2023 (4) TMI 1070 - AT - Central Excise

100% Export Oriented Unit for the manufacture of Ultra fine magnet wire 45-52 AWG - Non-fulfilment of Export Obligation (condition of value addition) - short fall in the value addition by 45% during the period covering financial years 1994-95 to 1998-99 - recovery of Customs Duty condition no. 6(iv) of Notification No. 53/92-Cus dated 04.06.1997 and Excise Duty condition no. (c)(d) of notification no. 1/95-CE dated 04.01.1995 - whether the respondent assessee has violated the condition of above notifications - HELD THAT - N/N. 53/97-Cus dated 03.06.1997 provides exemption to the capital goods imported for the purpose of manufacture of articles for export by 100% exported oriented unit - It can be seen that the 100% EOU has to fulfill the export obligation and conditions as mentioned in the export-import policy for the relevant period. The appendix which have been provided to Rule 97 does not have specific entry Ultrafine Magnetic Wires as a electronic item however, the same is to be governed by norms which have been prescribed for the computer software-hardware - It can be seen from the Appendix-1 for the exim policy 2002-2007 that electronic hardware does not have any minimum value addition norms, it need to be only a positive value addition. Since it is an admitted fact that the respondent assessee had achieved value addition norms of about 25% and if we go by the minimum percentage of value addition prescribed in the exim policy, it is found that there has not been any substantial violation of value addition norms by the respondent s 100% EOU. Thus there are no violation of the conditions of the exemption notification. To decide whether there has been any violation of relevant exim policy by any Export Oriented Unit, the most appropriate authority to decide the violation of the policy are the officers of the Ministry of Commerce and Industry and as can be seen from the above orders, they have categorically found that there has been no violation on the part of the respondent assessee of any provisions of the import-export policy and it has very categorically been provided that no statutory requirement of achieving any minimum value addition and therefore as a corollary no violation of any provisions of the exim policy. For demanding the forgone customs duty under the notification no. 53/97-Cus dated 03.06.1997 there need to be violation of the conditions of the import-export policy of the relevant period. Since the relevant authorities implementing the import export policy provisions have categorically found that there has not been any violation of the conditions therefore, no conditions of the exemption notification no. 53/97-Cus dated 03.06.1997 and notification no. 1/95-CE dated 04.01.1995 has been violated by the respondent assessee - relevant period taken for judging export performance was very short i.e. 18 months only which they were to achieve the entire export obligation in 5 years. The fact is also noted that the Export Oriented Unit was continuously engaged in the export of their final product hence, no conditions of the exemption notification as well as exim policy has been violated by them and therefore, there are no short coming in the impugned order-in-original under challenge. Appeal dismissed.

Summary

Issues Involved:
1. Violation of Export Obligation and Value Addition Norms.
2. Applicability of Exemption Notifications.
3. Validity of Show Cause Notice and Adjudication Orders.

Summary:

1. Violation of Export Obligation and Value Addition Norms:
The department contended that the respondent assessee, M/s. Lumen Cable Pvt. Ltd., was required to achieve a value addition of 70% but only achieved an average of 25%, resulting in a shortfall of 45% during the financial years 1994-95 to 1998-99. Additionally, they were required to fulfill an export obligation of Rs. 1540 lacs but only achieved Rs. 647.44 lacs, resulting in an export shortfall of Rs. 892.56 lacs. The Development Commissioner, KASEZ, however, found that there was no statutory requirement of achieving any minimum value addition and that the period of 1 year and 8 months for calculating NFE was too short. The appellate order confirmed that the respondent had met their export obligations and value addition norms as per the EXIM policy.

2. Applicability of Exemption Notifications:
The respondent was allowed to import capital goods, raw materials, and packing materials valued at Rs. 4,69,17,618/- during the period 1994-95 to 1998-99, availing the benefit of Notification No. 53/91-Cus and Notification No. 1/95-CE, which provided exemptions from customs and excise duties. The department issued a show cause notice proposing to recover customs duty of Rs. 2,26,51,803/- and excise duty of Rs. 4,01,324/- for alleged violations of the conditions of these notifications. The tribunal found that the respondent had not violated the conditions of the exemption notifications as there was no statutory requirement for achieving minimum value addition, and the period taken for judging export performance was too short.

3. Validity of Show Cause Notice and Adjudication Orders:
The initial show cause notice was adjudicated by the Commissioner, who held that the respondent was liable to pay customs and excise duties. However, the tribunal remanded the matter for a fresh decision, taking note of the pending appellate proceedings before the DGFT. In the denovo proceedings, the Commissioner dropped the proceedings initiated by the show cause notice, holding that there was no merit in the allegations of non-achievement of export obligation and value addition. The department's appeal against this order was dismissed by the tribunal, which upheld the Commissioner's findings and confirmed that the respondent had not violated any conditions of the exemption notifications or the EXIM policy.

Conclusion:
The tribunal dismissed the department's appeal, holding that the respondent had not violated any conditions of the exemption notifications or the EXIM policy, and therefore, no customs or excise duties were recoverable. The show cause notice and subsequent adjudication orders were found to be without merit.