2023 (10) TMI 832 - SCH - Customs

Denial of exemption from payment of customs duty - non-fulfilment of export obligation - sale outside the DTA - HELD THAT - The Court is of the opinion that for the purpose of calculating duty and interest, the respondent-assessee should be given the benefit to the extent of valuation based upon the exports already made (i.e. Rs. 3,89,87,054/)-. The export commitments were fulfilled to this extent is not in dispute. The impugned order is modified. Instead of the depreciated value, a proportion may be duly worked out taking into account the export commitment actually fulfilled by the respondent - assessee while working out the duty liability component payable as well as its liability, towards interest. Appeal allowed in part.

Summary

Issues involved:
The issues involved in the judgment are the availing of 100% exemption from payment of customs duty for the import of capital goods, failure to fulfill export obligations, violation of conditions regarding sales outside the Domestic Tariff Area (DTA), imposition of duty and interest, and calculation of duty and interest based on fulfilled export commitments.

Availment of 100% exemption and failure to fulfill export obligations:
The respondent - assessee had availed the benefit of 100% exemption from payment of customs duty for the import of capital goods. However, the respondent could only fulfill the export obligation to the extent of Rs. 3,89,87,054/- instead of the fixed amount of Rs. 20,73,75,000/-. This non-fulfillment led to the issuance of a show cause notice and the imposition of duty amounting to around Rs. 1.54 crores along with an equivalent amount as interest.

Violation of condition regarding sales outside DTA:
In addition to the failure to meet the export obligations, the respondent also violated the condition that the final products could not be sold outside the Domestic Tariff Area (DTA). The actual sales made outside the DTA amounted to Rs. 9,41,89,191/-.

Impugned order and direction by the assessed tax authority:
The assessee appealed to the assessed tax authority, which partly allowed the plea and directed the adjudicating authority to consider the depreciated value of the capital goods subject to customs duty while determining the liability.

Court's decision and modification of the impugned order:
After hearing the counsel for both parties and reviewing the material on record, the Court decided that the respondent - assessee should be given the benefit of valuation based on the exports already made (Rs. 3,89,87,054/-) for calculating duty and interest. The Court modified the impugned order to work out the duty liability component and interest based on the export commitments fulfilled by the respondent - assessee.

Conclusion:
In conclusion, the Court partially allowed the appeal and modified the impugned order to calculate the duty and interest based on the fulfilled export commitments of the respondent - assessee. Any pending applications were also disposed of as part of the judgment.