2010 (5) TMI 929 - AT - Customs

Whether the appellant is required to discharge customs duty foregone by the Revenue on the capital goods and raw materials, consumables and components, imported for setting up of green house for export of cut flowers as per the letter of permission given by DGFT? Held that - The admitted fact being that the appellant had installed and used the capital goods and raw materials, consumables and components imported by him claiming the benefit of Notification No.126/94-Cus. and it is recorded in the Order-in-Original that the appellant had started commercial production from 10/11/1995. It is undisputed that the capital goods which were procured by claiming benefit of exemption under Notification No.126/94-Cus was installed and used for production of goods for export - as per notification, the demand of the duty on the capital goods cannot be sustained. Enhancement of penalty imposed by the adjudicating authority - Held that - As we have held in favour of the appellant/assessee on merits and set aside the impugned order, there cannot be any penalty on the appellant and hence, question of enhancement of the penalty as prayed in the Revenue s appeal does not arise. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Discharge of customs duty foregone by the Revenue on imported goods.
2. Interpretation of Notification No.126/94-Cus and its applicability.
3. Export obligation fulfillment and its impact on customs duty liability.
4. Applicability of relevant case laws in determining customs duty liability.

Analysis:
1. The first issue revolves around whether the appellant is required to discharge the customs duty foregone by the Revenue on imported capital goods and raw materials. The appellant imported goods under Notification No.126/94-Cus for establishing a 100% EOU for manufacturing and exporting cut flowers. The DGFT canceled the permission due to shortfall in export commitments, leading to a demand for customs duty by the Revenue. The appellant argued that duty liability should not apply to capital goods and relied on Notification clauses and past Tribunal decisions to support their stance.

2. The interpretation of Notification No.126/94-Cus is crucial in determining the customs duty liability. The notification requires the importer to execute a bond for fulfilling export obligations and complying with conditions. The duty liability only applies to raw materials, components, spares, and consumables, excluding capital goods. The Tribunal analyzed the notification clauses and past judgments to conclude that duty on capital goods cannot be sustained, as they were installed and used for production as per the notification's conditions.

3. The issue of export obligation fulfillment plays a significant role in customs duty liability. The DGFT canceled the permission due to the appellant's failure to meet export commitments. However, the Tribunal found that the capital goods were utilized for production as per the notification's requirements, leading to the conclusion that duty on capital goods cannot be demanded. The non-fulfillment of export obligations does not automatically trigger duty liability on capital goods, as per the notification's provisions.

4. The Tribunal referenced relevant case laws such as CCE, Pune Vs. Semco Electric Pvt. Ltd. to support the appellant's argument regarding duty liability on capital goods. The judgments highlighted the conditions under which duty can be levied, emphasizing the importance of installation and utilization of capital goods for export production. By aligning with past decisions and interpreting the notification clauses, the Tribunal ruled in favor of the appellant, setting aside the impugned order and rejecting the Revenue's appeal for penalty enhancement.