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Barco Electronics System Private Ltd., Rakesh Kumar Vohra, Director, Manish Gaur, Manager Commercial Versus Commissioner of Customs, Central Excise & Service Tax- Noida

2017 (10) TMI 492 - CESTAT ALLAHABAD

100% EOU - destroyed goods - N/N. 22/2003 CE read with N/N. 52/2003 CUS - manufacture of parts of data projector as overview IU, PU, Interface etc - whether the appellant are liable to pay duty for the raw materials which was acquired duty-free under N/N. 52/2003 CUS read with N/N. 22/2003 CE, duty-free, on the remnants, rejects etc., which were destroyed by them under intimation to the Revenue during the period in dispute from April, 2007 to March, 2014? - Held that: - the appellant, as req .....

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violation either of the Notification or of the Foreign Trade Policy or the provisions of the Central Excise Act or the Customs Act. - Once the said raw material etc have been issued for production and when in the course of production on the shop floor such raw material, work in progress, etc., are rejected, the same is equivalent to use in the course of production and does not amount to removal of inputs as such. Accordingly, the goods destroyed were used in connection with the production o .....

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sioner) AR for Respondent ORDER Per: Anil Choudhary The issue in these appeals is whether the appellant Barco Electronic Systems Private Ltd, which is 100% EOU and engaged in manufacture of parts of data projector as overview IU, PU, Interface etc., whether they are liable to pay duty for the raw materials which was acquired duty-free under Notification No. 52/2003 CUS read with Notification No. 22/2003 CE, duty-free, on the remnants, rejects etc., which were destroyed by them under intimation t .....

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0,000 3. E/51717-51719/2015-EX (DB) March 25, 2014 April, 2012 to March, 2013 15,196,365 15,196,365 1,000,000 200,000 4. E/51714-51716/2015-EX (DB) May 25, 2014 April, 2013 to March, 2014 5,555,186 5,555,186 500,000 200,000 2. The facts as per the show cause notice dated 22 May, 2014 are that the appellant is 100% EOU and have executed the Bond in form B 17, for a value of ₹ 15.34 crore and have been removing the finished goods which are excisable manufactured by them into DTA. For the pur .....

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not paid duty involved thereon. The duty involved on such goods was worked out by the Department at ₹ 4,57,90,755/-. The Audit objections were issued on 3rd February, 2011. However, as observed by the Audit Team, certain goods imported duty-free by the appellant in accordance with the EOU scheme under the aforementioned notifications were not used in the manufacture of the articles for export or in connection with the production and were written off on purportedly becoming obsolete. Simila .....

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urther stated in the SCN that Notification No. 22/2003 CE read with Notification 52/2003 CUS incorporates provisions and conditions, wherein 100% EOU executes a bond in such form and for such sum binding itself (a) to bring the said goods into the unit and use them for the specified purpose mentioned in Clause (a) to (e) in the opening paragraph of the notification; (b) to maintain proper accounts of the receipt, storage and utilization of the goods; (c) to dispose of the goods or services, the .....

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te of duty free import of the said goods till the date of payment of such duty. Further Clause (ii) provides in case the goods other than capital goods, such goods as are not proved to the satisfaction of the said officer to have been used in connection with the production or packaging of goods in accordance with SION for export out of India or cleared for home consumption within a period of three years from the date of import or procurement thereof or within such extended period as the said off .....

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rms are fixed on ad hoc basis by the Jurisdictional Development Commissioner. 4. Accordingly, it appeared to Department that it is not proved to the satisfaction of the Jurisdictional Assistant/Deputy Commissioner that the raw material, etc., so imported or procured duty free to have been used in connection with the production or packaging of goods for export out of India or cleared for home consumption within a period of three years from the date of import or procurement thereof and that on bei .....

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ds. 5. Based on the information furnished by the appellant and in accordance with the provisions of law/notifications, show cause notice for recovery of duty for the period 2007 08, 2010 11, show cause notice for the period 2011-12 and show cause notice for the period 2012-13, were separately issued by the Commissioner, Central Excise Noida as detailed here in above table. The appellant on being questioned by the Revenue submitted the details of the amount of inventory written off as obsolete ra .....

