TaxTMI 
TaxTMI 
2022 (5) TMI 1302
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....OU unit as discussed in Paral1.08 & 11.13 above under the provisions of Section 11A (5) of Central Excise Act, 1944 read with Rule 14 of the CCR,2004 for contravention of proviso to Section 3(1) of the Central Excise Act, 1944 read with Para 6.18 of FTP. (ii) I appropriate the total amount of Rs.83,16,040/-(Eighty Three Lacs, Sixteen Thousand and Forty Only) already paid by the Noticee (Rs.65,05,647/- paid on De-bonding of due to valuation of WIP + Rs. 18,10,393/- paid on De-bonding due to valuation of Stock of Finished goods as against the total duty of Rs. 1,56,55,368/-demanded in the subject SCN. (iii) I order recovery of interest as applicable on the total differential amount of duty Rs.73,39,328/-payable and stand confirmed as at (i) above under the provisions of Rule 14 of the CCR, 2004, read with Section 11AA of the Central Excise Act, 1944; (iv) I impose a penalty of Rs.73,39,528/-(Rupees Seventy three Lacs Thirty Nine Thousand Three Hundred and Twenty Eight Only)on the Noticee under Rule 15(2) of the CCR, 2004, read with Section 11AC of the Central Excise Act, 1944. (v) I also give an option to the Noticee, under ....
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....partment accepted it and allowed the unit to pay duty accordingly, vide its letter dated 08- 04-2013. It appeared that "This classification of WIP inventory as indigenous and imported was incorrect as Work in Progress was nothing but partially finished product. The provisions of S. No. 3 of Notification No.23/2003 CE dated 31-03-2013 (i.e. payment of duty equivalent to only Central Excise duty when finished goods are manufactured wholly out of indigenous raw materials) was applicable only to finished goods cleared under Para 6.8 of FTP. Since the de-bonding units paid duty under Para 6.18 of FTP, benefit of concessional duty under Para 6.8 cannot be applied to de-bonded units (iii) Thus Appellant had wrongly availed duty concessions vide Central Excise Notification No. 23/2003-CE dated 31st March 2003" read with Para 6.8 of FTP, since the de-bonding units pay duty under Para 6.18 of FTP; as per the proviso to Section 3(1) of the Central Excise Act, 1944. The Appellant had also contravened the provisions of Section 6.8 of FTP (as this was not available to a de-bonding unit; as the exit from EOU scheme was allowed under para 6.18). (iv) Thus there was a short levy o....
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....040,379 3 Finished Goods Assessable Value 7,921,864 Basic Custom Duty 396,093 Sub Total 8,317,957 12% Excise Duty 998,155 Basic + CVD 1,394,248 2% Edu. Cess 27,885 1% S & H Edu Cess 13,942 Sub Total 9,357,939 4% Additional Duty 374,317 Total Duty 1,810,393 4 Work in Process Imported Assessable Value 52,003,081 Basic Custom Duty 5,200,308 Sub Total 57,203,389 12% Excise Duty 6,864,407 Basic + CVD 12,064,715 2% Edu. Cess 241,294 1% S & H Edu Cess 120,647 Sub Total 64,429,737 4% Additional Duty 2,577,189 Total Duty 15,003,846 5 Work in Process Indigenous Assessable value 52,634,686 12% Excise Duty 6,316,162 2% Edu. Cess 126,323 1% S & H Edu Cess 63,162 Total Duty 6,505,647 4.3 After getting permission for "In-principle" exit of unit from the Development Commissioner, appellants approached the jurisdictional Central Excise Authorities for issuance of "No Dues Certificate". After consideration of the request and due verification jurisdictional assistant Commissioner issued the "No Dues Certificate to the appellan....
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....ble Value Duty Amount 1 2 3 4 1 Capital Goods 2,60,52,015.90 * 70,33,215.16 N.B.* This is amount of duty foregone as per the E.P.C.G. License No.3130007338 dated 7.5.2013 issued by D.G.F.T.Pune; allowing the said EOU for conversion of DTA as per Para 6.18 of FT.P.and Para 5.4 of Handbook of Procedure 2009-14. In view of the above No dues are payable by the unit in respect of imported/ indigenous capital goods and raw material. Yours Sincerely, Sd/- 21/5/2013 ( B.S.CHAUHAN ) Assistant Commissioner, C.Ex.Pune IV Division Copy to: Supdt.,C.Ex., Thergaon Range w.r.t. his letter F.No.TR/VVCL//De-bonding/ 2012-13 dated 05.04.2013 and 16/05.2013 for information and to necessary action in respect of the de-bonding of capital goods against the above EPCG Licence and ensure the compliance of all rules and regulation and to debit the said EPCG Licence after verifying the quantity and description of the goods as per the said licence." 4.4 From the perusal of the information submitted by the appellant and the information as recorded in the no due certificate issued, it is quite evident that jur....
