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TMI Blog2008 (8) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... said finished goods in the above premises with effect from 27th April, 1999. They were granted approval for setting up 100% EOU by the Secretariat of Industrial Assistance, Ministry of Industry, Government of India, vide letter dated 9-9-1998 with certain terms and conditions as prescribed in the said letter. Under Condition No. 2(i) of the terms and conditions of the said letter of permission and the approval granted by the Ministry of Industry, the appellants were required to enter into a legal agreement (LUT) with the Development Commissioner, SEEPZ, Mumbai, binding themselves to fulfil the required export obligation under the 100% EOU scheme. Pursuant to the said approval of the Ministry of Industry, they had entered into a legal agreement with the Joint Development Commissioner, SEEPZ, Mumbai, on 9-10-1998 binding themselves to fulfil the export obligations as projected by them in the above legal agreement. 2. In order to fulfil the export obligation, the appellants imported capital goods worth Rs. 120,29,60,194/- (see page 2 of show cause notice), apart from various raw materials and spares as stated in Annexure II and III to the show cause notice dated 27-2-2004, duty free ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y without fulfilling the export obligations. 6. A show cause notice bearing F.No. V/Adj(SCN)15/R06/BSR/M-III/2001 dated 27-2-2004 was issued to them asking them to show cause as to why :- (a) full amount of applicable customs duties payable on imported capital goods, raw materials and spares totally amounting to Rs. 61,24,18,364/-(Rupees sixty-one crores twenty-four lakhs eighteen thousand three hundred sixty-four only) should not be demanded and recovered from them under the provisions of the bonds executed with the Assistant/Deputy Commissioner of Central Excise, in terms of condition No. (6) of Notification 53/97-Cus. dated 3-6-1997 read with Sections 61 and 72 of the Customs Act, 1962; (b) interest at appropriate rate on the duty so determined as payable should not be recovered from them in terms of the provisions of the bonds executed by them as per Notification 1/95 dated 4-1-1995 and Notification 53/97-Cus. dated 3-6-1997 ready with Section 72 of the Customs Act, 1962, from the date of importation till the date of payment of duties in respect of imported capital goods, spares and raw materials; (c) penalty should not be imposed on them under Section 112(a) of the Customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that financial institution filed suit in April, 2000 in the Hon'ble High Court and their unit was closed and the unit was with the High Court Receiver; that the unit was under BIFR and rehabilitation package was expected by 30-9-2005; that as per circular No. 7/2005 dated 14-2-2005, the competent authority could grant the extension for the next five years; that under such circumstances, the factory could not be run due to reasons beyond their control, and thus they could not fulfil the export obligation and that they have sought extension of period for fulfilling the export obligation. 8. In the meanwhile, the Development Commissioner, vide letter dated 25-8-2006, informed the Commissioner of Central Excise that the appellants' request for continuation of their EOU status for further period of five years from 2004-2005 to 2008-2009 was not considered and in the meantime the unit had approached the BIFR. He, therefore, requested the Commissioner of Central Excise to proceed with the adjudication of the show cause notice as the unit had not met the export obligation upto date. Thereafter, another personal hearing was granted to the appellants on 14-9-2006 and as per the request of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the revival package and the matter was pending before BIFR. (d) The Commissioner did not specify as to which of the conditions of Notification 53/97-Cus. dated 3-6-1997 had been violated by the appellants, he refers to condition regarding execution of bond, but as per the bond the liability to pay duty arises only if any of the conditions stipulated in the notification are violated. Further, condition 6(i) requires that capital goods should have been installed or used within the bonded period within a period of one year from the date of importation. Condition 6(ii) requires that goods other than capital goods have to be used in the production and there is no allegation that the raw materials have been diverted or that the capital goods have not been installed. (e) As per clause 4 and 5 of the legal agreement executed by the appellants there was an exception when the fulfilment of the export obligation is prevented or delayed because of any law or proclamation/regulation or ordinance of the government and in the appellants' case, since the Hon'ble High Court had appointed Court Receiver and taken over the entire plant and machinery the Commissioner failed to appreciate that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l goods is exempt and thus no interest was payable. He also pleaded that in the instant case, the Development Commissioner has no option but to extend the period upto 23-7-2009 and if so, the show cause notice was premature. They have further referred to modification in ground (f) of the synopsis which was to be read as under :- "The Ld. Commissioner has erred in ordering confiscation of the subject goods when the same were already in possession and under the control of the Court Receiver appointed by the Hon'ble Bombay High Court." 