Duty on Capital Goods Calculated on Deemed Removal Date; Interest Payable on Delays; No Penalties Imposed.

The Tribunal determined that duty on capital goods should be calculated at the rate applicable on the date of deemed removal, allowing appellants to benefit from exports made. Interest is payable on delayed duty payment as per Section 61 of the Customs Act. Penalties under Sections 112 and 114A cannot be imposed due to the lack of suppression or fraud. The case was remanded to the adjudicating authority to reassess duty liability based on these findings.

---

---

Issues Involved:
1. Relevant date for application of rate of duty for demanding duty foregone in case of imports and domestic procurement by the EOU.
2. Whether duty is payable on the depreciated value.
3. Whether penalties can be imposed under Sections 112 and 114A of the Customs Act, 1962.

Summary:

Issue 1: Relevant Date for Application of Rate of Duty
The appellants argued that the impugned order wrongly demands Customs duty at the rate applicable on the day of import rather than the rate prevalent on the day of de-bonding, in terms of Clause 5(a) of Notification No.53/97 and Section 15 of the Customs Act. The Tribunal found that as per Condition No.5(a) of Notification No.53/97-Cus., duty foregone on the capital goods is payable on the depreciated value at the rate in force on the date of payment of such duty. The relevant date for determining the rate of duty is the date of de-bonding or deemed removal, as supported by the Supreme Court's decision in Kesoram Rayon and the Tribunal's decision in International Knitting Ltd.

Issue 2: Duty on Depreciated Value
The appellants contended that the learned Commissioner wrongly assumed the export obligation and did not consider the fulfilled export obligation. The Tribunal held that the appellants are entitled to the proportionate benefit of exports made, as consistently held by the Tribunal in cases like Moonlight Exim (P) Ltd. and supported by CBEC Circular No.29/2003-Cus. Therefore, duty liability should be calculated proportionately based on the foreign exchange earned.

Issue 3: Imposition of Penalties
The appellants argued that the penalties under Sections 112 and 114A of the Customs Act, 1962, were wrongly imposed as there was no suppression, fraud, or mis-statement, and no proposal for confiscation of goods was made in the show-cause notice. The Tribunal found that penalties cannot be imposed on EOUs for failure to achieve positive NFE, as consistently held in cases like Moonlight Exim (P) Ltd.

Interest Liability
Regarding the applicability of interest, the Tribunal held that interest is payable on the delayed payment of duty in terms of Section 61 read with Section 2(44) of the Customs Act, as held in International Knitting Ltd.

Conclusion
The Tribunal concluded that while duty at the rate prevalent on the date of deemed removal of capital goods is payable, the appellants are entitled to the benefit to the extent of exports made. However, the appellants are liable to pay interest on the duty payable on the capital goods as on the date of removal. No penalty can be imposed on the appellants either under Section 112 or 114A of the Customs Act, 1962. The matter was remanded to the adjudicating authority to calculate the duty liability of the appellants in accordance with the Tribunal's findings.

---