2022 (1) TMI 470 - HC - Customs

Revenue appeal dismissed, CESTAT order upheld on compliance, capital goods use, warehousing.

The Court dismissed the appeal filed by the Revenue against the Customs, Excise and Service Tax Appellate Tribunal's order. The judgment favored the ... 100% EOU - Inter-unit transfer of goods - main ground urged by the Revenue that the condition of the notification for not using the capital goods on inter unit transfer was not complied with, cannot be countenanced since the said imported goods were undisputedly used by the importer M/s Verifone India Pvt. Ltd., from 1990-2001 till the merger of the respondent – company with M/s Verifone India Pvt. Ltd. - time limitation - HELD THAT:- It is well settled that all notifications are prospective in nature, in the absence of giving any retrospective effect specifically, no retrospective effect could be given to the exemption notifications - Secondly, the assertion of the department that no warehousing period was extended for the goods in consideration is also held to be unjustifiable, warehousing licence granted to the respondent is examined by the CESTAT and is held to be in accordance with Circular No.7/2005-Cus, dated 14.2.2005. Time limitation - HELD THAT:- The demand made by the revenue is not tenable. Having regard to these factors which, more or less relates to the factual aspects of the matter, the finding given by the fact finding authority – CESTAT cannot be held to be perverse or arbitrary. Appeal dismissed. Issues:1. Appeal against order passed by Customs, Excise and Service Tax Appellate Tribunal.2. Allegations of non-usage of capital goods and extension of warehousing period.3. Interpretation of conditions of Notification No.140/91-Cus.4. Transfer of goods between units of Export Oriented Undertakings.5. Application of conditions and limitations under Customs Act, 1962.Analysis:Issue 1:The Revenue filed an appeal under Section 130 of the Customs Act against the order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) setting aside the demand confirmed by the Commissioner. The appeal raised substantial questions of law regarding the treatment of goods transferred between units and the interpretation of relevant notifications.Issue 2:The department alleged that the respondent did not use capital goods and did not seek an extension of the warehousing period after procuring duty-free capital goods. The respondent, engaged in software development, argued that the goods were used and the warehousing license was extended in compliance with Circular No.7/2005-Cus.Issue 3:The key dispute revolved around the interpretation of Notification No.140/91-Cus and whether the conditions regarding the usage of goods and inter-unit transfers were met. The CESTAT held that the conditions were satisfied, and the subsequent notification dated 24.6.2002 could not be applied retrospectively to alter the obligations under the original notification.Issue 4:Regarding the transfer of goods between units of Export Oriented Undertakings (EOU), the Court referred to precedent where inter-unit transfers were deemed exempt from duty. The Court confirmed that such transfers between 100% EOUs were covered under the exemption notification.Issue 5:The Court addressed the applicability of limitations under the Customs Act, 1962 to violations of notifications. It was held that the demand made by the Revenue was not sustainable, and the findings of the CESTAT regarding factual aspects were not arbitrary or perverse.In conclusion, the Court dismissed the appeal, ruling in favor of the respondent on all substantial questions of law. The judgment emphasized compliance with notification conditions, the usage of capital goods, and the extension of warehousing licenses in determining the outcome of the case.