2004 (11) TMI 158 - AT - Central Excise

Demand duty - capital goods imported/procured indigenously - Penalty - EXIM policy - 100% EOU - Appellants granted letter of permission for manufacture and export of finished goods - HELD THAT - While discharging the Customs duty liability on the imported raw material the duty of Customs already discharged by them in respect of raw material removed in D.T.A. has to be adjusted. Similarly the duty paid by them while removing the finished goods made out of the imported raw material has to be adjusted against the Customs duty liability since the duty is now upheld in respect of entire raw material imported by them. We agree with the learned SDR that no depreciation has to be granted to the Appellants while levying the duty on the capital goods since the same have not been used for the purpose they were procured free of duty i.e. manufacture of goods in a 100% E.O.U. for the purpose of export. We, therefore, uphold the demand of Central Excise duty. We also uphold the demand of Customs duty subject to the adjustment of duty already paid by the Appellants on the removal of raw material as such and on the removal of finished goods manufactured out of the raw material imported by them. Penalty is also imposable on the Appellants as they have not fulfilled the export obligation. Thus, we reduce the penalty to Rs. 1 lakh. The appeal is disposed of in the above terms.

Summary

Issues involved: Appeal against Order-in-Original confirming demand of Customs duty, Central Excise duty, and penalty on goods imported/procured without payment of duty.

Summary:
The Appellants, a company granted permission for setting up an Export-Oriented Undertaking, appealed against the confirmation of duty demand and penalty for failing to export goods and achieve Net Foreign Exchange Earnings (N.F.E.P). The Appellants imported raw material and acquired capital goods without duty payment, citing challenges in the international market. They argued that duty cannot be demanded twice for cleared raw material and that value addition conditions apply only to inputs used in finished goods, not raw materials. They also contested the denial of duty benefits on finished goods, citing relevant case law.

Regarding duty liability on capital goods, the Appellants claimed depreciation benefits due to installation and deemed use dates. They asserted no mala fide intent for non-compliance with export obligations, attributing it to market conditions.

The opposing argument emphasized the Appellants' duty to pay Customs and Central Excise duty for imported/procured goods meant for export, highlighting the lack of exports or fulfillment of obligations. Reference was made to regulations denying depreciation on unused capital goods.

The Tribunal upheld duty liabilities on imported raw material and capital goods, with adjustments for duty already paid on cleared material and finished goods. It rejected the depreciation claim on capital goods due to non-use for intended export manufacturing. A penalty was imposed for non-fulfillment of export obligations, albeit reduced considering the circumstances. The appeal was resolved accordingly.