2018 (7) TMI 311 - AT - Central Excise

100% EOU - Permission to remove capital goods procured / imported to their job work unit - The department was of the view that these items being machineries and not moulds, jigs, tool, fixtures cannot be removed from the EOU - Held that - Pursuant to the letter of appellant dt.2.4.2004 requesting permission for removal of capital goods for job work purposes, the Deputy Commissioner vide letter dt.5/5/2004 has granted permission to remove the capital goods as per notification 52/2003 - Since the appellant has removed the capitals as per the permission given, the department cannot later allege violation of provision of notification 52/2003 - demand on this ground do not sustain. Removal of capital goods which were locally procured without permission - Held that - Even if the appellant had reversed the credit, the appellant would be eligible to avail the credit of the Excise Duty paid on the capital goods when they are brought back to the EOU. Thus the entire exercise being revenue neutral one and since there is no allegation of diversion of capital goods, the demand on this count do not sustain. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellants violated provisions of Notifications No. 52/2003 Cus. Dt. 31/3/2003 and No. 22/2003 CE dt. 31/3/2003 by removing certain capital goods to the DTA/Jobwork Unit?
2. Whether the appellant removed locally procured capital goods to the job work unit without reversing the credit, leading to a demand for Central Excise Duty?

Analysis:

Issue 1: Violation of Notification Provisions
The appellants, engaged in manufacturing lighters and components as a 100% EOU, imported and locally procured capital goods under exemptions from Customs and Excise duties. They obtained permission to sub-contract processing work and remove capital goods to the job work unit without duty payment. The dispute arose when the department alleged that certain items like machineries were removed in violation of the Notifications, which only allowed removal of specific items like moulds, jigs, tools, and fixtures. The Show Cause Notice demanded Customs duty and Excise duty along with penalties. The appellant argued that they had permission from the Deputy Commissioner, and the removal was in compliance with the Notifications. The Tribunal found that the removal of capital goods, including imported machineries, was as per the permission granted, thus dismissing the Customs duty demand of ?3,23,717.

Issue 2: Removal of Locally Procured Capital Goods
The second allegation was regarding the removal of locally procured capital goods without permission and failure to reverse the credit. The appellant believed that the permission under Notification No. 52/2003 applied to Notification No. 22/2003 due to similar wording. The department contended that the appellant should have reversed the credit under Rule 3(5). The Tribunal noted that the removal was under a genuine belief and would result in a revenue-neutral situation as the Excise Duty credit could be availed upon return. Since there was no diversion of goods, the demand for Excise duty of ?2,08,946 was deemed baseless and set aside.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal with any consequential reliefs. The decision highlighted the importance of compliance with Notification provisions and the significance of permissions granted by authorities in determining duty liabilities for the removal of capital goods in EOU settings.