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.... 6. AND WHEREAS, unit' has submitted an Undertaking that it has not claimed and will not claim any deemed export benefits viz. CST/DBK/TED on the balance stock, if any, of raw material. 7. NOW THEREFORE, the said M/s Virgo Valves & Controls Ltd. is hereby allowed final de-bonding of their project covered under Letter of Permission No. PER:33(2004)/SEEPZ/EOU/33/04 05/6910 dated 30.8.2004 as amended. 8. The Letter of Permission No. PER:33(2004)/SEEPZ/EOU/33/04 05/6910 dated 30.8.2004 as amended for manufacture and export of Control Valves and Ball Valves at A128/2, Telco Road, Chinchwad, Pune, Maharashtra and any other permission granted to unit' under EQU Scheme is hereby cancelled with immediate effect. Sd/- (NPS Monga) Development Commissioner, SEEPZ SEZ. M/s Virgo Valves & Controls Ltd. S. No. 277, Village - Mann, Taluka- Mulshi, Dist.-Pune" 4.6 Thereafter appellant vide their letter dated 13/14.08.2013 approached the jurisdictional Assistant Commissioner for the release of the B-17 Bond executed by them. On the basis of the observation made by Customs R....
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.... work in progress material, it is also reasonable to entertain a thought that no duties are applicable and to be paid on such work in progress material, which view is also supported by a Tribunal decision rendered in this regard. 11.07 It is further stated by the Noticee that the Central Board of Excise and Customs, while issuing clarification to Central Excise matter dealing with reversal of Cenvat on WIP goods written off, under their Circular no.907/27/2009-CX., dated 07- 12-2009 issued from F.No.267/141/2009-CX-8 has clarified in the context of WIP goods (which has reached the stage of finished goods) the treatment for reversal of credit applicable to input would be applicable. Though the said reference is in the context of Central Excise but in principle the clarification applies pari materia and hence, what can be demanded at best on the stock of work in progress material is only the duty foregone by the department on the raw material (imported and indigenous) at the time of its procurement from suppliers. Therefore, what could at best be payable and demanded is the Customs duty forgone on the imported material under Notification no. 52/2003-Cus and the Central....
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.... goods manufactured exclusively out of indigenously procured raw materials with it. In doing so, the Noticee appears to have misrepresented and fabricated the facts thereby and made the department to believe that it has discharged its duty liability correctly and whereas, by its deliberate act it has in fact effected short assessment of duty and appears to have evaded duty thereby. Not challenging the declaration does not mean that correct duty should not be collected. It is a case of valuation loading of 15%on WIP goods. However, it has been claimed by the Noticee that while arriving at the assessable value of WIP goods it had considered 15% value addition on WIP goods though not produced any evidences in support of the same. But the Noticee stated that the duty so paid thereon was on higher side and hence they are entitled to refund to that extent. In this context it is observed that if there is excess payment then assessee is to prove their case and to follow procedures of claiming refund under the statute. If credit is admissible, then the assessee has to claim with supporting evidences before the Assistant Commissioner i/c of the manufacturing unit. Regarding the Noticee's....
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....al rate of duty applicable for DTA clearances on the finished goods held in stock at the time of de- bonding and applied the duties as applicable under Notification No. 23/2003-CE by paying duty of Rs.1810393/ which has been accepted by the department while issuing 'no due certificate' and also accepted by Development Commissioner, but in the present show cause notice, the department has proposed computation on payment of aggregate of customs duties without considering 50% concession, by determining an amount of Rs. 2047998/-, and thereby a differential duty of Rs. 237605/- has been demanded, which according to them is not correct and valid in law. 11.11 The Noticee further stated that when 100% EOU and DTA units are concurrently operating, they are governed by two independent excise registrations and under the Central Excise law for the purpose of clearance of goods from EOU to DTA or vice versa, they are to be treated as two different entities and payment of duty is regulated in such a manner. When, there is clearance from EOU to DTA, there is a transfer of possession of goods from one to the other and there are book entries passed for recovery of money fro....
