TMI Blog2022 (9) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Annexure II to the SCN - HELD THAT:- Admittedly the appellant pursuant to import have brought the capital goods to the factory (in the bonded warehouse). Such goods have admittedly, not been removed by the appellant and are still lying under bond, under the control of the Customs Department. In spite of several requests by the appellant for de-bonding, the Customs Department have not cared to allow the de-bonding, which is wholly arbitrary. It is established law that duty can be demanded on the capital goods from an EOU on the event of de-bonding. Accordingly, the demand with penalty is set aside - the respondent Commissioner are directed to allow the de-bonding of the capital goods and the appellant shall be liable to pay duty on the depreciated value, as per the applicable rate on the date of de-bonding. There being no liability to pay duty on import of the goods (for re-export) under the provisions of the Central Excise Act r/w the Customs Tariff Act, the penalty imposed under Rule 173 Q(1) of Central Excise Rules is bad and accordingly set aside. Appeal allowed. - Custom Misc. Application No. 85038 of 2019-DB in Custom Appeal No. 245 of 2010 - A/85712/2022 - Dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name, to the name of the appellant company. 4. The appellant entered into an agreement with the President of India which recorded, inter alia, that the appellant had been permitted to import capital goods worth 25 lakhs and that during the gestation period of one year, the unit had been permitted to import finished goods and re-export the same after repacking and labelling. The appellant was issued customs warehousing license No. S/15 34/85/86D dated 15th November 1985 under Section 58 of the Customs Act and were granted sanction for manufacture inbond vide letter dated 6th December 1985 under Section 65 of the Customs Act, for manufacturing, filling, packing, labelling etc. of assorted cosmetics, perfumery and toiletry products for a period of one year. Thus appellants obtained the requisite license under Section 58 of the Act for storage of the product, without payment of customs duty. By permission dated 6th December 1985, the Assistant Collector of Customs Bond, informed the appellant that they have been granted permission for repackaging and labelling of the products in bond under the supervision of the preventive officer. The permission was subject to the following con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,08,131/- namely i) labelling machine, ii) strand carton iii) wrapping machine and iv) embossing machine. The appellant brought the imported goods to the bonded warehouse and utilised all the imported cosmetics and consumables in repacking and re labelling the goods during the period 1986 1987. This was done under the supervision of the customs authority. All the repacked and re-label goods were exported A) with respect to contract No. 27/861001, the appellant filed shipping bill dated 10th December 1985 along with invoice dated 12th December 1985, showing the quantity as per the contract, packing list, receipt register of the private bonded warehouse, certified copy by preventive officer showing quantity bonded, issued utilised and nil balance, statement of issue of consumables. B) Export documents relating to contract No. 27/561183, the appellant filed shipping bill dated 26th December 1985 along with invoice dated 23rd December 1985, showing quantity as per contract, packing list, statement of issues showing quantity issued utilised, wastage, balance. C) With respect to Contract No. 27/661250 the appellant filed shipping bill dated 29th September 1986 alongwith in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause notice dated 25th July 1989. 14. On 11th November 1990, the appellant entered into an agreement with the USSR for supply of goods worth Rs. 10.02 crores. The supplies were to be effected from the 1st quarter of 1991. However, soon thereafter, the USSR disintegrated. Thus due to super vening impossibility or difficulty, the appellant were unable to start the export. 15. On 12th September 1991 the appellants were granted the industrial license. Thereafter, warehousing license dated 25th November 1992, under Section 58 was issued for storage of raw materials and packaging materials in respect of the said plot. The appellants were permitted to manufacture in those premises under bond as per section 65 of the Act. 16. That the appellants regularly corresponded with the authorities for extending the validity of the industrial license and the same was extended up to 11 September 1996. In the meantime, the Import Export Control Act, 1947 was repealed and Foreign Trade (Development and Regulation) Act, 1992 was enacted. After issue of the new Act, the Additional Director General of foreign trade issued fresh notice to the appellants, and thereafter vide ex parte order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of hearing of their stay application before this Tribunal, when this was filed by the revenue before this Tribunal in the month of October/November 2011. 20. No action was taken by the Customs Department after filing of the reply to the audit objection in December 1996, till 12th April 2000. On 13th April 2000, the present show cause notice was issued demanding custom duty of Rs. 33,00,23,404/- allegedly for non-fulfilment of the condition achievement of 20% value addition and further demand of Rs. 64,08,325/- on the capital goods imported for setting up of the factory and manufacture under bond, which had been warehoused and had not been de-bonded till date. Further penalty was also proposed. It is noteworthy that there is no allegation of suppression, in respect of these demands. The appellant contested the SCN and filed the detailed reply on 26th September 2000. 