1. The issue involved in these appeals arising out of common Order-in-Original No. 94/2001, dated 18-10-2001 is whether the capital goods imported by M/s. Perfect Latex Pvt. Ltd. and procured indigenously without payment of duty are liable to duty on account of disuse.
2. Shri Manoj Arora, learned Advocate, submitted that M/s. Perfect Latex Pvt. Ltd., a 100% Export Oriented Undertaking (EOU), imported plant and machinery for production of surgical/examination gloves and started production in 1989-90; that as they incurred losses due to break down of the USSR and buyer in USA defaulted in its commitment, they became a sick industrial company; that the Board for Industrial & Financial Reconstruction (BIFR) recommended winding up of the assessee company; that a show cause notice dated 2-6-2000 was issued to them for demanding Customs duty and Central Excise duty on capital goods for violating the provisions of Notification No. 5/86-C.E., dated 20-1-86 and Notification No. 339/95-Cus., dated 21-11-95 and 33/94-Cus., dated 22-6-1994; that the Commissioner, under the impugned Order, has come to the finding that the conditions of the Notifications that the 100% EOU ought to be authorized by the Development Commissioner for purposes of manufacturing of the export goods has been fulfilled; that the Commissioner has also found that the condition that the capital goods imported or procured locally ought to be installed and used within the zone for manufacture of export of goods has been complied with by the 100% EOU; that the Commissioner, however, has held that Para 4 of Notification No. 339/85-Cus. provides that they can be allowed to clear capital goods on payment of duty on depreciated value out of NEPZ subject to the permission of the Development Commissioner and that even though they had not made any request to shift the goods out of the Zone, the goods may be treated as goods improperly removed on the date of their deemed removal from the warehouse; that the Commissioner has, therefore, confirmed the demand of duty on capital goods after allowing 90% depreciation.
3. The learned Advocate, further, submitted that the Development Commissioner, who had initiated proceedings under the Foreign Trade (Development & Regulation) Act, 1992 has himself in regard to same issue by his Order dated 24-11-2001, observed that since they had exported goods worth Rs. 833.65 lakhs, they had achieved the requisite value addition and had complied with the Letter of Approval and thus the charges against them do not hold any ground; that the authority under the Foreign Trade Act, being the authority supervising their operations, having come to a finding that the conditions of Letter of Approval had been complied with it is not open to the Commissioner of Customs to hold that there was deemed non-compliance of the Letter of Approval. He relied upon the decision in Teg's Masrado Ltd. v. CCE, Chandigarh - 2002 (139) E.L.T. 117 (T) wherein it has been held that the demand of duty on raw material and capital goods is premature when the application of the noticee for de-bonding of the unit is pending and the Development Commissioner has not arrived at definite conclusion about non-fulfilment of their export obligation. Reliance has also been placed on the decision in Vishal Footwear ltd, v. CCE, 1999 (114) E.L.T. 60 (T). He also contended that there is no allegation against the assessee company that they had mis-utilised the capital goods procured without payment of duty; that the impugned goods are still lying in the factory and as such no demand of duty can be made from them.
4. On the other hand Shri D.N. Chaudhary, learned SDR, submitted that the capital goods imported/procured indigenously without payment of duty have not been in use since 1996-97 and thus the assessee has violated the conditions of the exemption Notification making the goods liable for confiscation under Section 111(o) of the Customs Act and Rule 209 of the Central Excise Rules, that as the capital goods are not being utilized for export production since long and the unit is lying closed, the benefit of exemption Notifications is no longer applicable; that thus the duty is chargeable from the assessee without allowing any depreciation; that Proviso to Section 3(1) of the Central Excise Act is applicable as held by the Larger Bench of the Tribunal in the case of Himalaya International Ltd. v. CCE, Chandigarh, 2003 (154) E.L.T. 580 (T-LB).
5. We have considered the submissions of both the sides. The show cause notice was issued to the assessee for demanding duty of Customs and duty of Excise on the capital goods as these were not being utilized for export production since long as the 100% E.O.U. was lying closed.
