2013 (9) TMI 26 - AT - Customs

100% EOU - debonding - duty on capital goods - Eligibility for depreciation - what should be the value on which duty can be demanded on the capital goods and whether the appellant would be eligible for any depreciation or not Held that - No permission has been obtained by the assesse from the Development Commissioner and the Development Commissioner had also not renewed the LOP when it expired In the absence of any such permission, the question of allowing any depreciation on the value of the capital goods does not arise depreciation was permissible only when the capital goods were cleared after getting approval from the Development Commissioner for being taken to any other place in India in accordance with the EXIM policy. Duty demand on raw materials Held that - The quantity and value lying unutilized on the date of export of warehousing period was not forthcoming from the records - If any such raw materials were lying unutilized on the date of deemed removal - they had to be assessed to Customs duty on the original value of the importation but at the rate prevailing on the date of deemed removal - if the raw materials were consumed in the manufacture of goods exported, then the demand of duty will not arise at all Only in respect of raw materials lying unutilized still remaining in the bonded premises, the question of demand on duty on raw materials would arise. Confiscation of goods u/s 111(o) Redemption fine Penalty u/s 112(a) - Held that - Assesses had failed to fulfil the terms and conditions of the exemption - the goods were liable to confiscation u/s111(o) - Inasmuch as the assesse had been allowed to function as an EOU from April 2009 onwards - the imposition of a nominal fine in lieu of confiscation would suffice assesse s penalty was reduced managing director s Penalty was set aside. Duty on imported goods Interest Held that - Appellant was liable to pay duty on the imported capital goods deemed to had been removed at the rate of duty prevailing on the date of deemed removal - Interest was also leviable on such amount of duty - Only if any such materials were lying in stock on the date of deemed removal, duty liability will have to be discharged at the rate prevailing on the date of deemed removal matter remanded back to the adjudicatory authority for re computation of Demand decided partly in favor of assesse.

Issues Involved:
1. Fulfillment of Export Obligation by the Appellant.
2. Liability for Import Duty on Capital Goods.
3. Confiscation and Penalty under Customs Act.
4. Applicability of Depreciation on Capital Goods.
5. Validity of Renewal of EOU Status.

Detailed Analysis:

1. Fulfillment of Export Obligation by the Appellant:
The appellant, a 100% EOU, was required to achieve a minimum NFEP of 20% and an export performance of US Dollar One Million or five times the CIF value of imported capital goods. The appellant imported capital goods valued at Rs. 120,29,60,194/- duty-free under Notification No. 53/97-Cus. but failed to meet the export obligation, achieving only Rs. 2.95 crore in exports and ceasing manufacturing activities in September 2000. Consequently, a show-cause notice was issued demanding import duty and penalties for failing to fulfill the export obligation.

2. Liability for Import Duty on Capital Goods:
The adjudicating authority confirmed a duty demand of Rs. 61,24,18,364/- on the capital goods and spares under Notification No. 53/97-Cus. read with Sections 61 and 72 of the Customs Act, 1962. The Tribunal upheld the duty demand on capital goods and spares but set aside the demand on raw materials consumed in the manufacture of export goods. The duty was to be calculated based on the rate prevailing on the date of deemed removal, which occurred when the private bonded warehousing license expired in 2001.

3. Confiscation and Penalty under Customs Act:
The capital goods, spares, and raw materials, except those used in the manufacture of exported goods, were held liable for confiscation under Section 111(o) of the Customs Act. The adjudicating authority imposed a fine of Rs. 20 crore in lieu of confiscation and penalties of Rs. 6 crore on the appellant firm and Rs. 5 crore each on the Chairman and Managing Director. The Tribunal reduced the fine to Rs. 1 crore and the penalty on the appellant to Rs. 1 crore, setting aside the penalties on the Chairman and Managing Director.

4. Applicability of Depreciation on Capital Goods:
Depreciation on capital goods is permissible only when cleared with approval from the Development Commissioner. Since the appellant did not obtain such permission, depreciation was not allowed. The duty on raw materials lying unutilized was to be assessed based on the original value at the rate prevailing on the date of deemed removal.

5. Validity of Renewal of EOU Status:
The appellant's EOU status was renewed effective from 1-4-2009, but the renewal was conditional and did not affect actions taken for the period prior to 1-4-2009. The Tribunal held that the renewal did not regularize previous actions and should be considered a fresh LOP for practical purposes. The original LOP and private bonded warehousing license expired in 2001, leading to deemed removal of goods and liability for customs duty on the capital goods.

Conclusion:
The Tribunal concluded that the appellant is liable to pay duty on the imported capital goods deemed to have been removed at the rate prevailing on the date of deemed removal, along with interest. No duty liability would accrue on raw materials and consumables already utilized in the manufacture of export goods. The confiscation of capital goods was upheld, but the fine was reduced to Rs. 1 crore. The penalty on the appellant was reduced to Rs. 1 crore, and penalties on the Chairman and Managing Director were set aside. The case was remanded to the adjudicating authority for re-computation of the demand.

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