2022 (9) TMI 442 - AT - Customs

Customs duty and penalties set aside in appeal due to compliance with value addition requirements and bond status.

M/s International Research Park Laboratories Ltd. Versus Commissioner, Central Excise, Thane

M/s International Research Park Laboratories Ltd. Versus Commissioner, Central Excise, Thane - TMI Issues Involved:1. Non-fulfillment of export obligation and value addition requirement.2. Demand for customs duty on imported capital goods.3. Penalty imposition under Rule 173 Q(1) of Central Excise Rules.Issue-wise Detailed Analysis:1. Non-fulfillment of Export Obligation and Value Addition Requirement:The appellant, a 100% EOU, was accused of not fulfilling the export obligation of achieving a minimum of 20% value addition on imported goods. The appellant imported finished goods and consumables, repackaged and relabeled them, and re-exported them. The Commissioner initially confirmed a demand of Rs. 33,00,23,408/- for non-fulfillment of this obligation. However, it was later clarified through a letter dated 23rd August 2004 from the Commissioner, Thane, to the Member CBEC that an error in calculation had occurred, and the appellant had indeed achieved the required 20% value addition. Consequently, the Tribunal set aside the demand and the corresponding penalty, recognizing the appellant's compliance with the value addition requirement.2. Demand for Customs Duty on Imported Capital Goods:The appellant imported capital goods for setting up a factory but could not commence production due to the disintegration of the USSR, which was their primary export market. Despite several requests, the Customs Department did not allow de-bonding of these goods. The Commissioner demanded Rs. 64,08,325/- as customs duty on these capital goods. The Tribunal found this demand unjustified since the capital goods were still under bond and had not been removed by the appellant. It was established that duty could only be demanded upon de-bonding. Therefore, the Tribunal set aside the demand and penalty, directing the Commissioner to allow de-bonding and calculate duty on the depreciated value as per the applicable rate on the date of de-bonding.3. Penalty Imposition under Rule 173 Q(1) of Central Excise Rules:The Commissioner imposed a penalty under Rule 173 Q(1) of the Central Excise Rules, claiming the appellant had not fulfilled the conditions of the notification. However, the Tribunal found that no excise duty was attracted under the provisions of the Central Excise Act since the goods were imported for manufacturing under bond for export. The penalty was deemed unwarranted and was set aside.Conclusion:The Tribunal allowed the appeal, setting aside the impugned order with consequential relief to the appellant. The demands for customs duty and penalties were found to be unjustified based on the facts and circumstances, including the appellant's compliance with value addition requirements and the arbitrary refusal of de-bonding by the Customs Department.