14. On behalf of the department, the learned Joint CDR contended that the claim of the appellants that they could not fulfil the export obligation because of taking over assets by the Court Receiver is fallacious. The Hon'ble High Court ordered taking over the assets by the Court Receiver as they did not repay the loans/advances by banks within time prescribed. The default in payment was not due to any external reason but because of their own misdoings. They cannot take advantage of their own fault or negligence. The factory was closed not because of any law or force majeure, but because of their own carelessness and apathy. 15. Regarding argument of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on capital goods is allowed only if capital goods are removed from the EOU to any other place in India by the order of the Development Commissioner or other competent authority. If such permission was not available, then the provisions of clause 5 will be applicable and no depreciation will be allowed for capital goods cleared without the permission of the Development Commissioner/other competent authorities. Pointing out to the decisions cited by the learned advocate, the learned Jt. CDR referred to the fact that none of these decisions considered clause 5 of the notification. He also submitted that the decisions cited by the learned counsel on the issue of depreciation had not considered the provisions of relevant notification and therefore had been passed sub silentio and could not be considered as a binding precedent as held by the Tribunal in the case of CCE v. Surgichem - 1987 (27) E.L.T. 548. In particular, he referred to para 5 of the order. He also referred to the decision of the Tribunal in Bajaj Auto v. CC 1994 (74) E.L.T. 312, wherein the same principle was applied. He, therefore, submitted that no depreciation was to be allowed in this case. He relied on the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or this purpose, (hereinafter referred to as the said Board), from the whole of duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty, if any, leviable thereon under section 3 of the said Customs Tariff Act subject to the following conditions, namely :- (1) The imports, clearance, export, transfer and usage of the goods and goods manufactured therefrom and the net foreign exchange earning as a percentage of export shall be subject to the conditions of the Export and Import Policy - 1st April, 1997 to 31st March, 2002 notified by the Government of India under the Ministry of Commerce Notification No. 1/97, dated the 31st March, 1997 (hereafter referred to as the said Export and Import Policy). (2) The importer has been granted necessary licence for the import of the goods for the said purpose. (3) The importer carries out the manufacture, production, packaging or job work or service in Customs bond and subject to such other conditions as may be specified by the Commissioner of Customs in this behalf. (4) Importer exports out of India 100% or such other percentage, as may be fixed by the said Board, of artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Only in such circumstances will depreciation be allowed. We do not find any other provisions in the notification whereunder depreciation has been envisaged. 22. Admittedly, in the instant case, the clearance of the capital goods has not been allowed by the Development Commissioner or the Board of Approval. The advocate claimed that when the Development Commissioner declined to extend the time for fulfilment of the export obligation, it should be presumed that the clearance of the capital goods to other place in India was permitted. In other words, the learned counsel canvassed an argument that the same should be considered as deemed removal. We are afraid we cannot subscribe to such a view. When the law requires that depreciation will be allowed only if the capital goods are allowed to be cleared by the prescribed authorities, such permission cannot be presumed in absence of an express order. As rightly pointed out by the learned Jt. CDR, the decision referred to by the appellants had not considered the provisions of the respective notifications for the purpose of grant of depreciation on capital goods cleared without the express permission of the Development Commissioner or the B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of the concession. In 'Salmond on jurisprudence' Twelfth Edition Section 27 page 153 it is opined that "A decision passed sub silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind. The court may consciously decide in favour of one party because of point A, which it considers and pronounces upon. It may be shown, however, that logically the court should not have decided in favour of the particular party unless it also decided point B in his favour; but point B was not argued or considered by the court. In such circumstances, although point B was logically involved in the facts and although the case had a specific outcome, the decision is not an authority on point B. Point B is said to pass sub silentio". "A good illustration is Gerard v. Worth of Paris, Ltd. (K). There, a discharged employee of a company, who had obtained damages against the company for wrongful dismissal, applied for a garnishee order on a bank account standing in the name of the liquidator of the company. The only point argued was on the question of the priority of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority for re-computation of the duty liability after extending the benefit of depreciation as the appellant had put the imported capital goods to use for the fulfilment of the export obligation. 