55/2003, to produce installation

certificate after each import. According to them, such a certificate need be

produced only after completion of all imports. On this basis, they argue that the

goods imported by them were not liable to be confiscated under Section 111(o) of

the Customs Act on the ground of non-production of installation certificate. It is

submitted by the appellants that they did not misclassify the DSNG equipment and

that the wrong heading (8529 90 90) was entered in the Bill of Entry by their

clearing agent. They have also described as fanciful the redemption fine of Rs. 70.00

lakhs and the penalty of Rs. 1.90 crores imposed by the Commissioner on the

company. There is a similar challenge to the penalties imposed on the Managing

Director and other Directors of the company.

6. Heard both sides. Learned Counsel for the appellants reiterated the grounds of

the appeals and further submitted that the description of goods given in each Bill of

Entry was the same as the one mentioned in the relevant invoice. Such description

tallied with the description of capital goods given in the corresponding EPCG

licence. Therefore, according to learned Counsel, there was no misdescription of

goods by the importer. Learned Counsel also argued that mere mention of wrong

tariff entry could not be termed 'misclassification'. Referring to the provisions of

Section 17 of the Customs Act, he submitted that it was the assessing authority's

duty to classify the imported goods under the CTA Schedule for the purpose of

assessing the goods to duty. Where classification itself was a departmental function,

there could be no misclassification by the importer, counsel argued. Without

prejudice to this argument, learned Counsel submitted that there was no mens rea

in misclassification, unlike in misdeclaration. He relied on the Karnataka High

Court's judgment in Commissioner of Customs, Bangalore v. A. Mahesh Raj to bring

out the distinction between misclassification and misdeclaration. In respect of the

DSNG equipment, learned Counsel further pointed out that WPC licence had since

been produced before the Commissioner and provisional release of the equipment

obtained by the appellants in terms of Miscellaneous Order No. 512/2007 dated

31.5.2007 passed by the Tribunal in Appeal No. C/293/2005. He also suggested that

the matter relating to DSNG equipment be remanded to the Commissioner for fresh

decision. As regards other equipments, it was submitted that the Commissioner had

misinterpreted the condition pertaining to installation certificate. Commissioner had

misunderstood the expression 'completion of imports' as 'completion of each

import'. Counsel pointed out that some more equipments mentioned in the EPCG

licences were yet to be imported, and argued that Notification No. 55/2003-Cus. had

allowed six months time from the date of completion of imports for producing

installation certificate of the jurisdictional Deputy Commissioner/Assistant

Commissioner of Central Excise before the Customs authorities. Therefore,

according to learned Counsel, the appellants could not be held to have violated the

above condition. On this basis, it was argued that the confiscation of the goods and

the demand of duty thereon were premature. Yet another argument advanced by

counsel was that it was not open to the Department to demand duty on the goods

from the appellant-company before the expiry of the period of 8 years granted by

DGFT for fulfilment of export obligation. In this connection, he claimed support from

the decision of this Bench in Sharpscan and Prints Ltd. v. Commissioner of Customs,

Chennai 2007 (209) ELT 107 (Tri. Chennai). Counsel also attacked the quanta of

redemption fine and penalties imposed by the Commissioner.

7. Learned JDR Shri M.K.A.K. Mohideen submitted that WPC licence was a condition

precedent insofar as import of DSNG system was concerned. He referred to ITC

(HS) CLASSIFICATION OF EXPORT AND IMPORT ITEMS relevant to the period of

imports and submitted that 'other satellite communication equipment' falling under

EXIM Code 8525 20 92 was not permitted to be imported except against a licence

issued by the WPC Wing of the Ministry of Communication. He pointed out that the

appellants had accepted the classification of DSNG equipment as 'other satellite

communication equipment' under EXIM Code 8525 20 92. The equipment imported

without WPC licence was liable to be confiscated under Section 111(d) of the

Customs Act. Learned JDR contested the appellant's claim of having obtained WPC

licence in respect of DSNG equipment imported by them. He submitted that Import

Licence dated 25.5.2007 produced by the company was a licence to import at

Chennai the apparatus specified in the ANNEXURE thereto during the period

25.5.2007 to 24.8.2007. The licence would not cover the DSNG equipment imported

prior to 25.5.2007. Moreover, there was no specific mention of DSNG equipment in

the ANNEXURE to the Import Licence dated 25.5.2007 produced by the appellants.

