TaxTMI 
TaxTMI 
TaxTMI 
2024 (6) TMI 203
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....ued at Rs. 16,54,77,557/-. The Preventive Officer of SEZ conducted investigation and stock verification on 07.06.2018 and drew punchnama on the same. On 14.05.2019 and 12.09.2019, the appellant submitted details of the material destroyed in fire and valued it at Rs. 7,95,76,996/-. The material destroyed consisted of raw material, packing material, stock in process both indigenous and imported. The material also includes stock in process which required further reprocessing. A show cause notice was issued to the appellant on 06.06.2020 wherein demand of customs duty on the loss of goods on account of fire accidence was made, in respect of entire quantity in stock of material time valued at Rs. 16,54,77,557/- which was lying in their factory on the day of fire. The value of actual loss reported by the appellant amounting to Rs. 7,95,76,996/- was ignored. The said demand was confirmed by the Principal Commissioner vide order dated 03.03.2021. Aggrieved by the said order, the appellants are before Tribunal. 2.1 Learned counsel pointed out that no custom duty is payable on the material destroyed in the fire accident. He pointed out that the Commissioner wrongly relies on Rule 22(2) read....
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....rtaking shall be as under : - (a)..; (b)..; (c)..; (d)..; (e)...; (1)...; (g)... (2) Every Unit and Developer shall maintain proper accounts, financial yearwise, and such accounts which should clearly indicate in value terms the goods imported or procured from Domestic Tariff Area, consumption or utilization of goods, production of goods, including by-products, waste or scrap or remnants, disposal of goods manufactured or produced, by way of exports, sales or supplies in the domestic tariff area or transfer to Special Economic Zone or Export Oriented Unit or Electronic Hardware Technology Park or Software Technology Park Units or Bio-technology Park Unit, as the case may be, and balance in stock : Rule 25 of SEZ Rules, 2006 Where an entrepreneur or Developer does not utilize the goods or services on which exemptions, drawbacks, cess and concessions have been availed for the authorized operations or unable to duly account for the same, the entrepreneur or the Developer, as the case may be, shall refund an amount equal to the benefits of exemptions, drawback, cess and concessions availed without prejudice to any other action under the relevant provisions....
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....erever applicable". 2.2 He pointed out that on the basis of aforesaid rules, the Commissioner came to the conclusion that exemption of duty in respect of goods imported/ procured by any SEZ Unit is available only when such goods are utilized in authorized operations and accounted for "by way of exports, sales or supplies in the domestic tariff area or transfer to SEZ or EOU or EHTP or HTP". He pointed out that the impugned order holds that in terms of Rule 34 of SEZ Rules duties shall be chargeable on such goods which are not utilized for authorized operation as if such goods have been cleared for home consumption. It further holds that as per Rule 47 of SEZ Rules 2006, valuation and assessment cleared into domestic tariff area shall be made in accordance with Customs Act and Rules made there under. 2.3 Learned Counsel pointed out that when the Section 23 of the Customs Act deals with the remission of duty in case of fire, Section 23 of the Customs Act reads as under : "Section 23 of the Customs Act, provide for remission of duty on goods lost or destroyed and reads: "23. Remission of duty on lost, destroyed or abandoned goods. (1) Without prejudice to the provisions of s....
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..... We find that since the entire assessment of customs duty is done under the Customs Act. The provision for remission of custom duty shall automatically apply. We agree with the submission of the learned counsel that only those provisions of other Act shall not apply, which are inconsistence with the provision of the SEZ Act. In the present case the grant of remission in respect of customs duty in terms of Section 23 does not contradict any of the provision of the SEZ Act. Therefore, the contention of the Adjudicating Authority about nonapplicability of the Section 23 of the Customs Act, is not sustainable. 4.3 As regard the contention that the appellant have not insured the customs duty along with the value of the goods, we find that it is obvious that only the value of the goods is liable to be insured, which is appearing in the invoices. If the invoice contain any taxes or duties, obviously the gross value inclusive of all these elements shall be taken for the purpose of insurance. However, in the case of SEZ, when the goods are imported and entered into SEZ, the value of goods remain the only principle value and since no duty was payable, question of inclusion of duty does no....
