2019 (4) TMI 490 - AT - Customs

100% EOU - EPCG scheme - debonding of unit - the appellant sought permission from the Development Commissioner VSEZ to debond from 100% EOU scheme and switch to Export Promotion Capital Goods (EPCG) Scheme in terms of para 6.18 (e) of Foreign Trade Policy 2004-2009 - suppression of facts - Held that - There is nothing on record to show fraud and that the officers being aware of the legal provisions and that the appellant has allegedly not fulfilled the NFE requirements, have fraudulently permitted them to switch over to EPCG Scheme. Otherwise the concerned Officers who would have been put to notice for the fraud. There is nothing on record to show that appellants have suppressed any facts or misstated facts. If the permission from the Customs and the final exit from the Development Commissioner were obtained either through fraud or collusion, then all Officers who were involved in so colluding or sanctioning fraudulent permissions also should have been investigated and put to notice. If there was no evidence of fraud or collusion, then there is no case for the demand. The impugned order demanding customs and central excise duties invoking extended period of limitation and proposing confiscation of the goods and imposing of penalties is without any merit and the same needs to be set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Competency of authority in matters related to Foreign Trade Policy.
2. Reversal of decisions by the same authority.
3. Fulfillment of conditions under exemption notifications for 100% EOU.
4. Validity of demand for customs and central excise duties.
5. Confiscation of goods and imposition of penalties.
6. Application of extended period of limitation.

Analysis:

Competency of authority in matters related to Foreign Trade Policy:
The appeal involved a dispute regarding the authority competent to decide matters related to Foreign Trade Policy, specifically the conversion from 100% EOU to EPCG Scheme. The appellant argued that decisions once taken cannot be reversed by the same officers. Citing relevant case laws, the appellant contended that the Development Commissioner's approval was final, and Customs had no authority to revisit the matter.

Fulfillment of conditions under exemption notifications for 100% EOU:
The Customs and Central Excise authorities issued a show cause notice demanding duties, penalties, and proposing confiscation of goods due to the appellant's alleged failure to fulfill NFE criteria during conversion from EOU to EPCG Scheme. The authorities contended that the appellant had not met the conditions of exemption notifications, leading to the demand for duties and penalties.

Validity of demand for customs and central excise duties:
The impugned order confirmed the demand for customs and central excise duties, along with interest, based on the appellant's alleged non-fulfillment of NFE criteria. The authorities argued that the appellant had paid only a fraction of the applicable duty under the EPCG Scheme, necessitating the payment of full duties prevailing at the time of clearance or debonding.

Confiscation of goods and imposition of penalties:
The adjudicating authority confirmed the demand for duties, ordered confiscation of capital goods, and imposed penalties under the Customs Act, 1962. The penalties were imposed based on the appellant's alleged failure to achieve NFE and pay the full duties as required under the prevailing EPCG Scheme.

Application of extended period of limitation:
The impugned order invoked the extended period of limitation to demand duties and penalties from the appellant. However, the appellate tribunal found that the demand for customs and central excise duties, along with the proposed confiscation of goods and penalties, lacked merit. The order was set aside, and the appeal was allowed based on the lack of evidence of fraud or collusion in the appellant's actions.

In conclusion, the appellate tribunal ruled in favor of the appellant, setting aside the impugned order demanding customs and central excise duties, confiscation of goods, and imposition of penalties. The tribunal emphasized the lack of evidence of fraud or collusion and highlighted the authorities' awareness of the appellant's situation before permitting the conversion to the EPCG Scheme.