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TMI Blog2011 (2) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... s worked out as Rs. 30, 28,228/-. In the case of Kandla Polyplast Pvt. Ltd. (KPPL for short), on 5-12-04 stock verification was carried out and duty worked out to Rs. 22,07,551/-. After issue of show cause notice, impugned orders have been passed confirming the demand for customs duty payable on imported raw materials imported by the appellants for use in SEZ unit on the ground that the same were not used for the purpose for which they were imported. Nominal penalties also have been imposed on all the appellants. 2. The learned advocate on behalf of the appellants submitted that there is no dispute that there was a fire and the fire was accidental; remission of duty payable on the goods should have been allowed under Section 23 of Customs Act, 1962; in terms of Rule 5(1) and Rule 8(2) of SEZ Rules 2003, in case of failure to account for the utilization of duty free imported goods, the same shall be chargeable to duty as if the goods have been removed for home consumption. When the goods were already destroyed in the fire, the same could not be removed for home consumption; vide Section 76B of Customs Act, 1962 relating to special economic zones all the provisions of other cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the rules made in this behalf, - (a) any goods admitted to a special economic zone from the domestic tariff area shall be chargeable to export duties at such rates as are leviable on such goods when exported; (b) any goods removed from a special economic zone for home consumption shall be chargeable to duties of customs including anti-dumping, countervailing and safeguard duties under the Customs Tariff Act, 1975 (51 of 1975), where applicable, as leviable on such goods when imported; and (c) the rate of duty and tariff valuation, if any, applicable to goods admitted to, or removed from, a special economic zone shall be the rate and tariff valuation in force as on the date of such admission or removal, as the case may be, and where such date is not ascertainable, on the date of payment of the duty." 6. As contended by the learned advocate, it is not only the Foreign Trade Policy which treats SEZ as deemed foreign territory but also the Customs Act, 1962 as can be seen from the provision of Section 76-A reproduced above. 7. Section 76-B reads as under : "76-B. Application of provisions. - The provisions of this Chapter and other Chapters shall apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e SEZ unit, it is treated as clearance for home consumption. Under these circumstances, the view taken by the learned Commissioner that remission under Section 23 of Customs Act, 1962 cannot be granted has to be upheld. 9. The submission made by the learned advocate was that under the provisions of Rule 12 of SEZ Rules 2003 read with Regulation 28 of SEZ Regulations, no duty can be recovered on the goods destroyed within the zone. Section 76F of Customs Act, 1962 was also cited to plead that duty can be recovered only if the goods are removed from the SEZ for home consumption. 10. The learned Commissioner has considered the provisions of Rule 12 of SEZ Rules 2003 read with Regulation and has come to the conclusion that Rule 12 permits destruction of goods procured from DTA or imported by SEZ unit after obtaining the permission of the Assistant Commissioner of customs. No parallel can be drawn between the destruction of imported goods by fire and goods destroyed with permission according to the learned Commissioner. Further he has also observed that Regulation 28(1) envisages clearance of scrap, waste or remnants arising out of destruction of goods under Rule 12 and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n where an imported ocean-going vessel becomes 'not sea-worthy' after a few years and the ship-owner decides to scrap/break it. It provides that in such a situation it would be deemed as if the ship is imported for breaking-up when it is broken up and the customs duty is charged on that basis. The notification thus creates a fiction viz. the vessel must be deemed to have been imported for being broken-up when it is broken up, though as a matter of fact the import was at an earlier point of time. Ordinarily speaking, no doubt, customs duty is levied with reference to the date of actual import but the exemption notification says that if the ship imported is an ocean-going vessel it shall be exempt from customs duty on the date of its import but in case it is subsequently broken-up the duty shall be paid as if it were then imported for being broken-up - which necessarily means that duty will be levied on the value and at the rate prevailing on the date of breaking-up. Indeed, in our opinion, the notification was quite clear even before it was amended in 1962; at any rate it has become clearer beyond any doubt after the said amendment. By virtue of the fiction created by the proviso in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be a breach of Rule 8 of SEZ Rules 2003. We take note of the fact that the Rule does not provide for a situation other than unauthorized use or failure to account for. In this case there is no denial of the fact that the Customs Authorities were informed of the fire accident on 5-12-04. In fact on the same day, stock verification was done in one of the three appellant units. In respect of the remaining the stock verification was done on 31-12-04 and 6-1-05. In none of the three orders there is an observation that the fire was manmade or there was a mala fide intention or it was not accidental. Rule 8 provides for charging of duty when the goods imported/procured are utilized for the purposes other than authorised operations or failure to account for the goods. In this case it cannot be said that goods were utilized for purposes other than authorised operations since the expression used clearly means a deliberate utilization or misuse of the goods procured duty free for unauthorized operations. When there is an accidental fire resulting in destruction of goods, it cannot be said that it amounts to use of goods for unauthorized operations. Similarly the second term namely failure ..... X X X X Extracts X X X X X X X X Extracts X X X X
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