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TMI Blog2018 (1) TMI 1212X X X X Extracts X X X X X X X X Extracts X X X X ..... the order impugned before us cannot said to be erroneous. Question whether, it is within the export processing zone or free trade zone, does not arise, for consideration - appeal dismissed. - C.M.A. No. 3342 of 2017 - - - Dated:- 30-11-2017 - S. Manikumar And R. Suresh Kumar, JJ. For the Appellant : Mr. A. P. Srinivas JUDGMENT ( Judgment of this Court was made by S. Manikumar, J. ) Civil Miscellaneous Appeal is filed against the Final Order No.723 of 2009, dated 04.06.2009, on the file of the Customs, Excise and Service Tax Appellate Tribunal, Chennai. 2.1. Short Facts leading to the appeal are that M/s.India Actuators Pvt. Ltd., a 100% EOU was found to be a defunct unit. The capital goods raw material procured duty free were lying unused for many years. The records maintained by the unit revealed that procurement of capital goods and raw material were done without payment of duty, as early as 1993, and during 1995. After effecting few exports, the said EOU became defunct, as their product became outdated and un-marketable. Since the project was unviable, they applied for de-bonding and got the de-bonding permission from Secretariat of Industrial Assistance ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imported capital goods and customs duty of ₹ 5,46,607/-, on the imported raw materials and central excise duty of ₹ 13,541/-, on the duty free raw material, procured indigenously, and second hand machinery should be released on payment of the above duty only, after the fulfillment of the conditions prevailed, in Import Export Policy. 3. Aggrieved by the order of the CESTAT, Chennai, respondent filed an appeal in E/156/2002, before the CESTAT, Chennai. The Appellate Tribunal after hearing both sides, allowed the application for permission to destroy the obsolete goods in terms of Notification No.71/2000-Cus- dated 22.05.2000. 4. Aggrieved by the same, instant Civil Miscellaneous Appeal is filed on the following substantial questions of law:- I) Whether the Tribunal is right in according permission for destruction of obsolete goods under Notification No.71/2000-Cus which became effective only from 22.05.2000, to the goods that became obsolete in the past, well before the Notification No.71/2000-Cus came into effect and for which show cause notice was issued on 11.04.2000 for the goods imported and purchased during 1993 and 1995 respectively? II) Whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utside the said unit, where it is not possible or permissible to destroy the same within the said unit, in the presence of custom officer. 8. According to the learned counsel for the appellant, from the above, it is seen that permission could be granted for destruction of capital goods only, and raw material imported/purchased indigenously. Moreover, insertion of the above para 12(A) under Notification No.53/97-Cus, vide Notification No.71/2000-Cus, is effective from 22.05.2000 whereas, show cause notice dated 11.04.2000 covers capital goods imported during 1993, and indigenous raw materials purchased during 1995. 9. Learned counsel for the appellant submitted that there was no discussion, by CESTAT, Madras, in its order, as to how, Notification effective from 22.05.2000 can be applied, for the past happenings, and to the show cause notice, issued earlier, to the amendment. The assessee opted for de-bonding on his own, and the same was accepted by the Secretariat of Industrial Assistance, vide letter dated 25.03.1997. Thus, it is clear that the assessee wanted de-bonding, well before the issuance of the Notification No.71/2000-cus, dated 22.05.2000. 10. Learned counsel f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for destruction within the zones can be taken for destruction outside the zones, as the notification only provides for destruction within the zone? 2. The issue has been examined by the Board. It is clarified that action taken under the rescinded seven notifications will be deemed to have been done or taken under the corresponding provisions of the current Notification No.133/94 and the goods which were imported under any one of the earlier notifications could be allowed destruction under present notification. Under para 7 (ii) of Notification No.133/94-Cus., the imported goods as such may be allowed destruction and under para 7(iii), the scrap/waste obtained in the process of manufacture may also be allowed destruction. In the cases where goods cannot be destroyed within the Zone because of the safety reasons or Municipal Corporation's regulations, the Commissioner may permit destruction outside the zone subject such conditions as may be prescribed by the Commissioner since this is only a procedural requirement and non-substantive in nature. 3. Pending cases may be processed accordingly and the receipt of this letter may kindly be acknowledged. 14. Circular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable to EOU/EPZ units, shall not be available. The trading units would, however, be allowed to supply goods to other EOU/EPZ/EHTP/STP units or supply goods to DTA against valid advance licences or specific duty-free import entitlements. The notifications governing duty free procurement and import by EOU/EPZ units have been amended suitably to incorporate the said changes. Leasing of Capital Goods : 4. Under Paragraph 9.4 of the Policy, an EOU/EPZ/EHTP/STP unit is on the basis of a firm contract between the parties, allowed to source capital goods from a domestic/foreign leasing company. In such cases, the EOU/EPZ/EHTP/STP unit and the domestic/foreign leasing company are required to jointly file the documents to enable import of the capital goods without payment of duty. This paragraph has been amended now to allow EOU/EPZ/STP/EHTP units to source indigenous capital goods without payment of duty. Access to central facility for software development by DTA units : 5. In terms of Paragraph 9.2 of the Policy, STP/EHTP/EPZ are allowed to import free of duty all types of goods for creating a central facility for use by software development units in STP/EHTP/EPZ. