2016 (11) TMI 676 - AT - Customs

Demand - EOU - export obligation - N/N. 53/1997-Cus. dated 3.6.1997 - whether the charge against the appellant that non-fulfilment of the conditions under Notification No. 53/1997 and the conditions of the bond executed at the time of setting up the EOU is justified? - Held that - The impugned order has not given the proportionate benefit of the exports made by the appellant though it is a fact that their net foreign exchange earnings are not positive. However, considering the contents of Circular No. 29/2003-Cus dated 3.4.2003 issued by CBEC its clause 7 (vii) and considering Condition 3 (d) of notification No, 52/2003-Cus dated 31.3.2003 (though this notification was issued rescinding the N/N. 53/1997-Cus.) and considering the CESTAT Bangalore decision in case of CC Vs. Natural Stone Exports Ltd (2006 (1) TMI 338 - CESTAT, BANGALORE), we are of the considered view that the appellant is entitled to the proportionate benefit of exports made against which they claim to have realized the foreign exchange. The impugned order did not give the assessee appellant the benefit of exports saying that they did not produce any documentary evidence showing realization of export proceeds. The duty liability against the appellant is only to the extent of the gap between the foreign exchange realised on the exports made and the foreign exchange outgo for the imports made by the appellants as per the clarifications in the Circular No. 29/2003-Cus. and the contents of the N/N. 52/2003-Cus. referred above. The liability of duty against the appellant would be limited to the gap between the foreign exchange outgo for the imports and the foreign exchange earned on account of exports made. To hold the assessee liable for the duty foregone in case of all the imports is illogical, which is clear from the contents of the N/N. 52/2003-Cus. and the case laws cited above ; and it naturally flows that the appellant is entitled to the proportionate benefit of the exports made and foreign exchange realised though for which they had not produced the documentary evidence before the adjudicating authority. Impugned order set aside - matter remanded back to the Commissioner, Central Excise, Jaipur-I who shall decide it afresh in the light of the findings made above within four months of receipt of this order after giving opportunity of personal hearing and that of production of necessary evidence/documents.

Summary

Issues:
Confirmation of customs duty, interest, and penalty due to failure to fulfill export obligation and conditions of benefit Notification No. 53/1997-Cus.

Detailed Analysis:

Issue 1: Confirmation of Customs Duty, Interest, and Penalty
The appellant, an EOU, failed to fulfill its export obligation of US $407.80 lakhs within five years as per the granted Letter of Permission (LOP). The appellant imported mixed metal scrap, processed it, and exported goods worth &8377; 298.98 lakhs. The appellant argued that the duty should be offset against the present demand due to clearances to DTA and waste clearance on payment of full duties. The appellant referred to Notification no. 52/2003, Circular No. 29/2003, and various case laws to support their case. The Revenue contended that the appellant breached conditions of Notification No. 53/1997 and bonds by not meeting export obligations.

Issue 2: Findings of the Impugned Order
The impugned order found that the appellant did not provide proof of realization of foreign exchange against exports, leading to non-fulfillment of export obligations. The order highlighted discrepancies in documentation regarding export proceeds and foreign exchange realization. It calculated the gap between total accountable exports and CIF value of imports, determining negative Net Foreign Exchange Earnings (NFEE), indicating a violation of policy conditions.

Issue 3: Decision and Remand
The Tribunal set aside the impugned order, remanding the case for reconsideration. It emphasized that duty liability should only be for the gap between foreign exchange outgo for imports and foreign exchange earned from exports. The Tribunal disagreed with the penalty and confiscation imposed, citing the appellant's entitlement to proportionate benefit based on exports made. The Commissioner was directed to review the case within four months, considering the Tribunal's findings and allowing the submission of necessary evidence.

In conclusion, the Tribunal's judgment focused on the appellant's failure to meet export obligations, the calculation of duty liability based on foreign exchange differentials, and the need for proper documentation to support claims. The case was remanded for a fresh decision, emphasizing the appellant's entitlement to proportionate benefit and the Commissioner's role in reassessing the matter in light of the Tribunal's findings.