2021 (9) TMI 1106 - HC - Central Excise

100% EOU - central excise duty arrived on the depreciated value of the indigenously procured capital goods - section 11A of the Central Excise Act, 1944 - fulfillment of export obligation to a higher limit or not - payment of duty already compensated by fixing export obligation demand of duty again - HELD THAT - It is clear that the assessee did not contest the dutiability of the indigenously procured capital goods on merit or on the quantum. Therefore, their plea was that based on the letter of the Assistant Commissioner dated 18.05.2006 central excise duty liability stood discharged. Unfortunately the assessee who has been registered under the provisions of the Central Excise Act has failed to take note of rudimentary legal principles. If the assessee claims that he has discharged the duty liability, the same should be established in the manner known to law by producing the necessary challan or an order to the said effect passed by the competent Assessing Officer. The Tribunal rightly held that the letter dated 18.05.2006 by the Assistant Commissioner to the Development Commissioner, MEPZ is not an order. The Tribunal was right in stating that the intention of the assessee was not as that of an honest tax payer as they failed to come forward to disclose that they have not paid the duty amount. That apart, as observed earlier the letter dated 18.05.2006 cannot be regarded as an assessment order and it is merely an inter-departmental communication. Admittedly, there was no adjudication done prior to the letter dated 18.05.2006 for it to be considered as an adjudication order and at best, it can be taken to be an inadvertent mistake committed by the authority in addressing the Development Commissioner. Precisely, for this reason the Tribunal has granted relief to the assessee by deleting the penalty which also in our considered view is a proper exercise of discretion by the Tribunal - the Tribunal has rightly re-appreciated the facts and rejected the appeal filed by the appellant/assessee. There are no question of law much less the substantial question of law arising for consideration in this appeal - appeal dismissed.

Summary

Issues:
1. Appeal against order passed by Customs, Excise and Service Tax Appellate Tribunal.
2. Dispute regarding payment of central excise duties on capital goods.
3. Fulfillment of export obligations and relevance in central excise duty demand.

Analysis:
1. The appeal was filed against the order of the Customs, Excise and Service Tax Appellate Tribunal dismissing the appellant's appeal. The appellant, a Private Limited Company engaged in manufacturing cotton yarn, transitioned from a Domestic Tariff Area Unit to a 100% Export Oriented Unit for specified periods. The appellant imported capital goods duty-free under the EPCG Scheme to fulfill export obligations. Upon exiting the EOU status, a show cause notice was issued for non-payment of central excise duties on indigenously procured capital goods, leading to a demand of &8377;1,30,50,370 along with interest. The appellant contested the demand, citing compliance with export obligations and discharge of duty liability as per inter-departmental communication.

2. The substantial questions of law raised by the appellant included challenges to the demand of central excise duty on depreciated value of capital goods, relevance of export obligation fulfillment, and non-adjudication of export obligation issues by the Tribunal. The Tribunal noted the appellant's failure to contest the dutiability of capital goods or the duty amount quantified. The Tribunal emphasized the need for proper documentation to establish duty discharge, highlighting that an inter-departmental communication cannot replace an assessment order. The Tribunal also referenced legal provisions allowing demand for short levy or non-levy of duty.

3. The Tribunal found the appellant's argument regarding burden of export obligation and revenue neutrality irrelevant, as adjustments were subject to DGFT authorities' approval. The Tribunal concluded that the appellant's failure to pay duty despite acknowledging the liability demonstrated lack of honest taxpayer intent. The Tribunal exercised discretion by deleting the penalty but upheld the duty demand. Ultimately, the High Court dismissed the appeal, finding no substantial question of law for consideration. The Court upheld the Tribunal's decision, emphasizing the appellant's duty liability acknowledgment and the Tribunal's correct interpretation of legal provisions.

This detailed analysis covers the issues involved in the legal judgment comprehensively, highlighting the key arguments, findings, and conclusions made by the Tribunal and the High Court in this case.