The DR also pointed out that the permission given to the appellants by the Ministry

of Information & Broadcasting on 5.8.2003 was to use DSNG for getting live feeds

from the southern States by downlinking to their licensed earth station at Chennai

for permitted TV channels subject to condition that uplinking should be in 'C' Band

by using 3 MHz capacity on THAICOM - 3 satellite. But, as per the technical

parameters laid down by the WPC Wing of the Department of Telecommunications

under the above Ministry through letter dated 24.5.2007 addressed to the

appellant-company [produced along with Import Licence dated 25.5.2007], the

allocated bandwidth was 2 MHz and, that too, on INSAT 2E satellite network. On

this basis, learned JDR submitted that it was difficult to correlate the Import

Licence dated 25.5.2007 produced by the appellants with the DSNG equipment

imported by them. Referring to the condition relating to installation certificate, the

DR supported the Commissioner's finding, by submitting that the import period

allowed by the DGFT was 24 months only and that no extension of this period had

been obtained by the appellant-company. The import period had expired long ago

and hence there was no question of any further imports by the company under the

EPCG licences. The DR also supported other findings of the Commissioner.

8.1. We have given careful consideration to the submissions. The classification of

the DSNG system under EXIM Code 8525 20 92 as a satellite communication

equipment has been accepted by the appellants. It is not in dispute that a WPC

licence was required for its import. Admittedly, the equipment was imported

without this licence. The appellants have made a feeble attempt to salvage the

import on the strength of the letter dated 5.8.2003 issued by the Ministry of

Information & Broadcasting conveying the Ministry's permission for use of DSNG

equipment by the appellant-company for getting live feeds from the southern States

to be downlinked at their earth station in Chennai. This letter dated 5.8.2003 of the

Ministry was not a licence to import DSNG equipment. On the other hand, the letter

advised the company to obtain 'frequency clearance' from the WPC Wing and also to

get a licence from the Telecom Department for DSNG terminals to be located at

specified places. The letter indicates that the company had not applied for WPC

licence till 5.8.2003 whereas the relevant Bill of Entry was filed on 6.8.2003 for

clearing the equipment. The correspondence between the company and the Ministry

of Information and Broadcasting indicates that their application for WPC licence

was submitted only on 16.10.2003. This licence was not obtained by the company

either. Of late, the appellants through counsel produced a copy of Import Licence

No. SR-IMP-034 dated 25.5.2007 issued by WPC Wing of the Department of

Telecommunications, Ministry of Communications & Information Technology, Govt.

of India. This document (with ANNEXURE thereto) referred to by both sides is

reproduced below:

L-14027/01/07-RLO(SR)

GOVERNMENT OF INDIA

Ministry of Communications & Information Technology Department of

Telecommunications

Wireless Planning and Co-ordination Wing

Regional Licensing Office, Chennai

International Monitoring Station Campus

Perungudi, Chennai - 600096

IMPORT LICENCE NO. SR-IMP-034 DATED: 25/0 5/07

LICENCE TO IMPORT WIRELESS TRANSMITTING AND/OR RECEIVING

APPARATUS INTO INDIA

In pursuance of Notification No. 71-Customs dated September 25, 1953 issued

Section 19 of the Sea Customs Act 1878 (VIII of 1878) the Ministry of

Communications & information Technology of the Government of India (hereinafter

called the Ministry) hereby grant to:

M/S. RAJ TELEVISION NETWORK LTD.

32, POES, ROAD, 2ND STREET

TEYNAMPET, CHENNAI - 600018

(Hereinafter called licensee) during the term/period commencing on the day of the

date hereof, and terminating on the last day of 24.8.2007 Licence and permission to

import at CHENNAI the following apparatus for Wireless Telegraphs:

ITEM NO.

DESCRIPTION OF APPARATUS

MODEL OR TYPE NO. AND

FREQUENCY BAND (in MHz) POWER

QUANTITY

AS PER ANNEXURE-I

This is only a clearance from technical angle and does not pertain to administrative

and/or financial aspects of Import. Please note that grant of import licence does not

imply permission to establish, maintain and operative a W/T equipment. A separate

licence will be required for operational usage of equipment.

