EOU loses customs duty exemption on imported goods after failing export obligations despite technology failure claims

CESTAT Chennai upheld customs duty demand on imported capital goods, raw materials and consumables by EOU after non-fulfilment of export obligations despite appellant's claim of technology failure. The tribunal ruled that exemption under Notifications 13/81-Cus and 53/97-Cus was unavailable as goods were not used for intended export production. Special Additional Duty demand was remanded for verification of import dates prior to 1.6.1998. Interest demand was sustained despite incorrect section citation. Appeal partly allowed with consequential relief.

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Issues involved:
The issues involved in this case relate to the demand of duty on raw materials, the demand of Special Additional Duty, and the demand of interest.

Demand of duty on raw materials:
The appellant imported raw materials intended for use in finished products for export, but due to technology failure, the export obligations were not fulfilled. The appellant argued that the duty demand on raw materials cannot be sustained as the goods were intended for export. However, the Tribunal held that since the export obligations were not met and the raw materials were not used for finished products for export, the exemption of the notification is not applicable.

Demand of Special Additional Duty:
The demand of Special Additional Duty was challenged by the appellant on the grounds that most goods were imported prior to the introduction of the duty. The Tribunal referred to a previous decision and held that goods imported before the introduction of the Special Duty of Customs would not be liable to pay such duty. The issue was remanded to the original authority for verification of the import dates, and if goods were imported before 1.6.1998, the demand of Special Additional Duty would be set aside.

Demand of interest:
The appellant argued that the demand of interest was not sustainable as the show cause notice cited a section that had been omitted. The Tribunal noted that although the cited section had been omitted, it had been substituted by another section. The Tribunal held that the mere quoting of a wrong section was not a ground to set aside the demand of interest, and upheld the demand of interest.

Conclusion:
The Tribunal modified the impugned order to set aside the demand of Special Additional Duty prior to 1.6.1998 pending verification by the original authority. The impugned order was sustained in all other respects. The appeal was partly allowed with consequential relief, if any, in the above manner.

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