2022 (6) TMI 707 - AT - Central Excise

100% EOU - Demand of interest on duty paid on DTA clearances of warehoused goods - goods remained in warehouse for four years - period for which goods may remain in warehouse - what is relevant, intent to use the goods or actual use of goods? - HELD THAT - There is no dispute that appellant is 100% EOU and the goods imported by them under exemption provided to 100% EOU whereby after warehousing the goods, the same were cleared after four years on payment of Customs duty as per Customs Warehouse provisions - By reading the provisions under Section 61 (1)(aa), it is clear that any goods intended to use by 100% EOU and the same were cleared after warehousing period of three years and in terms of sub-section (2)(i) the assessee was required to clear the goods after expiry of three years. In the present case, the assessee being 100% EOU, imported goods exempted under Notification No. 50/2003-Cus. There is no dispute about the intention of the said goods to be used in the manufacture of final product in the 100% EOU unit of the appellant. Section 61(1) does not provide that goods should be used in the manufacture but it only requires that the goods imported with intention of use in 100% EOU. As regards the intention for use, it is not disputed - Therefore, appellants clearances falls under Section 61(1)(aa), according to which the interest provisions provided under sub-Section (2)(i) shall apply, which provides that interest to be charged only after expiry of three years till the date of payment of duty. The appellant have discharged the customs duty along with interest beyond three years till the date of payment. Therefore, as per statutory provisions, as discussed above under Section 61, the demand of interest over and above the interest paid by the appellant is not sustainable. A similar issue has been considered by this Tribunal in the case of M/S. SUN PHARMACEUTICALS INDUSTRIES LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE S.T., VADODARA 2015 (12) TMI 656 - CESTAT AHMEDABAD where it was held that there is no occasion to demand interest from the appellant as there is no delay in payment of the duty. Interest can be levied only if there is delay in payment of duty, which is not the case herein. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant, a 100% EOU, is liable to pay interest on imported goods cleared after a warehousing period.
2. Interpretation of Section 61(1)(aa) and Section 61(2)(i) of the Customs Act, 1962 regarding the payment of interest on warehoused goods.
3. Application of statutory provisions in determining the liability of interest on goods cleared by the appellant.

Analysis:
Issue 1: The appellant, a 100% EOU, imported goods under an exemption meant for such units. The goods were intended for use in the manufacture of final products by the EOU but were cleared after the warehousing period. The department contended that interest was payable after 90 days as the goods were not used by the EOU. The appellant argued that interest should be paid only after three years of bonding as per Section 61(2)(i) since the goods were intended for EOU use. The Commissioner (Appeals) upheld the demand for interest, leading to the present appeal.

Issue 2: Section 61 of the Customs Act, 1962 specifies the period for which goods may remain warehoused. The provision under Section 61(1)(aa) applies to goods intended for use by a 100% EOU, allowing interest to be charged only after three years of warehousing. The appellant, being a 100% EOU, imported goods with the intention of using them in manufacturing, falling under Section 61(1)(aa). The judgment highlighted that the intention for use in the EOU was not disputed, making the demand for interest beyond the three-year period unsustainable.

Issue 3: The Tribunal referred to a previous case involving similar circumstances, where it was held that interest on warehoused goods is payable only if there is a delay in payment of duty. The judgment emphasized that interest should not be charged within the interest-free period specified under the warehousing provisions. The Tribunal, in alignment with the previous case, set aside the demand for interest and penalty, stating that the appellant had not violated any provisions or delayed duty payment. The impugned order was overturned, and the appeal was allowed based on the statutory provisions and legal interpretations provided under Section 61 of the Customs Act, 1962.