1. The appellants are a 100% EOU. They import goods in terms of Notification No. 13/81 Cus dated 9.2.81 and 53/97 dated 3.6.97 duty free. As per the conditions of the relevant Notification and EXIM Policy, the appellants were required to fulfill certain export obligations as decided by the Department of Industrial Development. The appellants could not fulfill the export obligations in absolute terms.
However, they achieved 64% of the NFEP for the period from 1.3.92 to 31.3.2001. The Development Commissioner, Cochin Special Economic Zone initiated penal action against the appellants and imposed a penalty of Rs. 10,000/-.The Dy. Commissioner of Customs proceeded against the appellants for non-fulfillment of export obligation. She demanded Customs Duty of Rs. 1,83,17,264/- on the goods imported by the appellants in terms of Notification 13/81 and 53/97 read with Section 28 and 72 of the Customs Act 1962. Further, she confirmed Central excise duty of Rs. 98,95,350/- under Notification No. 1/97 dated 4.1.95 read with Section 11A of the CE Act 1944. She confirmed demand of interest under Section 28/72 of Customs Act and Section 11AB of CE Act 1944. A penalty of Rs. 10,000/- was imposed under Section 117 of the Customs Act and Rs. 20,000/- was imposed under Section 11AC of the CE Act 1944. The Commissioner (A) in his Order 17/2005 dated 25.2.2005 uphold in Toto the Order-in-Original. The appellants strongly challenge the impugned Order-in-Appeal.
2. Mr. K.S. Ravi Shankar, learned Advocate appeared for the appellants and Mr. K.S. Bhatt, learned SDR appeared for the Revenue.
3. The learned advocate said that inspite of the fact that 64% of NFEP has been achieved, the original authority has demanded duty on all the items imported and the indigenously procured items duty free. He also brought to the notice of the bench that the de-bonding of the appellants unit has already been permitted by the authorities and on request of the appellants the de-bonding period was extended up to 3.11.2005. The appellants have requested for further extension. In terms of Apex Court decision in the case of LML Ltd. v. CCE , duty liability arises only on the removal of goods from the bonded warehouse. Taxable event in respect of warehoused goods occurs on the date on which the goods are cleared from a bonded warehouse for home consumption. Further, he relied on the decision of this bench in the case of CC v. Infosys Technologies Ltd. wherein it has been held that the goods deposited in the warehouse can be charged to duty only on expiry of bond period.
Before the said expiry, the demand would be premature. Hence, the learned advocate urged that the demand of duty on capital goods is not sustainable at this stage, when the goods are in the bonded warehouse of 100% EOU. As regards raw materials, consumables, etc., he said that the appellants are liable to duty to the extent of non-utilized quantity.
5. We have gone through the records of the case carefully. Both the lower authorities have extracted the following paragraph from Notification 53/97.
the importer ... binding himself to fulfill the export obligations and conditions stipulated in this Notification and in or under the Import and Export Policy for April 1985, March 1988, published under the Ministry of Commerce, Public Notice No. 1-ITC (PN) 85-88 dated 12th April 1985 (hereafter in this Notification referred to as the said Import and Export Policy), as amended from time to time, and to pay on , demand, an amount equal to the duty leviable on the goods as are not proved to the satisfaction of the Asst. Collector Customs to have been used in the manufacture of articles for export: A careful reading of the above paragraph shows that the appellants are under an obligation to pay on demand an amount equal to the duty leviable on the goods as are not proved to the satisfaction of the Asst. Collector Customs to have been used in the manufacture of articles for export. In the present case, it is not the case of the Revenue that the appellants had not at all exported any goods in terms of the Notification and the permission given by the Department of Industrial Development. It is on record that the appellants have achieved 64% of NFEP, therefore the conclusion that the appellants have not used the imported the goods/indigenously procured goods in the manufacture of articles for export is not correct in view of the partial fulfillment of the export obligations. Hence, demanding duty on the entire goods imported/indigenously procured goods in terms of the relevant Notification is not at all correct. The view taken by lower authority is not in consonance with justice and fair play. The fact that the EOU has been allowed to de-bond is not in dispute. We are in agreement with the contention of the appellants that the demand of duty on capital goods at this stage is rather premature. The 100% EOU is a bonded warehouse in terms in the scheme of 100% EOU and also the Customs Act. It is well settled that duty has to be paid on warehouse goods only at the time of clearance from the warehouse. The lower authorities' view that duty is payable even when the goods are in the bonded warehouse is not as per law. As regards goods other than capital goods (raw materials, consumables, etc.,), the quantity unutilized in the manufacture of articles for export is definitely liable for appropriate duty. Since, the Adjudication Order has treated both the capital goods and the other goods on the same footing, we have no other option but to remand the case to the Original Authority for quantification of duty on the goods (other than capital goods which are imported/indigenously procured duty free but not utilized in the manufacture of articles for export). As regards penalties, we find that due to recession in the industry and other circumstances beyond their control, the appellants could not fulfill the export obligations. There is no finding of deliberate intention on the part of the appellants to violate the law. Hence, the penalties are not justifiable, in fact this Tribunal in the case of Suvarna Aqua Farm & Exports Ltd. v. CC, Guntur held that when the circumstances were beyond the control of the importer, penalty, fine and confiscation are not sustainable. The ratio of the above decision will be applicable to this case also. The duty demand on capital goods imported/indigenously procured duty free is set aside. The appeal is allowed in the above terms.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)