TaxTMI 
TaxTMI 
2013 (8) TMI 651
X X X X Extracts X X X X
X X X X Extracts X X X X
...., for use in the manufacture of the final products for export. Besides this, they also procured indigenous capital goods, raw materials and consumables valued at Rs. 24,83,541/-, against CT-3 certificates free of Central Excise Duty by availing exemption under Notification No. 123/81-C.E., dated 2nd June, 1981, as amended, for use in the manufacture of finished products for export. The Customs duty involved on the imported capital goods, raw materials and consumables was Rs. 4,33,75,028/- and the Central Excise Duty involved on the indigenously procured goods was Rs. 3,37,465/-. While the appellant were required to export goods valued at Rs. 634 lakhs with minimum value addition of 78%, their actual exports were worth Rs. 550.90 lakhs with value addition of only 19.79%. The Department was, therefore, of the view that the appellant have contravened the provisions of Notification No. 13/81-Cus., dated 9th February, 1981 and of Notification No. 123/81-C.E., dated 2nd June, 1981 and hence are not eligible for duty exemption under these notifications. It was also found that in addition to the above-mentioned capital goods, raw materials and consumables, they had also imported raw materi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as confirmed along with interest on imported raw materials and consumables in terms of condition No. 6 of Notification No. 13/81-Cus., dated 9th February, 1981; (c) Customs duty demand of Rs. 20,48,118/- was confirmed on the unutilised imported goods valued at Rs. 30,52,956/- in terms of condition 5(b) of Notification No. 13/81-Cus.; (d) Central excise duty demand of Rs. 21,102/- on the indigenous capital goods valued at Rs. 1,34,037/- and another Central excise duty demand of Rs. 1,26,793/- on the indigenously procured consumables and raw materials valued at Rs. 10,62,343/- was confirmed against the appellant along with interest; (e) penalty of Rs. 5,00,000/- was imposed on the appellant under Section 112(a) of Customs Act, 1962 and another penalty of Rs. 5,000/- was imposed on the appellant under Rule 210 of Central Excise Rules, 1944. The imported goods were also held to be liable for confiscation under the provisions of Section 111 of Customs Act, 1962. 1.4 It is against this order of the Commissioner that the present appeal has been filed. 2. Heard both the sides and have also perused the written submissions submitted by them.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rce as on the date of payment of Customs Duty. However, the respondent-Commissioner has erroneously applied the rate of duty as in force on 30th May, 2000. Since the rate of duty applied is contrary to the provisions of Notification, the demand quantified based on erroneous rate of duty requires modifications by applying the rate of duty in force on the date of payment of duty. In terms of sub-condition No. (f) of Notification No. 123/81-C.E., the rate of duty is the rate in force on the date of clearance and hence the demand of duty on the indigenously procured goods based on the rate of duty in force on 30th May, 2005 is wrong; (5) In an Annexure VI to the impugned order passed by the Commissioner, the duty demand has been confirmed against item appearing at Sl. No. 11. This item had been imported in August, 1998. By this date, Notification No. 13/81-Cus., the basis for issuing the show cause notice had been repealed and the import had been made under Notification No. 57/93-Cus. Neither the notice nor the impugned order contains allegation or finding under this Notification. Hence, this demand of Rs. 8,02,517/- is not sustainable. 2.2 Shri D.P. Nagendra Kumar, the learned J....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is to be done as soon as the permission or order for debonding is issued from the Development Commissioner. The goods procured free of duty earlier become liable for duty on the date of order of debonding and accordingly the appellant's duty liability had to be determined with reference to the date on which the order of debonding had been issued by the Development Commissioner. (5) The goods imported by the appellant have been rightly held to be liable for confiscation, as the appellant have failed to achieve the export obligation and also achieve the value addition, and the exemption under this Notification is subject to fulfilling the export obligation and achieving the required value addition. 3. We have carefully considered the submissions from both the sides and perused the records. In this case capital goods, raw materials and consumables valued at Rs. 3,74,25,949/- involving Customs Duty of Rs. 4,33,75,028/- had been imported free of Customs Duty under exemption Notification No. 13/81-Cus., dated 9th February, 1981 and domestically manufactured excisable goods valued at Rs. 24,83,541/- involving excise duty of Rs. 3,37,165/- had been acquired free of excise duty under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in force on the date of import, but on the depreciated value as on the date of debonding. On the same basis in the case of indigenous capital goods Central Excise Duty of Rs. 21,102/- has been confirmed under the provisions of Notification No. 123/81-C.E. As regards, the imported consumables and raw materials valued at Rs. 30,52,956/- lying unused on the date of debonding, the Commissioner holding that the duty would be chargeable in terms of Condition No. 5(b) of the Notification No. 13/81-Cus. at the rate in force on the date of debonding, has confirmed Customs Duty demand of Rs. 20,48,118/-. Beside this, Commissioner holding that the goods imported were liable for confiscation under Section 111(o) of Customs Act, 1962 and the indigenously procured goods were liable for confiscation under Rule 210 of Central Excise Rules, 1944, as the appellant failed to meet the export obligation and achieve the required value addition and thereby contravening the conditions of the exemptions notifications, has also imposed penalty of Rs. 5,00,000/- on the appellant under Section 112(a) of Customs Act, 1962 and penalty of Rs. 5,000/- on them under Rule 210 of Central Excise Rules, 1944. 