2023 (5) TMI 1088 - AT - Customs

Tribunal Overturns Excise Order: EOU Eligible for Notification Benefits, Rejects Extended Notice Due to Full Disclosure.

M/s. Same Deutz – Fahr India (P) Ltd. Versus Commissioner of GST & Central Excise, Chennai

The Tribunal set aside the order of the Commissioner of Central Excise, Chennai III, allowing the appeal with consequential relief. It determined that the ... 100% EOU - Joint filing of import documents by the EOU / EPZ unit and the domestic leasing company - Warehousing of goods imported for use in the units, from payment of Customs duties - duty exemption under Notification No. 52/2003-Cus dated 31.3.2003 - extended period of limitation - HELD THAT:- The Circular No. 88/95-Cus dated 1.8.1995 makes it clear that the Exim policy seeks to facilitate EOU’s who would like to source capital goods from leasing companies. Since imports by a leasing company for supply to EOU’s do not qualify for the exemption, a facility has been provided by the Exim policy for the domestic leasing company to jointly file the import documents along with the EOU to enable the import of the capital goods free of duty. Consequently, the bond for fulfilment of the conditions of the exemption notification has also to be executed by both the persons - the circular makes it clear that the Exim policy seeks to facilitate EOU’s who would like to source capital goods from leasing companies. Since imports by a leasing company for supply to EOU’s do not qualify for the exemption, a facility has been provided by the Exim policy for the domestic leasing company to jointly file the import documents along with the EOU to enable the import of the capital goods free of duty. Consequently, the bond for fulfilment of the conditions of the exemption notification has also to be executed by both the persons. The allegation that import documents have not been filed jointly by the appellant-EOU and the owner-importer of the goods, Amul has been adequately explained by the appellant. The appellant cannot be faulted if the EDI system did not permit a joint filing of the import documents. Revenue has not disputed the appellants claim. As regards the bond for fulfilment of the conditions of the exemption notification having not been executed jointly by the appellant and Amul, the appellant has not provided a satisfactory answer and have been found to have erred. Revenue has stated that since in the agreement there is no provision for consideration i.e. amount of leasing rent, for leasing out the machines, then as per Section 25 of the Indian Contract Act, 1872 the said agreement is void and cannot be enforced in a court of law. The appellant-EOU imported the impugned goods they would have been eligible for the exemption. Similarly, if Amul had jointly filed a Bill of Entry and executed a bond along with the appellant, they (Amul) too would have been eligible for the exemption. Moreover the learned Commissioner in the order has noted that the impugned goods have been received and put to use by the EOU and hence she did not find any grounds to confiscate the same, only strengthens the appellants plea that the impugned goods were put to proper use and were hence eligible for the benefits of Notification No. 52/2003-Cus dated 31.3.2003. Extended period of limitation - HELD THAT:- There are considerable force in the views of the appellant that suppression of facts cannot be alleged by the department as the lease agreement was given to the Superintendent of Central Excise on 31.10.2008. After scrutiny of the lease agreement only, re-warehousing certificate was sent to customs authorities at Chennai. All operations inside the bonded warehouse are with the knowledge of officers. It is not the case of the department that the machines were diverted or not put to use for production of goods meant for export. It is true that the EOU scheme involves the close working of a number of different authorities. Two such authorities are the officers of the Customs department at the port of import who look after the import of goods meant for an EOU and in this case the Central Excise authorities have jurisdiction over the EOU. Producing one set of documents before one authority say Customs would not tantamount to the facts being in the knowledge of the Central Excise Authorities. However, no such allegation has been made by Revenue - The SCN is based on documents that were submitted to the department during the course of processing the imports of the impugned machines and completing the bonding process. No extra / hidden document that was not submitted to the department was unearthed by the department by way of an investigation etc while coming to a conclusion whether the exemption was eligible for the goods or not. Hence the charge of suppression of facts must fail. This being so the department was not justified in invoking the larger time limit while issuing the show cause notice. The impugned order passed by the Commissioner of Central Excise, Chennai III is set aside - Appeal allowed. Issues Involved:1. Eligibility for the benefit of Notification No. 52/2003-Cus dated 31.3.2003.2. Correctness of invoking the extended time limit for issuing the show cause notice.Summary:Issue 1: Eligibility for the benefit of Notification No. 52/2003-Cus dated 31.3.2003The appellants, an Export Oriented Unit (EOU) manufacturing tractors and parts, were charged with clearing imported machines without paying customs duties by availing the benefit of Notification No. 52/2003-Cus dated 31.3.2003 without fulfilling its conditions. The key legal provisions involved include Para 6.4(a) of the Foreign Trade Policy 2004-2009 and CBEC Circular No. 88/95-Cus dated 1.8.1995, which stipulate joint filing of import documents and joint execution of the bond by the EOU and the leasing company.The main charges by Revenue were:(a) Import documents were not filed jointly by the appellant-EOU and Amul.(b) The bond for fulfilling the exemption conditions was not executed jointly.(c) The agreement between the appellant and Amul was not a lessor-lessee relationship but a principal manufacturer and job worker relationship, lacking leasing rent consideration.The Tribunal found that the appellant adequately explained the inability to file joint import documents due to the EDI system's limitations. However, the appellant failed to provide a satisfactory answer regarding the joint execution of the bond. The Tribunal noted that the promise of interest-free financing and free space for machinery constituted adequate consideration under Section 2(d) of the Indian Contract Act, 1872, making the agreement valid. The Tribunal concluded that the impugned goods were put to proper use by the EOU, and the benefit of the notification should not be entirely denied. A penalty for the bond condition violation would suffice.Issue 2: Correctness of invoking the extended time limit for issuing the show cause noticeThe Tribunal found merit in the appellant's argument that suppression of facts could not be alleged since the lease agreement was submitted to the Superintendent of Central Excise, and the re-warehousing certificate was sent to customs authorities. The operations inside the bonded warehouse were conducted with the knowledge of officers, and there was no allegation of machinery diversion. The SCN was based on documents submitted during the import and bonding process, with no hidden documents unearthed. Therefore, the charge of suppression of facts failed, and invoking the extended time limit for issuing the SCN was unjustified.Conclusion:The impugned order by the Commissioner of Central Excise, Chennai III, was set aside. The appeal was allowed with consequential relief as per law.