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TMI Blog2023 (9) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst Release Advice No.4 dated 6.7.2012 issued by Assistant Commissioner of Customs, New Customs House (EPCG Section) Mumbai against EPCG licence no.0530158560 dated 15.6.2012 issued in the name of M ISGEC Heavy Engg. Ltd., Plot No.13-B, GIDC, Dahej (DTA Buyer). The said bill of entry was provisionally assessed under which the subject capital goods/ machineries were removed to EPCG licensee (license no.0530158560/2/11/00 dated 15.6.2011 holder in DTA to their sister concern M/s ISGEC Hitachi Ltd, Dahej Unit. The subject capital goods were imported vide Bill of entry No.DSEZ/013/2011-12 dated 20.6.2011 in the SEZ unit from Switzerland by M/s Saraswati Industries Syndicate Ltd, Plot No.Z-89, SEZ, Dahej. The assessable value of said capital goods was taken as Rs.218083271/- and total duty forgone was amounting to Rs.52140999/- and Bill of entry was assessed on 20.6.2011. 2. The clearance of the said capital goods under EPCG scheme was allowed under provisional assessment as per provisions of SEZ Act/Rules. The department's case was that appellant has not exited from Special Economic Zone and they were not eligible for clearing the capital goods under the prevailing Export Promotion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P) Ltd vs Masood Ahmed Khan-2010(9)SC496 iii. the application of the Rules specifically to the facts of the case has been omitted in the impugned order and there is no finding against the submissions advanced by the appellant so violation of principles of natural justice and is liable to set aside; iv the appellant is legally permitted to sell capital goods to a DTA buyer under an EPCG scheme; v. there is agreement to the fact that the appellant had validly imported the Plate Bending machine for its authorized operations, however, there is no provisions under the SEZ Act, 2005 or SEZ Rules, 2006, which prohibits the sale of a capital goods held by an SEZ unit either to a buyer in the DTA or outside India: vi that the department is incorrect in interpreting that the removal of capital goods under EPCG is only available as per Rule 74(4) of the SEZ Rules, 2004 i.e. only at the time of exit of a unit from SEZ and that there is a bar on otherwise claiming benefits under the EPCG scheme at the time of clearance of goods into the DTA; as none is specifically mentioned. vii. `Sale of plate bending machine into the DTA is to be considered as an import of capital goods into India; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ports. This means that any clearance into the DTA shall be at the same effective rate of duty as in the situation of import, meaning thereby that exemptions available at the time of import shall also be available to a DTA buyer. Reference is made to the following judicial decisions: * Adinath Trade Link Vs. Commissioner of Customs, Kandla, [2013 (293) E.L.T. 746 (Tri. - Ahmd.)] Maintained by the Hon'ble Gujarat High Court in [2015 (315) ELT 359 (Gujarat High Court)] Adani Power Ltd. vs Union of India 2015 (330) ELT 883 (Guj) Maintained by * the Hon'ble Supreme Court in [2016 (331) E.L.T. A129 (S.C.)]. A.3. It is submitted that identical propositions relating to the payment of effective duty have also been discussed in the following judicial decisions and circulars: * CBEC Circular issued vide F. No. 81/65/87-CX.3 dated 02.11.1989; * Plastics Processors Vs. Union of India, [2002 (143) E.L.T. 521 (Del.)]; * Jain Irrigation Systems Ltd. Vs. Commissioner of Central Excise, Nasik, [2008 (221) E.L.T. 531 (Tri. - Mumbai)]; * Premier Rubber Factory Vs. CCE, [1990 (47) E.L.T. 125 (Tribunal)]. A.4. Further, it has been settled by the Hon'ble Supreme Court in the case of Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completely incorrect. DTA buyer can obtain an EPCG Authorization to indigenously procure capital goods- As per Rule 47 of the SEZ Rules, removal of goods (which have not been subjected to any manufacturing process) to DTA is governed by relevant Foreign Trade Policy ("FTP"). This rule creates a deeming fiction that such goods are being imported into India. Thus, it is established that the intention of the legislature vide SEZ law was to allow a SEZ unit to sell its goods to DTA, subject to compliance with FTP. Further, under Para 5.5 of Handbook of Procedure ("HBP") a DTA buyer can obtain an EPCG Authorization to indigenously procure capital goods. In the present case, the impugned goods have not undergone any manufacturing process, hence, the same can be sold to DTA unit of the Appellant having an EPCG Authorization. Thus, there has been no violation of SEZ law by the Appellant. DEMAND FOR CUSTOMS DUTY AND INTEREST IS ILLEGAL AND IS LIABLE TO BE SET ASIDE Duty and interest cannot be demanded by the SEZ Unit- Rule 48 (1) of SEZ Rules states that it is the duty of a DTA unit to file Bill of Entry for home consumption of goods being cleared from a SEZ unit. In the present case, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Excise Act, 1944 creates a legal fiction that clearances from 100% EOUs are to be treated at par with imports and therefore DTA clearance of capital goods to EPCG units by EOUs is permissible by payment of concessional rate of duty under the EPCG exemption notifications. Similar legal fiction is being created by Section 30 of SEZ Act. Similarly, in the case of Semco Electric Pvt. Ltd. Vs. CCE, Goa, [2019 (370) E.L.T. 1052 (Tri.