TMI Blog2024 (1) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... uts or raw materials, the condition is that they shall be used in connection with or in relation to the production or packaging of finished goods with in the specified time period or such extended period, as may be allowed; such finished goods may either be used in accordance with Standard Input Output Norms (SION) for export out of India or cleared for home consumption, as may be permitted by the JDC, SEEPZ in terms of extant provisions of EOU Scheme under the Foreign Trade Policy. In the present case, the facts of the case indicate that out of the imported duty free raw material/inputs for a total value of Rs.73.85 lakhs, part of it were used in the manufacture of finished goods at the EOU unit and remaining part of the raw materials/inputs which were lying in stock, at the time of de-bonding of the EOU unit of the appellants. In terms of the aforesaid condition, payment of an amount equal to duty leviable on the goods and applicable interest would arise, only if the imported duty free raw material/inputs have not been used either for export or for DTA home consumption. This is not the case of the appellants. The appellants have not violated the condition specified in parag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of LOP issued for their EOU and executed Letter of Undertaking (LUT) with the Joint Development Commissioner, SEEPZ. In pursuance of the LOP given and LUT executed by the appellants, they were allowed duty free import or procurement of capital goods, raw material, components and other required items as approved by the Development Commissioner, in terms of notifications No.52/2003-Customs and No.22/03-C.E. dated both dated 31.03.2003. The appellants had also executed necessary B-17 Bond with the jurisdictional Central Excise authorities to comply with the conditions of the aforesaid notifications. The appellants had imported capital goods and raw materials duty free by availing the above notifications for use in their 100% EOU for manufacture and export of finished goods. However, due to recession in the export market and availability of cheap alternate products there was no demand for the finished product manufactured by the appellants. Thus, they had applied to the JDC, SEEPZ for advance clearance of goods in Domestic Tariff Area (DTA) with the expectation that the export market may pick-up in near future and cleared the goods on payment of applicable duty. However, as they coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the demand of differential duty of Rs.6,83,301/- under Section 28 of the Customs Act, 1962 along with interest and imposed mandatory penalty on the appellants under Section 112(a) ibid besides confiscation of imported goods under Section 111(o) ibid and allowing the same on redemption fine of Rs.1,00,000/- under Section 125 ibid. The appellants had filed an appeal against the aforesaid order before the appellate authority. The learned Commissioner of Customs (Appeals) while deciding the case, had confirmed the order of the original authority in respect of duty demand and interest, and confiscation of the impugned goods but reduced the penalty imposed under Section 112(a) ibid to Rs.5,000/- as the assessments were provisional and as he found that there is no case for evasion of duty with an intention to evade duty or suppression of facts. Being aggrieved with the impugned order, the appellants have preferred this appeal before the Tribunal. 3.1. Learned Advocate for the appellants contended that they have paid all applicable duties in respect of raw materials, capital goods and finished goods in terms of existing legal provisions, when the appellants EOU unit was de-bonded. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with one of the conditions prescribed under Notification No. 52/2003-Customs dated 31.03.2003 as amended. The relevant condition of the said Notification is as follows: (d) to pay on demand (I) An amount equal to duty leviable on the goods and interest at a rate as specified in the notification of the government of India in the Ministry of Finance (Department of Revenue) issued under Section 28AB of the said Customs Act on the said duty from the date of duty free import of the said goods till the date of payment of such duty, if - (i) In the case of capital goods, such goods as are not proved to the satisfaction of the said officer to have been installed or otherwise used within the unit within a period of one year from the date of import or procurement thereof or within such extended period not exceeding five years as the said officer may, on being satisfied that there is sufficient cause for not using them as above within the said period, allow; (ii) In the case of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 of the Order-in-Original has rightly held that in view of para 1(3)(d)(ii) of Notification 52/2003-Cus. And para 1(4)(b) of Notification 22/2003-CE both dated 31.03.2003, the duty on imported raw materials not used in the export of goods is recoverable from Appellants. 7. We find from the factual matrix of the case, that the appellants had imported capital goods, raw materials, inputs after having obtained valid LOP for an EOU and upon execution of LTU to abide by the conditions of the notification No.52/2003-Customs dated 31.03.2003. These goods were also used in the manufacture of finished goods and awaiting the export orders, the appellants had also obtained advance DTA clearance permission of finished goods from the JDC, SEEPZ. Thus at the time of import of such goods, and their use in the EOU premises for manufacture of finished goods, there was no apparent violation of the said notification by the appellants. However, due to the reasons adduced by the appellants in their appeal memorandum, they were unable to export the finished goods and thus had sought permission from JDC, SEEPZ and informed the jurisdictional Central Excise authorities for paying the appropriate di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C letter for issue of final debonding permission by the JDC, SEEPZ. Accordingly, differential duty in respect of capital goods imported duty free for the EOU operations, inputs/raw materials procured duty free which were lying in stock, were paid along with applicable interest. However, later the differential duty on the inputs/raw materials procured duty free which were consumed in the finished goods which have been cleared in DTA have been demanded, on the ground that the raw materials have not been consumed in the finished products exported and on the other hand have been cleared for DTA consumption. It is also seen that the same jurisdictional Central Excise authorities have accepted the voluntary payment of differential duty on finished goods cleared for DTA and finalized the issue without issue of show cause notice in terms of legal provisions under Section 11A(2B) of the Central Excise Act, 1944. Thus, we are unable to appreciate how and on what basis, the learned Commissioner (Appeals) had come to the conclusion that demand raised in this regard, by the original authority is sustainable. In fact such an assertion in the impugned order is contrary to the facts of the case on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n specified in paragraph 1(3)(d)(ii) of the Notification No. 52/2003-Customs dated 31.03.2003 as amended. 