2006 (8) TMI 55 - AT - Central Excise

EXIM - Debonding of 100% EOQ - No transfer of machinary to any other legal person - New machinary will not be nature of second hand - DGFT and EPCG were allowed -No case or cause to invoke lager period limitation

Summary

Issues:
1. Interpretation of Paragraph 9.39 of Handbook of Procedure (1997-2002) regarding de-bonding of second-hand capital goods under EPCG scheme.
2. Applicability of extended recovery period under Section 28(1)(b) of the Customs Act 1962 for non-payment of customs duty on depreciated value.
3. Validity of customs duty demand, interest, and penalty imposed by the Commissioner.

Analysis:
1. The judgment revolves around the interpretation of Paragraph 9.39 of the Handbook of Procedure (1997-2002) concerning the de-bonding of second-hand capital goods under the EPCG scheme. The Commissioner found that de-bonding of second-hand capital goods imported by the appellants was not permissible under the EPCG scheme as per Paragraph 9.39. The de-bonding occurred after the insertion of this paragraph, making the customs duty leviable on the de-bonding recoverable from the unit. The non-payment of duty on the depreciated value was considered an intentional evasion, leading to the demand for duty payment, interest, and penal action under the Customs Act 1962.

2. Regarding the applicability of the extended recovery period under Section 28(1)(b) of the Customs Act 1962, the judgment held that the duty on indigenous goods was only paid upon de-bonding, indicating an intention to evade payment on the depreciated value. This non-payment of duty on the depreciated value was deemed deliberate, leading to the imposition of interest and penalties under Sections 114A and 112 of the Customs Act 1962. The judgment highlighted the consequences of non-payment and the intent to evade customs duty obligations.

3. The judgment also addressed the validity of the customs duty demand, interest, and penalty imposed by the Commissioner. It was argued that the final de-bonding and subsequent EPCG eligibility were not correlated, and the customs authority could not question the EPCG license granted for new/used machinery imported as capital goods. The appellants contended that since the goods were cleared on the EPCG license, there was no basis to invoke a larger recovery period, and the demands were time-barred. The judgment emphasized the importance of honoring the terms of the EPCG license and the limitations on invoking recovery actions beyond the prescribed period.

In conclusion, the judgment analyzed the issues related to the interpretation of Paragraph 9.39, the application of extended recovery periods under the Customs Act, and the validity of customs duty demands, interest, and penalties, providing a comprehensive overview of the legal considerations and implications in the case.