100% EOU appeal allowed for DG sets exemption, confiscation and penalties set aside, refund ordered

The Tribunal allowed the appeal of the 100% EOU, holding the DG sets eligible for exemption under Notification No. 53/97-Cus. The confiscation and penalties imposed by the Commissioner were set aside, emphasizing that delays by statutory authorities in permissions should not disqualify the appellants from notification benefits. The Tribunal ruled that the transfer of power to the DTA did not violate notification conditions, citing relevant case laws, and ordered the refund of amounts paid under protest with statutory interest.

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Issues Involved:
1. Eligibility for exemption under Notification No. 53/97-Cus.
2. Confiscation and imposition of penalties.
3. Demand of customs duty and interest.
4. Procedural compliance and permissions.
5. Validity of the transfer of power to DTA.
6. Appropriation of amounts paid under protest.
7. Applicability of case laws and precedents.

Summary:

1. Eligibility for Exemption under Notification No. 53/97-Cus:
The appellants, a 100% EOU, imported 3 DG sets claiming exemption u/s Notification No. 53/97-Cus. The Commissioner held the DG sets ineligible for exemption due to the alleged violation of notification conditions by transferring power to DTA without required permissions.

2. Confiscation and Imposition of Penalties:
The Commissioner ordered the confiscation of the DG sets valued at Rs. 11,18,01,269/- u/s 111(o) of the Customs Act, 1962, with an option to redeem on payment of a fine of Rs. 25,00,000/-. A penalty of Rs. 10,00,000/- was also imposed u/s 112(a) of the Customs Act, 1962.

3. Demand of Customs Duty and Interest:
The Commissioner demanded Rs. 5,67,95,045/- as customs duty foregone on the DG sets and appropriated the amount paid under protest. Interest was also demanded from the date of import till the date of payment of duty.

4. Procedural Compliance and Permissions:
The appellants argued that they had informed the Jurisdictional DC of Customs about their intention to transfer surplus power and had been following up with BESCOM and CSEZ for necessary permissions. They cited the Apex Court decision in CCE v. Tullow India Operations Ltd., emphasizing that delays by statutory authorities should not disqualify them from notification benefits.

5. Validity of the Transfer of Power to DTA:
The Tribunal noted that the transfer of power to the appellants' own DTA does not amount to a sale, thus no duty on raw materials is applicable. The DG sets were bonded goods, and duty can only be demanded when de-bonded at clearance. The Tribunal referenced several case laws supporting this view.

6. Appropriation of Amounts Paid Under Protest:
The appellants contended that the Rs. 5.68 crores collected before the Show Cause Notice was issued should be refunded with statutory interest, citing Supreme Court decisions in Kuil Fireworks v. UOI and Sandvik Asia Ltd. v. CIT.

7. Applicability of Case Laws and Precedents:
The Tribunal applied the principles from Indian Charge Chrome Ltd. v. CCE and Hanil Era Textile Ltd. v. CCE, where diversion of surplus power to DTA did not violate notification conditions. The Tribunal concluded that the appellants had not violated the notification conditions and that delays in obtaining permissions were not attributable to them.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal with consequential relief, if any, and emphasized that procedural delays by statutory authorities should not penalize the appellants. The operative portion of the order was pronounced in open court.

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