2013 (8) TMI 651 - AT - Customs

Tribunal modifies duty exemptions, imposes penalties for non-compliance with post-import conditions.

The Tribunal upheld the Commissioner's order with modifications, ruling that duty exemptions were denied due to the appellant's failure to meet export ... 100% EOU - Export obligations - Rate of duty on de-bonding - Rate of depreciation of capital goods on debonding - Benefit of Notification No. 13/81 and Notification No. 123/81 - Whether in respect of the imported capital goods, raw materials and consumables which were, admittedly, used for manufacture of the goods for export the assesse were eligible for duty exemption under Notification No. 13/81-Cus. dated 9-2-1981 and similarly in respect of indigenously procured capital goods, raw materials and consumables which were used for manufacture of export goods, the assesse were eligible for Central Excise Duty exemption under Notification No. 123/81-C.E. - Held that:- The assesse had failed to achieve the export target and failed to achieve the required value addition and thereby have failed to fulfil the condition of the exemption notification, they were not eligible for duty exemption under the notification. Imported raw materials and consumables acquired free of customs duty under Notification No. 13/81-Cus. and indigenous raw material and consumables acquired free of excise duty under Notification No. 123/81-C.E. were concerned, the assesse would not be eligible for duty exemption and the duty forgone in respect of these goods has been correctly demanded – following EAGLE FLASK INDUSTRIES LIMITED Versus COMMISSIONER OF C. EX., PUNE [2004 (9) TMI 102 - SUPREME COURT OF INDIA] and State of Jharkhand v. Ambay Cements [2004 (11) TMI 319 - SUPREME COURT OF INDIA ] - if an exemption was available on complying with certain conditions, the conditions have to be strictly complied with – Decided against assesse. Rate of Duty - Whether the duty chargeable in respect of the unused raw materials and consumables and used capital goods would be at the rate in force on the date of payment of duty or at the rate in force on the date of debonding order or the rate in force at the time of import - Held that:- The warehousing period expired on 30th May, 2000 the duty liability on the goods at the time of debonding would have to be discharged on the basis of the rate of duty in force as on 30th May, 2000 - The rate of duty applicable on the goods would be the rate in force on the date of expiry of the warehousing period, irrespective of the date on which the goods were actually cleared from the bond - relying upon Kesoram Rayon v. CC, Calcutta [1996 (8) TMI 109 - SUPREME COURT OF INDIA ] and M/s. SBEC Sugar Limited & Another v. Union of India [2011 (2) TMI 227 - SUPREME COURT OF INDIA ] – Decided against the assesse. Eligibility for Depreciation - Whether in respect of clearance into DTA of capital goods, which admittedly had been used, the duty would be chargeable after permitting depreciation as on the date of debonding order or after giving depreciation as on the date of payment of duty - Held that:- There was no merit in the assesses’s plea for 100% depreciation for which there was no provision - In terms of Board’s Circular No. 43/98-Cus. prescribing the rate of depreciation, the same was to be permitted at the rate of 4% per quarter for first year, 3% per quarter for 2nd and 3rd year and 2.5% per quarter for subsequent years, subject to maximum depreciation of 90% - The Commissioner in had permitted 90% depreciation - The provisions of condition No. 5 of the Notification No. 13/81-Cus. have to be read with the Board’s Circulars issued from time to time fixing the quantum of depreciation – Decided against assesse. Confiscation of Goods u/s 111(o) and under Rule 210 of Central Excise Rules, 1944 – Penalty u/s 112(a) and under Rule 210 of Central Excise Rules, 1944 – Whether the capital goods and consumables imported by availing duty exemption under Notification No. 13/81-Cus. were liable for confiscation u/s 111(o) for violation of post-import conditions and on this count whether the assesse would be liable for penalty u/s 112(a) and also whether the indigenous excisable goods procured free of duty under Notification No. 123/81-C.E. would be liable for confiscation under Rule 210 of the Central Excise Rules, 1944 and whether the appellant would be liable for penalty under this Rule - Held that:- Penalty u/s 112(a) had been rightly imposed on the assesse and for the same reason, penalty in respect of indigenously procured excisable goods in respect of which the conditions of the exemption notification had not been fulfilled, had been rightly imposed under Rule 210 of Central Excise Rules, 1944 - the conditions of the exemption notification subject to which the goods have been imported free of duty have not been fulfilled, the provisions of Section 111(o) would be attracted and the imported goods would be liable for confiscation and hence the assesse who imported the goods, would be liable for penalty u/s 112(a) of Customs Act – Decided against assesse. Issues Involved:1. Duty exemption eligibility for imported and indigenously procured goods.2. Applicable rate of duty for unused raw materials, consumables, and used capital goods.3. Depreciation calculation for duty on capital goods.4. Liability for confiscation and penalties under Customs and Central Excise laws.Detailed Analysis:1. Duty Exemption Eligibility:The appellant, a Public Sector Undertaking, was permitted to set up a 100% Export Oriented Unit (EOU) and imported capital goods, raw materials, and consumables under duty exemption notifications. However, they failed to meet the export obligation and value addition requirements stipulated in the notifications and the EXIM policy. The Department argued that the appellant contravened the provisions of Notification No. 13/81-Cus. and Notification No. 123/81-C.E., making them ineligible for duty exemptions. The Tribunal upheld this view, citing that failure to fulfill export obligations and value addition norms results in total denial of exemption benefits, as per the conditions of the notifications and relevant legal precedents.2. Applicable Rate of Duty:The appellant contended that the rate of duty should be the rate in force on the date of payment of duty. However, the Tribunal ruled that for bonded goods, the rate of duty applicable is the rate in force on the date of expiry of the warehousing period. Since the warehousing period expired on 30th May 2000, the duty liability must be discharged based on the rate in force on that date. This principle aligns with the Supreme Court's rulings in cases like Kesoram Rayon and SBEC Sugar Limited.3. Depreciation Calculation for Duty on Capital Goods:The appellant argued for 100% depreciation on capital goods up to the date of payment of duty. The Tribunal, however, adhered to the Board's Circular No. 43/98-Cus., which prescribes a maximum depreciation of 90%. The Tribunal found no merit in the appellant's plea for 100% depreciation, affirming that the depreciation should be calculated up to the date of debonding, allowing a maximum of 90% depreciation.4. Liability for Confiscation and Penalties:The Tribunal confirmed that the imported goods were liable for confiscation under Section 111(o) of the Customs Act, 1962, due to non-fulfillment of post-import conditions. Consequently, the appellant was liable for penalties under Section 112(a) of the Customs Act, 1962. Similarly, indigenously procured excisable goods were liable for confiscation under Rule 210 of the Central Excise Rules, 1944, and the appellant was liable for penalties under the same rule.Conclusion:The Tribunal upheld the Commissioner's order with modifications:- Duty on used capital goods should be calculated with 90% depreciation at the rate in force on the date of debonding (30th May 2000).- The appellant was liable for penalties under Section 112(a) of the Customs Act and Rule 210 of the Central Excise Rules for non-fulfillment of conditions of the exemption notifications.The appeal was disposed of accordingly.