2018 (2) TMI 283 - HC - Central Excise

100% EOU - Principles of Natural Justice - main ground of challenge by the appellant in the present Appeal is that the Writ Court did not appreciate the issue in proper prospective, as the issue pending before the 1st respondent, as it stood, while the matter was to be heard finally by the 1st respondent, on 05.04.2016 was with regard to the demand of duty of ₹ 2,92,01,610/- on mould and as to whether claim of 90% of depreciation was allowable? Held that - The appellant has sought settlement on the admitted liability, and prayed for immunity provided under the law. The direct answer to the grounds raised by the appellant are that even during the preliminary proceedings, wherein an interim order was passed by the respondents, at no point of time, the department has accepted that there is no liability towards the duty on raw materials. In fact, on the submission made by the appellant, at various points of time, when the appellant was assailing against the liability on raw materials, it could be seen from the records that the case of the appellant that the machinery imported was found to be old and unused machinery and because of the wrong supply of sub-standard machines, the appellant could not produce the goods and fulfill the export obligation, in which case, the appellant should have immediately informed the authorities regarding the same, which the appellant failed to do so. It is a clear case and is also admitted by the appellant before the authority that the goods were never lost or destroyed, but they become unfit for consumption, since they were not put into use by the appellant. Besides that the appellant failed to inform the department about stoppage of production at any point of time. When the officers verified stocks, they found shortage of stocks, which the appellant admitted and also paid duty on such quantities of shortage. The authorities below have appreciated the aspect of depreciation of value of capital goods at 90% of the value in terms of CBEC Circular 43/91-Cus. dated 26.06.1998 and accordingly, ordered the appellant to deposit the admitted liability of ₹ 10,17,283/-, which is a direct answer to the grounds raised by the appellant against the order passed by the Writ Court. The letter/submission dated 10.05.2016 is the reply/submission filed by the Jurisdictional Commissioner against the letter/submission of the appellant dated 25.04.2016. The aforesaid submissions of both the appellant and the revenue have been extracted as post hearing submissions of the applicant dated 25.04.2016 and post hearing submissions of the jurisdictional commissioner dated 10.05.2016 and have been discussed in detail by the Settlement Commission in the order dated 25.05.2016. Therefore, the contention of the appellant that there is violation of principles of natural justice, cannot be accepted. The Settlement Commission has exercised its jurisdiction properly, under Section 127F(1) of the Customs Act, by going through the factual aspects, as well as the legal position, and exercised discretion and allowed 90% depreciation on capital goods and directed the appellant to deposit the admitted liability of ₹ 10,17,283/- - appeal dismissed - decided against appellant.

Summary

Issues Involved:

1. Violation of principles of natural justice.
2. Scope of the Settlement Commission's order.
3. Depreciation on imported machinery.
4. Duty liability on raw materials.
5. Jurisdiction and powers of the Settlement Commission.
6. Remission of duty under Section 23 of the Customs Act.
7. Finality and conclusiveness of the Settlement Commission's order.

Detailed Analysis:

1. Violation of principles of natural justice:
The appellant argued that the learned Judge failed to appreciate the specific plea of violation of principles of natural justice. The appellant contended that the letter dated 10.05.2016 from the Department was not furnished to them, which deprived them of an opportunity to reply. However, the court found that the letter dated 10.05.2016 was a response to the appellant's submission dated 25.04.2016 and both submissions were discussed in detail by the Settlement Commission. Therefore, the contention of violation of principles of natural justice was not accepted.

2. Scope of the Settlement Commission's order:
The appellant claimed that the order passed by the Settlement Commission was beyond the scope of their application. They argued that the only issue pending was the duty liability on moulds, not on raw materials. The court, however, found that the appellant had sought settlement on the admitted liability and prayed for immunity under the law. The Settlement Commission had considered all aspects, including the duty on raw materials, and passed a comprehensive order.

3. Depreciation on imported machinery:
The appellant contended that the Settlement Commission should have allowed 90% depreciation on the imported machinery. The court noted that the Settlement Commission had accepted the 90% depreciation on capital goods, including moulds, and settled the liability accordingly. The appellant's claim was addressed, and the depreciation was duly considered in the final order.

4. Duty liability on raw materials:
The appellant argued that there was no liability with regard to raw materials. However, the court found that the Settlement Commission had determined the duty liability on raw materials at ?36,25,472/-. The appellant's contention that the raw materials were unfit for consumption and should be destroyed was not accepted, as the goods were neither lost nor destroyed but had become unfit due to non-use by the appellant.

5. Jurisdiction and powers of the Settlement Commission:
The appellant claimed that the Settlement Commission should have exercised powers as an adjudicating authority under Section 127F of the Customs Act. The court held that the Settlement Commission had exercised its jurisdiction properly, considered the factual and legal aspects, and exercised discretion in settling the liability. The argument that the Settlement Commission should have acted as an Assessing Officer was not accepted.

6. Remission of duty under Section 23 of the Customs Act:
The appellant contended that they were entitled to remission of duty under Section 23 of the Customs Act, as the raw materials had become unfit for consumption. The court found that remission of duty under Section 23 applies only when goods are lost or destroyed before clearance. Since the raw materials were not lost or destroyed but became unfit due to the appellant's failure to use them, remission under Section 23 was not applicable.

7. Finality and conclusiveness of the Settlement Commission's order:
The appellant challenged the finality of the Settlement Commission's order. The court cited previous judgments, emphasizing that an order passed by the Settlement Commission is final and conclusive and can only be interfered with if it is contrary to statutory provisions. The findings of fact recorded by the Commission are not open for examination by the High Court or the Supreme Court. The appellant cannot accept favorable parts of the order and challenge the unfavorable parts.

Conclusion:
The court dismissed the Writ Appeal, upholding the order of the Writ Court and the Settlement Commission. The appellant's contentions were not accepted, and the comprehensive order of the Settlement Commission, including the duty liability on raw materials and the depreciation on capital goods, was affirmed. The court emphasized the finality and conclusiveness of the Settlement Commission's order and found no violation of principles of natural justice.