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2018 (10) TMI 8 - AT - Central Excise


Issues Involved:
1. Liability to pay customs duty on capital goods due to non-fulfillment of export obligations.
2. Applicability of depreciation on capital goods.
3. Demand of duty on raw materials and finished goods.
4. Validity of confiscation and imposition of penalty.

Detailed Analysis:

1. Liability to Pay Customs Duty on Capital Goods Due to Non-Fulfillment of Export Obligations:
The appellants, a 100% Export Oriented Unit (EOU), imported capital goods under Notification No.13/81-Cus. and Notification No.123/81-CE. They contended that due to genuine financial constraints and changes in market conditions, they could not fulfill their export obligations. The Tribunal found that the appellants were not liable to pay customs duty on capital goods as per Notification No.13/81-Cus, which did not provide for such a demand in case of non-fulfillment of export obligations. This decision was supported by previous judgments, including Hindustan Agrigenetics Ltd. Vs. CCE and affirmed by the High Court of Andhra Pradesh.

2. Applicability of Depreciation on Capital Goods:
The appellants argued that they should be entitled to pay duty on the depreciated value of the capital goods. The Tribunal agreed, referencing Circular No.29/2003-Cus, which allows for 100% depreciation from the date of commencement of commercial production until the date of payment of duty. The Tribunal consistently held that depreciation is available to a 100% EOU if commercial production has started, citing several case laws such as CC Vs. Maharashtra Hybrid Seeds Co. Ltd. and Sandur Micro Circuit Ltd. Vs. CCE.

3. Demand of Duty on Raw Materials and Finished Goods:
The appellants contended that the demand for duty on raw materials and finished goods was premature and not sustainable. They argued that the raw materials and consumables were used in goods exported worth ?2.08 crores, and no duty is payable on these materials. The Tribunal agreed that no duty could be demanded on the finished goods lying in the factory, referencing the Supreme Court's decision in SIV Industries Vs. CCE and subsequent Tribunal decisions.

4. Validity of Confiscation and Imposition of Penalty:
The appellants argued that the confiscation of goods and imposition of penalties were not sustainable. They cited various case laws, including Jaswal Neco Ltd. Vs. CC and Suvarna Aqua Farm & Exports Ltd. Vs. CC, to support their contention. The Tribunal did not find sufficient grounds to uphold the confiscation and penalties imposed by the Commissioner of Customs.

Conclusion:
The Tribunal concluded that the appellants were not liable to pay customs duty on the capital goods due to non-fulfillment of export obligations, as the relevant notifications did not stipulate such a condition. Depreciation on capital goods was to be allowed up to 100%, reducing the duty liability to nil. The demand for duty on raw materials and finished goods was not sustainable, and the matter was remanded to the original authority for recalculating the duty payable on raw materials. The confiscation of goods and imposition of penalties were deemed unsustainable.

Order:
The appeals were allowed by way of remand for the limited purpose of recalculating the duty payable on raw materials imported or procured duty-free. The Tribunal followed the decision of Hindustan Agrigenetics Ltd., affirmed by the High Court of Andhra Pradesh, and allowed the appeals accordingly.

 

 

 

 

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