2025 (1) TMI 854 - AT - Customs

Admissibility of Notification No 12/2012 by an EOU/ EHTP in respect of the imported goods at the time of debonding along with the notification No 52/2003 - denial of benefit of Notification No 12/2012 in terms of the condition prescribed by the Notification No 52/2003 - HELD THAT - In terms of the D O F No 334/7/2016-TRU dated 01.02.2017, JS TRU issued by the JS (TRU) benefit of the exemption as per notification No 12/2012 would be admissible to the EOU/ EHTP subject to fulfillment of the conditions of the notification. The benefit of the said exemption would be available to them at the time of importation of the goods or even at the time of removal of the goods either on debonding or otherwise. The condition 4 of Notification No 52/2003 referred in the impugned order, cannot be reason for denial of the said benefit. Undisputedly the condition prescribed by the said notification had been complied and a bond for Rs 1000 crores was accepted by the jurisdictional authorities on 28.02.2015 as required in terms of IGCR, 1996. From the clarification issued by the TRU referred above, it is evident in case the EOU/ EHTP can claimed the benefit of the said notification at the time of import of the said goods even without seeking fresh registration under Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2016 or the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable and Other Goods) Rules, 2016. The said clarification also provides that the benefit of the said Notification will be admissible even without separately comply with the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2016 for availing the CVD exemption, if the procedure under the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rule, 2016 is followed by it for availing exemption / concession from BCD on imports of inputs/raw materials. There are no hesitation in holding that at the time of debonding, the value of raw material cleared has to be value at the time of importation and the rate of duty is the effective rate of duty leviable on the imported goods at the time of debonding. Impugned order sought to deny the benefit of said exemption notification to the appellant for the reason that appellant had not claimed the same at the time of importation of these raw materials and hence could not have claimed the same subsequently at the time of clearance from EOU on de-bonding. Interestingly impugned order relies on the decision in case of Priya Blue and other similar cases to deny the claim made by the appellant. Conclusion - i) The appellant is eligible for the exemption under Notification No. 12/2012-Cus at debonding. ii) The customs duty should be calculated at the effective rate at the time of debonding. iii) The appellant's procedural compliance is sufficient for claiming the exemption. iv) The exemption can be claimed at debonding, even if not claimed at importation. v) The demand for duty and interest is not justified. There are no merits in the impugned order - appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• Whether the appellant, an EHTP unit, is eligible for the benefit of Notification No. 12/2012-Cus at the time of debonding of imported raw materials.
• Whether the customs duty should be calculated at the effective rate of duty at the time of debonding, considering the exemption under Notification No. 12/2012-Cus.
• The applicability of procedural compliance under the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996, for claiming exemptions.
• Whether the appellant's failure to claim the exemption at the time of importation bars them from claiming it at the time of debonding.
• The legitimacy of the demand for customs duty and interest under Sections 28 and 72 of the Customs Act, 1962.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Eligibility for Notification No. 12/2012-Cus at Debonding

• Relevant Legal Framework and Precedents: Notification No. 12/2012-Cus provides conditional exemption for certain goods, requiring compliance with the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. The appellant argued that the exemption should apply at the time of debonding.
• Court's Interpretation and Reasoning: The court interpreted that the exemption could be claimed at the time of debonding if the conditions were met, referencing the clarification by the JS (TRU) and precedents like Sahajanand Technologies Pvt Ltd.
• Key Evidence and Findings: The appellant had complied with the conditions of Notification No. 52/2003-Cus, and a bond was accepted by authorities, indicating procedural compliance.
• Application of Law to Facts: The court found that the appellant could claim the exemption at debonding, as procedural compliance was substantially met, and the goods were treated as imports for the purpose of calculating duty.
• Treatment of Competing Arguments: The court rejected the revenue's argument that the exemption was not applicable due to procedural lapses, emphasizing the substantial compliance and the purpose of the exemption.
• Conclusions: The appellant was entitled to claim the exemption under Notification No. 12/2012-Cus at the time of debonding.

