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Chemasia Industries Ltd. Versus Commissioner of Customs, Central Excise and Service Tax Guntur

2015 (10) TMI 418 - CESTAT BENGLALORE

Failure to fulfil export obligation – Imposition of Duty, Penalty and redemption fines –Appellant being 100% EOU failed to fulfil export obligation – In 2007 Development Commissioner allowed appellant to exit from 100% EOU scheme however, proceedings were initiated by Revenue proposing to demand duty foregone on imported/indigenously procured raw materials and capital goods culminating in impugned order imposing duty, penalty and redemption fine – Held that:- Notification No.13/81-Customs provid .....

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. RAGHURAM AND SHRI B.S.V.MURTHY, JJ. For The Appellant : Mr. G. Prahlad & Mr. Karan Talwar, Advocates For The Respondent : Dr. A. K. Nigam, Addl. Commissioner (AR) Per : B.S.V.MURTHY The appellant is a 100% Export Oriented Unit (EOU) engaged in the production/manufacture of Sodium Perborate and Hydrogen Peroxide falling under Chapter Heading 2840 3000 and 2847 0000 respectively of the Central Excise Tariff Act, 1985. The said unit was purchased by the appellants from M/s. Asian Peroxides Lt .....

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pellant was given Letter of Permission (LOP) for manufacture and export of 1200 metric tonne of Sodium Perborate per annum with value addition of 26%. Export obligation for 5 years was fixed at 5 times CIF value of capital goods. However, even though commercial production was commenced on 19.1.1997, the appellants could not fulfill the export obligation. Proceedings were initiated by the Development Commissioner for non-fulfillment of export obligation from 19.1.1997 to 31.3.2001 which culminate .....

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ing unstabilized hydrogen peroxide, stabilize and pack the same in cans and drums for further export. The storage tanks and machinery would be used for this purpose. On 22.5.2006, proceedings initiated for non-fulfillment of obligation and non-achievement of positive NFE were dropped considering that the appellant has fulfilled obligations as per the LOP. On 18.10.2016, permission was sought to exit from EOU scheme which was allowed on 22.11.2006 and in November 2007 a final order was issued by .....

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as liable to pay duty of ₹ 5,21,27,308/-. Penalty of ₹ 2,40,10,000/- was imposed and redemption fine of ₹ 1.5 crores was ordered to be paid. 3. Learned counsel on behalf of the appellants took us through the facts which have been briefly discussed above. It was submitted that the Notifications under which the capital goods were imported did not require the appellants to make payment of duty with interest on capital goods in case they did not achieve positive NFE. It was submitt .....

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goods in view of the fact that the proceedings were dropped by the Development Commissioner and Development Commissioner had taken a view that appellants had achieved positive NFE as required in the LOP and had fulfilled the export obligations. Therefore for the period subsequent to 2003, there was no obligation on the appellant. It was also submitted that when the order was passed on 6.11.2008, several decisions on the issue were not available and could not be cited. Some of them are as under: .....

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mmissioner had observed that the capital goods had not been utilized or installed and this was factually incorrect. It was submitted that appellants had exported Sodium Perborate in the first 3 years viz., 1997-98, 1998-99 and 1999-2000 and because of adverse market condition, they had to stop export of Sodium Perborate thereafter. 3.2 The Commissioner did not take note of the fact that Development Commissioner on 25.11.2003 had permitted to fulfill the obligation cast on them by exporting Hydro .....

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cannot be considered as manufacture. According to him, the manufacture as per the definition requires a new product with distinct name, character and use to emerge and in this case this has not happened. It was submitted that definition of manufacture in Foreign Trade Policy is different. 4. We have considered the submissions. We find that as submitted, Notification No.13/81-Customs dated 9.2.1981 provided for payment of duty on the raw materials and consumables imported by the EOU in case of f .....

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drogen Peroxide by the appellant can be considered as manufacture. The Commissioner has not agreed with this view on the ground that the activity undertaken are stabilization, stirring and packing of Hydrogen Peroxide only and no new product with distinct name and character emerges. According to Foreign Trade Policy, manufacture is defined as under: Manufacture means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive .....

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h Court of Kerala and Hon ble High Court took the view that manufacture has been given wide definition to take even processing and refrigeration as manufacture. In the case of Hewlett Packard (supra) also a similar view was taken by this Tribunal. Moreover, once Broad Banding has been permitted and Development Commissioner had allowed export of Hydrogen Peroxide to be considered for fulfillment of export obligation, whether it is correct for the Commissioner to take a different view is also anot .....

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ck year 1997-2001. The Development Commissioner has accorded permission to the assessees to manufacture and export hydrogen peroxide under Broad Band Scheme. Though the assessees claim that they have earned positive NEF for the next period from 2002 to 2007, the NFE is not earned by manufacturing and exporting neither sodium perbonate nor hydrogen peroxide. The positive NFE was achieved by exporting hydrogen peroxide which was not actually manufactured by the assessees by using the duty free cap .....

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ilization, stirring and packing and thus violated the conditions of the Notifications, Bond, LOP and Legal Agreement and thereby are liable to pay the duty with interest on the capital goods imported and procured indigenously. 43. Now, coming to the contentions of the assessee in their reply, on one side they are stating that they have not violated the conditions of the Notifications, Bonds, LOP, Legal Agreement and hence duty cannot be demanded from them on the capital goods and raw materials p .....

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and that duty should be demanded on the depreciated values only, etc. This clearly proves that they are aware of their violations and liabilities but are only saying some thing or other to draw the attention of the adjudicating authority to various directions. Since they raised the issues of time bar and demand of duty on depreciated values I would like to record in my findings that they are not eligible for depreciation as they have not fulfilled the conditions of the Notifications and not fulf .....

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