Sd/-

Astt/Dy. Wireless Adviser

To the Govt. of India

Ministry of Communications & IT.

L-14027/01/07-RLO(SR)

SR-IMP-34

Item No.

Manufacturer's Name

Whether Transmitter/ Transreceiver or components thereof

Model or Type No.

Quantity

Frequency of Operation & RF Power Output

Approx. CIF value, if known

1

2

3

4

5

6

7

1.

C.P.I (Canada)

Satellite communication equipment

400 Watts HPA

(One)

C BAND 5.8 - 6.2 Hz.

2.

ADVENT (U.K.)

-do-

1.8 MTR Anteena

(One)

-do-

3.

TANBERG (U.K.)

-do-

ENCODERS

(One)

-do-

4.

ADVENT (U.K.)

- do -

Upconverter

(One)

-do-

Sd/-

(M. RAVINDRAN)

DIRECTOR

The covering letter of the licensing authority, dated 25.5.2007, for the above import

licence indicates that the licence was issued with reference to letter dated

24.5.2007 of the appellant-company. The licence is apparently not one issued with

reference to the application dated 16.10.2003 submitted by the company. Further,

the above licence permits the company to import at Chennai the equipments

specified in the Annexure during the period from 25.5.2007 to 24.8.2007 (3

months). The DSNG system described in, and cleared under, Bill of Entry No. 6394

dated 6.8.2003 does not find specific mention in the Annexure to the above licence.

In fact, the equipments mentioned in the above Annexure are not correctable to the

equipments cleared under the said Bill of Entry. In any case, the above licence for

import of equipments during the specified period of three months from 25.5.2007 to

24.8.2007 cannot be accepted as a licence for the DSNG equipment imported and

cleared on 6.8.2003. The appellants have also produced a letter dated 24.5.2007 of

the same authority addressed to the company. This letter conveys the decision of

the Ministry to grant a licence to the company for establishing wireless telegraph

station. This letter lays down certain technical parameters to be satisfied by the

appellant-company for the purpose of obtaining licence from the Ministry for

establishing wireless telegraph station. These parameters include INSAT 2E (83E)

as the satellite network and 2 MHz as the allocated bandwidth. But the satellite

network and bandwidth prescribed by the Ministry in their letter dated 5.8.2003 in

connection with permission for using mobile DSNG equipment are THAICOM - 3

Satellite and 3 MHz respectively. Non-mention of such parameters in the

description of DSNG system in the Bill of Entry also stands in the way of correlation

of the goods specified in Import Licence dated 25.5.2007 and those cleared by the

appellants under Bill of Entry No. 6394 dated 6.8.2003. For all these reasons, we

hold that the appellants failed to produce WPC licence in respect of the DSNG

equipment covered by Bill of Entry dated 6.8.2003 at the time of its import and

clearance or at any later stage. Consequently, the confiscation of the goods under

Section 111(d) of the Customs Act is liable to be sustained. Before parting with this

part of our order, we must also record that we have not found any misdescription of

the goods by the appellants inasmuch as the Revenue has not established that the

description of goods as given in the Bill of Entry is at variance with that given in the

relevant invoice or that the goods were different from the items mentioned in the

relevant EPCG licence. Again, we have found a valid point for the counsel in having

submitted that classification is a departmental function and therefore an importer

cannot be accused of having 'misclassified' the goods imported by him.

8.2. It appears from the record of evidence in this case that this equipment, after its

clearance, was mounted on a vehicle and put to use as mobile unit for the intended

purpose by the appellants. The company's Chartered Accountant's certificate,

produced by counsel, shows that, out of use of the imported equipments, they could

achieve substantial exports (to the extent of US $ 783423 upto 17.7.2006) under the

EPCG scheme. However, the requisite installation certificate was not produced

within the period prescribed under Notification No. 55/2003-Cus. or thereafter. It

has been argued by learned Counsel that it was not necessary to produce

installation certificate after each import and that such a certificate was required to

be produced only after completion of imports under the EPCG licences. This

argument cannot be accepted for the reason that each EPCG licence had prescribed

a period of 24 months for completing imports thereunder and the licensing

authority was never approached for extension of the period with the result that no

further imports were possible after the expiry of the above period. On the facts of

this case, it is not necessary to embark on interpretation of the expression

"completion of imports" used in the Notification. As rightly pointed out by learned

