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TMI Blog2012 (12) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... /consumables. As regards the indigenously procured capital goods and raw materials the duty demand has been made in terms of condition (4)(b) of Notification No. 22/03-C.E., dated 31-3-2003. Both the Notifications No. 52/03-C.E. and 22/03-C.E., both dated 31-3-2003 came into force on 31-3-2003 and they have only prospective application and the provisions of these Notifications cannot be made applicable to goods imported during the period 1994-97 and procured during the period from 1995-97 in respect of indigenous goods. On this ground alone the demand of Customs duty on the imported goods and the demand of Excise duty in respect of indigenously procured goods are not sustainable and are liable to be set aside. In the impugned order, an amount of Rs. 40,34,232/- confirmed in the order of the Deputy Commissioner mentioned above and recovered by way of tender has been reduced from the total demand of duty on raw materials. Therefore, issue of demanding any duty on raw materials/consumables unused in the manufacture of export goods does not arise at all. the case of raw materials which are consumed in the manufacture of goods which have been exported, the question of demanding e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 100% EOU manufacturing polyethylene coverings falling under Chapter 39 of the Schedule to the Central Excise Tariff Act. They were approved to function as a 100% EOU vide LOP bearing No. PER : 361(1993)/EOB-329/93 dated 27-8-1993. As per the LOP, they were required to export 100% of the production with a minimum value addition of 35% over a period of 10 years from the date of commencement of commercial production. The appellant commenced commercial production in 1996. As per the LOP the appellant was allowed to purchase capital goods indigenously for value of Rs. 914.75 lakhs over five years without payment of excise duty. The appellant was required to earn net foreign exchange of US $ 2,05,78,000/- over a period of 5 years. In case the appellant failed to fulfil the above terms conditions the appellant was required to pay any customs/excise duty and interest @ 18% from the date of import/indigenous procurement up to the date on which duty payment is made. The appellant was also granted private bonded warehousing licence under Section 58 of the Customs Act, 1962 and a manufacture-in-bond permission under Section 65 of the Customs Act, 1962. The appellant imported duty-free capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice also demanded Central Excise duty amounting to Rs. 7,28,205/- on the indigenously procured capital goods under the provisions of Section 11A of the Central Excise Act, 1944 read with Notification No. 1/95-C.E., dated 4-1-1995 and 22/03-C.E., dated 31-3-2003. The show cause notice further proposed to demand Central Excise duty amounting to Rs. 5,20,798/- on indigenously procured raw materials/consumables under the above provisions of law. In addition, it was proposed to confiscate the imported capital goods and raw materials under Section 111(o) of the Customs Act, 1962 and the indigenously procured capital goods and raw materials/consumables under Rule 25 of the Central Excise Rules, 2001/2002. The show cause notice further proposed to impose penalty on the appellant under Section 112(a) of the Customs Act, 1962 and under Rule 25 of the Central Excise Rules ibid. The show cause notice was adjudicated vide the impugned order and the following demands were confirmed : (i) Customs duty of Rs. 6,66,26,455/- on the imported capital goods/spares; (ii) Customs duty amounting to Rs. 3,51,14,312/- on imported raw materials; (iii) Excise duty amounting to Rs. 7,28,205/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge bears to the total foreign exchange required to be achieved and no abatement has been granted towards depreciation in respect of the used capital goods, in terms of para 4 of the Notification No. 52/03-Cus., dated 31-3-2003. The said notification has been amended vide Notification No. 60/08 dated 5-5-2008 wherein it has been provided that incase the unit fails to achieve positive net foreign exchange earning, depreciation was to be allowed on the value of the capital goods in the same proportion as the achieved proportion of net foreign exchange earning and if depreciation is allowed from the date of commencement of commercial production to the date of payment of duty i.e. 24-4-2006 the depreciated value would become nil and accordingly the duty payable would also become nil and, therefore, the entire demand of duty on capital goods is not sustainable in law. The confirmation of demand of Customs duty amounting to Rs. 3,51,14,212/- is also incorrect in law inasmuch as the raw materials have been used in the manufacture and export of finished products and whatever raw materials and consumables were lying in stock the demand of duty thereon had already been confirmed vide order No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demands have been confirmed, in the same proportion as the foreign exchange earning by way of exports actually realised bears to the total foreign exchange outgo as stipulated in Notification No. 52/03-Cus., dated 31-3-2003. 5.3 As regards the demand of duty on raw materials, which have been consumed in the manufacture of goods exported, the learned AR submits that in terms of the provisions of Notification No. 52/03-Cus. there is no provision for exempting raw materials contained in the goods exported and the duty demand has to be made in proportion to the foreign exchange earned to the total foreign exchange also and so is the case in respect of capital goods also. Therefore, the question of any abatement towards depreciation on capital goods or usage of inputs in final products manufactured and exported does not arise at all. The learned AR has relied on the following judgment of this Tribunal in support of his contentions : (i) Sterlite Industries (I) Ltd. v. Transmission Corporation of Andhra Pradesh Ltd. - 2005 (189) E.L.T. 266 (A.P.); (ii) Rajasthan Spinning Weaving Mills Ltd. v. Collector of Central Excise, Jaipur - 1995 (77) E.L.T. 474 (S.C.); (iii) Kri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this regard and, therefore, there is no infirmity in the impugned order in respect of this contention. 8.2 In the instant case we notice that the capital goods have been imported during the period from June, 1994 to December, 1994 and the raw materials have been imported/procured during the period from April 1995 to September 1997. This would indicate that the capital goods have been imported availing the benefit of Notification No. 13/81-Cus., dated 9-2-1981 and the raw material/consumables have been imported availing the benefit under Notification No. 13/81-Cus., dated 9-2-1981 and 53/97-Cus., dated 3-6-1997. As regards the indigenously procured goods, both the capital goods and the raw materials have been procured in terms of Notification No. 1/95-C.E., dated 4-1-1995. However, the demand of duty has been computed on the basis of provisions of Notification No. 52/03-Cus., dated 31-3-2003 in terms of para 3(ii) of the said Notification in respect of imported capital goods and raw materials/consumables. As regards the indigenously procured capital goods and raw materials the duty demand has been made in terms of condition (4)(b) of Notification No. 22/03-C.E., dated 31-3-2003. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used for the purpose for which they were procured. 8.5 Therefore, what survives for demand of duty is only the duty on the capital goods which have been imported/indigenously procured. Inasmuch as these capital goods have been imported vide Notification No. 13/81-Cus. and indigenously procured vide Notification No. 1/95-C.E. the demand has to be computed in terms of the provisions of these Notifications and the bonds executed in terms of the aforesaid Notifications and not under the provisions of Notification No. 52/03-Cus. and 22/03-Cus. as proposed in the notice. During the material period if the capital goods have been put to use, the appellants were entitled for depreciation as prescribed in Board s Circular No. 43/98-Customs, dated 26-6-1998 on the used capital goods. In the instant case, from the records it is seen that the commercial production commenced in April, 1996 and the production was completely stopped in July, 1999 and, therefore, for this period, the appellant is certainly entitled for the depreciation on capital goods. The liability to pay duty on capital goods would arise only when the goods are removed from the bonded premises or when the goods are deemed to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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