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2023 (10) TMI 735 - AT - Central Excise100% EOU - non-fulfilment of export obligation - import of capital goods availing benefit of Notification No.53/97 and domestically procuring capital goods availing Notification No.1/95-CE dated 04.01.1995 - relevant date for application of rate of duty for demanding duty foregone in case of imports and domestic procurement by the EOU - duty is payable on the depreciated value or not - levy of penalties u/s 112 and 114A of the Customs Act, 1962 - Applicability of interest in terms of Section 15 read with Section 68 of the Customs Act 1962. HELD THAT - As per Condition No.5(6)(i) of Notification No.53/97-Cus., duty foregone on the capital goods is payable if it is not shown to the satisfaction of Assistant/ Deputy Commissioner of Customs that the said capital goods have not been installed in the factory within one year of import or within such period that may be extended, not exceeding five years, on sufficient cause being shown - In the instant case, it is not the case of the Department that the capital goods have not been installed in the factory before the expiry of stipulated period. Therefore, in terms of Condition No.5, duty has to be demanded as if the said capital goods have been removed from the warehouse or the EOU. As the capital goods are not removed from the EOU, the relevant date for the same would be the day of de-bonding or say the date of deemed removal. Hon ble Apex Court in the case of KESORAM RAYON VERSUS COLLECTOR OF CUSTOMS, CALCUTTA 1996 (8) TMI 109 - SUPREME COURT held that the valuation in respect of imported capital goods would be the date on which warehousing period or extended period comes to an end. Tribunal in the case of INTERNATIONAL KNITTING LTD. VERSUS COMMISSIONER OF C. EX., MUMBAI 2012 (11) TMI 443 - CESTAT, MUMBAI following the Hon ble Apex Court s decision in the case of Kesoram Rayon held that the rate prevailing on the date of deemed removal is relevant for valuation of capital goods. Duty is payable on the depreciated value or not - HELD THAT - The appellants also argued that learned Commissioner has demanded the entire duty whereas it has been consistently held by the Tribunal that in case of part fulfillment of export obligation,proportionate duty is to be demanded - it is found that Tribunal in the case of M/S MOONLIGHT EXIM (P) LTD. VERSUS CCE, JAIPUR 2016 (11) TMI 676 - CESTAT NEW DELHI held that the appellants are entitled proportionate benefit of exports made against which foreign exchange was realized; CBEC Circular No.29/2003-Cus. dated 03.04.2003 also supports this view. Applicability of interest in terms of Section 15 read with Section 68 of the Customs Act 1962 - HELD THAT - In the case of INTERNATIONAL KNITTING LTD. VERSUS COMMISSIONER OF C. EX., MUMBAI 2012 (11) TMI 443 - CESTAT, MUMBAI , the Tribunal held that though the place may be warehouse at the time of deposit of goods but it may not be so at the time of removal of goods from that place and interest is payablein terms of Section 61 with Section 2(44) of the Customs Act, the goods are liable to interest on the delayed payment of duty. Confiscation of goods - imposition of redemption fine and penalty - HELD THAT - Tribunal has been consistently holding that in such circumstances, penalty cannot be imposed on EOUs for failure to achieve positive NFE. Tribunal in the case of Moonlight Exim (P) Ltd. has held that penalty is not imposable. A conjoint reading of the relevant provisions relating to warehousing under Customs Act, 1962 and the Notifications issued and the ratio of the judgments in the cases discussed, it is found that while duty at the rate prevalent on the date of deemed removalof capital goods is payable; the appellants are entitled to the benefit to the extent of exports made by them even though they have not achieved positive NFE. However, the provisions do not seem to give any immunity as regards the payment of interest is concerned. The matter should go back to the adjudicating authority to calculate the duty liability of the appellants - the appeal is allowed by way of remand to the Adjudicating Authority.
Issues Involved:
1. Relevant date for application of rate of duty for demanding duty foregone in case of imports and domestic procurement by the EOU. 2. Whether duty is payable on the depreciated value. 3. Whether penalties can be imposed under Sections 112 and 114A of the Customs Act, 1962. Summary: Issue 1: Relevant Date for Application of Rate of Duty The appellants argued that the impugned order wrongly demands Customs duty at the rate applicable on the day of import rather than the rate prevalent on the day of de-bonding, in terms of Clause 5(a) of Notification No.53/97 and Section 15 of the Customs Act. The Tribunal found that as per Condition No.5(a) of Notification No.53/97-Cus., duty foregone on the capital goods is payable on the depreciated value at the rate in force on the date of payment of such duty. The relevant date for determining the rate of duty is the date of de-bonding or deemed removal, as supported by the Supreme Court's decision in Kesoram Rayon and the Tribunal's decision in International Knitting Ltd. Issue 2: Duty on Depreciated Value The appellants contended that the learned Commissioner wrongly assumed the export obligation and did not consider the fulfilled export obligation. The Tribunal held that the appellants are entitled to the proportionate benefit of exports made, as consistently held by the Tribunal in cases like Moonlight Exim (P) Ltd. and supported by CBEC Circular No.29/2003-Cus. Therefore, duty liability should be calculated proportionately based on the foreign exchange earned. Issue 3: Imposition of Penalties The appellants argued that the penalties under Sections 112 and 114A of the Customs Act, 1962, were wrongly imposed as there was no suppression, fraud, or mis-statement, and no proposal for confiscation of goods was made in the show-cause notice. The Tribunal found that penalties cannot be imposed on EOUs for failure to achieve positive NFE, as consistently held in cases like Moonlight Exim (P) Ltd. Interest Liability Regarding the applicability of interest, the Tribunal held that interest is payable on the delayed payment of duty in terms of Section 61 read with Section 2(44) of the Customs Act, as held in International Knitting Ltd. Conclusion The Tribunal concluded that while duty at the rate prevalent on the date of deemed removal of capital goods is payable, the appellants are entitled to the benefit to the extent of exports made. However, the appellants are liable to pay interest on the duty payable on the capital goods as on the date of removal. No penalty can be imposed on the appellants either under Section 112 or 114A of the Customs Act, 1962. The matter was remanded to the adjudicating authority to calculate the duty liability of the appellants in accordance with the Tribunal's findings.
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