Legal principle

Where a 100% EOU's letter of permission and private bonded warehousing licence have expired without renewal, the imported goods are deemed removed from bonded premises and become dutiable at the rate prevailing on the date of deemed removal, and a conditional renewal of EOU status 'without prejudice' to prior action does not shield breaches of the exemption conditions from confiscation under Section 111(o) and penalty under Section 112(a).

Court decision

The Tribunal upheld the duty liability on the imported capital goods, deemed to have been removed, payable at the rate of duty prevailing on the date of deemed removal, along with interest; no duty accrues on raw materials and consumables already utilised in export manufacture, but duty applies to any such materials lying in stock on the date of deemed removal. Confiscation under Section 111(o) was upheld, but the fine was reduced from Rs.20 crore to Rs.1 crore; the company's penalty was reduced from Rs.6 crore to Rs.1 crore, and the penalties on the Chairman and Managing Director were set aside. The matter was remanded to the adjudicating authority for re-computation of the demand, so the Revenue substantially succeeded while the appellants obtained relief only in fine and penalty.

Facts

Mavi Industries Ltd. (formerly Krishna Filaments Ltd.), a 100% EOU manufacturing HDPE/PP yarn/ropes, imported capital goods valued at Rs.120,29,60,194/- duty free in 1999-2000 under Notification No.53/97-Cus against an LOP requiring an NFEP of 20% and export performance of Rs.601.48 crore in five years. The unit achieved exports of only Rs.2.95 crore and stopped manufacturing in September 2000. A show-cause notice dated 27/02/2004 demanded duty of Rs.61,24,18,364/- under Notification No.53/97-Cus read with Sections 61 and 72 of the Customs Act and the bond, proposed confiscation of capital goods, spares and raw materials valued at Rs.126,59,47,384/- under Section 111(o), and penalties under Sections 112(a) and 117. After remands by the Tribunal (10/07/2008) and the Bombay High Court (17/12/2008), the Commissioner confirmed the duty demand with interest, a fine of Rs.20 crore in lieu of confiscation, and penalties of Rs.6 crore on the company and Rs.5 crore each on the Chairman and Managing Director.

Key provisions

• Section 72, Customs Act, 1962 — Goods improperly removed from warehouse, etc
• Section 111(o), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 61, Customs Act, 1962 — Period for which goods may remain warehoused
• Section 112(a), Customs Act, 1962 — Penalty for improper importation of goods
• Section 117, Customs Act, 1962 — Penalties for contravention etc not expressly mentioned
• Section 15, Customs Act, 1962 — Date for determination of rate of duty and tariff valuation of imported goods
• Section 68, Customs Act, 1962 — Clearance of warehoused goods for home consumption
• Section 23, Customs Act, 1962 — Remission of duty on lost, destroyed or abandoned goods