2024 (8) TMI 414 - AT - Customs

100% EOU - non-accountal of certain goods, both imported and indigenously procured - non-fulfilment of conditions of N/N. 22/2003-CE dt. 31.03.2003 in respect of procurement of indigenous goods without payment of duty and N/N. 52/2003-CUS dt. 31.03.2003 in respect of imported goods - HELD THAT - One has to appreciate that both these notifications are self-contained exemption notifications and in order to avail the exemption from payment of Customs duty or Central Excise duty, the 100% EOU has to fulfill several conditions including achievement of positive NFE. In so far as the issue of NFE is concerned, the Department s case is that Respondents have not achieved positive NFE during the notice period but only subsequent to that. However, we find from the Order dt.18.05.2010 of the Development Commissioner submitted by the Respondent that non-achievement of positive NFE has been regularized by the competent authority on payment of penalty, subject to certain conditions and admittedly, those conditions have been fulfilled by the Respondent in the said period. Therefore, this ground is no longer in breach in so far as the conditions required to be fulfilled by the Respondent is concerned. Several issues which have bearing on admissibility or otherwise of the Notifications in respect of which the Respondents have claimed exemption have apparently not been fulfilled and thus, these factual aspects should have been examined in detail by the Commissioner (Appeals), based on the evidence adduced by both sides, when the Department preferred an Appeal before the Commissioner (Appeals) against the OIO. In the case of Big Bags India Pvt Ltd (supra), there was evidence to suggest that Assessee was diverting the duty-free materials to local bonded warehouses, which has not been alleged in the present SCN, hence the facts are distinguishable. However, it is found that if there is a clear case of non-fulfillment of condition for exemption notifications and there is an unauthorized removal of goods, then merely meeting export obligation cannot lessen the gravity of offense. The Order of the Commissioner (Appeals) is required to be set aside and the matter is required to be remanded back to the Commissioner (Appeals) for examining all the conditions independently in respect of both the Notifications 22/2003-CE 52/2003-CUS - Appeal is allowed by way of remand to the Commissioner (Appeals).

Summary

Issues Involved:
1. Non-fulfillment of conditions of Notification No. 22/2003-CE and Notification No. 52/2003-CUS.
2. Non-achievement of positive Net Foreign Exchange (NFE).
3. Non-installation and non-accountal of capital goods and consumables.
4. Unauthorized removal and non-accountal of duty-free imported and indigenous goods.
5. Procedural lapses and compliance with warehousing provisions.

Issue-wise Detailed Analysis:

1. Non-fulfillment of conditions of Notification No. 22/2003-CE and Notification No. 52/2003-CUS:
The Department concluded that the Respondent failed to meet the conditions stipulated in these notifications, which allowed procurement of goods without payment of duty. The Respondent did not provide the required intimations for receipt and installation of imported and indigenously procured capital goods and consumables, leading to the Department's assertion that the Respondent did not fulfill the necessary conditions.

2. Non-achievement of positive Net Foreign Exchange (NFE):
The Department alleged that the Respondent did not achieve positive NFE during the period from 15.05.2005 to 30.04.2010. Although the Development Commissioner regularized this non-achievement by imposing a penalty and extending the EOU status for one year, the Department contended that the Respondent's compliance was only for the extended period and not for the original period in question.

3. Non-installation and non-accountal of capital goods and consumables:
The Department's visit to the Respondent's premises revealed the absence of capital goods and consumables, which were supposed to be present as per the records. The Respondent admitted to transferring these goods to another EOU, M/s Veerabhadra Minerals Pvt Ltd, but failed to provide adequate documentation to verify this transfer and the subsequent installation or usage of the goods.

4. Unauthorized removal and non-accountal of duty-free imported and indigenous goods:
The Department accused the Respondent of illicitly removing goods from the bonded premises without proper accounting or authorization. The Respondent's failure to maintain proper records and provide necessary intimations regarding the movement and utilization of these goods constituted a breach of the warehousing provisions and the conditions of the exemption notifications.

5. Procedural lapses and compliance with warehousing provisions:
The Adjudicating Authority initially dropped most of the demands, citing procedural mistakes and the subsequent fulfillment of export obligations. However, the Department argued that these lapses were significant breaches of the warehousing provisions and the conditions of the notifications, warranting recovery of duty and imposition of penalties. The Commissioner (Appeals) also noted procedural compliance issues, such as the lack of evidence for the availability of goods at M/s Veerabhadra Minerals Pvt Ltd and the timing of the intimation regarding the transfer of goods.

Conclusion:
The Tribunal found that the Respondent had not adequately fulfilled the conditions of the exemption notifications and had significant procedural lapses in accounting for and managing duty-free goods. The case was remanded back to the Commissioner (Appeals) to independently examine all conditions of the notifications in light of the Department's grounds and determine whether there were breaches warranting recovery of duty and imposition of penalties. The appeal was allowed by way of remand to the Commissioner (Appeals).