2008 (12) TMI 160 - AT - Customs

100% EOU Debonding of Export Oriented Units Demand of Duty on capital goods imported free of customs duty on depreciated value Demand of duty is not in dispute but demand of interest on duty is in dispute EOU applied to the CBEC (Board) for waiver of interest, but no reply from the board - The Board in exercise of its power under Section 61(2) issued a Notification No. 67/95-Cus. (N.T.) exempting the interest accrued from the customs duty payable on the capital goods imported by warehouse 100% EOU. The Board issued a Circular No. 31/96-Cus. dated 7-6-96, wherein it was clarified that the goods warehoused prior to the amendment of Customs Act, 1962 are also eligible for waiver of interest accrued on duty, even if the goods have been cleared for home consumption after the date of issue of notification i.e. 1-11-95 Held that since, no finding has been given by the Commissioner (Appeals) regarding applicability of the Notification and circular impugned order is set aside and the matter is remanded to the C(A) for de novo decision

Summary

Issues:
1. Demand of interest on duty payable on capital goods imported by a 100% EOU.
2. Applicability of waiver of interest on customs duty for capital goods imported by an EOU.
3. Interpretation of relevant provisions under Section 61 of the Customs Act, 1962.
4. Consideration of Board circulars and notifications exempting interest on duty for EOUs.
5. Adjudication process for interest demands and debonding procedures for EOUs.

Analysis:
1. The Appellant, a 100% EOU, imported capital goods under a LOP and operated in bonded premises. The Assistant Commissioner issued show cause notices for interest on duty. The CC (Appeals) modified the order, setting the interest chargeable from the date of withdrawal from the EOU scheme. The Appellant challenged this decision.

2. The Appellant argued that pending interest waiver application to the Board should prevent interest charges. They also cited notifications exempting interest on customs duty for EOUs. The Departmental Representative supported the CC (Appeals) decision.

3. The Member analyzed Section 61(1)(a) and (2) of the Customs Act, 1962, regarding warehousing period and interest on duty for EOUs. Board circulars emphasized automatic extension of warehousing period for EOUs and waiver of interest at debonding.

4. Board circulars highlighted waiver considerations for EOUs not meeting export obligations and the importance of Board decisions on interest waiver applications. The Appellant faced penalties for not achieving value addition and debonded later.

5. The Member noted the Finance Act, 1994 extended the warehousing period for EOUs to five years and empowered the Board to exempt interest on specified goods. The Board issued notifications and circulars exempting interest on duty for capital goods imported by EOUs.

6. Due to lack of findings on the notification's applicability, the Member set aside the order and remanded the matter to the Commissioner (Appeals) for a fresh decision after considering the Board's interest waiver decision and the notification's relevance. The appeal was disposed of accordingly.