Letter of Approval stood expired and the Development Commissioner had forwarded the case to DGFT for penal action under Foreign Trade (Development & Regulation) Act, 1992. Both notifications issued under the provisions of the Customs Act as well as the Central Excise Act provide exemption from payment of duty if the goods are for being used in connection with the production, manufacture, or packaging of articles for export out of India. The Commissioner in the impugned Order, has recorded a very specific finding that the condition stipulated in Notification No. 339/85-Cus. and Notification No.5/86-C.E. to the effect that "the capital goods imported or procured locally without payment of duty ought to be installed and used within the zone in the manufacture of export goods" has also been complied with and "it is on record that the noticees were able to export their products up to 1995-96 since 1989-90, the total value of the export goods being over 8.5 times the value of capital goods. The Commissioner has, therefore, held that they cannot be faulted on this count as well." This factual position has not been controverted by the Revenue.
The learned Advocate for the Company has brought on record the Order dated 24-11-2001 passed by the Development Commissioner, Noida Export Processing Zone, in which the Development Commissioner has observed that M/s. Perfect Latex Pvt. Ltd. were granted letter of approval for manufacture and export of latex gloves subject to the condition that the net average value addition shall not be less than 30.9% during first five years of operation and unit will fulfil export obligation.
The Development Commissioner has recorded his findings that "the unit had imported capital goods worth Rs. 88.56 lacs up to 1995-96. They had imported raw materials worth Rs. 121.10 lacs up to 1995-96. During the period their export was worth Rs. 833.85 lacs. Thus the unit has achieved requisite value addition." He, therefore, dropped the adjudication proceedings against M/s. Perfect Latex Pvt. Ltd. In view of these findings it cannot be alleged that the conditions of the relevant notifications have been violated by the 100% E.O.U. so as to attract the provisions of Section 111(O) of the Customs Act for confiscation of the imported goods and for imposition of penalty under Section 112 of the Customs Act and provisions of Rule 209 of the Central Excise Rules, 1944 for confiscation of the capital goods procured indigenously and for imposition of penalty. The capital goods in question have been used for purpose of manufacture and export of goods. Accordingly all the appeals filed by Revenue are rejected.
6. The Commissioner, under the impugned Order has confirmed the demand of duty on the depreciated value of the capital goods on the ground that these goods are deemed to have been removed form the Zone with the lapse of the Letter of Approval, relying upon the judgment in the case of Kesoram Rayon v. C.C., Calcutta, 1996 (86) E.L.T. 464 (S.C.). We observe that the Revenue itself in its appeals has mentioned that the said decision of the Apex Court does not appear to be applicable as the goods installed in the unit situated in EPZ area are for manufacturing the products, which are to be exported out cent-per-cent and in these circumstances, such goods are not meant for temporary storage under Section 59 of the Customs Act and therefore, not necessarily bound to be cleared for home consumption on payment of duty. It has also been mentioned by Revenue in its Grounds of Appeal that "expiry of the permitted period of warehoused goods cannot be compared with the expiry of letter of approval," and "exemption notification is very clear in respect of authority for de-bonding and permission for removal of the capital goods from the EPZ area. It is the Development Commissioner of EPZ who is authorized to permit the removal of such goods on being requested by the unit.... But, there is no such provision in the exemption notifications that the UNIT will be allowed to remove the goods by Customs without any request/permission sought by the Unit.
Thus it appears that the Adjudicating Authority has acted beyond his jurisdiction and beyond the scope of Show Cause Notice, which is legally not proper and correct. Removal of the goods on payment of duty on depreciated value of the goods was not the subject matter of the show cause notice; hence this aspect should not have been taken into consideration by the Adjudicating Authority." In view of these averments made in the Grounds of Appeal filed by Revenue, no demand of duty on the impugned capital goods can be made treating the capital goods as having been re moved from the Zone. The decision of the Larger Bench in Himalaya International will be applicable only to the goods produced or manufactured by a 100% E.O.U. when the same are cleared to Domestic Tariff Area. In the present matter no such goods are involved as the duty is being demanded on the capital goods imported/procured indigenously without payment of duty. It is also not the case of the Revenue that the capital goods so imported/procured by the Unit have been removed from NEPZ. We, therefore, allow the appeals filed by M/s.
Perfect Latex (P) Ltd.