2005 (3) TMI 174 - AT - Customs

Demand - 100% Export Oriented Scheme - setting up an industrial unit for the salting and roasting of cashew nuts and cryogenic grinding of spices - imports capital goods - extension of validity of the licence - HELD THAT - In the present case, taking into account the difficulties pointed out by the appellant, the Assistant Development Commissioner, NOIDA extended the validity of the LOP till 31-3-2008. In such a situation, the Revenue authorities are also required to grant permission to the appellant for the harmonious functioning of the EOU Scheme. Taking of a restricted view by the Revenue authorities would make the scheme unworkable. Such a view also is not warranted as there is no material showing that the appellant had diverted any of the imported goods for any purpose other than use in the EOU premises. The appellant has also a strong case except for two machines, other machines remain installed and the duty demand in the case of installed machines is contrary legal provision The assessee had applied for extension of validity of the licence which was not considered in view of the fact that the Building/Plant machinery were not got insured by the assessee and the assessee was asked to do the needful it was only on 22-5-2000, when the assessee submitted a copy of insurance cover regarding insurance of the Building, plant machinery and accordingly validity of licence of the assessee has been extended upto 31-12-2000 by the Assistant Commissioner, Central Excise Division, Bhiwadi. In view of the above it is held that since validity of assessee's licence and LOP has already been extended uptill 31-12-2000, the show cause notice is pre-mature and at this stage no duty can be demanded from the assessee. Thus, the impugned order is set aside and the appeal is allowed with consequential relief, if any, to the appellant.

Summary

Issues:
1. Validity of Letter of Permission (LOP) for setting up an industrial unit under the Export Oriented Scheme.
2. Import of capital goods without payment of duty under specific notifications.
3. Failure to progress with project implementation and seeking extensions.
4. Confiscation of imported machinery, penalty imposition, and duty demand by the Commissioner.
5. Discrepancy in installation of machinery and duty demand.
6. Allegation of impermissible proceedings due to a previous Show Cause Notice.
7. Interpretation of the exemption notification regarding installation time frame.
8. Compliance with duty-free import provisions for Export Oriented Units.
9. Consideration of extension of LOP validity and harmonious functioning of the EOU Scheme.
10. Previous Commissioner's decision on similar issues and its impact on the present case.

Analysis:

1. The appellant, a company, obtained approval and a Letter of Permission (LOP) from the Ministry of Industries for setting up an industrial unit under the Export Oriented Scheme. The LOP included permission to import capital goods duty-free, subject to maintaining a specified value addition percentage.

2. Import of capital goods worth Rs. 2.5 crores without duty payment was done by the appellant under specific customs notifications. The Commissioner confiscated the machinery, imposed penalties, and demanded duty due to alleged non-compliance with installation timelines.

3. The appellant faced delays in project implementation and sought extensions, leading to the Commissioner's actions based on non-installation of machinery within the stipulated period.

4. The Commissioner's decision on confiscation and duty demand was challenged by the appellant, citing an extension of LOP validity until 2008 by the Export Promotion authorities, emphasizing the need for harmony between different departments involved in the EOU Scheme.

5. The appellant argued that most machinery was installed, and duty demands were unjustified for all imported machines, highlighting discrepancies in the Commissioner's actions and the earlier decision in a Show Cause Notice.

6. The Tribunal acknowledged the appellant's contentions, emphasizing the duty-free import provisions for Export Oriented Units and the necessity for Revenue authorities to align with Export Promotion authorities for the scheme's smooth functioning.

7. The Tribunal found merit in the appellant's arguments, especially regarding the extension of LOP validity and the lack of evidence suggesting diversion of imported goods. The Tribunal emphasized the importance of considering the difficulties faced by the appellant in project implementation.

8. The Tribunal referred to a previous Show Cause Notice where the Commissioner had dropped proceedings due to extended LOP validity, highlighting the inconsistency in the successor Commissioner's actions, leading to the setting aside of the impugned order and allowing the appeal in favor of the appellant.