TMI Blog2013 (9) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... he importation but at the rate prevailing on the date of deemed removal - if the raw materials were consumed in the manufacture of goods exported, then the demand of duty will not arise at all – Only in respect of raw materials lying unutilized still remaining in the bonded premises, the question of demand on duty on raw materials would arise. Confiscation of goods u/s 111(o) – Redemption fine – Penalty u/s 112(a) - Held that:- Assesses had failed to fulfil the terms and conditions of the exemption - the goods were liable to confiscation u/s111(o) - Inasmuch as the assesse had been allowed to function as an EOU from April 2009 onwards - the imposition of a nominal fine in lieu of confiscation would suffice – assesse’s penalty was reduced – managing director’s Penalty was set aside. Duty on imported goods – Interest – Held that:- Appellant was liable to pay duty on the imported capital goods deemed to had been removed at the rate of duty prevailing on the date of deemed removal - Interest was also leviable on such amount of duty - Only if any such materials were lying in stock on the date of deemed removal, duty liability will have to be discharged at the rate prevailing on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and Managing Director of the appellant firm. In the meanwhile, the matter was also referred to Development Commissioner, who vide letter 26-8-2006 informed the department that the appellants failed to fulfil the export obligation and, therefore, the department was at liberty to proceed with the adjudication of the show-cause notice. 2.3 The notice was adjudicated vide order dated 29-9-2006 wherein the duty demand of Rs. 61,24,18,364/- was confirmed along with interest thereon. Further, capital goods, spares and raw materials valued at Rs. 126,59,47,384/- excepting raw materials used in the manufacture of goods valued at Rs. 2,95,29,133/- exported out of India, were held liable for confiscation under Section 111(o) of the Customs Act, and an option was given to redeem the goods on payment of a fine of Rs. 20 lakhs in lieu of confiscation. A penalty of Rs. 6 crore was imposed on the appellant firm under Section 112(a) of the Customs Act and a penalty of Rs. 5 crore each was imposed on the Chairman and Managing Director of the appellant firm. 2.4 The appellants preferred an appeal before this Tribunal and vide order dated 10-7-2008 this Tribunal upheld the duty demand on capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... renewed by the Development Commissioner, the question of demanding any duty on the imported capital goods would not arise at all as the goods continue to remain in bond in the 100% EOU. Even if it is held that the goods have been removed from the 100% EOU, inasmuch as they have been allowed to continue as a 100% EOU effective from 1-4-2009, it should be considered as removal from one bonded premises to another bonded premises and viewed from this context, the question of duty demand on the capital goods will not arise. 4. The ld. Counsel relies on the Board Circular No. 11/96, dated 16-2-1996, 31/96, dated 7-6-1996 and 47 of 2002, dated 29-2-2002 in support of his above contention. He also relies on the following judgments, namely :- (i) Paras Fab International v. CCE - 2010 (100) RLT 116 (CESTAT-LB) (ii) Bee International v. CCE - 2007 (220) E.L.T. 128 (Tri.-Mumbai) (iii) Essar Oil Ltd. v. CC - 2005 (183) E.L.T. 481 (Tri.-Mumbai) (iv) Parsan Brothers v. UOI - 2005 (68) RLR 113 (Guj.) (v) CCE v. Semco Electric Pvt. Ltd. - 2007 (215) E.L.T. 253 (Tri.-Mumbai) and (vi) Order dated 20-5-2010 in the case of Hindustan Agrigenetics Ltd. v. CCE, Hyderabad. 5. The ld. Addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court Receiver from 2000 (and therefore, they could not complete their Export Obligation and were unable to submit APRs) The unit s request for continuation of their EOU status for further period of five years 2004-05 to 2008-09 was not considered by this office and in the meantime, the unit referred the matter to BIFR. The Registrar, Board of Industrial and Finance Reconstruction, Deptt. Of Economic Affairs, New Delhi was requested vide this office letter dated 4-6-2004, 14-7-2004 13-3-2005 to submit the status report of the case so as to enable this office to take decision about continuation of EOU status or otherwise. There is no reply from the office of BIFR till day. In view of the above, you may proceed with the adjudication of the show cause notice issued by your office, as the unit has not met the export obligations undertaken, till day . 