23.2 In the case of CCE v. Aravic Aqua Farms (P) Ltd. - 2008 (224) E.L.T. 319, the respondents imported raw materials and capital goods in terms of Notification 196/94-Cus dated 8-2-1994 and were required to fulfil export obligation. However, they failed to do so due to certain reasons and therefore the Revenue initiated proceedings for recovery of customs duties; demand was confirmed, goods were confiscated with option to redeem and penalty was imposed by the adjudicating authority; the lower appellate authority set aside the adjudication order; the Revenue came up in appeal before the Tribunal. Counsel for the respondent pleaded that non-fulfilment of the export obligation was due to circumstances beyond his control, as the Apex Court had ordered closure of all aqua culture units in the eastern coast and that in any case, commercial production commenced in 1995 and the goods were sold to other units which exported the same. The Tribunal held that M/s. Aravic could not fulfil the expor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (I) Ltd. v. CC, Bangalore - 2008 (224) E.L.T. 417, CCE v. Aravic Aqua Farms (P) Ltd. - 2008 (224) E.L.T. 319 and CCE, Bangalore v. Maharashtra Hybrid Seeds Co. Ltd. - 2008 (226) E.L.T. 575, do not consider the relevant provisions of the respective notifications for the purpose of grant of depreciation on capital goods cleared without the express permission of the Development Commissioner or of the Board of Approval. In the case of Profitex Pvt. Ltd. v. CCE, Raigad - 2008 (226) E.L.T. 711, the notification itself (Notification 52/03) provided for payment of duty on depreciated value of capital goods upto the date of in-principle debonding. 24. We, therefore, hold that the decision cited by the learned advocate on the issue of depreciation are sub silentio qua the type of capital goods eligible. We are of the view that, in this case, there was no clearance of the capital goods with the permission of the Development Commissioner or Board of Approval. Hence the appellants will not be entitled to any depreciation on the capital goods for the purpose of arriving at the quantum of duty payable. Therefore we uphold the duty demand on capital goods and spares. 25. Learned counsel also poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s may allow, evidence to the satisfaction of the Asstt. Commissioner of Customs showing the extent of export obligation fulfilled, and where the export obligation of any particular block of two years is not fulfilled in terms of the preceding condition, the importer shall within three months from the expiry of the said block pay duties of customs of an amount equal to that portion of duties leviable on the goods but for the exemption contained herein which bears the same proportion as the unfulfilled portion of the export obligation bears to the total export obligation together with interest at the rate of 24% per annum from the date of clearance of the goods. 5. The importer, shall, if he fails to discharge a minimum of 25% of the export obligation prescribed for any particular block of two years for two consecutive blocks, be liable to pay forthwith, the whole of the duties of customs leviable on the goods imported but for the exemption contained in this notification together with interest at the rate of 24% per annum from the date of clearance of the goods. 6. The importer shall, if he fails to import goods for a minimum value of twenty crores of rupees within the validity per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication 64/88-Cus in respect of import of hospital equipment, the Larger Bench of the Tribunal held in the case of Lady Amphthil Nurses Institutions v. CC, Chennai - 2002 (150) E.L.T. 776, that confiscation of imported equipment was warranted due to breach of obligation cast on the importers thereof, subsequent to import of equipment. In coming to this conclusion, the Tribunal relied upon the Apex Court's decision in Sheshank Sea Foods Pvt. Ltd. v. UOI - 1996 (88) E.L.T. 626 (S.C.). 29. Further, in the case of Noel Agritech Ltd. v. CCE, Mangalore - 2006 (195) E.L.T. 88, the Tribunal upheld confiscation of goods imported by an EOU which was unable to completely fulfil its export obligation. Confiscation has also been held to be valid for similar violation in the case of Asian Alloys supra. The Tribunal's decision in Noel Agritech was delivered prior to the decision in Oswal Paper & Allied Industries, but has not been noticed by the Bench while deciding the Oswal case. In the light of the Larger Bench decision in Lady Amphthil, Noel Agritech and Asian Alloys, we uphold the confiscation of capital goods and spares. Liability of the appellants to penalty is also upheld; however, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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