2023 (5) TMI 651 - AT - Central Excise

100% EOU - non-fulfilment of export obligation - manufacture and export of ‘footwear’ - Dutiability of capital goods and raw materials imported by availing the benefit of notification no. 53/97- Cus dated 3rd June 1997 and notification no. 1/95-CE dated 4th January 1995 and notification no. 22/2003-CE dated 31st March 2003 - HELD THAT:- Admittedly, the appellant was unable to fulfil the prescribed export obligation for the first five years of operation and, therefore, in accordance with the policy prescriptions and corresponding exemption notifications issued under Central Excise Act, 1944 and Customs Act, 1962, became liable to duties in accordance with the scheme. Furthermore, the appellant also was liable to be proceeded under the Foreign Trade (Development & Regulation) Act, 1992 by the designated authority competent to impose penalties for such failure.

Between 2002-03, when the appellant ceased to export and the effective closure of the factory in 2006 as well as the proceedings initiated under Customs Act, 1962/Central Excise Act, 1944 in 2011, several changes had been made to the scheme. Concurrently, the perception on liabilities arising from non-fulfilment of export obligation had also undergone transformation in terms of judicial determination.

In SHRIRAM GRAPE GROWERS CO-OPERATIVE SOCIETY LTD VERSUS COMMISSIONER OF CENTRAL EXCISE & CUSTOMS [2018 (3) TMI 205 - CESTAT MUMBAI], it was held that It is, therefore, adequately certain that the duty liability on imported, or indigenously procured, capital goods is erased by sheer efflux of time. The appellant has been functioning exportoriented unit since 1992 and capital goods procured in that year should be eligible for depreciation over the period that the unit has been in existence. As on the date of the impugned order, the appellant has been in existence for over a decade and, by application of the straight-line depreciation approved by the Central Board of Excise & Customs, the value of capital goods would be nil. Consequently, no duty liability would arise.

In BAGLAN TALUKA GRAPE GROWERS CO-OPERATIVE SOCIETY LTD VERSUS COMMISSIONER OF CENTRAL EXCISE NASHIK [2019 (1) TMI 1188 - CESTAT MUMBAI] it was held that With a lapse of time since the commencement of ‘commercial production’, the value of the missionary appreciates to ‘nil’ and demand of duty is thus erased. At the same time, the proceedings for recovery of duty, under the applicable notification granting exemption from duty, for annual deficiency is independent, and exclusive, of the proceedings for debonding. In the present dispute, the proceedings appear to have originated with completion of the period of warehousing which should be applicable only if the warehouse goods whenever put to use and, on completion of the warehousing., The duty liability would be computed on value as assessed originally without benefit of depreciation. In the present circumstances, owing to utilization, depreciation is not reliable. The depreciation over the entire tenor result in ‘nil’ value for the purpose of assessment.

It would appear that these decisions of the Tribunal, and several others thereafter establishing the consistent view of judicial determination on duty liability of such units unable to continue exportation, was not available to the original authority which precluded a judicious disposal of the issue as proposed in the show cause notice - As the substantial part of the amount in dispute pertains to capital goods and the adjudicating authority would need to reappraise the demand in accordance thereof requiring the matter to be remanded, it would also be in consonance thereof for the dispute relating to raw materials also to be reconsidered at the same time.

Matter remanded back to the original authority for a fresh decision in accordance with the law as enacted and as judicially determined - appeal allowed by way of remand.