2014 (5) TMI 331 - AT - Customs

100% EOU - Duty-free goods - Failure in fulfillment of export obligation Whether assessee failed to fulfil the export obligation and whether duty can be demanded on the goods procured duty-free Manufacture of prawn and prawn seeds Circular No. 13/95-Cus., dated 15-2-1995 -100% EOU - Freedom to transfer of goods imported or manufactured to another 100% EOU Requirement of Permission to transfer goods - Held that - Appellants did not need any permission to transfer their goods to another 100% EOU and unless it is shown that the clearances made by the appellants to other unit was DTA clearance and was not to a 100% EOU, the duty could not have been demanded - Other than stating that no permission was taken, there is no contradiction of the claim that the unit to whom prawn and prawn seeds were cleared by assessee was a 100% EOU - Thus, Commissioner was right in not demanding the duty on domestic clearances even though he did not make these observations and he did not record a finding on the same. Duty demand on raw materials and capital goods imported and indigenously procured Held that - The concerned DC in Order-in-Original No. 8/EOU/ADJLIO6/VEPZ condoned the shortfall and accordingly, upheld the fulfillment of the conditions of LOP during the period from 1-10-1994 to 31-3-2000 - Therefore, the Development Commissioner did not declare the unit as defaulter for the period when the show cause notice is issued - Moreover, it is not the case that the unit has opted for de-bonding - There is no cause for demanding duty at this juncture - In the light of the above, the show cause notice proceedings cannot sustain. No doubt, Development Commissioner is the competent authority to decide the fulfilment of export obligation and achievement of minimum NFEP under the License - This aspect has been affirmed by the C.B.E. & C. in its Circular No. 21/95-Cus., dated 10-3-1995 Since the Development Commissioner has accepted the export performance as enough to fulfil the export obligation and therefore it cannot be said that the unit has not fulfilled the export obligation and therefore is liable to pay duty - Accordingly, the appeal filed by the Revenue has no merit and is rejected - The Cross-objection filed by the respondent also gets disposed of - Decided in favour of assessee.

Summary

Issues:
1. Failure to fulfill export obligation.
2. Demand for duty on goods procured duty-free.

Issue 1: Failure to fulfill export obligation
The appellant was required to produce a specific quantity of prawn and prawn seeds with a minimum value addition over a period of 10 years. The appellant imported capital goods, consumables, and raw materials, and cleared a portion of prawn and prawn seeds. The Revenue alleged that the export obligation was not met, leading to a show cause notice for duty recovery. The Commissioner, however, noted that the Development Commissioner had condoned the shortfall in export obligation, considering it fulfilled. The Revenue appealed this decision, arguing that the clearances were made without proper permissions. The appellant contended that they had permission to clear goods to other units, which exported them. The Tribunal observed that 100% EOUs were allowed to transfer goods to other EOUs without permission, and unless proved otherwise, duty could not be demanded. As the Development Commissioner had condoned the shortfall, the duty was not liable to be paid.

Issue 2: Demand for duty on goods procured duty-free
Regarding the duty demand on imported and indigenous goods, the Tribunal found the Commissioner's decision justified. The Development Commissioner was the authority to determine if the export obligation was fulfilled. The Commissioner's observations highlighted that the Development Commissioner had condoned the shortfall and upheld the fulfillment of conditions, preventing duty demand. As the Development Commissioner accepted the export performance as sufficient, the Tribunal held that the duty demand was unjustified. The Revenue's appeal was rejected, and the respondent's cross-objection was disposed of accordingly.

In conclusion, the Tribunal upheld the Commissioner's decision, emphasizing the importance of the Development Commissioner's role in determining export obligation fulfillment and rejecting the duty demand based on the condonation of the shortfall.