2009 (9) TMI 351 - AT - Customs

100% EOU, De-bonding- The appellants a 100% EOU engaged in business process outsourcing operation and had procured duty free capital goods and indigenous goods without payment of applicable customs duty and central excise duty. On the foreign buyer of their services defaulting payment for the exports, the EOU opted to exit the scheme. The capital goods procured under the EOU scheme were de-bonded under Bill of Entry dated 27-11-2007 and assessed to applicable customs duty. The impugned goods were assessed to duty on their value and at the rate at the time of procurement without allowing applicable depreciation in value and applying the correct rate of duty. After clearance of the impugned goods, they claimed refund of the excess duty of Rs. 15,01,762/- paid by them on account of denial of depreciation and adoption of wrong rate of duty by the authorities. The original authority rejected their claim. The Commissioner (Appeals) sustained the order of the original authority. Held that- we find that the lower authorities wrongly assessed the impugned capital goods on their de-bonding at the value and rate of duty in force at the time of their procurement instead of assessing duty with reference to the depreciated value and the rate of duty in force at the time of filing of bill of entry for ex-bond clearance of the capital goods. The appellants are entitled to refund of the excess duty paid when the liability is computed in terms of the EOU Notifications in force at the time of filing of bill of entry for ex-bond clearance of impugned capital goods. In the light of the decision of CC&CE, Vadodara v. Solitaire Machine Tools P. Ltd. he matter is remanded for recomputation of the duty liability on the capital goods in the light of our above observations. The appellants shall be entitled to consequential relief, if any, on such recomputation of liability.

Summary

Issues:
Assessment of duty on capital goods under EOU scheme, denial of depreciation, applicability of notifications, refund of excess duty.

Analysis:
1. The case involved M/s. Business Process Technologies (I) Pvt. Ltd., a 100% EOU, which procured duty-free capital goods and indigenous goods but faced non-payment from a foreign buyer, leading to their exit from the scheme. The dispute arose when they were assessed duty on the capital goods at the time of de-bonding without allowing depreciation and applying the correct rate of duty. The authorities denied their claim for refund of excess duty based on the failure to achieve Net Foreign Earning (NFE) criteria, as per Notifications No. 60/2008-Cus. and No. 26/2008-C.E., both dated 5-5-2008. The Commissioner (Appeals) upheld this decision, citing that the EOU had not earned foreign exchange, thus justifying the duty assessment.

2. In the appeal, the appellant argued that they had exported services but had to close operations due to non-payment by the foreign client. They contended that the excess duty should be refunded based on CBEC circulars and the nexus between depreciation allowance and positive NFE criteria introduced in Notifications No. 60/2008-Cus. and No. 26/2008-C.E. They also referenced a Tribunal decision emphasizing that duty liability is not linked to export obligations. They further claimed that the lower authorities incorrectly demanded duty foregone on procurement instead of applying the correct rate of customs duty on the depreciated value.

3. The Tribunal reviewed the relevant notifications and circulars, noting the amendments introduced on 5-5-2008, linking duty payment on capital goods to achieved NFE and depreciation allowance. The Tribunal found that the lower authorities erred in assessing duty based on the procurement value instead of the depreciated value at the time of de-bonding. Referring to previous Tribunal decisions, including the Solitaire Machine Tools case and Beekay Hygine Products case, the Tribunal emphasized that duty liability upon de-bonding is not contingent on meeting export obligations. The matter was remanded for recomputation of duty liability based on the correct assessment criteria, with the appellants entitled to consequential relief upon such recomputation.

This detailed analysis of the judgment highlights the key issues, arguments presented, legal interpretations, and the final decision rendered by the Tribunal, providing a comprehensive understanding of the case.