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....and at the rate prevailing on the date of breaking-up. Indeed, in our opinion, the notification was quite clear even before it was amended in 1962; at any rate it has become clearer beyond any doubt after the said amendment. By virtue of the fiction created by the proviso in the notification, the vessel is deemed to have been imported for breaking-up on the date it is broken-up. It is well settled that where a fiction is created by a provision of law, the court must give full effect to the fiction, and as is often said, it should not allow its imagination to be boggled by any other considerations. Fiction must be given its due play; there is to be no half-way stop. According to this notification, therefore, the date relevant for determining the value and rate of the customs duty chargeable in the case of two ships concerned in Jalyan Udyog is the date on which they were broken-up." 13. It is the submission of the learned advocate that Section 76A of Customs Act specifically provides that SEZ is to be treated as outside customs as territory of India provided in this chapter. The notification issued by the Central Government or by the CBE & C has been issued to implement the provis....
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....berate utilization or misuse of the goods procured duty free for unauthorized operations. When there is an accidental fire resulting in destruction of goods, it cannot be said that it amounts to use of goods for unauthorized operations. Similarly the second term namely failure to account for also cannot be applied since the shortage has been accounted for by fire accident and no evidence has been brought out by Revenue to show that goods have been procured or released elsewhere. Therefore there is no contravention of provisions of Rule 8 at all and this is the rule which authorizes Revenue to demand duty. 13. We also find considerable force in the argument advanced by the learned advocate and his reliance upon the decision of the Hon'ble Supreme Court. In this case SEZ is a fiction created and in that fiction if there is contravention of provisions of SEZ Rules, the fiction itself provides for taking action. Once the action to the SEZ units or the loss of goods by fire is not covered by Rule 8 of SEZ Rules 2003, the deemed fiction of SEZ being a foreign territory comes into picture. As already considered earlier, duty becomes payable only when the goods are cleared into DTA or fa....
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....opinion that loss of goods by fire cannot be deemed as accountal of goods and should be treated as non-utilization of goods for authorized operations. 6. It is seen that the issue regarding remission of duty arising on account of loss of goods due to fire has been examined in the case of Satguru Polyfab Private Limited [2011 (267) ELT 273(Tri.)]. In the said case, there was a fire in three units located close to each other and consequently there was a loss of goods. In the said case also the units were located in SEZ and the demand was raised on the ground that the goods lost in fire were not utilized for the purpose of authorized operations. In the said case the scope of Rule 8 of SEZ Rules was examined in para 12-14 following has been observed: "12. The next submission that is to be considered is the submission that the deemed fiction has to be given full effect to. The learned advocate relied upon the decision of the Hon'ble Supreme Court in the case of Jalyan Udyog referred to above. In this case the Hon'ble Supreme Court observed as follows : "It is not disputed that it is this exemption notification which is applicable herein. Now what does the notification say? In our o....
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....13. It is the submission of the learned advocate that Section 76A of Customs Act specifically provides that SEZ is to be treated as outside customs as territory of India provided in this chapter. The notification issued by the Central Government or by the CBE & C has been issued to implement the provisions of Customs Acts and the relevant provisions relating to SEZ in the Customs Act. It was necessary to provide for a system for movement of goods from the port/airport/SEZ to DTA and therefore a procedure has been designed whereby SEZ units have been required to file bill of entry for home consumption. Since SEZ is located within India and there is a possibility of diversion of the goods to DTA, exemption notification has also been issued under Customs Act even though the relevant exemption notification covering the present imports and goods lying in the SEZ have not been produced before us. In fact, in this case this non-availability of exemption to the SEZ unit which has created a problem for the appellants. As can be seen Rule 8 of SEZ Rules 2003 and Notification No. 52/2003-N.T. dated 22-7-03 provides that where goods admitted duty free in the SEZ are used for the purposes other....
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....rovides for taking action. Once the action to the SEZ units or the loss of goods by fire is not covered by Rule 8 of SEZ Rules 2003, the deemed fiction of SEZ being a foreign territory comes into picture. As already considered earlier, duty becomes payable only when the goods are cleared into DTA or failure in terms of provisions of Rule 8 of SEZ Rules 2003. Once the event is not covered by these provisions at all, we have to hold that goods are still in foreign territory which is the status of SEZ and it is a deemed fictional status. As observed by Hon'ble Supreme Court, the fiction has to be given full effect to unless there is a valid reason supported by law to do otherwise. Therefore the goods which have been destroyed have to be held to have been destroyed in the deemed foreign territory and if that is so no customs duty can be demanded." We find that the facts in the instant case are similar to the facts in the case of Satguru Polyfab Private Limited (supra). We come to the conclusion that the goods have been destroyed in foreign territory and no customs duty can be demanded on the said goods. The Revenue has relied on the decision in the case of Sandoz Private Limited (supr....