3.2 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uld be liable for penalty under Section 112(a) of Customs Act, 1962 and also whether the indigenous excisable goods procured free of duty under Notification No. 123/81-C.E. would be liable for confiscation under Rule 210 of the Central Excise Rules, 1944 and whether the appellant would be liable for penalty under this Rule. 3.4 Our answers to these questions are discussed below. 4. Customs duty exemption under Notification No. 13/81-Cus. and Central Excise duty exemption under Notification No. 123/81-C.E. is subject to certain conditions, as enumerated in these notifications. Condition No. 6 of the Customs Notification No. 13/81-Cus. is as under :- "The importer executes a bond in such form and for such sum and with such authority, as may be prescribed by the Assistant Commissioner of Customs, binding himself to fulfil the export obligations and conditions stipulated in this notification and in or under the said export-import policy and to pay on demand, an amount equal to duty leviable on the goods as are not proved to the satisfaction of Assistant Commissioner of Customs to have been used in the manufacture of Articles for exports." Condition No. 3 of this Notificatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e positive NFE, was introduced. But prior to 31-3-2003 there was no such provision in exemption Notification for 100% EOUs. When the exemption to the goods imported under Notifications No. 13/81-Cus. as well as No. 53/97-Cus. is subject to certain conditions and one such condition of the Notification regarding fulfilment of the export obligation and value addition norms as per the EXIM policy is not fulfilled, the exemption under these notifications would not be available. A failure is a failure and implication of the same is total denial of the exemption benefit, as during the period of dispute there was no provision for partial denial of exemption benefit in case of partial import to achieve the export target and the required value addition. Hon'ble Supreme Court in the case of Eagle Flask Industries Ltd. v. CCE reported in (2004) 7 SCC 377 = 2004 (171) E.L.T. 296 (S.C.) and State of Jharkhand v. Ambay Cements reported in (2005) 1 SCC 368 = 2004 (178) E.L.T. 55 (S.C.) has held that if an exemption is available on complying with certain conditions, the conditions have to be strictly complied with. As regards the Central Excise duty exemption Notification No. 123/81-C.E. is concern....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oxes, polythene bags of a kind unsuitable for repeated use may be allowed without payment of any customs duty ; Provided that the importer shall not be eligible to avail of the exemption applicable to goods falling under Heading Number 98.01 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), or the exemption available to the imported goods under any Export Promotion scheme other than the Export Promotion Capital Goods scheme permitting import of capital goods at the rate of duty of 15% ad valorem in terms of notifications in force at the time of debonding. Explanation. - The depreciation in respect of goods covered by clause (a) shall be allowed for the period from the date of commencement of commercial production of the unit or where such goods have been imported after such commencement, from the date such goods have come into use for commercial production, upto the date of payment of duty." Thus the provisions of condition No. 5 apply when the duty free goods are allowed to be cleared into DTA by the Development Commissioner and in terms of the provisions of this condition, on clearance of capital goods, duty on the depreciated value and at the rate in f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any further extension been granted, but still the goods were not cleared. In case of warehoused goods, the rate of duty applicable on the goods cleared from bond is the rate in force on the date of clearance on the goods from bond. The question arises as to what would be the rate of duty if the goods are cleared from the bond after the expiry of the warehousing period. This question has been answered by Hon'ble Supreme Court in the case of Kesoram Rayon v. CC, Calcutta reported in 1996 (86) E.L.T. 464 (S.C.), wherein it was held that in such a situation, the rate of duty applicable on the goods would be the rate in force on the date of expiry of the warehousing period, irrespective of the date on which the goods were actually cleared from the bond. Same view has been taken by Hon'ble Supreme Court in a recent judgment in case of M/s. SBEC Sugar Limited & Another v. Union of India reported in 2011-TIOL-16-S.C.-Cus. = 2011 (264) E.L.T. 492 (S.C.). Since, in this case admittedly the warehousing period expired on 30th May, 2000 the duty liability on the goods at the time of debonding would have to be discharged on the basis of the rate of duty in force as on 30th May, 2000. 4.2 One ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n view of this, we do not find any infirmity in the Commissioner's order with regard to quantification of the duty payable on the unused raw materials and consumables lying in stock on the date of debonding. 6. Coming to the question of penalty on the appellant under Section 112(a) of Customs Act, 1962, in terms of provisions of Section 110(o) of Customs Act, 1962, any goods exempted, subject to any condition from duty or any prohibition in respect of import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed, unless the non-observance of the condition were sanctioned by the proper officer, shall be liable for confiscation and under Section 112(a) of Customs Act, 1962, any person who, in relation to any goods, does or omits to do any acts, which act or omission would rather such goods liable for confiscation under Section 111 or abets the doing or omission of such an Act, shall be liable for penalty, which in case of dutiable goods other than the prohibited goods, shall be not exceeding the duty sought to be evaded or Rs. 5,000/- whichever is greater and in case of goods in respect of which prohibition is in forc....