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2023 (5) TMI 651 - AT - Central Excise100% EOU - non-fulfilment of export obligation - manufacture and export of footwear - Dutiability of capital goods and raw materials imported by availing the benefit of notification no. 53/97- Cus dated 3rd June 1997 and notification no. 1/95-CE dated 4th January 1995 and notification no. 22/2003-CE dated 31st March 2003 - HELD THAT - Admittedly, the appellant was unable to fulfil the prescribed export obligation for the first five years of operation and, therefore, in accordance with the policy prescriptions and corresponding exemption notifications issued under Central Excise Act, 1944 and Customs Act, 1962, became liable to duties in accordance with the scheme. Furthermore, the appellant also was liable to be proceeded under the Foreign Trade (Development Regulation) Act, 1992 by the designated authority competent to impose penalties for such failure. Between 2002-03, when the appellant ceased to export and the effective closure of the factory in 2006 as well as the proceedings initiated under Customs Act, 1962/Central Excise Act, 1944 in 2011, several changes had been made to the scheme. Concurrently, the perception on liabilities arising from non-fulfilment of export obligation had also undergone transformation in terms of judicial determination. In SHRIRAM GRAPE GROWERS CO-OPERATIVE SOCIETY LTD VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS 2018 (3) TMI 205 - CESTAT MUMBAI , it was held that It is, therefore, adequately certain that the duty liability on imported, or indigenously procured, capital goods is erased by sheer efflux of time. The appellant has been functioning exportoriented unit since 1992 and capital goods procured in that year should be eligible for depreciation over the period that the unit has been in existence. As on the date of the impugned order, the appellant has been in existence for over a decade and, by application of the straight-line depreciation approved by the Central Board of Excise Customs, the value of capital goods would be nil. Consequently, no duty liability would arise. In BAGLAN TALUKA GRAPE GROWERS CO-OPERATIVE SOCIETY LTD VERSUS COMMISSIONER OF CENTRAL EXCISE NASHIK 2019 (1) TMI 1188 - CESTAT MUMBAI it was held that With a lapse of time since the commencement of commercial production , the value of the missionary appreciates to nil and demand of duty is thus erased. At the same time, the proceedings for recovery of duty, under the applicable notification granting exemption from duty, for annual deficiency is independent, and exclusive, of the proceedings for debonding. In the present dispute, the proceedings appear to have originated with completion of the period of warehousing which should be applicable only if the warehouse goods whenever put to use and, on completion of the warehousing., The duty liability would be computed on value as assessed originally without benefit of depreciation. In the present circumstances, owing to utilization, depreciation is not reliable. The depreciation over the entire tenor result in nil value for the purpose of assessment. It would appear that these decisions of the Tribunal, and several others thereafter establishing the consistent view of judicial determination on duty liability of such units unable to continue exportation, was not available to the original authority which precluded a judicious disposal of the issue as proposed in the show cause notice - As the substantial part of the amount in dispute pertains to capital goods and the adjudicating authority would need to reappraise the demand in accordance thereof requiring the matter to be remanded, it would also be in consonance thereof for the dispute relating to raw materials also to be reconsidered at the same time. Matter remanded back to the original authority for a fresh decision in accordance with the law as enacted and as judicially determined - appeal allowed by way of remand.
Issues Involved:
1. Demand of customs duty, central excise duty, interest, confiscation, and penalties. 2. Dutiability of capital goods and raw materials under exemption notifications. 3. Fulfillment of export obligations under the '100% export-oriented unit (EOU)' scheme. 4. Application of depreciation on capital goods. 5. Correctness of recourse to the general bond for recovery of duties. Summary: 1. Demand of Customs Duty, Central Excise Duty, Interest, Confiscation, and Penalties: The appeal challenges the order demanding Rs. 1,15,22,678 under section 28 of the Customs Act, 1962, along with interest under section 28AB, and Rs. 87,034 as duties of central excise under section 11A of the Central Excise Act, 1944, with interest under section 11AA. The order also includes confiscation of goods valued at Rs. 2,23,04,089 and Rs. 61,353 under section 111(o) of the Customs Act, 1962, and rule 25 of the Central Excise Rules, 2002, respectively, with redemption fines and penalties under section 112 of the Customs Act, 1962, and section 11AC of the Central Excise Act, 1944. 2. Dutiability of Capital Goods and Raw Materials Under Exemption Notifications: The appellant, operating as a '100% export-oriented unit (EOU)', was issued a letter of permission (LoP) allowing duty-free procurement of capital goods, inputs, and consumables. The dispute pertains to the dutiability of capital goods valued at Rs. 1,99,70,416 and raw materials valued at Rs. 23,33,673 imported under notification no. 53/97-Cus and domestically procured raw materials valued at Rs. 6,13,353 under notification no. 1/95-CE and notification no. 22/2003-CE. 3. Fulfillment of Export Obligations Under the '100% Export-Oriented Unit (EOU)' Scheme: The customs authorities alleged that the appellant failed to fulfill the export obligation, exporting only US $136571 against an obligation of US $69,61,500, leading to ineligibility for duty exemptions. The duty liability was charged on the original value of imported capital goods and the entirety of raw materials on which exemption had been claimed. 4. Application of Depreciation on Capital Goods: The appellant contended that depreciation should be granted on capital goods in accordance with various Tribunal decisions, such as Baglan Taluka Grape Growers Coop Society Ltd v. Commissioner of Central Excise, Nashik and others. The appellant also relied on CBEC circular no. 14/2004 for depreciation from the commencement of commercial production. The Tribunal acknowledged that depreciation must be factored in for duty computation, and the value of capital goods would be nil due to the efflux of time. 5. Correctness of Recourse to the General Bond for Recovery of Duties: The Learned Authorised Representative relied on notification no. 6/98-CE (NT) and the decision in Commissioner of Central Excise, Thane-II v. Bee International to justify the recovery of duties under the general bond. The Tribunal noted that the scheme and judicial determinations on duty liabilities had evolved over time, and the original authority did not consider these changes adequately. Conclusion: The Tribunal set aside the impugned order and remanded the matter to the original authority for fresh decision-making in accordance with the law and judicial determinations. The adjudicating authority is required to reappraise the demand, considering the depreciation on capital goods and the duty liability on raw materials. The Tribunal emphasized the need for a judicious disposal of the issue as proposed in the show cause notice. Order Pronounced: The order was pronounced in the open court on 01/05/2023.
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