2012 (7) TMI 115 - AT - Customs

Denial of claim of concessional duty under Notification No.02/95-CE dated 4.1.95 for not achieving NFEP as has been undertaken by assessee - Held that - Considering EXIM Policy 1997-2002 about calculation of NFEP annually and cumulatively for a period of five years from the commencement of commercial production based upon the formula whereas the case in hand, it is undisputed that five years have not been completed after the start of commercial production by the appellant. Even in the event of failure to make or continue exports, the Development Commissioner s recommendation is required before duty demands can be confirmed by the Customs authorities. In this case, there is no definite conclusion arrived at by the concerned authority namely the Development Commissioner. On the other hand, the Development Commissioner has vide its letter dated 22-12-1998 extended the period of validity for a further period upto 31-3-1999 and the importers have further requested for further extension. Therefore, in the present case, the duty demand is premature and we see no option but to set aside the impugned order - in favour of assessee.

Summary

Issues:
Demand of duty liability on goods cleared to DTA for not achieving NFEP as undertaken by the appellant.

Analysis:
The appellant, situated in a special economic zone, failed to achieve the required net foreign exchange percentage (NFEP) as per the export-import policy. The lower authorities directed the appellant to produce a statement for value addition, which led to a demand for duty payment for clearances made into the domestic tariff area. The appellant challenged this duty liability, arguing that only the Development Commissioner could initiate proceedings for NFEP shortfall. The appellant contended that the calculation of NFEP should be done cumulatively for five years from the start of commercial production, which had not been completed in this case. The appellant also highlighted that no show cause notice was issued by the Development Commissioner. The first appellate authority upheld the duty demand, leading to the appellant's appeal.

The Tribunal analyzed the provisions of the export-import policy, specifically para 9.29, which outlines the calculation of NFEP over a five-year period from the commencement of commercial production. Referring to previous decisions, the Tribunal emphasized that duty demands for NFEP shortfall required a clear finding by the Development Commissioner. In the absence of such a finding, duty demands were premature and liable to be set aside. The Tribunal cited a Ministry of Finance Circular stating that duty demands on 100% EOUs should align with the Development Commissioner's determination of export obligations. As the Development Commissioner had not reached a definite conclusion in this case, the duty demand was premature. Therefore, the Tribunal set aside the duty demand, penalty, and confiscation order, allowing the appeal.

In conclusion, the Tribunal held that the duty demand on the appellant for not achieving NFEP was premature as the Development Commissioner had not made a clear determination. The Tribunal set aside the duty demand, penalty, and confiscation order, emphasizing the need for alignment between customs duty demands and the Development Commissioner's recommendations in cases of NFEP shortfall.