2019 (4) TMI 397 - HC - Customs

Customs case: Court affirms duty demand and penalties for delayed use of imported goods by Export Oriented Units

UNIWORTH LTD. Versus COMMR. OF CUS. & CENTRAL EXCISE, RAIPUR

The Court upheld the Commissioner's decision in a customs case involving the retrospective application of an amended notification on the timeline for ... 100% EOU - Effect of notification - N/N. 65/99-Cus., dated 19-5-99 - requirement of notification is that the imported capital goods shall be used within a period of one year from the date of importation or procurement - the appellant had imported the goods in November, 1997 i.e. prior to the date of issuance of the subject notification. Held that:- On a close scrutiny of the amended notification it is clearly discernible that the amended notification provides for procurement of goods either from a public warehouse or a private warehouse, in addition to import. The condition of installation of capital goods within one year was, thus, made applicable both for goods which are imported duty free as well as procured duty free, the appellant having procured the capital goods from its bonded warehouse at Nagpur, it falls under the second category and having thereafter failed to complete installation of goods so procured within one year or even within extended period of five years it is liable to pay Customs duty because the rewarehousing was done after 19-5-1999. In any case, even in the pre-amended notification the appellant was under obligation to satisfy that once having claimed exemption, the capital goods have been used in the manufacture of articles or in connection with the production or packaging or job work for export of goods or services out of India. This condition or obligation having not been fulfilled by the appellant even in March, 2005, even if for the sake of argument, the amended notification is not applied, the appellant was still liable to satisfy the demand. The substantial question of law is answered against the appellant that in the amended notification dated 19-5-1999 the date of procurement of goods would be the relevant date for application of the notification - Appeal dismissed. Issues:Interpretation of customs notifications regarding the timeline for using imported capital goods under an exemption scheme for Export Oriented Units (EOUs).Analysis:The case involved an appeal under Section 130 of the Customs Act, 1962, focusing on the substantial question of law regarding the application of an amended notification (No. 65/99-Cus.) to imported goods procured before the issuance of the said notification. The appellant, operating as a 100% EOU for wool yarn manufacturing, imported second-hand machinery under an exemption scheme but faced challenges related to the installation timeline at different units. The dispute arose when the machinery remained uninstalled at one of the units, leading to a demand for Customs duty by the authorities.The Commissioner initially confirmed the duty demand and imposed penalties, which were later remitted for a de novo decision by the Tribunal. Subsequently, the Commissioner reaffirmed the duty demand and penalties, leading to the current appeal. The appellant argued against the retrospective application of the amended notification, highlighting that the machinery was procured before the amendment. However, the Tribunal upheld the Commissioner's decision, emphasizing the importance of the installation timeline specified in the notifications.The Court analyzed the relevant customs notifications (No. 53/97 and No. 65/99) and concluded that the amended notification introduced a one-year timeline for using capital goods, extendable up to five years. The Court noted that the appellant rewarehoused the goods at a different unit after the amendment, making the installation timeline applicable. Even without considering the amended notification, the appellant failed to demonstrate the utilization of the imported goods for export purposes, further strengthening the duty demand.Ultimately, the Court ruled against the appellant, stating that the date of procurement post-amendment was crucial for applying the notification's provisions. The appeal was dismissed due to lack of merit, affirming the duty demand and penalties imposed by the Commissioner. The judgment underscores the significance of complying with timelines and conditions specified in customs notifications, especially in cases involving duty exemptions for EOUs.