1.2 Earlier the assessee company was the 100% EOU and for the purpose of manufacture of the goods they imported new as well as second hand used machinery and equipments under the EOU scheme and installed the same in the registered premises as per the Exim policy 1997-2000 with effect from dated 1-4-94 EOU could be permitted De-bonding by the approval of Development Commissioner and such De-bonding was subject to payment of duties of Customs and Central Excise applicable at the time of such De-bonding. The Development Commissioner was to permit such De-bonding as a one time option to de-bond on payment of duty on Capital Goods under the prevailing Export Promotion Capital Goods (EPCG) scheme, subject to the factory units satisfying the eligibility criteria as prescribed by Exim Policy.
2. The Commissioner, pursuant to a Show Cause Notice dated 29-4-2004 found: (A) 1. The second hand/used capital goods in question were de-bonded on 4-11-99/5-11-99.
2. The depreciated value of the capital goods in question has been correctly arrived at.
3. As per Paragraph 9.39 of the Handbook of Procedure, de-bonding of capital goods imported as second hand shall not be allowed under EPCG scheme.
4. No Customs Duty was paid on the second hand capital goods in question at the time of de-bonding.
Now I proceed to decide the disputed aspects of the notice as to whether the provisions of Paragraph 9.39 of Handbook of Procedure (1997-2002) are applicable to the present case and thereby demand of duty and other allegation made in the show cause notice before me are sustainable.
B. From the available records, the chronological history of events and the dates related to the present issue are noticed as under.
1. The permission for de-bonding, in principal, was granted by the Development Commissioner, KFTZ, Gandhidham, vide his No. KFTZ/100% EOU/II/417/97-98 dated 29-6-1999.
2. The EPCG licence No. P/CG/0112842 was granted to the unit by the DGFT on 5-8-1999.
3. The DGFT issued a de-bonding letter No. KFTZ/100% EOU/II/417/97-98/7876 dated 29-10-1999.
4. Permission for premature de-bonding of the EOU was granted to the unit vide final order No. KFTZ/100% EOU/II/417/97-98 dated 4-11-1999.
5. Paragraph 9.39, prohibiting de-bonding of second-hand capital goods, was inserted in the Handbook of Procedure (1997-2002) vide DGFT Public Notice No. 33 (REJ-99)/1997-2002, New Delhi dated 1-10-1999.
The dates and events mentioned above show that the permission for pre-mature de-bonding was granted to the unit after paragraph 9.39 prohibiting de-bonding of second hand machines (capital goods) under EPCG scheme was inserted in the Handbook of Procedures (1997-2002).
Moreover, the said licence was issued in respect of new capital goods to be imported whereas the Annexure list attached to the Licence indicates the description of goods as used textile machinery, second hand sewing machine and other capital goods imported during the year 1998-99. Thus, it is evident that the de-bonding of second hand/used capital goods by the unit in this case was effected when the same was prohibited vide Paragraph 9.39 of the Handbook of Procedure (1997-2002) and therefore the Customs Duty leviable on the said de-bonding is recoverable from the unit.
And held that the extended period of recovery of customs duty under proviso to Section 28 (l)(b) of the Customs Act 1962, could be applied as only applicable duties in respect of indigenous types of goods on 27-10-1999 on de-bonding was paid. This non-payment of duty on the depreciated value is held to be an intention on the part of the appellants to evade payment of Customs Duty on such capital goods, knowingly. The said duty not paid & interest liability was demanded and penal action under Section 114A and Section 112 of the Customs Act 1962, arrived. Hence these appeals.
2.3 The Commissioner confirmed the allegation in notice & demanded customs duty of Rs. 64,27,455/- with interest under Section 28AB & imposed penalty under Section 114A of Rs. 64,27,455/- Hence this appeal.
3.1 The facts of debonding are not under contest as also the claim that the EOU imports were of New as well as second hand machinery. The premium & other details and are also not contested.
3.2 The final debonding and subsequent EPCG eligibility are not shown to be correleted: customs authority cannot sit in judgments over the licence (EPCG licence) granted in this case for New/used machinery imported & being installed as Capital Goods. There is no transfer of the machinery to any other legal person. Therefore the new machinery will not become second hand & the natures of second hand machinery in will not alter. Since the Annexure to the EPCG licence indicates the description of the goods as installed & in situ in the EOU the benefit of the Licence cannot be denied & DGFT authorities licence as issued cannot be questioned. EPCG benefit cannot be denied.
3.3 Since the BE's filed Ex-Bond were assessed & cleared on EPCG licence, there can be no case or cause to invoke the larger period. The demands are barred by limitation. Appeal is consequently to be allowed.