-Mumbai)], the hon'ble tribunal has held that an EOU unit is authorized to sell capital goods in DTA after payment of applicable duties subject to compliance of Customs Procedures. Now, since EOUs and SEZs work essentially on similar principles, these judgments will be equally applicable in the present case. Hence, in view of the above, no duty can be demanded by the DTA buyer. 9. No duty can be demanded as the DTA buyer has fulfilled its Export Obligation under the EPCG Authorization: Under the EPCG Scheme, capital goods are allowed to be imported at concessional rate of duty. In lieu of the concessional rate of duty, the EPCG Authorization Holder has to fulfil its Export Obligation ("EO") fixed by the DGFT Authorities. In case where an EPCG Authorization ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trepreneur or Developer does not utilize the goods or services on which exemptions, drawbacks, cess and concessions have been availed for the authorized operations or unable to duly account for the same, the entrepreneur or the Developer, as the case may be, shall refund an amount equal to the benefits of exemptions, drawback Customs Act, 1962, the Customs Tariff Act, 1975, the Central Excise Act, 1944, the Central Excise cess and concessions availed without prejudice to any other action under the relevant provisions of the Tariff Act, 1985, the Central Sales Tax Act, 1956, the Foreign Trade (Development and Regulate Act, 1992 and the Finance Act, 1994 (in respect of service tax) and the enactments specified in the Fes Schedule to the Act, as the case may be: Provided that if there is a failure to achieve positive net foreign exchange earning, by a Unit, such entrepreneur shall be liable for penal action under the provisions of Foreign Trade (Development and Regulation) Act, 1992 and the rules made there under. Rule 34 of the SEZ Rules, 2006 (Utilization of goods)- The goods admitted into a Special Economic Zone shall be used by the Unit or the Developer only for carrying out the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revailing Export Promotion Capital Good Scheme under the Foreign Trade Policy subject to the Unit satisfying the eligibility criteria under that Scheme. 12. In response to various submissions by the appellant AR submitted that Commissioner (Appeals) has correctly found that since the appellant has not exited from Special Economic Zone, they were not eligible for clearing the capital goods under the prevailing Export Promotion Capital Goods Scheme, as removal of capital goods from SEZ unit under EPCG is only available as per the Rule 74(4) of the SEZ Rules, 2006. On scrutiny of the relevant Sections and Rules of SEZ, it is explicitly clear that there is no bar on clearance of capital goods from SEZ to DTA under EPCG, but following the condition that a unit can opt for EPCG scheme only at the time of Exit, as per SEZ Rules, 2006 with one time permission from the Development Commissioner. Since the Unit had not exited from the SEZ nor any such permission from the Development Commissioner was taken therefore, the capital goods cleared are in contravention of the provisions of the SEZ Act/Rules and hence liable to re-workout the value as per provisions of Section 30 of SEZ Act, 2005 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and accessories" under EPCG scheme under licence no.0530158560/2/11/00 dated 15.6.2011, to their sister concern M/s ISGEC Hitachi Ltd which were cleared provisionally on payment of customs duty at concessional rate @ 3% only and appropriate Customs duty was not discharged. That Rule 49(1) of the SEZ Rules, 2006, stipulates that Development Commissioner may permit a Unit, as one time option, to exit from Special Economic Zone on payment of duty on capital goods under the prevailing Export Promotion Capital Goods Scheme under the Foreign Trade policy subject to the Unit satisfying the eligibility criteria under that Scheme. Since the SEZ unit has not exited from Special Economic Zone, they were not eligible for clearing the capital goods under the prevailing Export Promotion Capital Goods Scheme. That there is no bar on clearance of Capital goods from SEZ to DTA under EPCG, but following the condition that a unit can opt from the Development Commissioner. Since the Unit had not exited from the SEZ nor any such permission from the Development Commissioner was taken, therefore, the capital goods cleared are in contravention to the provisions of the SEZ Act/Rules and hence, liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e legislature has made a special provision by mentioning a particular export promotion Scheme to be availed only at the time of exit, same cannot be allowed to be freely availed at any time under a provision in which there is no prescription of capital goods to be cleared under EPCG Scheme is available. In this context, we are fortified in interpreting the provision of statute by the trite law that when a method has been laid down, , it necessarily prohibits the doing of the act in any other manner than that which has been prescribed, and thus, the prohibition in other provision not being mentioned specifically will not apply. In Taylor v. Taylor ((1875) 1 Ch D 426), as notably followed in Nazir Ahmed v. King Emperor [AIR 1936 PC 523] and a plethora of judgments of the Supreme Court, the most well- known being, perhaps, State of Uttar Pradesh v. Singhara Singh [AIR 1064 SC 358], conclude the issue, in law, in favour of the department. The legal principle, fossilised over a period of time, is thus enunciated, in Singhara Singh [AIR 1964 SC 358] "8. In Nazir Ahmed's case [AIR 1936 PC 523] the Judicial Committee observed that the principle applied in Taylor v. Taylor [(1875) 1 C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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