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TMI Blog2008 (11) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... oner has also imposed redemption fine of Rs. 10 lakhs and a penalty of Rs. 4.5 lakhs. For denial of the benefit, the Commissioner has relied upon the following grounds : (i) The appellants failed to fulfill the conditions of the Bond executed by them at the time of clearance to Domestic Tariff Area (DTA) under Notification No. 2/95 being advance clearance against future export. (ii) The appellants had failed to achieve the prescribed value addition/KFTZ whereby it became liable to pay duty, penalty etc. 2. Heard both sides. 2.1 Learned Advocate Shri S.R. Dixit on behalf of the appellants submitted that Notification No. 2/95-C.E. did not provide that exports should precede DTA sales; Notification does not require fulfillment of export obligation/achievement of value addition in respect of advance DTA sales. Since the said DTA sales were made after permission issued by the Development Commissioner, they have fulfilled all the conditions under Notification No. 2/95-CE. Further, they had fulfilled the export obligations if deemed export value was also included. It is settled law now that for computing the value of the export, deemed export value also has to be included. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on has to be taken by Customs only after Development Commissioner had taken a decision in that regard. 3. We have considered the rival submissions. The issue to be decided is whether the appellants are eligible for the benefit of Notification No. 2/95-C.E. in respect of their DTA clearance made after obtaining permission from the Development Commissioner against their future entitlements. Before proceeding further, it is necessary to note that the permission for advance DTA sales is given against future entitlements. It is well settled that entitlements for DTA sales is decided by the Development Commissioner and only on his permission, the DTA sales are allowed by the Customs. Therefore, to decide whether the appellants are entitled to the benefit of Notification No. 2/95-C.E., it becomes necessary to examine whether the permission of the Development Commissioner was available valid. Since this is permission for advance sales against future entitlements, it becomes necessary to examine the permission given by the Development Commissioner; therefore, the relevant portion of his letter giving permission is extracted below : Please refer to your letter dated 4th April, 1996 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides that DTA sales has been allowed subject to adjustment of facility against future entitlement, which means the Development Commissioner will work out the entitlement based on the performance of the EOU and if they are eligible to achieve the entitlement of DTA sales by their exports, this condition is fulfilled. In case they are not able to do so, the letter specifically provides that action will be initiated to enforce undertaking/declaration incorporated in the bond dated 24-4-96. 3.2 As regards future entitlements, the Order-in-Original of the Development Commissioner clearly states that the appellants failed to fulfil the requirement. The relevant paragraphs of the order are reproduced to show that Development Commissioner has reached his conclusion and there is no doubt whatsoever this regard : "I find that during the entire period from 25-7-96 (when they commenced productions) till date the unit has not exported even a single Kg product. The entire sale has been deemed exports of 4.3. crores which is totally opposite the promised physical exports as per their project report. Even their argument regarding free foreign exchange problems Customs Departments issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability arises as a result of application of the advance permission given by the Development commissioner, the conditions under which permission was given, the bond executed by the appellants and the conclusion of the Development commissioner in his Order-in-Original that the appellants failed to fulfil the export obligation and therefore, they are not entitled for the benefit. In this connection, it has to be observed that Development Commissioner had intimated the Department to proceed against the appellants as early as 1998. However, proceedings have been concluded after the Development Commissioner has passed a final order holding that appellants failed to fulfil their obligations. 3.3 Appellants have contended that they have fulfilled all the conditions of Notification No. 2/95-C.E. We find that this is not correct. In view of the fact that table attached to the Notification provides that percentage limit of entitlement for clearance for home consumption is 25% in respect of the appellants. It is well settled now that the authority who is to decide whether they have achieved this entitlement or not is the Development Commissioner. Since the Development Commissioner has alr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical) 5. [Order per : Archana Wadhwa, Member (J)]. - After having gone through the order proposed by my ld. Brother, I record a separate order. As the facts stand detailed in the proposed order, the same are not being repeated. 