21. During pendency of the adjudication of the SCN, the Commissioner of Central Excise, Thane addressed a letter dated 23rd August 2004 to the Member-CBEC with respect to the affairs of the appellant, inter alia stating that: i) The Show Cause Notice issued by the Ministry of Commerce in 1989 and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24. The Hon'ble Bombay High Court taking notice of the letter of the learned Commissioner dated 23rd August 2004 addressed to the member CBEC, as aforementioned, set aside the stay order of this Tribunal and directed for hearing of the appeal without any pre deposit. 25. By order dated 24th November 2014, the Hon'ble Delhi High Court in WP No. 6353 of 2012 was pleased to set aside the rejection of appeal communicated by letter dated 13th October 1997 and remanded the matter back to the Appellate Committee of DGFT. The Appellate Committee by its order dated 14th March 2017 held that as the matter was very old and many records were not available, but with available records and submissions made, it appeared that the appellant had availed of duty free benefit of import with the condition that they would export. This has not happened hence, the appellant are defaulter and hence, there is no scope for reducing the penalty. Being aggrieved the appellant filed writ petition before Hon'ble Delhi High Court being WP No. 7863 of 2017, challenging the order, and by order dated 6th September 2017, the Hon'ble Delhi High Court have issued notice giving directions to file a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd brought on record. Hence, the same is a good and reliable piece of evidence which cannot be ignored. Accordingly, the penalty imposed of matching amount is also fit to be set-aside. 30. With respect to the 2nd demand of Rs. 64.08 lakhs approx., it is urged that the learned Commissioner have erred in holding that the appellant is liable to pay duty on capital goods, without considering the fact that Serial No. 1 of Annexure 1 to the SCN, relates to import of capital goods which were used to repack/re-labelling the imported finished goods listed at of Annexure II to the SCN. Thus the duty has been demanded mechanically without application of mind. 31. It is further submitted that the capital goods as set out at No. 2 4 of Annexure-I were imported and installed in the bonded warehouse (factory premises) sometime in 1990. The appellant had set up the factory at great expense. The factory was set up being bonded premises with a view to manufacture cosmetics, which were to be exported to the USSR. Unfortunately soon after the import of machinery, and by that time the factory could be established and production started, the USSR disintegrated in the year 1991. The appellant tried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f confiscation of capital goods is bad as the goods are still lying under bond in the bonded warehouse (factory premises). Evidently, the appellant have not violated any of the conditions/rules of warehousing. The learned Commissioner in para- 26 of the impugned order have admitted that the bonded goods were not cleared from the warehouse even after the expiry of the warehousing period. Thus holding of the goods liable to confiscation under Section 111 (j) of the Customs Act, holding dutiable goods removed or attempted to be removed from the customs area or warehouse by not paying custom duty even after expiry of the warehousing period, is erroneous and illegal. 37. It is further urged that evidently, the appellant could not manufacture and export finished goods to the USSR as it disintegrated in the year 1991, when still the factory of the appellant was under the setup stage. Thereafter, in spite of the best efforts, the appellant could not get export orders from the separated countries of the USSR. Thus, there was genuine reason due to super vening impossibility in performance of its contract, as required under the Bond, submitted to the Customs Department. Thus, under the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 43. Opposing the appeal, Learned Authorised Representative for revenue contended that there is a clear finding by the Additional DGFT to the effect that the appellant have failed to fulfil the export obligation and thereafter, action have been initiated by the Adjudicating Authority, there being a clear finding by the Competent Authority. The Competent Authority have come to the conclusion that the appellant have not fulfilled the terms and conditions of the LOI and approval granted for setting up of the EOU. The appellant have violated the terms and conditions of Notification No. 13/1981 Cus as amended, and therefore, they have been rightly held liable to duty as demanded for non-fulfilment of export obligation. The learned AR also relies on the ruling of the Hon'ble Bombay High Court in the case of Bombay Hospital Trust vs. CCE 2006 201 ELT 555 , wherein it have been held that violation of post clearance condition of exemption notification would attract the provisions of Section 111 (o) of the Customs Act, whereby the imported goods can be confiscated with an option to redeem the same by imposing fine in lieu of confiscation under Section 125(1) of the Customs Act. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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