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TMI Blog2013 (8) TMI 651X X X X Extracts X X X X X X X X Extracts X X X X ..... onsumables acquired free of excise duty under Notification No. 123/81-C.E. were concerned, the assesse would not be eligible for duty exemption and the duty forgone in respect of these goods has been correctly demanded – following EAGLE FLASK INDUSTRIES LIMITED Versus COMMISSIONER OF C. EX., PUNE [2004 (9) TMI 102 - SUPREME COURT OF INDIA] and State of Jharkhand v. Ambay Cements [2004 (11) TMI 319 - SUPREME COURT OF INDIA ] - if an exemption was available on complying with certain conditions, the conditions have to be strictly complied with – Decided against assesse. Rate of Duty - Whether the duty chargeable in respect of the unused raw materials and consumables and used capital goods would be at the rate in force on the date of payment of duty or at the rate in force on the date of debonding order or the rate in force at the time of import - Held that:- The warehousing period expired on 30th May, 2000 the duty liability on the goods at the time of debonding would have to be discharged on the basis of the rate of duty in force as on 30th May, 2000 - The rate of duty applicable on the goods would be the rate in force on the date of expiry of the warehousing period, irrespective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the imported goods would be liable for confiscation and hence the assesse who imported the goods, would be liable for penalty u/s 112(a) of Customs Act – Decided against assesse. - C/1/2009 - 343/2011 - Dated:- 3-5-2011 - R.M.S. Khandeparkar and Shri Rakesh Kumar, JJ. Shri B.N. Gururaj, Advocate, for the Appellant. Shri D.P. Nagendra Kumar, Jt. CDR, for the Respondent. ORDER The facts giving rise to this appeal are, in brief, as under. 1.1 The appellant, a Public Sector Undertaking of Government of Karnataka, had been permitted to set up a 100% EOU by the Department of Industrial Development vide permission dated 17th September, 1984. The validity of the permission was first extended up to 30th December, 1999 with further extension up to 30th May, 2000. The unit was to discharge its export obligation by exporting a specified quantity of the processed granite and also achieve certain specified value addition - 78%. During the period 1984-1998, the appellant imported capital goods, raw materials and consumables valued at Rs. 3,74,25,949/- free of Customs duty under Notification No. 13/81-Cus., dated 9th February, 1981, as amended, for use in the manufacture of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Customs Act, 1962; (d) imposition of penalty on the appellant under Section 112(a) of Customs Act, 1962; (e) recovery of Central Excise duty amounting to Rs. 3,37,465/- on the indigenously procured capital goods and indigenously procured consumables valued at Rs. 24,83,541/-, which though used in the manufactured of finished product, but the appellant could not achieve the stipulated value addition and fulfilled the export obligation in full; (f) confiscation of the above-mentioned capital goods and consumables under Rule 210 of Central Excise Rules, 1944; and (g) imposition of penalty on the appellant under Rule 210 of Central Excise Rules, 1944. 1.3 The show cause notice was adjudicated by Commissioner of Customs, Mysore vide order-in-original dated 30th September, 2008 by which - (a) Customs duty demand of Rs. 12,50,248/- was confirmed along with interest on the imported capital goods in terms of condition No. 5(a) of Notification No. 13/81- Cus., dated 9th February, 1981; (b) Customs duty demand of Rs. 3,11,43,617/- was confirmed along with interest on imported raw materials and consumables in terms of condition No. 6 of Notification No. 13/81-Cus., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case where the export obligation is fully discharged and the provision equally applies to other circumstances of debonding where the export obligation was not fully discharged. In this regard, the appellant relies upon Para 9.26 of the Handbook of Procedure, Volume I 1992-1997 EXIM Policy, which also buttress this submission; (3) The respondent has confirmed the duty demands on all consumables including the consumables admittedly used in the manufacture and export of the final products. In terms of Condition No. 6 of Notification No. 13/81-Cus., duty can be demanded only on such goods as are not proved to the satisfaction of the Assistant Commissioner to have been used in the manufacture of the articles for export. In view of this, the duty demand on the consumables which admittedly had been used for manufacture of finished products for export is totally incorrect; (4) In terms of Clauses (a) and (b) of Condition 5 of the Notification No. 13/81-Cus., the rate of duty to be applied is the rate of duty in force as on the date of payment of Customs Duty. However, the respondent-Commissioner has erroneously applied the rate of duty as in force on 30th May, 2000. Since the rate of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /81-Cus. and 123/81-C.E. would not be available to them. (3) The appellant contend that, that depreciation is to be allowed for period till payment of duty. If this contention of the appellant is accepted, an EOU can postpone the date of payment till the goods have to be provided 100% depreciation and there would not be any value of the goods on which the duty could be demanded. Such an interpretation, therefore, cannot be given to the Notification. Vide Board Circular No. 27/98 - dated 21st April, 1998, the depreciation has to be counted from the date the capital goods have been put into the manufacturing process in the EOU, up to the date they are sought to be cleared into DTA. (4) The appellant contend that rate of duty for calculation of duty liability is rate of duty in force on the date of payment of duty. It is on record that the appellant have not paid the duty so far. The appellant are required to debond on payment of duty only and the duty payment precedes the clearance on debonding, which is to be done as soon as the permission or order for debonding is issued from the Development Commissioner. The goods procured free of duty earlier become liable for duty on the dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... May, 2000, and has not been extended further, 30th May, 2000 has been treated as the deemed date of debonding. 