Issue 2: Calculation of Customs Duty at Debonding

• Relevant Legal Framework and Precedents: The duty calculation should consider the effective rate of duty at the time of debonding, as per Section 3 of the Central Excise Act and related notifications.
• Court's Interpretation and Reasoning: The court held that the duty should be calculated at the effective rate, considering applicable exemptions, aligning with decisions in cases like Maneta Automotive Components P Ltd.
• Key Evidence and Findings: The court noted that the appellant had discharged duty based on the effective rate, supported by the procedural compliance and documentation.
• Application of Law to Facts: The court applied the principle that the duty should reflect the effective rate, considering exemptions available at the time of debonding.
• Treatment of Competing Arguments: The court dismissed the revenue's claim that the tariff rate should apply, emphasizing the effective rate principle and the appellant's compliance.
• Conclusions: The duty should be calculated at the effective rate at the time of debonding, considering applicable exemptions.

Issue 3: Procedural Compliance and Exemption Claim

• Relevant Legal Framework and Precedents: Compliance with the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996, is required for claiming exemptions.
• Court's Interpretation and Reasoning: The court emphasized substantial compliance over procedural lapses, referencing precedents like Hotline CPT Ltd.
• Key Evidence and Findings: The appellant had followed procedures under Notification No. 52/2003-Cus, and the bond was accepted by authorities, indicating compliance.
• Application of Law to Facts: The court found that the appellant's procedural compliance was sufficient to claim the exemption.
• Treatment of Competing Arguments: The court rejected the revenue's strict procedural interpretation, focusing on the substantive compliance achieved by the appellant.
• Conclusions: The appellant's procedural compliance was adequate for claiming the exemption.

Issue 4: Timing of Exemption Claim

• Relevant Legal Framework and Precedents: The appellant argued that the exemption could be claimed at debonding, even if not claimed at importation, supported by cases like Salora Components Pvt Ltd.
• Court's Interpretation and Reasoning: The court agreed that the exemption could be claimed at debonding, considering procedural compliance and the purpose of the exemption.
• Key Evidence and Findings: The court noted the appellant's compliance and the absence of objections from authorities at importation.
• Application of Law to Facts: The court applied the principle that exemptions could be claimed at debonding, aligning with the appellant's compliance and procedural history.
• Treatment of Competing Arguments: The court dismissed the revenue's argument that the exemption must be claimed at importation, emphasizing the appellant's compliance and the policy's intent.
• Conclusions: The exemption could be claimed at debonding, even if not claimed at importation.

Issue 5: Legitimacy of Duty and Interest Demand

• Relevant Legal Framework and Precedents: Sections 28 and 72 of the Customs Act, 1962, govern the recovery of customs duty and interest.
• Court's Interpretation and Reasoning: The court found that the demand for duty and interest was not justified, given the appellant's compliance and the procedural history.
• Key Evidence and Findings: The court noted the appellant's payment of duty and the acceptance of procedural compliance by authorities.
• Application of Law to Facts: The court applied the principle that duty and interest demands must be based on non-compliance, which was not the case here.
• Treatment of Competing Arguments: The court rejected the revenue's demand, emphasizing the appellant's compliance and the absence of procedural violations.
• Conclusions: The demand for duty and interest was not justified.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning:
• "The appellant was entitled to claim the exemption under Notification No. 12/2012-Cus at the time of debonding."
• "The duty should be calculated at the effective rate at the time of debonding, considering applicable exemptions."
• "The appellant's procedural compliance was adequate for claiming the exemption."
• Core Principles Established:
• Exemptions can be claimed at debonding if procedural compliance is substantially met.
• The effective rate of duty applies at debonding, considering applicable exemptions.
• Procedural compliance should focus on substantive compliance rather than technicalities.
• Final Determinations on Each Issue:
• The appellant is eligible for the exemption under Notification No. 12/2012-Cus at debonding.
• The customs duty should be calculated at the effective rate at the time of debonding.
• The appellant's procedural compliance is sufficient for claiming the exemption.
• The exemption can be claimed at debonding, even if not claimed at importation.
• The demand for duty and interest is not justified.