JDR, the period allowed for imports under the EPCG licences dated 30.5.2003 and

18.7.2003 had expired on 29.5.2005 and 17.7.2005 respectively. The company was

not entitled to make any import under the EPCG licences beyond the above period

and therefore their plea that time is available for importing the remaining items and

that installation certificate is required to be produced only after completion of such

imports cannot be accepted. Admittedly, the appellants have not produced

installation certificate in respect of the DSNG equipment. Therefore, we have to

uphold the Commissioner's decision to confiscate the DSNG equipment under

Section 111(o) also. However, learned Commissioner appears to have overlooked

the requirements of Section 125 of the Customs Act, whereunder an option for

redeeming the goods was available to the importer. He ought not to have ordered

absolute confiscation and should have allowed the party to redeem the goods on

payment of a reasonable fine besides duty. In the facts and circumstances of this

case, we are of the view that 15% of the value of the goods would be a reasonable

fine for redemption thereof and this works out to Rs. 19,00,000/- (Rupees nineteen

lakhs only). The company will be entitled to redeem the DSNG equipment against

payment of this fine. The duty foregone in Bill of Entry No. 6394 dated 6.8.2003

shall also be paid along with redemption fine as the company disentitled themselves

to the benefit of the Notification by not fulfilling the mandatory requirement of

installation certificate.

8.3. In respect of the remaining goods covered by the 10 Bills of Entry also, the

Commissioner's decision to confiscate the goods under Section 111(o) of the

Customs Act with option for redemption has to be upheld. We have already stated

our reasons for such confiscation, in the case of DSNG system. The same reasons

are equally applicable to other goods. However, the quantum of fine imposed by the

Commissioner is rather harsh. He took 50% of the value of the goods to be the fine.

Applying the same yardstick which we employed in the case of DSNG system, we

reduce this fine to Rs. 21,00,000/- (Rupees twenty-one lakhs only) being 15% of the

value. We are also of the view that the penalty of Rs. 1.90 crores imposed on the

company by the Commissioner is unconscionable. We reduce this penalty to Rs.

25,00,000/- (Rupees twenty-five lakhs only) in the facts and circumstances of the

case.

8.4. We have not accepted ld. Counsel's argument that the demand of duty before

expiry of the period prescribed for discharge of export obligation is premature. The

demand is consequential to the assessee's failure to comply with another mandatory

requirement under the exemption Notification, i.e., production of installation

certificate from the jurisdictional Assistant Commissioner or Deputy Commissioner

of Central Excise. Non-fulfilment of export obligation is not a ground for the demand

of duty on the assessee. The decision in Sharpscan & Prints (supra) is not applicable

to the present case as, in that case, the party was challenging a demand of duty

which was raised on the sole ground of non-fulfilment of export obligation.

9. In the result, Appeal No. C/293/2005 gets disposed of, with the following results:

(a) The classification of the goods cleared under Bill of Entry No. 6394 dated

6.8.2003 is affirmed under CTH 8525 20 92 and its confiscation under Section

111(d) and (o) of the Customs Act is upheld. The redemption fine in lieu of such

confiscation shall be Rs. 19,00,000/- (Rupees nineteen lakhs only). The duty

foregone in the above Bill of Entry shall also be paid by the appellant.

(b) The confiscation of the goods cleared under the remaining 10 Bills of Entry, with

option for redemption thereof, is upheld. The fine to be paid in lieu of confiscation

shall be Rs. 21,00,000/- (Rupees twenty-one lakhs only). Duty as demanded by the

Commissioner shall also be paid on these goods.

(c) The penalty on the appellant-company stands reduced to Rs. 25,00,000/- (Rupees

twenty-five lakhs only).

10. Learned Commissioner has imposed penalties on the Managing Director and 3

other Directors of the company under Section 112(a) of the Act. We have already

upheld the proposal to penalize the company under Section 112(a) for their

commissions/omissions which rendered the goods liable for confiscation under

Section 111. Over and above such commissions/omissions, learned Commissioner

has not brought out any separate commission or omission of the Managing Director

and Directors of the company rendering the goods liable for confiscation. He has not

found against them abetment of the company's offence either. In the circumstances,

the proposal to penalize the Managing Director and other Directors of the company

under Section 112(a) of the Act is not justifiable. In the result, Appeal Nos. C/294 to

297/2005 stands allowed.

