TMI Blog2021 (1) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... at Nil rate of duty claiming exemption under Notification No.21/2002-Cus. dated 1.3.2002 and have cleared crystal oscillators and crystals to M/s. BEL under Notification No.39/1996. In both cases, Customs duty is Nil and CVD is exempt subject to the condition that the importer produces the required certificates from Department of Space or the competent authority. The adjudicating authority has given a clear finding that the appellants have produced the required certificates. These facts are not under dispute. As per the Notification, the Customs duty forgone on inputs required to be repaid by the importer under the two conditions: (i) if the finished goods are not excisable and (ii) the finished goods, if imported are liable to Nil rate of Customs duty under First Schedule as well as the additional duty (CVD) under Section 3 of Customs Act, 1962. Now, it requires to be seen whether the final goods cleared by the appellant to M/s. BEL and ISRO fulfill the above conditions. The appellants have cleared hybrid micro circuits to M/s. ISRO at Nil rate of duty under Notification No.21/2002-Cus. dated 01.03.2002 and have cleared crystal oscillators and crystals to M/s. BEL unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Customs Appeal No. 108 of 2009 - Final Order No. 20002/2021 - Dated:- 4-1-2021 - MR. S.S GARG, JUDICIAL MEMBER AND MR. P. ANJANI KUMAR, TECHNICAL MEMBER For the Appellant : Mr. M.S. Nagaraja, Advocate For the Respondent : Mrs. C.V. Savitha, Superintendent (AR) ORDER This appeal is directed against Order-in-Appeal No 128/2008 dated 29.10.2008 passed by Commissioner of Customs (Appeals) on an appeal filed by the appellants against the Order-in-Original No 08/2008 dated 26/29.02.2008 passed by Joint Commissioner of Customs. Brief issue involved is whether the appellants have violated the conditions of Notification No 52/2003-Cus dated 31.3.2003 read with Notification No 22/03-CE dated 31.03.2003 and thus rendering the imported goods liable for confiscation; rendered themselves to pay applicable duty on the raw materials imported and used in the manufacture of final products and as to whether they are liable for penalty. 2. Brief facts of the case are that the Appellant , M/s Centum Electronics Limited, Bangalore (formerly known as M/s Solectron Centum Electronics Limited), a 100% EO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were to be imported and if such imported goods were leviable to Nil rate of Customs duty, then no exemption would be available in respect of the inputs utilized in the manufacture of such finished goods; ; Hybrid Micro Circuits and Crystal Oscillators Crystals, when imported, are classifiable under CTH 8542 3100 8541 6000 respectively, attracting basic Customs duty @ Nil (effective rate) and Additional duty of Customs @ 10% under Section 3(1) of the Customs Tariff Act, 1975(equivalent to the Excise duty leviable on the like article manufactured in India); it is not shown in the Show Cause Notice or the impugned orders that the subject goods when imported attract Nil rate of Customs duty; these Notifications are also not applicable on clearance of the finished goods by 100% EOU in DTA; therefore, the said final products if imported were not exempted goods or leviable to Nil rate of Customs duty. 5. Learned counsel for the appellants also submits that EOU is required to assess and pay excise duty on the goods manufactured and cleared in DTA in terms of Section 3 of the CEA, 1944 read with Notification No 23/2003 CE dated 31.3.2003; finished products even if not exported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rosoft India (R D) Pvt Ltd 2014 (300) ELT 149 (Tri-Bang) 8. Learned counsel for the appellants submits, as regards penalty, that a plain reading of Section 112 (a) ibid reveals that penalty is imposable under this section on any person who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 111, or abets the doing or omission of such an act; when the goods are not available and liable for confiscation, the penalty imposed under Section 112 (a) of the Customs Act, 1962 is also not sustainable as it is contingent upon the goods being liable for confiscation. 9. Learned Authorised Representative for the department submits that the main contention of the appellant appears to be that finished goods were taxable and Central Excise Duty was to be demanded on finished goods and not the Customs duty foregone on inputs imported by them; the issue to be decided is whether demand on the duty foregone on inputs is sustainable or not; as there is no demand of Central Excise duty on finished goods, the argument on the same is beyond the purview of SCN. The meaning of Proviso, to Para 3 of Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... import of inputs; this is a post import condition which is applicable in this case as it is based on clearance of finished goods. Therefore, duty not collected, at the time of import of raw materials, becomes payable at the time of clearance of final goods as the conditions of Notification 52/2003 Cus dt.31.03.2003, are violated. 