2010 (5) TMI 503 - HC - Central Excise

100% EOU - demand and penalty - against stipulated value addition of 47% the petitioner had been able to achieve only 21.3% value addition (at one place stated to be 17.15% / 16.26%). The shortfall was thus to the extent of more than 50% of the stipulated limit as the petitioner was not in a position to complete manufacture and achieve export of almost 26% within the period of remaining three months. - petitioner was called upon to pay the demand and penalty was levied before the stipulated period of one year was over, suffice it to state that the petitioner was not in a position to comply with the stipulated limit of value addition even if the authorities had granted further time to the petitioner - authorities have taken action within the period of one year no prejudice has been caused to the petitioner Petition rejected

Summary

Issues Involved:
1. Sealing of factory premises and hindrance to manufacturing activities.
2. Imposition of value addition conditions in the letter of approval.
3. Levy of penalty and demand for customs duty.
4. Compliance with export obligations and value addition criteria.
5. Alleged premature action by authorities.
6. Claims for duty drawback.

Detailed Analysis:

1. Sealing of Factory Premises and Hindrance to Manufacturing Activities:
The petitioner, a 100% export-oriented unit, initially sought relief to unseal its factory premises and resume manufacturing and export activities. However, this issue became moot as the petitioner was permitted to export goods under court orders, and thus, no further orders were required on this matter.

2. Imposition of Value Addition Conditions in the Letter of Approval:
The petitioner contested the inclusion of value addition conditions in the letter of approval, arguing that the Export Import (EXIM) policy did not mandate such conditions. The court examined Paragraph No. 4 of the EXIM Policy, which clearly required importers to regulate imports to adhere to value addition criteria. The court concluded that the policy document did indeed obligate importers to fulfill value addition requirements, and thus, the conditions in the letter of approval were valid and binding.

3. Levy of Penalty and Demand for Customs Duty:
The respondent authorities imposed a penalty of Rs. 25,00,000/- for mis-utilizing imported components and violating Section 4-I(1)(a) of the Imports and Exports (Control) Act, 1947. Additionally, a demand of Rs. 3,14,84,373.10 was confirmed under the Customs Act, 1962. The petitioner argued that these actions were premature and unjustified. However, the court found that the petitioner failed to achieve the stipulated value addition and thus upheld the penalty and demand.

4. Compliance with Export Obligations and Value Addition Criteria:
The petitioner was required to achieve a minimum value addition of 47% in the first year as per the letter of approval. Despite importing components worth Rs. 2.30 crores, the petitioner only achieved 21.3% value addition and was unable to meet the export target of 12,000 knitting machines. The court noted that the petitioner exhausted all imported components and was not in a position to import more to meet the shortfall. Thus, the petitioner failed to comply with the export obligations and value addition criteria.

5. Alleged Premature Action by Authorities:
The petitioner claimed that the authorities initiated action before the one-year period for achieving the stipulated value addition had expired. The court observed that even if the authorities had waited until the end of the period, the petitioner would still have failed to meet the value addition requirement. Therefore, the court found no prejudice caused by the timing of the authorities' actions.

6. Claims for Duty Drawback:
The petitioner sought permission to file claims for duty drawback for goods exported to the USSR. The court noted that respondent No. 3 had already stated that the petitioner could apply for duty drawback in accordance with the law. Thus, the court did not grant this prayer, emphasizing that the petitioner must first make a proper application and demonstrate entitlement.

Conclusion:
The court rejected all the prayers made by the petitioner, including those added through various amendments. The petition was dismissed, and the rule was discharged without any order as to costs. The petitioner's request for a stay of the judgment was also denied, considering the long-standing nature of the impugned orders.