2017 (11) TMI 1267 - AT - Customs

100% EOU - Benefit of N/N. 53/1997-CUS dated 03/06/1997 - compliance with remand directions - Held that - On a close examination of the present impugned order, we are clear that the Original Authority passed the order in respect of certain aspects showing indifference, if not defiance, towards the remand directions of the Tribunal as contained in the final order dated 28/10/2016. We are not in agreement with the submissions of the learned AR to the effect that the remand directions are for deciding the case afresh in all aspects. A plain reading of the final order of the Tribunal makes it abundantly clear that the only role for the Original Authority in re-deciding the case is to find out the duty liability against the appellant limited to the gap between the foreign exchange outgo for the imports and foreign exchange earned on account of exports made. Non-submission of documents by the appellant in support of their claim for export/deemed export - Held that - in case of any doubt, the Original Authority could have referred to the concerned bank authorities to counter verify the genuineness of the documents. Further, the fact of export or DTA clearance against foreign exchange realization can also be collaborated by various other contemporaneous documents, which the appellant submits, will establish to the satisfaction of the Original Authority, the facts as claimed by the appellant. Matteris remitted to the Original Authority to comply with the directions as contained in the final order dated 28/10/2016 of the Tribunal - appeal allowed by way of remand.

Issues Involved:
1. Compliance with Notification 53/1997-CUS conditions.
2. Proportionate benefit of exports made.
3. Confiscation of goods and imposition of penalty.
4. Examination of manufacturing process.
5. Inclusion of deemed exports in FOB value.
6. Submission and verification of documentary evidence.

Issue-wise Detailed Analysis:

1. Compliance with Notification 53/1997-CUS conditions:
The appellants were accused of not fulfilling the conditions of Notification 53/1997-CUS, as they failed to export goods as per the Letter of Permission (LOP) and bond executed. The Original Authority demanded Customs duty of ?2,05,59,822/- and imposed an equivalent penalty under Section 112 (a), along with the confiscation of goods.

2. Proportionate benefit of exports made:
The Tribunal in its earlier order dated 28/10/2016, remanded the case, directing the Original Authority to consider the proportionate benefit of exports made by the appellants. The Tribunal stated that the duty liability should be limited to the gap between the foreign exchange outgo for imports and the foreign exchange earned from exports, as per Circular No.29/2003-Cus and Notification No.52/2003-Cus.

3. Confiscation of goods and imposition of penalty:
The Tribunal had previously set aside the penalty and ordered that confiscation of goods was unnecessary if the goods were used for manufacturing export goods. The Original Authority, in the denovo proceedings, ignored these directions and re-imposed the penalty, which was found to be contrary to the Tribunal's remand directions.

4. Examination of manufacturing process:
The Original Authority, beyond the scope of the show cause notice, discussed the manufacturing process under Section 2 (f) of the Central Excise Act, 1944, and held that segregation of waste and scrap does not amount to manufacture. The Tribunal found no basis for this examination, as it was not alleged in the show cause notice. The Tribunal referenced Board Circular dated 06/05/1997 and various case laws, indicating a broader interpretation of the EOU notification.

5. Inclusion of deemed exports in FOB value:
The Original Authority erroneously excluded deemed exports from the FOB value calculation. The Tribunal clarified that deemed exports should be included, referencing the case of Shree Rohini Enterprises and other decisions, which held that EOUs are entitled to include deemed exports for determining the FOB value for domestic market sales.

6. Submission and verification of documentary evidence:
The Original Authority doubted the genuineness of the documents submitted by the appellants, citing issues like attestation by another company and overwriting. The Tribunal noted that the Original Authority could have verified the documents with the concerned bank authorities and other contemporaneous records. The Tribunal emphasized that the duty liability should be calculated based on verified documentary evidence of foreign exchange realization from exports.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter to the Original Authority to comply strictly with the remand directions from the final order dated 28/10/2016. The Original Authority is directed to determine the duty liability limited to the gap between the foreign exchange outgo for imports and the foreign exchange earned from exports, allowing proportionate benefits of exports made. Confiscation and penalty were already set aside by the Tribunal. The Original Authority must verify the documentary evidence submitted by the appellants to calculate the duty liability accurately.

Order Pronounced:
The impugned order is set aside, and the Original Authority is directed to calculate the duty liability, if any, in accordance with the Tribunal's observations. The order was pronounced in open court on 18/10/2017.

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