(Operative portion of the order was pronounced in open court on 7.6.2007)

1st April,2003

Notification No. 55 / 2003 - Customs

In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts goods specified in the Table annexed hereto from so much of the duty of Customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act, 1975 (51of 1975) as is in excess of the amount calculated at the rate of five percent ad- valorem and from the whole of the additional duty and special additional duty leviable thereon respectively under sections 3 and 3A of the said Customs Tariff Act.

2. The exemption under this notification shall be subject to the following conditions namely:-

(1) that the goods imported are covered by a valid licence issued under the Export Promotion Capital Goods (EPCG) Scheme in terms of Chapter 5 of the Export and Import Policy permitting import of goods at the rate of five percent duty and the said licence is produced for debit by the proper officer of customs at the time of clearance:

Provided that for import of spare parts specified at Sr.No.4 of the said Table, the validity period of the licence shall be deemed to be the period permitted for fulfilment of the export obligation in full;

(2) that the importer executes a bond in such form and for such sum and with such surety or security as may be specified by the Deputy Commissioner of Customs or Assistant Commissioner of Customs binding himself to fulfil export obligation on FOB basis equivalent to eight times the duty saved on the goods imported as may be specified on the licence, or for such higher sum as may be fixed by the Licensing Authority, within a period of eight years from the date of issue of licence, in the following proportions, namely:-

S.No. Period from the date of issue of licence Proportion of total export obligation

(1) (2) (3)

1.2.3.4.

Block of 1st and 2nd yearBlock of 3rd and 4th yearBlock of 5th and 6th yearBlock of 7th and 8th year

Nil15%35%50%

Provided that where the duty saved is not less than Rs.100 crores, or where the licence is issued to units in the agri export zone as may be notified by the licensing authority, the export obligation shall be fulfilled with a period of twelve years from the date of issue of licence in the following proportions, namely:-

S.NO. Period from the date of licence Proportion of total export obligation

(1) (2) (3)

1.2.3.4.

Block of 1st, 2nd ,3rd ,4th and 5th yearBlock of 6th,7th and 8th yearBlock of 9th and 10th yearBlock of 11th and 12th year

Nil15%35%50%

Provided further that where a sick unit is notified by the Board for Industrial and Financial Reconstruction or where a rehabilitation scheme is announced by the concerned State Government in respect of sick unit for its revival, the export obligation may be fulfilled in terms of Paragraphs 5.5.1 of the Export and Import Policy.

Provided also that export obligation of a particular block may be set off against the excess exports made in the said preceding block(s);

(3) that the importer produces within 30days from the expiry of each block from the date of issue of licence or within such extended period as the Deputy Commissioner of Customs or Assistant Commissioner of Customs may allow, evidence to the satisfaction of the Deputy Commissioner of Customs or Assistant Commissioner of Customs showing the extent of export obligation fulfilled , and where the export obligation of any particular block 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 equal 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 15 % per annum from the date of clearance of the goods;

(4) that the capital goods imported, assembled or manufactured are installed in the importer’s factory or premises and a certificate from the jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise or an independent Chartered Engineer, as the case may be, is produced confirming installation and use of capital goods in the importer’s factory or premises, within six months from the date of completion of imports or within such extended period as the said Deputy Commissioner of Customs or Assistant Commissioner of Customs may allow:

Provided that in the case of ,-

(i) manufacturer exporter and merchant exporter having supporting manufacturer (s) or vendor(s);

(ii) import of irrigation equipment for use in contract farming for export of agricultural products; and

(iii) importer rendering services;

the capital goods may be installed at the factory or premises of such other person whose name and address are endorsed on the licence referred to in condition (1) and where the bond for full difference of duty, if necessary, in terms of condition (2) , with a bank guarantee is executed by the importer and such other person binding themselves jointly and severally to fulfill the export obligation and all other conditions of this notification and to pay duty with interest at the rate of 15% per annum in case of default;