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....nit going as normal unit as no concept DTA apply now. It therefore appears that the Noticee has wrongly considered the concessional rate of duty applicable for DTA clearances on the finished goods held in stock at the time of de- bonding and wrongly applied the duties as applicable under Notification No. 23/2003-CE and paid duty of Rs.1810393/- which has been contested by the department in the present Noticee. In view of these circumstances, it is observed that differential duty of Rs.2,37,605/ (in total Rs.20,47,998/-) demanded from the Noticee, in access of the said amount of duty paid already, by issuance of the present Notice is legally sustainable and hence liable to be confirmed. 11.14 On limitation and penalty: (i) It is observed that the Noticee was aware of said provisions but it interpreted the Rules as per its convenience to accommodate such incorrect procedure of duty calculation resulting in the short-payment of total duty of Rs. 1,56,55,368/- as on 30.04.2013 [Rs. 1,36,07,370/- being the short levy of duty on De- bonding due to valuation of WIP + Rs. 20,47,998/- being the short levy of Duty on De-bonding due to valuation of Stock of Finis....
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....ccordingly should have made proper and appropriate assessment of duty. In view of these circumstances the various case laws cited by the Noticee in support of their claim that that Central Excise authorities cannot independently decide the issue in such cases without referring the matter to the Development Commissioner, need not be discussed further as they are not relevant to the facts and circumstances of the present case. Therefore the present SCN dated 09.02.2016 proposing to levy duty of Rs. 1,56,55,368/- (Rupees One Crore, Fifty Six Lakhs, Fifty Five Thousand Three Hundred Sixty Eight only), under the provisions of Section 11A (5) of the Central Excise Act, 1944 read with Rule 14 of the CCR,2004 with proposed levy of interest under the provisions of Rule 14 of the CCR, 2004, read with Section 11AA of the Central Excise Act, 1944 and proposed levy of penalty under Rule 15(2) of the CCR, 2004, read with Section 11AC of the Central Excise Act, 1944 is liable to be confirmed. (iv) Reliance is placed on the judgement of the Hon'ble Supreme Court in the case of UOI Vs. Dharmendra Textile Processors (2008-TIOL-192-SC-LB), while holding that mens-rea is not an esse....
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.... 4.8 Explaining the concept of bonding and de-bonding in respect of the 100 % EOU Hon'ble Supreme Court has in case of SIV Industries [2000 (117) E.L.T. 281 (S.C.)} "23. Concept of bonding or debonding is well understood both under the Act and the Customs Act, 1962. The entire operations of an EOU are to be in customs bonded factory, unless otherwise specifically exempted from physical bonding. The approved unit is required to execute a bond/legal undertaking with the Development Commissioner concerned in the form prescribed. Under the conditions laid for EOU, bonding period for units under the EOU Scheme is ten years. This period may be reduced to five years by the Board of Approvals in case of products liable to rapid technological change. On completion of the bonding period it shall be open to the unit to continue under the Scheme or opt out of the Scheme. Such debonding is, however, subject to industrial policy in force at the time the option is exercised. On the satisfaction of the Board of Approvals, EOU may be debonded on its inability to achieve export obligations, value addition or other requirements. Such debonding is subject to such penalty as may be impos....
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....56 (T-Mum)] following was observed: "8. The extended period is not invocable in the present case in the absence of any suppression, misstatement, etc. as the respondents had made an application for de-bonding to ACCE, after having obtained in principle approval from the Development Commissioner and the ACCE, through letter dated 25-8-2003, required the respondents to pay duty on capital goods, spare parts, packing materials and raw materials. From the above, it is clear that ACCE did not direct the respondents to pay duty on stock of goods-in-progress. 9. The respondents, through their letter dated 5-9-2003, informed their payment of duty on capital goods, spare parts, packing materials and raw materials. The ACCE, through letter dated 17-9-2003, informed the Development Commissioner that the Respondents had paid all dues and there was no objection for issue of final de-bonding order. The duty paid on the goods was taken as credit by the DTA unit. When the respondents have paid duty of Rs. 89,05,616/-, they could not have even attempted to evade duty of Rs. 4,13,369/-, 10. Further, suppression, if any, should be deliberate and with an intent t....
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....e and Customs has vide its Circular No 21/95_Cus dated 10.03.1995 clarified as follows: "Issue of show cause notice for recovery of Customs Subject : duty on goods imported by 100% EOU - Regarding. A number of instances have come to the notice of the Board where 100% EOU's had imported capital goods, raw materials and other permissible items under Notification No. 13/81-Cus., dated 9-2-1981 but have failed to export any goods or have closed down after exporting a few consignments. A question has been raised as to the stage at which the customs authorities should proceed to recover duties on imported goods and other goods lying in the factory premises of the 100% EOU. 2. The matter has been examined by the Board in the context of an Audit Objection and I am directed to say that the Board has taken a view that liability of customs duties on goods imported by 100% EOUs arises either at stage of the unit being debonded or if any of the conditions of the exemption Notification No. 13/81, dated 9-2-1981 has been violated or remains unfulfilled. In this regard, it is seen that one of the conditions of the exemption notif....