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timation to the Department. The appellant had intimated to the Department on 2nd May, 2013 (RUD-4) and on 9 to May, 2013 (RUD-5) intimating therein that they intend to physically destroy the goods themselves within their premises by 14 May, 2013 and/or giving advance intimation of this activity. However, the goods were destroyed on 20th June, 2013, as is intimated by the appellant in the letter dated 23rd April, 2014 (RUD-3). Similar letter was given to the Department on 11, December, 2013 and 1 .....

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f manufacturing, which subsequently became un-usable for them. It further appeared from the said letters that the subject is self-destruction of waste and scrap material within 100% EOU premises. The information given is in terms of paragraph 6.15 (B) of Foreign Trade Policy 2009 14. It appeared to Revenue that the appellant has not gone through the provisions laid down in the Notification No. 22/2003 CE as amended and Notification No. 52/2003 - CUS as amended. It further appeared to Revenue tha .....

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ould not be ascertained. 6. It further appeared to Revenue that the appellant had bound themselves to pay duty in accordance with the Bond executed by them and as per the conditions stipulated in the aforementioned two notifications, but did not pay the amount of duty applicable on the goods written off. Thus, the appellant deliberately resorted to such modus-operandi and did not determine and pay the duty on the said goods in accordance with the notifications and as per proviso to Section 3(1) .....

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11 AC of the Central Excise Act read with Section 114 A and 117 of Customs Act. Further penalty was also proposed on Shri Rakesh Kumar Vohra, Managing Director and Shri Manish Gaur, Manager-Commercial of the appellant company-Barco. All the show cause notices are pari-materia in the contention and allegations. 7. The show cause notices were adjudicated on contest and demands were confirmed along with penalty as mentioned in the chart hereinabove. 8. Being aggrieved the appellant is in appeal be .....

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f in the relevant years and destroyed with proper intimation to the Revenue is within the 2% limit, as allowable. He further refers to their letter dated 25th February, 2015, which is addressed to the Assistant/Deputy Commissioner CUStoms and Central Excise, Division-III Noida. The said letter is reproduced herein for a better appreciation:- 25th February, 2015 The Asst/Deputy Commissioner, CUStoms and Central Excise Division III, Noida Sub: Self Destruction of waste and scrap material within 10 .....

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/unit for future production and we have decided to physically destroy them within the 100% EOU premises in terms of PARA 6.15 (B) OF FOREIGN TRADE POLLICY 2009-14read with NOTIFICATION 52/2003-CUS dated 31.03.2003. We are enclosing the list of said goods which are required to be destructed within our 100% EOU (refer Annexure-1). Accordingly, we would like to intimate your good self that we intend to physically destroy the said goods ourselves within our EOU premises, on 03.03.2015 and are giving .....

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hat as in the past we will pay the duty on these items as waste & scrap on the value realized by us. Hope the above you will find in order. Thanking you, Yours faithfully. 9. Referring to the aforementioned letter, the learned counsel stated that we have categorically informed along with the annexed list that the items in question have become un-usable/unfit for production and accordingly they are required to be physically destroyed in accordance with the said Notifications, 52/2003 CUS read .....

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ore destruction of such deffective and un-usable goods they had informed the Department in due time. The learned counsel also refers to intimation dated 10 February, 2017, which was filed on 13 February, 2017, which refers to the period subsequent to the period in dispute, wherein also similar intimation was given to the Department and the Department had deputed either Superintendent or Inspector to witness the destruction procedure and the list of defective items so destroyed have been duly end .....

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hat after going through the books of account and the balance sheets, profit and loss account etc., it was found that during the period 2009 10, goods of total value of ₹ 1,49,78,339/- which relates to exceptional material request raised by them, they have wrongly recorded as goods written off in the balance-sheet. The said items are not actually written off from the books of account, but raw material consumption, which were wrongly shown as written off. Accordingly, the value of goods writ .....

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ways given due intimation in accordance with the notification read with the Foreign Trade Policy, giving proper details of the goods which are been rendered defective and/or useless in the course of production which are intended to be destroyed. Only for the reason that the Department failed to attend the destruction process for the reason best known to them, the appellant, cannot be subjected to duty for the same. It is further urged that under the facts and circumstances, there is no case of a .....

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against the appellant company and its Manager Director and the Manager Commercial. The learned counsel further urges that from the allegations in the show cause notice, the same is self contradictory and vague and the demand is also not sustainable on this score alone. 10. The learned AR for Revenue have relied on the impugned order. 11. Having considered the rival contentions we are satisfied that the appellant, as required under the Notification No. 52/2003 CUS read with Notification No. 22/20 .....

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