3.1 The Commissioner in this case, holding that since the appellant have failed to achieve the export obligation and required value addition, they are not eligible for exemption, has confirmed, under the provisions of the condition No. 6 of the Notification No. 13/81-Cus., the Customs duty demand of Rs. 3,11,43,617/- in respect of the imported raw materials and consumables valued at Rs. 2,48,53,571/- which were used for production of the goods for export and has similarly confirmed the Central Excise Duty demand of Rs. 1,26,793/- on indigenously procured consumables and raw materials valued at Rs. 10,62,343/- under the provisions of Notification No. 123/81-C.E., dated 2-6-1981. As regards the imported capital goods the Commissioner, under Condition No. 5(a) of Notification No. 13/81-Cus., has confirmed duty demand of Rs. 12,50,248/- holding that duty would be chargeable at the rate of duty in force on the date of import, but on the depreciated value as on the date of debonding. On the same basis in the case of indigenous capital goods Central Excise Duty of Rs. 21,102/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nously procured capital goods, raw materials and consumables which were used for manufacture of export goods, the appellant are eligible for Central Excise Duty exemption under Notification No. 123/81-C.E. ? (2) whether the duty chargeable in respect of the unused raw materials and consumables and used capital goods would be at the rate in force on the date of payment of duty or at the rate in force on the date of debonding order or the rate in force at the time of import? (3) whether in respect of clearance into DTA of capital goods, which admittedly had been used, the duty would be chargeable after permitting depreciation as on the date of debonding order or after giving depreciation as on the date of payment of duty ? (4) whether the capital goods and consumables imported by availing duty exemption under Notification No. 13/81-Cus. are liable for confiscation under Section 111(o) of Customs Act, 1962 for violation of post-import conditions and on this count whether the appellant would be liable for penalty under Section 112(a) of Customs Act, 1962 and also whether the indigenous excisable goods procured free of duty under Notification No. 123/81-C.E. would be liable for co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt obligation and value addition norms. When as a part of the conditions of the notification, the EOU is required to execute a bond binding itself to fulfil certain export obligations and the condition value addition norms and also the conditions stipulated in the notification and in the EXIM policy, failure to fulfil those conditions in terms of the bond would be failure to fulfil the conditions of the notification. We find that even the successor Notification No. 53/97-Cus., dated 3rd June, 1997 also had a condition that - imports, clearance, export, transfer and uses of the goods and the goods manufactured there from and the net foreign exchange earning as the percentage of export shall be subject to the conditions of the said EXIM policy . It is only by Notification No. 52/03-Cus dated 31-3-2003, that the provisions for denial of duty exemption to an EOU only in proportion to failure to achieve positive net foreign exchange earning (NFE), in case the 100% EOU failed to achieve the positive NFE, was introduced. But prior to 31-3-2003 there was no such provision in exemption Notification for 100% EOUs. When the exemption to the goods imported under Notifications No. 13/81-Cus. a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board to clear any of the said goods for being taken to any other place in India in accordance with the Export and Import Policy, April, 1992 - March, 1997 published under the Ministry of Commerce Public Notice No. 1-ITC (PN)/92-97, dated 31-3-1992, as amended from time to time (hereinafter in this notification referred to as the said Export and Import Policy), - (a) such clearance of capital goods, material handling equipments, office equipments and captive power plants may be allowed on payment of an amount equal to the customs duty leviable on such goods on the depreciated value thereof and at the rate in force on the date of payment of such duty ; (b) such clearance of goods (including containers, suitable for repeated use) other than those specified in clause (a), may be allowed on payment of customs duty on the value at the time of import and at rates in force on the date of payment of such customs duty; (c) such clearance of used packing materials such as cardboard boxes, polythene bags of a kind unsuitable for repeated use may be allowed without payment of any customs duty ; Provided that the importer shall not be eligible to avail of the exemption applicable to goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d subject to such conditions, as may be specified by the Assistant Commissioner of Customs, in this behalf. In fact, the area, where the 100% EOU is located, is required to be a declared a warehousing station under Section 9 of Customs Act, 1962 and a private bonded warehouse licence is also required to be issued by the Jurisdictional Assistant Commissioner to the EOU under Section 58 of the Customs Act, along with permission under Section 65 ibid for the manufacture under bond. Once a 100% EOU is accepted as a bonded warehouse, the provisions of Chapter IX of Customs Act, 1962 would be applicable. In fact, Section 61(1)(aa) prescribes warehousing period for the capital goods and goods other than the capital goods stored in a 100% EOU and this warehousing can be extended by the Competent Authority as per the provisions of this Chapter. In this case, admittedly, the Letter of Permission (LOP) issued to the appellant and the warehousing period expired on 30th May, 2000, without any further extension been granted, but still the goods were not cleared. In case of warehoused goods, the rate of duty applicable on the goods cleared from bond is the rate in force on the date of clearance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oard s Circulars issued from time to time fixing the quantum of depreciation. We, therefore, do not find any merit in the appellant s plea for 100% depreciation for which there is no provision. 5. We, therefore, hold that in respect of capital goods, the duty payable at the time of debonding would be on their depreciated value after permitting 90% depreciation and at the rate of duty in force on the date of debonding i.e. 30th May, 2000 and not the rate in force at the time of import, as held by the Commissioner. But, as regards duty payable on the unused raw materials and consumables, the same in terms of the provisions of condition No. 5 of the exemption Notification No. 13/81-Cus. would be payable on the value of the goods at the time of import but at the rate in force on the date of debonding i.e. 30th May, 2000. As discussed above, in this regard the appellant s plea that rate of duty would be the rate in force on the date of payment of conditions is not acceptable. In view of this, we do not find any infirmity in the Commissioner s order with regard to quantification of the duty payable on the unused raw materials and consumables lying in stock on the date of debonding. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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