8.3 We further find that the issue in dispute in the present case in no more res integra in view of the decisions taken by the Co-ordinate Bench of the Tribunal in the case of (i) Sanjari Twisters (Supra) and (ii) Sarla Polyester (Supra) holding that no duty is required to be paid on the raw materials used in the finished products sold by the EOUs in domestic tariff area. These decisions of the Tribunal have also been upheld by the Hon ble Supreme Court in a number of cases by dismissing the Civil Appeals filed by the department. The extract of the relevant paragraphs in the said orders is extracted below: Sanjari Twisters 3. The Commissioner vide his impugned order confirmed the demand of duty on certain finished goods, wastes and rejects cleared by the respondent who are a 100% EOU. These clearances were effected by them into DTA. However, he did not demand the duty on the duty free imported raw material used in the manufacture of such goods on the ground that the respondents being a 100% EOU, only Central Excise duty in terms of Section 3 of the Central Excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he goods in DTA without obtaining the permission of Development Commissioner therefore, the appellant failed to follow the procedure laid down under the EXIM Policy and failed to fulfil the condition of exemption Notification No. 52/2003-Cus., dated 31-3-2003. There is no dispute in the fact that though the appellant have not obtained the permission from Development Commissioner for removal of goods in DTA but the appellant have paid full duty on the finished goods wherein, such imported raw material have been consumed. In case of 100% EOU, as per the policy, the appellant is required to clear the finished goods for export and if any part of the finished goods cleared in DTA, they are required to pay the excise duty equivalent to all customs duty. As per this policy in respect of DTA clearances, the customs duty which was forgone at the time of import of raw material gets subsumed in the excise duty paid on the finished goods at the time of clearance in DTA therefore, the customs duty which was forgone at the time of import stands paid in the form of excise duty on the finished goods. Once the duty free raw material got consumed in the manufacture of final product and the final pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nit in a factory in a free trade zone using imported raw materials or components are cleared to a buyer in the domestic tariff area they are not imported. The 100% export oriented unit and a free trade zone are located in India. What is correctly payable is excise duty. The proviso under sub-section (1) of Section 3 of the Central Excise Act, 1944 provides that the duties of excise payable on such goods manufactured in a free trade zone or by export oriented unit shall be equal to the aggregate of the customs duties leviable under Section 12 of the Customs Act, 1962 on like goods imported into India. It also provides that where such duties are ad valorem the value shall be determined in accordance with the provision of the Customs Act, 1962 and Customs Tariff Act, 1975. The measure, therefore, in the statute for the calculation of duty is the customs duty payable on such goods if they were imported. The levy and collection of duty is covered to be governed by the provisions of enactments relating to Central Excise. The provisions of the Customs Act, 1962 and Customs Tariff Act, will have no application in this regard. 3. On this point, without going to the merits of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that the value of deemed export should be included while determining the FOB value of export, based on which DTA clearances are permitted. However, in this case, the assessee is not in appeal before us. The duty on finished goods stands demanded on the ground that the same is in excess of the permissible limit for the purpose of DTA clearance. The department s claim is to the effect that the raw material used in such finished products cleared in DTA should be treated as not used for the intended purposes and the duty on import should be demanded. We do not agree with this view. In this case, it cannot be said that the raw materials have not been used for the intended purpose. Even if there was clearances in excess of permissible limit it may amount to be case of diversion of finished goods, the duty shall be payable in respect of finished goods and no duty become demandable on the raw material used in the manufacture of such diverted goods. 6. Therefore, the appeal by the department is rejected. The above decision of the Tribunal was maintained by the Hon ble Supreme Court by dismissing the revenue s appeal reported at Commissioner v. Sanjari Twisters - 2010 (255) E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same particulars were reflected in their monthly ER-2 return. In this fact when the department was in complete knowledge regarding the clearance of finished goods in DTA, they were not prevented from verifying the fact that whether the appellant have obtained the permission from Development Commissioner or not. However, the department has not raised any objection at the relevant time, it is only subsequently on scrutiny of ER-2 return were carried out. There is no change of circumstances at the time of clearance of goods, filing of ER-2 return and the verification of the same at the later stage therefore, there is absolutely no suppression of fact or misdeclaration with intend to evade payment of duty on the part of the appellant. Therefore, we are of the clear view that extended period of demand cannot be invoked hence the demand for extended period is not sustainable on limitation also. 9. From the above, we find that appellants have duly provided all the details necessary for debonding of the raw material/inputs, capital goods and paid the applicable duties in the present case. Thus, we are of the view that the alleged violation of 111(o) ibid, as concluded in the impug ..... X X X X Extracts X X X X X X X X Extracts X X X X
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