TaxTMI 
TaxTMI 
2008 (11) TMI 138
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....lants had failed to achieve the prescribed value addition/KFTZ whereby it became liable to pay duty, penalty etc. 2. Heard both sides. 2.1 Learned Advocate Shri S.R. Dixit on behalf of the appellants submitted that Notification No. 2/95-C.E. did not provide that exports should precede DTA sales; Notification does not require fulfillment of export obligation/achievement of value addition in respect of advance DTA sales. Since the said DTA sales were made after permission issued by the Development Commissioner, they have fulfilled all the conditions under Notification No. 2/95-CE. Further, they had fulfilled the export obligations if deemed export value was also included. It is settled law now that for computing the value of the export, deemed export value also has to be included. The total value of exports for the years 1996-97 to 1998-99 was Rs. 3.9 crores and therefore, they have fulfilled all the conditions and the order should have given them the benefit to the extent of export obligation achieved by the sales against free foreign exchange. He also submitted that the impugned goods being re-melted goods, the appellants were entitled for concessisonal rate of duty in terms ....
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....it is necessary to note that the permission for advance DTA sales is given against future entitlements. It is well settled that entitlements for DTA sales is decided by the Development Commissioner and only on his permission, the DTA sales are allowed by the Customs. Therefore, to decide whether the appellants are entitled to the benefit of Notification No. 2/95-C.E., it becomes necessary to examine whether the permission of the Development Commissioner was available & valid. Since this is permission for advance sales against future entitlements, it becomes necessary to examine the permission given by the Development Commissioner; therefore, the relevant portion of his letter giving permission is extracted below : Please refer to your letter dated 4th April, 1996 regarding permission for advance DTA Sale out of goods manufactured by you during trial production in the first year of production. You are hereby permitted in terms of Clause I (h) to Public Notice No. 148(PN)/92-97, dated 16-7-93 as amended, to clear into the DTA, the following approved product in relation to the trial production operation carried out by you during the period from 21-2-96 to 21-3-96, as per the value ....
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....king/declaration incorporated in the bond dated 24-4-96. 3.2 As regards future entitlements, the Order-in-Original of the Development Commissioner clearly states that the appellants failed to fulfil the requirement. The relevant paragraphs of the order are reproduced to show that Development Commissioner has reached his conclusion and there is no doubt whatsoever this regard : "I find that during the entire period from 25-7-96 (when they commenced productions) till date the unit has not exported even a single Kg product. The entire sale has been deemed exports of 4.3. crores which is totally opposite the promised physical exports as per their project report. Even their argument regarding free foreign exchange problems Customs Departments issues are related to the sale within India only. They have cited as Value fluctuations as a major reason. Whereas I find that the Copper content in their product was only 14%. In fact the major reason was improper implementation of the project and activity where they landed with 70% Ferrous Scrap on average which don't get exported at all. Clearly there was no effort to make any physical exports improve product quality to in crease quantum o....
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....ent Commissioner had intimated the Department to proceed against the appellants as early as 1998. However, proceedings have been concluded after the Development Commissioner has passed a final order holding that appellants failed to fulfil their obligations. 3.3 Appellants have contended that they have fulfilled all the conditions of Notification No. 2/95-C.E. We find that this is not correct. In view of the fact that table attached to the Notification provides that percentage limit of entitlement for clearance for home consumption is 25% in respect of the appellants. It is well settled now that the authority who is to decide whether they have achieved this entitlement or not is the Development Commissioner. Since the Development Commissioner has already reached the conclusion that the appellants have failed to fulfil the export obligation unless Development Commissioner revises the entitlement or modifies his permission, the eligibility for clearance under Notification No. 2/95 has to be taken as zero. Thus, the appellants have failed to fulfil the condition No. (i)(b) of proviso 1 of the Notification No. 2/95-C.E. The judgments cited by the learned Advocate are not relevant in....
