2009 (2) TMI 674 - AT - Customs

Export Oriented Unit, 100% EOU - Capital goods - transfer of - revenue proceeded against the appellants on the ground that the transfer of capital goods can only be made and in the present case, the goods namely modular furniture and anti static carpets cannot be considered as capital goods

Summary

Issues:
- Interpretation of capital goods for duty-free imports under Notification No. 52/2003-Cus.
- Validity of transfer of goods to another EOU on an inter unit transfer basis.
- Consideration of permissions obtained from Development Commissioner/Customs Authorities.
- Application of Circulars and case laws in determining the nature of goods.
- Bar on demanding duty for goods under customs bond.
- Limitation on show cause notices for transfer of bonded goods.
- Compliance with Foreign Trade Policy and Notification No. 53/2003-Cus.
- Justification for duty imposition and penalties post-transfer with permissions.

Analysis:
The judgment by the Appellate Tribunal CESTAT, Bangalore addressed the issue of transferring duty-free goods under Notification No. 52/2003-Cus to another EOU, contested by the revenue as not meeting capital goods criteria. The appellants' arguments highlighted permissions from the Development Commissioner and relevant circulars supporting the transfer. The definition of capital goods, as per the EXIM Policy and case laws, was crucial in this context, emphasizing the wide scope of capital goods. The contention that duty demand during goods' customs bond period is premature was supported by legal precedents, including CC v. Infosys Technologies Ltd. The defense also raised concerns about the limitation on show cause notices and detailed the compliance with Foreign Trade Policy for inter unit transfers.

The Tribunal scrutinized the permissions granted for the inter unit transfer, focusing on the nature of the goods - modular furniture and anti-static carpets. The Commissioner's conditions for IUT approval were examined, with reference to the usage of shared facilities for software development. Disagreement arose regarding the Commissioner's interpretation of capital goods, contrasting it with the EXIM Policy's broader definition. The Tribunal upheld the eligibility of modular furniture and carpets for duty exemption under the EOU scheme, emphasizing that once goods are imported under a notification, their eligibility cannot be questioned later. The judgment stressed the importance of complying with Foreign Trade Policy provisions for capital goods transfer and highlighted the customs bond status of the goods post-transfer as a factor against duty imposition and penalties.

Ultimately, the Tribunal set aside the impugned orders, ruling in favor of the appellants due to the lack of merit in the revenue's contentions. The decision underscored the significance of permissions from relevant authorities, adherence to policy guidelines, and the customs bond status in determining duty liability post-transfer. The judgment provided consequential relief to the appellants, emphasizing the protection of their rights in the inter unit transfer of goods under duty-free schemes.