12. Learned Authorised Representative submits that the appellants knew about the fact of clearance of finished goods at Nil rate and thus regarding his liability to pay the duty foregone on inputs; they cannot claim the benefit of exemption on finished goods and also justify the exemption on inputs at the same time. Further, clearance of finished goods had taken place during the period March 2007 to July 2007, the appellants have not obtained permission for the said DTA sales as is evidenced by the fact that the letter seeking permission is dt.15th May 2007 and subsequently SCN has been issued on 08.10.2007. Hence the claim of the party they have been permitted to carry out the aforesaid sales is not correct. Relying on Apex Courts judgement in Dilip Kumar case2018 (361) ELT 577 (S.C.), learned AR submits that an exemption notification should b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il additional duty leviable under Section 3 of the Customs Tariff Act, read with exemption notification in this regard, if any, no exemption in respect of inputs utilised for the purpose of manufacture of such finished goods (including rejects, waste, scrap, remnants and by-products) shall be available under this Notification. Provided that where such finished goods (including rejects, waste, scrap remnants and by-products) are not excisable, customs duty equal in amount to that leviable on the inputs imported under this notification and used for the purpose of manufacture of such finished goods, which would have been paid but for the exemption under this Notification shall be payable at the time of clearance of such finished goods. 16. Plain reading of the above provision gives a clear understanding that the Customs duty forgone on inputs required to be repaid by the importer under the two conditions: (i) if the finished goods are not excisable and (ii) the finished goods, if imported are liable to Nil rate of Customs duty under First Schedule as well as the additional duty (CVD) under Section 3 of Customs Act, 1962. Now, it requires to be seen whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods, respectively, by EOUs and EHTP/STP units, have been amended. We also find that in terms of Para 6.8j, in case of DTA sale of goods manufactured by EOU/EHTP/STP/BTP, where basic duty and CVD is Nil , such goods may be considered as non-excisable for payment of duty. 18. In view of the above discussion, it is clear that the finished goods supplied by the appellants to M/s. BEL and ISRO are exempt from payment of customs duty as well as additional customs duty. Therefore, in terms of proviso to Para 3 of the Notification No.52/2003 and the CBEC Circular No.54/2004-Cus. dated 13.10.2004 the appellants are required to pay the duty foregone, on the inputs imported duty-free. There is no confusion in the wordings of either the notification or circular. The appellants have argued on the basis of the case law cited by them. We find that the said cases are not relevant as the facts of the case are not identical. The dutiability of final products cleared by the EOU/EHTP/ units was the subject matter of the discussion in the cases cited. Whereas, in the instant case, duty has been demanded on raw materials which have been imported duty free as the final products a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D) Pvt. Ltd.: 2014 (300) ELT 149 (Tri.-Bang.) held that in case of STPI units, confiscation and penalty are not sustainable as the goods were imported after necessary approvals by STPI. We find that in the instant case too, the import of raw material, on which duty was demanded, was allowed by the customs authorities. We find that the show-cause notice seeks to invoke the provisions of warehousing saying that the imported bonded goods have been removed without payment of duty. We find that such an argument is quite out stretched. The mistake or lapse on the part of the appellant is that they have not repaid the duty foregone on the imported raw materials at the time of clearance of duty-free final goods in the DTA. The proper course of action, in such violations, is to recovery duty along with interest. Duty has been paid along with interest on being pointed out. In view of the facts of the case and the case law cited above, we are of the considered opinion that confiscation and imposition of penalty are not warranted in the instant case. 21. In view of the above, the appeal is partly allowed by setting aside confiscation, redemption fine and penalty. Duty demanded which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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