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....llant after entering into a bond. As per condition No. 1 of permission letter, in case the appellant failed to fulfil the requirements, action was required to be initiated to enforce undertaking/declaration given by them vide bond dt. 24-4-1996, as also for taking punitive action against them in terms of the provisions of Foreign Trade (Development and Regulation) Act, 1992. It is seen that the subsequent order passed by the Development Commissioner, as reproduced in the order of ld. Member (Technical), takes punitive action against the appellant when a penalty of Rs. 5 lakhs stand imposed upon them for their failure to meet export obligations. However, there is nothing in the said order to show that the earlier permission letter granted by the Development Commissioner stands withdrawn. 7. As such a question arises as to whether the clearances effected in DTA on the basis of the permission granted by the Development Commissioner would attract duty liability in terms of Notification No. 2/95-C.E. or the same will have to forego the said concession. It has been strongly contended before us that the appellant have fulfilled all the conditions of Notification No. 2/95-C.E., dt. 4-1-....
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.... permission was granted subject to adjustment against future entitlements. It is now well settled law that the exports against foreign exchange are required to be taken into consideration for determining the quantum of DTA sales. According to the appellant, if such sales against foreign exchange are taken into consideration, the, permitted DTA sales would be within the limitation. The issue that sales against foreign exchange are to be considered as physical exports stands settled by the Hon'ble Supreme Court in the case of M/s. Virlon Textile Mills Ltd. v. CCE, Mumbai [2007 (211) E.L.T. 353 (S.C.] as also in the case of M/s. Juned Bilal Memon v. CCE, Surat-II [2008 (221) E.L.T. 45 (Tri.-LB)]. As such, permission letter granted by Development Commissioner, which in any case does not stand withdrawn by him, is to be interpreted in terms of the law declared by the above judgments of Hon'ble Supreme Court as well as by Larger Bench. As rightly contended by the ld. Advocate permission for advance DTA sales did not prescribe achievement of value addition in the first year itself and the appellant's performance in respect of physical exports as also deemed exports have to be taken int....
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.... 12. In view of the foregoing, the impugned order is set aside and the appeal is allowed by way of remand in terms of the above observations. Sd/- (Archana Wadhwa) Member (Judicial) DIFFERENCE OF OPINION Whether the appeal is to be rejected as held by Member (Technical) or the same is to be remanded for de novo adjudication only in respect of duty determination and confiscation & penalty are required to be set aside as observed by Member (Judicial)? Sd/- (B.S.V. Murthy) Member (Technical) Sd/- (Archana Wadhwa) Member (Judicial) 13. [Order per : P.G. Chacko, Member (J)]. - The appellants are running a manufacturing unit in the Kandla Free Trade Zone duly approved by the Development Commissioner. They had obtained the Development Commissioner's permission for clearance of 25% of their production to the Domestic Tariff Area (DTA) as advanced DTA sale, for which they had executed a bond with the said authority undertaking to fulfil export obligation prescribed for the first year of production as also to achieve the prescribed value addition. They bound themselves to pay the duty otherwise leviable on DTA clearances, in the e....
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....export and that they had failed to fulfil their export obligation and that they were fit for de-bonding and final exit from SEZ Scheme. The Development Commissioner also imposed a penalty of Rs. 5 lakhs on them. The present proceedings are an offshoot of the Development Commissioner's order. I am told that the said order was appealed against by the EOU and that the appellate authority sustained the same, albeit with a reduction of penalty. The findings recorded by the Development Commissioner against the appellants have attained finality on the question whether the appellants fulfilled their export obligation. 17. The impugned demand of duty is consequential to denial of the benefit of Notification No. 2/95-C.E., dt. 4-1-1995 and is on the ground that the appellants had failed to abide by the terms and conditions of the bond executed by them with the Development Commissioner. Under the said bond, the appellants were required to pay any duty, fine or penalty in the event of breach of the terms and conditions of the bond. The appellants have no case that they did abide by the bond. On the other hand, they contested the show-cause notice by submitting that any amount of duty could ....