2014 (7) TMI 876 - HC - Customs

Principle of consistency - Release of goods - 100% EOU - segregation of Ferrous and non-ferrous scrap, mix scrap, electrical motors, transformers, etc. - Foreign Trade Policy 2004-2009 in the meantime was amended and from the definition of manufacture , segregation activities came to be excluded. - However, it was specifically provided inter alia that those units set up prior to 1st April 2002 for a period of five years shall not be disturbed. - Held that - The Tribunal once having held in favour of the assessee on both the issues and having said unequivocally that the unit set up prior to 1st April 2002 is to be treated differently and the activity of segregation of ferrous and non ferrous material shall need to be treated as manufacturing concern and the benefit of Notification No. 21/2002 available for clearance from EOU to DTA, surely resulted into the balance heavily tilting in favour of the petitioner, and therefore, without even waiting for any request on the part of the petitioner to release and return the goods attached by the respondents the same should have been released to give an effect to such order of the second appellate authority. Failure of the department to release of goods despite the decision in favor of assessee - Held that - For want of such release of attachment and return of the goods and machineries, the petitioner continuously has lamented alleged of having lost substantial business. It is for sure an arrogant way of putting it by way of an affidavit in reply by the respondent that due to expiry of LoP and the green card, return of such goods and machineries would have also served no purpose. Denying any citizen of his due and particularly the articles of his own ownership after second appellate authority held in his favour, surely was an act which needs to be adjudged with a strong disapproval. The respondents therefore are expected to act promptly as ensured by the learned counsel for the Revenue. Extension of LOP - Held that - Thus, to direct the respondent to grant further LoP without petitioner debonding its unit and also without necessary inspection and scrutiny of the premises would prove to be against the requirements of law on the subject, and therefore, as far as the second ground raised in this petition, the petitioner s claim is not found sustainable. However, petitioner can choose to apply once again on fulfilling the required parameters and if so done, the same shall be considered in accordance with law by the respondents. - Decided partly in favor of assessee.

Issues Involved:

1. Legality of the attachment of goods and machinery by the respondents.
2. Entitlement to the concessional rate of duty for clearance of goods from Export Oriented Unit (EOU) to Domestic Tariff Area (DTA).
3. Validity and extension of the Letter of Permission (LoP) for the petitioner's manufacturing activities.
4. Compliance with the Foreign Trade Policy amendments and the impact on the petitioner's operations.
5. Implementation of the Tribunal's order and the release of detained goods.
6. Claim for damages and extension of LoP due to the alleged deprivation of business operations.

Detailed Analysis:

1. Legality of the Attachment of Goods and Machinery:

The respondents attached the petitioner's goods and machinery on 18th October 2006 to recover dues amounting to Rs. 24.88 lakhs. The attachment occurred after the first appellate authority confirmed the demand of duty on 30th November 2005. The Tribunal's initial order for a pre-deposit of 50% of the duty was later revised to Rs. 2 lakhs. The court held that in the absence of a stay from the higher authority, the respondents' action of attachment was not arbitrary or mala fide. However, the court disapproved of the respondents' failure to release the goods post the Tribunal's favorable decision for the petitioner on 15th December 2011.

2. Entitlement to Concessional Rate of Duty:

The Tribunal found in favor of the petitioner, holding that the activity of segregation of ferrous and non-ferrous scrap was considered as 'manufacture' under the original LoP dated 18th September 2001. The Tribunal also held that the petitioner rightly availed the benefit of Notification No. 21 of 2002 for clearance of goods from EOU to DTA. The court emphasized that the respondents should have abided by the Tribunal's decision and released the attached goods promptly.

3. Validity and Extension of the LoP:

The petitioner's LoP, valid until 31st March 2008, was not extended due to the public notice dated 31st August 2005, which excluded segregation activities from the definition of 'manufacture' effective from 1st April 2002. The petitioner argued for an extension based on the Tribunal's decision and the loss of business due to the attachment. The court noted that the Board of Approval allowed the petitioner to apply for a fresh LoP after debonding and inspection, but did not grant an extension based on the expired LoP.

4. Compliance with Foreign Trade Policy Amendments:

The Foreign Trade Policy amendment excluded segregation activities from the definition of 'manufacture' from 1st April 2002. The Tribunal, however, held that units set up before this date should be treated differently. Despite this, the court found no justifiable reason to grant an extension of the LoP based on the expired policy and the need for compliance with current regulations.

5. Implementation of the Tribunal's Order:

The court criticized the respondents for not releasing the detained goods despite the Tribunal's favorable decision for the petitioner. The court referenced the Supreme Court's decision in Kamalakshi Finance Corpn. Ltd., emphasizing the need for judicial discipline and adherence to higher appellate authority orders. The respondents' failure to release the goods was deemed an act requiring strong disapproval.

6. Claim for Damages and Extension of LoP:

The petitioner claimed damages for the period of business deprivation due to the attachment. The court held that the period of 896 days could not be extended as the LoP had expired on 31st March 2008, and the policy had changed. The court stated that the petitioner could apply afresh for a new LoP after fulfilling the necessary requirements.

Conclusion:

The court partly allowed the petition, directing the respondents to release the attached goods and machinery and pay costs of Rs. 25,000 to the petitioner. The court did not grant an extension of the LoP but allowed the petitioner to apply afresh in compliance with current regulations. The court emphasized the importance of adhering to judicial decisions and the need for timely implementation of appellate orders.

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