5.2 From the said letter of the Development Commissioner, it is very clear that the appellant had failed to achieve the export obligation stipulated and the department was advised to proceed with the adjudication of the show-cause notice in accordance with law. 5.3 The ld. AR also submits that though the initial LOP was for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the ld. Advocate for the appellant that in view of the renewal of their LOP vide letter dated 27-3-2009 by the Development Commissioner, the appellant should be deemed to be a 100% EOU even now and accordingly, there has been no removal of capital goods from the bonded premises, the said argument is clearly untenable. In the said letter, in para 2(d), it has been made abundantly clear that the extension of LOP is without prejudice to any action that may be taken in respect of EOU operations prior to 1-4-2009 under the Foreign Trade (Development and Regulation) Act, 1992, Customs Act or Central Excise Law or any other law for the time being in force. Thus, the said letter does not regularize the previous action of the appellant and has to be considered as a fresh LOP for all practical purposes. In the instant case, it is seen that original LOP was valid upto 30-9-2001 and the private bonded warehousing of the licence also expired in 2001; the appellant did not get the same renewed. Once the private bonded warehousing licence expired, the goods lying in the warehouse has to be deemed as goods improperly removed from the warehouse under Section 72 of the Customs Act, 1962. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, polyethylene bags of a kind unsuitable for repeated use may be allowed without payment of any customs duty. 6.3 A plain reading of the above condition makes it absolutely clear that depreciation is permissible only when the capital goods are cleared after getting approval from the Development Commissioner for being taken to any other place in India in accordance with the EXIM policy. In the instant case no such permission has been obtained by the appellant from the Development Commissioner and the Development Commissioner has also not renewed the LOP when it expired in September, 2001. In the absence of any such permission, the question of allowing any depreciation on the value of the capital goods does not arise. As regards the duty demand on raw materials, if the raw materials are consumed in the manufacture of goods exported, then the demand of duty will not arise at all. Only in respect of raw materials lying unutilized still remaining in the bonded premises, the question of demand on duty on raw materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be regarded as cleared from the customs. In the case before us, the letter of permission allowing the appellant to function as a 100% EOU itself expired in September, 2001 and the same was not renewed. Consequently, the private bonded warehousing licence issued to the appellant was also not renewed. Inasmuch as the appellant lost its status as a 100% EOU and the premises no longer remained a warehouse, we are of the view that the judgment of the Hon ble Apex Court in the case of Kesoram Rayon applies squarely to the facts of the present case. As regards the reliance placed on Parsan Brothers case, the issue dealt therein was when duty free imported beer became unfit for home consumption due to suspension and subsequent cancellation of warehousing licence whether duty can be demanded. This Tribunal held that in such a case, Section 23 of the Customs Act relating to remission of Customs duty will come into operation and the petitioner would be entitled to seek remission of duty on goods lost due to destruction. The facts in that case has no bearing whatsoever to the facts of the present case. Therefore, we hold that this decision of the Hon ble High Court of Gujarat in the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s being revived, we are of the view that a penalty of Rs. 1.00 crore on the appellant will suffice and there is no need for any separate penalty on the Chairman and Managing Director. Accordingly, we reduce the penalty of Rs. 6 crore to Rs. 1 crore and set aside the penalties imposed on the Chairman and the Managing Director. 7. In sum, we hold that the appellant is liable to pay duty on the imported capital goods deemed to have been removed at the rate of duty prevailing on the date of deemed removal. Interest is also leviable on such amount of duty. No duty liability would accrue on the raw materials and consumables already utilised in the manufacture of export goods. Only if any such materials were lying in stock on the date of deemed removal, duty liability will have to be discharged at the rate prevailing on the date of deemed removal. Confiscation of capital goods is upheld but the fine in lieu of confiscation is reduced to Rs. 1 crore. The penalty on the appellant is reduced to Rs. 1 crore and the penalty on the Chairman and Managing Director are set aside. Inasmuch as the duty liability has to be reworked as discussed above, we remand the case back to the adjudicating aut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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