100% EOU unit wins appeal to switch to EPCG scheme, penalty waived for customs department delays

CESTAT HC allowed appeal of 100% EOU unit seeking to switch to EPCG scheme. Revenue demanded differential duty and imposed penalty for delay in obtaining no dues certificate during debonding process. Tribunal found delay attributable to customs/excise department which took 11 months to issue no dues certificate despite appellant's compliance. Appellant had paid assessed duties within prescribed time and obtained development commissioner's permission. Tribunal held appellant correctly paid duty from effective debonding date and was entitled to consequential benefits, setting aside the impugned demand order.

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Issues Involved:
1. Demand of Customs and Central Excise Duty.
2. Appropriation of Central Excise Duty paid.
3. Imposition of Penalty under Rule 25 of the Central Excise Rules, 2002.
4. Validity of the transition from 100% EOU to EPCG Scheme.
5. Delay in issuance of No Objection Certificate (NOC) and its implications.

Issue 1: Demand of Customs and Central Excise Duty

The Commissioner of Customs, Guntur demanded Customs and Central Excise duty of Rs. 6,12,93,229/- from the Appellants for the period from 01.04.2005 to 11.01.2006, alleging that the Appellants, being a 100% EOU, made clearances into the DTA without paying the aggregate of Customs Duties as required under Notification No. 23/2003-CE dated 31.03.2003 read with proviso to Section 3(1)(b) of the Central Excise Act, 1944.

Issue 2: Appropriation of Central Excise Duty Paid

The Commissioner appropriated a sum of Rs. 2,84,72,590/- paid by the Appellants during the period 01.04.2005 to 11.04.2006 towards the duty demand, requiring the Appellants to pay the differential amount of Rs. 3,28,20,709/-.

Issue 3: Imposition of Penalty

A penalty of Rs. 1 Crore was imposed on the Appellants under Rule 25 of the Central Excise Rules, 2002.

Issue 4: Validity of Transition from 100% EOU to EPCG Scheme

The Appellants contended that they ceased to be a 100% EOU w.e.f. 30.03.2005 and thus were liable to pay only Central Excise Duty. They argued that the Development Commissioner had granted "in-principle" permission to exit from the EOU Scheme on 20.11.2003, which was extended up to 18.11.2004. The Appellants paid the assessed duty and furnished necessary Bonds and Bank Guarantees by 30.03.2005. The Development Commissioner issued a "No Dues Certificate" on 04.11.2004 and confirmed the exit from the EOU Scheme effective 30.03.2005.

Issue 5: Delay in Issuance of No Objection Certificate (NOC)

The Appellants argued that the delay in issuing the final de-bonding order by the jurisdictional Assistant Commissioner was attributable to the Excise/Customs Department. The necessary NOC was only issued on 03.01.2006, despite the Appellants' compliance with all formalities by 30.03.2005. They contended that the department cannot take advantage of the delay it caused and raise a duty demand.

Judgment:

The Tribunal found that the delay in issuing the final de-bonding order was attributable to the Customs/Excise Department, which took almost one year to issue the no dues certificate. The Tribunal held that the Appellants had rightly paid tax/duty on the goods cleared from 01.04.2005 as a DTA unit under the EPCG Scheme. Consequently, the appeal was allowed, and the impugned order was set aside. The Appellants were entitled to consequential benefits as per law.

(Order Pronounced in open court on 06.03.2024)

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