TaxTMI 
TaxTMI 
2025 (7) TMI 227
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....section 114A of Customs Act, 1962 as well as penalty of Rs. 5,00,00,000 under section 114AA of Customs Act, 1962 besides fine of Rs. 2,50,00,000 in lieu of confiscation under the authority of Customs Act, 1962. 2. The appellant, purported holder of 'letter of permission (LoP) [no. PR:241(1998) EOB/2015/98 dated 17th November 1998 ]' from the Development Commissioner, SEEPZ SEZ to operate under the 'export oriented unit (EOU)' scheme in the Foreign Trade Policy (FTP), had undertaken, vide intimation [2020-21] of 27th November 2020 and purportedly in compliance with Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 [notification no. 68/2017-Cus (NT) dated 30th June 2017] prescribed as condition for availing the benefit of notification [no. 52/2003-Cus dated 31st March 2003], that the imported goods would be used for manufacture of several specified end products. It was alleged that imported goods were not in conformity with the said intimation and, consequently, ineligible for exemption afforded by the notification ibid which had to be recovered and, thereby liable to be subjected to re-assessment. According to jurisdictional customs authorities, the description o....
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....main issues to be decided, I now proceed to deal with each of the issues individually for analysis considering facts, circumstances of the case, legal provisions of the Customs Act, 1962and nuances of various judicial pronouncements A. Whether the imported goods classified under CTH 74030000 are liable for re-assessment and classifiable under CTH 85389000: (i) Classification of goods in the nomenclature are governed by the following principles: "7.1 GRI-1 provides that "The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require." The explanatory notes regarding the same explain that: - (1) the nomenclature sets put in systematic form the goods handled in international trade. It groups these goods in Sections, Chapters and sub-Chapters which have been given titles indicating as concisely as possible the categories or types of goods they cover. (III) the second part of this Rule provides that classificati....
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.... general, manufacture of finished goods without having to subject imported goods required for such production to duties of customs and, normally, in notifications specifying both raw materials and finished goods emerging therefrom. Rule 4 of the said Rules required furnishing of certain particulars to trigger oversight by central excise authorities. In the 'post-excise tax regime' after 31st June 2017, Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 was substituted to enable appropriate oversight and to be in force even in hitherto excluded schemes, such as 'export-oriented unit (EOU)' scheme, owing to 'manufacture' being no longer, for tax purpose, distinguishable economic activity. The present dispute arises from the legacy of sanctity accorded to the 'triggering intimation' under the erstwhile Rules designed for input-output 'marriage', as it were and its unalloyed application to a scheme designed to keep such regulated correlation out. The limited question is the primacy of the substantive notification that, over time, has shed all such restrictions over the Rules, embodying procedure, made applicable from lack of alternativ....
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....pes which the imported goods were not. 8. The appellant is a 'export-oriented unit (EOU)' governed by the provisions of Foreign Trade Policy (FTP) entitling procurement - from both abroad and domestically - of capital goods, raw materials components and samples subject to such restriction as are specified either in the Foreign Trade Policy (FTP) or in the corresponding exemption afforded under section 25 of Customs Act, 1962. The said scheme has been in operation for over three decades and, during this time, has evolved from supervised manufacture, prevailing before the comprehensive Central Excise Tariff Act, 1975 was brought into existence and in the regime of high rates of duty, to autonomous operation subject only to compliance with conditions including obligation to be 'net foreign exchange earnings (NFE)' positive and features inter-departmental annual reviews and submission of quarterly statements. From the days of approval to be granted on each occasion of import with double lock of bonded store, the scheme has travelled a long way to the regime of general exemption binding the unit to export goods in terms of said 'letter of permission (LoP)' or to clear them domestical....
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.... (B) the integrated tax and compensation cess leviable thereon under sub-sections (7) and (9), respectively of section 3 of the said Customs Tariff Act: Provided that nothing contained in clause (B) above shall apply on or after the 1st day of April, 2018, subject to the following conditions, namely:-"' 10. It is also noticed that an earlier notification [ no. 59/2017-Customs dated 30th June 2017 ] had caused change, viz., 2. In the said notification, - (a) in the opening paragraph, - (i) for the words "and the additional duty, if any, leviable thereon under section 3 of the said Customs Tariff Act", the words " and the additional duty, if any, leviable thereon under sub-sections (1), (3) and (5) of section 3 of the said Customs Tariff Act" shall be substituted; (ii) after condition (2), the following shall be inserted, namely:- "2A. The unit shall follow the procedure prescribed under rule 5 of the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017, for import of goods.";' 11. It would, therefore, appear that the appellant herein was required to be compliant with Customs (Import of Goods at Concess....
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....of Goods at Concessional Rate of Duty) Rules, 2017 is a framework that enables some level of supervisory control over 'goods and service tax (GST)' assessees otherwise commencing only 'post- manufacturing' with the procedural stipulations thereof are to be treated as merely procedural and nothing else. The customs authorities were required to examine eligibility, in terms of enumerated conditions, for exemption and the classification of the goods, which, from the intent of notification [ no. 52/2003-Cus dated 31st March 2003 ] , being assessment neutral and of no consequence, warranted interference only upon proven diversion instead of actual use in manufacture. Assessment to duty, whether at the rate prescribed for tariff item 7407 1030 or tariff item 8538 9000 of First Schedule to Customs Tariff Act, 1975, was immaterial to exempting 'export oriented units (EOU)' from payment of duty as the goods manufactured were, in any case, to be exported and, to the extent permitted by the scheme in the Foreign Trade Policy (FTP), cleared domestically in form that it was not at the time of import. 13. As far as the 169 bills entry for the period from July 2018 are concerned, there is no a....