6. The dispute in the present appeal relates to advance DTA sales made by the appellant in accordance with the permission letter granted by the Development Commissioner. The said sales were made by the appellant after entering into a bond. As per condition No. 1 of permission letter, in case the appellant failed to fulfil the requirements, action was required to be initiated to enforce undertaking/declaration given by them vide bond dt. 24-4-1996, as also for taking punitive action against them in terms of the provisions of Foreign Trade (Development and Regulation) Act, 1992. It is seen that the subsequent order passed by the Development Commissioner, as reproduced in the order of ld. Member (Technical), takes punitive action against the appellant when a penalty of Rs. 5 lakhs stand imposed upon them for their failure to meet export obligations. However, there is nothing in the said order to show that the earlier permission letter granted by the De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign exchange in DTA). In the year 1997-98, the appellant had exported goods worth Rs. 1,88,44,396/- (Rs. 6,81,954/- physical exports and Rs. 1,81,62,442/- against foreign exchange in DTA). In the year 1998-99, appellant had exported goods worth Rs. 83,60,041/- against payment in foreign exchange in DTA. The total value of exports therefore, for the years 1996-97 to 1998-99 was Rs. 3,90,39,876/-. It is pertinent to note that the advance DTA permission was granted subject to adjustment against future entitlements. It is now well settled law that the exports against foreign exchange are required to be taken into consideration for determining the quantum of DTA sales. According to the appellant, if such sales against foreign exchange are taken into consideration, the, permitted DTA sales would be within the limitation. The issue that sales against foreign exchange are to be considered as physical exports stands settled by the Hon'ble Supreme Court in the case of M/s. Virlon Textile Mills Ltd. v. CCE, Mumbai [2007 (211) E.L.T. 353 (S.C.] as also in the case of M/s. Juned Bilal Memon v. CCE, Surat-II [2008 (221) E.L.T. 45 (Tri.-LB)]. As such, permission letter granted by D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also note that Commissioner has imposed penalty of Rs. 4.50 lakhs on the appellant under Rule 173Q of the Central Excise Rules and has confiscated the goods with a fine of Rs. 10 lakhs. Inasmuch as the clearance in DTA was admittedly in accordance with the granted permission by the Development Commissioner, I do not find any justifiable reasons to either confiscate the goods or to impose penalty upon the appellant. The same are accordingly set aside. 12. In view of the foregoing, the impugned order is set aside and the appeal is allowed by way of remand in terms of the above observations. Sd/- (Archana Wadhwa) Member (Judicial) DIFFERENCE OF OPINION Whether the appeal is to be rejected as held by Member (Technical) or the same is to be remanded for de novo adjudication only in respect of duty determination and confiscation penalty are required to be set aside as observed by Member (Judicial)? Sd/- (B.S.V. Murthy) Member (Technical) Sd/- (Archana Wadhwa) Member (Judicial) 13. [Order per : P.G. Chacko, Member (J)]. - The appellants are running a manufacturing unit in the Kandla Free Trade Zone duly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. After examining the records and hearing both sides, I note that the Development Commissioner (authority competent to determine whether an EOU has fulfilled its export obligation and/or attained the prescribed value addition in respect of clearances to DTA) passed order-in-original No. 4/03-04 dt. 3-6-2003 holding that the appellants had misused the facilities extended by the Government for export promotion and had used it only for making inland sale without even a single export and that they had failed to fulfil their export obligation and that they were fit for de-bonding and final exit from SEZ Scheme. The Development Commissioner also imposed a penalty of Rs. 5 lakhs on them. The present proceedings are an offshoot of the Development Commissioner's order. I am told that the said order was appealed against by the EOU and that the appellate authority sustained the same, albeit with a reduction of penalty. The findings recorded by the Development Commissioner against the appellants have attained finality on the question whether the appellants fulfilled their export obligation. 17. The impugned demand of duty is consequential to denial of the benefit of Notification No. 2/95 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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