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts to warehouses authorised to carry out manufacturing operations in bond under section 65 of the Customs Act, 1962 and under Manufacture and Other Operations in Warehouse Regulations, 1966, without payment of duty. Supplies to foreign missions/diplomats : 9. Presently, under Para 9.10 (f) of the Export and Import Policy, supply of goods to defence and internal security forces are counted towards fulfillment of export obligation and NFEP provided they are entitled to duty-free import of such items. This paragraph has been amended to include foreign missions/diplomats, meaning thereby that supplies made by EOU/EPZ/STP/EHTP units to missions/diplomats, who are entitled to duty free import of goods, shall also be counted towards fulfillment of export obligation and NFEP. Sub-contracting on behalf of DTA units : 10. Under para 9.17(d), the EOU/EPZ units in specific sectors were allowed to undertake job work for export on behalf of DTA units. This paragraph has been amended to extend this facility to all sectors. It has also been provided that DTA units shall be entitled to brand rate of duty draw back. 11. The EOU/EPZ units in textiles, ready made garments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HOP provides the list of items, which are allowed to be imported duty free by EOU/EPZ/STP/EHTP units for the purposes specified in the Policy. This Paragraph has been revised to include additional items, such as, un-interrupted power supply (UPS) system, pollution control equipment, quality assurance equipment, storage systems, special racks for storage, modular furniture, computer furniture, anti-static carpet, tele-conference equipment, servo control systems, air-conditioners, panel for electricals, security systems etc. The notifications governing EOU/EPZ/EHTP/STP Schemes have been amended for extending duty free facility to above items. The same may be perused for further details. Special provisions for granite sector under EOU/EPZ Scheme : 15. Under paragraph 9.10(a) of the HOP, agricultural and allied sector units in EOU/EPZ are allowed to supply/transfer capital goods and other inputs in the farms/fields. In the revised HOP, the paragraph has been amended to allow granite sector units in EOU/EPZ to transfer/supply capital goods and inputs to the quarries with prior intimation to the jurisdictional Assistant/ Deputy Commissioner of Customs. To effect the above chang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pherals has been provided i.e. maximum limit of 90% would be achieved over a period of 2 years and 9 months in lieu of 4 years and 3 months as at present. Board s 15043$Circular 27/98-Cus, dated 21-4-98, provides depreciation norms for computer and computer peripherals upto the limit of 90%, and for the capital goods other than the computers upto a limit of 75%. 15043$Circular 27/98-Cus., dated 21-4-1998 was subsequently modified by 15059$Circular No. 43/98-Cus., dated 26-6-1998 in order to provide depreciation for capital goods other than computer and computer peripherals upto a limit of 90%. To implement the changes made in the HOP, it has been decided to allow a further accelerated depreciation for computer and computer peripherals as under : For every quarter in the first year @10% For every quarter in the second year @8% For every quarter in the third year @7% For every quarter in the fourth year and thereafter @ 5% Subject to a maximum of 90% 15043$Circular Nos. 27/98, dated 21-4-1998 and 15059$43/98-Cus., dated 26-6-1998 stand modified to the above extent. Powers of approval of Development Commissioner : 18. At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch are stated to be required for setting up of STP Complexes. These additional items are uninterrupted power supply, diesel generating sets, servo control system, air conditioner, private automatic branch exchange, fax machine, video projection system, security system, computer furniture, tool, kits and spares for the above. Accordingly, Notification No. 153/93-Cus., dated 13-8-1993 has been amended to allow duty-free import of the additional items as mentioned above. Duty-Free Import/Procurement of Accessories of Capital Goods under EOU/EPZ/STP/EHTP Scheme : 22. The notifications governing duty-free import/procurement of goods by EOU/EPZ/STP/EHTP units allow duty-free import of capital goods and spares. However, in these notifications, there is no specific entry for accessories of capital goods. The notifications have since been amended to allow import/ procurement of accessories of capital goods also. Furnace Oil for Boilers : 23. Notification Nos. 133/94-Cus., dated 22-6-1994, 53/97-Cus., dated 3-6-1997 and 1/95-C.E., dated 4-1-1995, provide for duty-free import/procurement of furnace oil for boiler in textile units only. The Ministry of Commerce has requeste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing rejects, wastes, scraps and remnants) into DTA on payment of appropriate duty of excise. In Budget 2000-2001, Notification No. 1/95-CE, dated 4-1-995, governing duty free procurement of indigenous goods by EOU/EHTP/STP units has been amended to provide that the goods so cleared into DTA which are not excisable, excise duty equal in amount to that leviable on the inputs obtained under this notification and used for the purpose of manufacture of such articles, which would have been paid but for the exemption under this notification, shall be payable at the time of clearance of goods. Similar amendments have been carried out in Notification Nos. 126/94-CE, dated 2-9-1994, 136/94-CE, dated 10-11-1994 and 10/95-CE, dated 23-2-1995 in order to achieve uniformity in provisions of all the notifications. 