(5) that the imports and exports are undertaken through sea ports at Mumbai, Kolkata, Cochin, Magdalla, Kakinada, Kandla, Mangalore, Marmagoa, Madras, Nhava Sheva, Paradeep, Pipavav, Sikka, Tuticorin, Visakhapatnam, Dahej, Mundhra, Nagapattinam and Okha or through any of the airports at Ahmedabad, Bangalore, Bhubaneswar, Mumbai, Kolkata, Coimbatore, Delhi, Hyderabad, Jaipur, Madras, Srinagar, Trivandrum, Varanasi, Nagpur and Cochin or through any of the Inland Container Depots at Agra, Bangalore, Coimbatore, Delhi, Faridabad, Gauhati, Guntur, Hyderbaad, Jaipur, Jallandhar, Kanpur, Ludhiana, Moradabad, Nagpur, Pimpri (Pune), Pitampur (Indore), Surat, Tirupur, Varanasi, Nasik, Rudrapur (Nainital), Dighi (Pune), Vadodara, Dauladtabad, (Wanjarwadi and Maliwada), Waluj (Aurangabad), Anaparthy (Andhra Pradesh), Salem, Malanpur, Singanalur, Jodhpur, Kota, Udaipur, Ahmedabad, Bhiwadi, Madurai, Bhilwara, Pondicherry and Garhi Harsaru or through the Land Customs Station at Ranaghat , Singhabad and Raxaul:

(6) notwithstanding anything contained in condition (3) above, where the Licensing Authority grants extension of block – wise period for any block(s) or overall period of fulfillment of export obligation upto a

period of two years or regularization of shortfall in export obligation, not exceeding five percent of such export obligation, the said block-wise period or overall period of export obligation shall be extended/ condoned by the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be:

Provided that where the duty saved is not less than Rs.100 crores and in respect of sick units as specified in the second proviso to condition (2) above, extension of overall period of export obligation shall not be allowed.

3. Where the goods specified in the said Table are found defective or unfit for use, the said goods may be re-exported back to the foreign supplier within 3 years from the date of payment of duty on the importation thereof:

Provided that at the time of re-export the goods are identified to the satisfaction of the Deputy Commissioner of Customs or Assistant Commissioner of Customs as the goods which were imported.

Table

S.NO. Description of goods

(1) (2)

1. Capital goods for pre production, production and post production including second hand capital goods upto 10 years old.

2. Capital goods in SKD/CKD conditions to be assembled into capital goods by the importer.

3. Components of capital goods required for assembly or manufacture of capital goods by the importer.

4. Spare parts of goods specified at Serial Nos.1,2,and 3 as actually imported and required for maintenance of capital goods so imported, assembled, or manufactured.

5 Spares for the existing plant and machinery of the licence holder.

Explanation - In this notification,-

(1) "Capital Goods" has the same meaning as assigned to it in Paragraph 9.10 of the Export and Import Policy;

(2) "Export and Import Policy" means the Export and Import Policy 2002-2007 published vide notification of the Government of India in the Ministry of Commerce and Industry, No.1/2003 dated the 31st March, 2003 as amended from time to time;

(3) "Licensing Authority" means the Director General of Foreign Trade appointed under section 6 of the Foreign Trade (Development and Regulation) Act,1992 (22 of 1992) or an officer authorised by him to grant a licence under the said Act;

(4) "export obligation", -

(i) in relation to importers other than those rendering services, means exports, to a place outside India, of products manufactured with the use of capital goods imported, assembled or manufactured in terms or this notification:

Provided that export obligation may also be fulfilled by ,-

(a) export of same products capable or being manufactured with the use of said capital goods; or

(b) export of same product manufactured in different units of the licence holder; or

(c) through third party exports made by an exporter or manufacturer on behalf of the licence holder by exporting the same product and in such cases, inter-alia the Shipping bills shall indicate name of both the third party and the licence holder; or

(d) making supplies of same product in terms of sub- paragraphs (a) (b) (d) (e) (f) (g) (h) (i) and (j) of paragraph 8.2 of the Export and Import Policy;

(ii) in relation to importers rendering services, means, receiving payments in freely convertible foreign currency for services rendered through the use of capital goods.

Provided that in respect of units holding license both as manufacturer exporter and service provider, the export obligation may be fulfilled either by export of products specified in clause (i) or by receiving payments in freely convertible foreign currency for services rendered through the use of such capital goods.

Alok JhaUnder Secretary to the Government of India

F.NO.605/1/2003-DBK