26. Wide publicity may be given to the above changes by issue of a Public Notice in this regard. 27. Difficulties, if any, faced in understanding or in implementation of the above changes, may be brought to the notice of the Board at an early date. Kindly acknowledge receipt of this Circular. 15. Let us now consider, as to how the Commissioner of Central Excise, Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f warehousing period and the machineries are hypothecated to the State Bank of Mysore, Coimbatore. 27. The show cause notice proposes to demand duty by denying the depreciated value and adopt the assessable value declared at the time of import, on the ground that the EOU had not obtained permission from the BOA and also debonding permission granted by the SIA had lapsed. The rate of duty shall be that which was prevalent on the day of payment of duty as per the provisions of Section 15 of Customs Act 1962 read with condition 5(a) of the Notification 53/97 Cus. 28. Notification No. 67/95 Cus dated 1.11.95 exempts interest accrued on the duty on capital goods warehoused. The same is applicable to the machineries imported even prior to 1.11.1995 in terms of clarification given by Board in Circular No. 31/96 Cus dated 7.6.96. But it is proposed to deny the exemption in terms of Notification No. 53/97 Cus as amended by Notification No. 65/99 Cus dated 19.5.99. As per the amendment, if the AC is satisfied that the capital goods are not used (for the purpose for which they are imported) within the warehouse, interest at the rate of 20% has to be charged on the duty. On the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he visit of the CIU, Coimbatore to Mis India Actuators Pvt. Ltd., Coimbatore and not of their own initiative. Hence not only destruction but also depreciation on the capital goods cannot be extended to them. On the same analogy, raw materials I components could have been disposed off in the local market in view of the final products having become obsolete, with due permission of the concerned authorities and hence the duty on the imported and indigenous raw materials I components is also to be paid by the EOU. 30. On the question of demanding 20% interest on the duty demanded, Notification No. 53/97 Cus has been amended by Notification No. 65/99-cus dated 19.5.99 to the effect that if the Asst. Commissioner is satisfied that the capital goods are not used (for the purpose for which they are imported) within the warehouse, interest at the rate of 20% has to be charged on the duty from the date of import till the date of payment of duty. The amended provisions of Notification No. 53/97 Cus can be invoked only for the imports made after 19.5.99, the date of amendment, and it cannot have a retrospect effect. Hence interest as per Notification No.53/97 Cus cannot be charged on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for destruction could be permitted under the notification currently in force. The Circular reads as under:- Destruction of scrap/waste in the Export Processing I am directed to refer to Notification No.133/94-Cus, dated 22-06-1994 governing 100% EOUs set up in various Export processing Zones/Free Trade Zones. Under the above notification, seven earlier notifications each governing 100% EOU in an Export Processing Zone, were rescinded. In this connection, the following doubts have been raised; (i) Whether the actions taken earlier under these seven Notifications which were issued for seven Export Processing Zones are deemed to have been done or taken under the corresponding provisions of the current Notification No.133/94-Cus, which has rescinded all these seven notifications. (ii) Whether defective or sub-standard computers and its parts which are not required (useful) for current production and have also not been used can be destroyed out side the zone i.e. whether the goods which were imported under an earlier notification could be allowed destruction under the present Notification No.133/94-Cus. (iii) Whether the goods which are permitted for destructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er may permit destruction outside the zone subject such conditions as may be prescribed by the Commissioner since this is only a procedural requirement and non-substantive in nature. 18. Paragraph No.12 of the Circular No.49/2000-Cus, dated 22.05.2000, in respect of EOU/EPZ/STP/EHTP Scheme - Amendments in Exim Policy and Handbook of Procedures, 1997-2002, is extracted hereunder:- 12. Para 9.19 of the Exim Policy has been amended to allow destruction of obsolete capital goods and spares without payment of duty with prior permission of Customs. To align with the revised provision of the Policy, all notifications governing duty free import/procurement by EOU/EPZ/STP/EHTP units have been amended suitably to provide that destruction of capital goods shall be allowed by the Assistant/Deputy Commissioner of Customs/Central Excise in charge of the EPZ/EOU/STP/EHTP units without payment of duty. Such destruction shall be carried out in the presence of Customs/Central Excise officer insider the Zone/unit, where it is not permissible or possible to carry out destruction within the Zone/unit. The officers supervising destruction may exercise due caution to ensure that capital goods ..... X X X X Extracts X X X X X X X X Extracts X X X X
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