Custom, Excise & Service Tax Tribunal
M/S. Pudumjee Plant Laboratories Ltd vs Cce Pune Iii on 3 February, 2012
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI
COURT NO. II
APPEAL NO. C/994/09 Mum
Arising out of Order-in-Original No. 06/CEX/2009-10 dated 7.7.2009 passed by the Commissioner of Central Excise, Pune III.
For approval and signature:
Honble Shri Ashok Jindal, Member (Judicial)
Honble Shri P.R. Chandrasekharan, Member (Technical)
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : Yes
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
M/s. Pudumjee Plant Laboratories Ltd.
:
Appellant
Versus
CCE Pune III
Respondent
Appearance Shri Vishal Agarwal, Advocate for appellant Shri Y.K. Agarwal, Addl. Commissioner (A.R.) For Respondent CORAM:
Shri Ashok Jindal, Member (Judicial) Shri P.R. Chandrasekharan, Member (Technical) Date of Hearing : 03.02.2012 Date of Decision : 03.02.2012 ORDER NO.
Per: P.R. Chandrasekharan This appeal is directed against the Order-in-Original No. 06/CEX/2009-10 dated 7.7.2009 passed by the Commissioner of Central Excise, Pune III.
2. The facts arising for consideration in this case are as follows.
2.1 The appellant, M/s Pudumjee Plant Laboratories Ltd., (PPL in short), Pune is a producer of cut flowers for which purpose they have a nursery at Village Chande, Pune where it grows flowers and thereafter sells or exports such flowers in a cut form. They were granted industrial licence under the 100% EOU scheme, vide letter No. 102 (1996)/EOB/843/95 dated 20.2.1996 for growing of roses (cut flowers) and its export thereof. Under the said scheme they were permitted to import capital goods valued at Rs.594.60 lakhs and raw materials valued at Rs.60 lakhs duty free. They were also permitted to procure indigenous capital goods, consumables etc. worth Rs.164.20 lakhs without payment of duty subject to the condition that the entire production is exported within a minimum value addition of 44%. Subsequently, the LOP was modified by the Development Commissioner, SEEPZ, Mumbai vide a letter dated 30.09.2004 wherein the export obligation was modified and they were required to achieve net foreign exchange earning of US$ 21,08,888.00. The appellant was also granted a licence for a private bonded warehouse by the Jurisdictional Assistant Commissioner vide a letter dated 22.04.1996 and the appellant was permitted to import capital goods, consumables etc. under Notification No. 126/94-Cus dated 03.06.1994. During April, 1996 to August, 2000 the appellant imported capital goods and components thereof, valued at Rs.3,09,32,811/- under Notification No. 126/94-CUS dated 03.06.1994. They also imported raw materials and consumables valued at Rs.24,69,690/- during June, 1997 to July, 2001 under the said Notification. The appellant also procured domestically, capital goods to the tune of Rs.16,93,338/- during 1996-97 by availing exemption under Notification No. 136/94 dated 10.11.1994. The appellant started commercial production from January, 1997 and has exported cut flowers valued at Rs.2,29,74,000/- till about August, 2008.
2.2 Due to severe competition in the export market, the appellant was unable to achieve export obligation and on 09.09.2005 they made an application seeking permission for debonding from the EOU scheme and for clearing the capital goods which had been imported duty free by claiming exemption under EPCG scheme as contemplated in para 6.18 (d) of EXIM Policy 2004-2009. The Assistant Development Commissioner, SEEPZ vide a letter dated 02.11.2006 informed that the Development Commissioner, SEEPZ, had agreed in-principle to allow debonding of the unit. The appellant vide letter dated 09.02.2007 requested the Development Commissioner for grant of permission to debond against an EPCG licence and the Assistant Development Commissioner vide letter dated 25.2.2007 informed the appellant that the office of the Development Commissioner had no objection for issuance of EPCG licence by the Joint DGFT. The appellant applied to the Joint DGFT for EPCG licence. The Joint DGFT issued the EPCG licence vide letter dated 19.06.2007 and have fixed the export obligation to US$ 21272.07 within a period of eight years. The appellant, in the meanwhile, requested the department to allow debonding of the unit on payment of appropriate duties on the depreciated value of the capital goods. The department did not agree to the same and issued a show-cause notice dated 11.12.2008 demanding Customs duty of Rs.1,14,35,737/- on the imported goods and Central Excise duty of Rs.1,45,816/- on the indigenously procured goods by computing the duty in terms of para 1(3)(d)(II) of Notification No. 52/2003-Cus dated 31.03.2003 read with the provisions of Section 28 and 142 of the Customs Act, 1962 and the B-17 bond executed by the appellant. In respect of excise duty, the demand was made under Notification No.22/2003-CE dated 31.03.2003 as amended read with conditions of the B-17 bond executed by them read with provisions of Section 11 of the CEA 1944. Interest was also demanded under Section 28AB and 11AB of Customs Act, 1962. In addition there was a proposal for confiscation of the imported goods under Section 111(o) of the Customs Act, 1962, penalty under Section 112a(ii) of the Customs Act, 1962, confiscation of the indigenous goods under Rule 25 of the Central Excise Rules, 2002 and penalty under the said Rule read with Section 11AC of the Central Excise Act, 1944. The case was adjudicated by the Commissioner vide the impugned order and the above duty demands were confirmed along with the interest thereon. The imported goods were confiscated under Section 111(o) and a fine of Rs.3,00,000/- were imposed in lieu of confiscation. A penalty of Rs.1,00,000/- was imposed on the appellant under Section 112a(ii) of Customs Act, 1962. The indigenously procured goods were confiscated under Section 25 of the Central Excise Rules, 2002 with an option to redeem the same on fine of Rs.10,000/- under Rule 25 of the said Rules. Hence the appellant is before us.
3. The learned Counsel for the appellant makes the following submissions:-
(a) The goods have been imported/indigenously procured vide Notifications No. 126/94-CUS and 136/94-CE and, therefore, Notification No. 52/03-CUS and 22/03-CE have no application what-so-ever for computation of duty demands.
(b) Notification No. 126/94-Cus provides for depreciation on the value in respect of the imported goods. Vide para 2 of the said Notification, duty has to be computed on the depreciated value thereof and at the rate in force on the date of payment of such duty. In the instant case, they have not been granted any depreciation as requested for and duty demand has been confirmed on a proportionate basis under Notification No. 52/2003-Cus and 22/03-CE, i.e., duty demand is proportionate to the ratio of the foreign exchange required to be earned and foreign exchange actually earned and the said ratio has been applied on the duty foregone to arrive at the duty liability required to be discharged by the appellant. This computation of the duty demand is incorrect.
(c) They have obtained in-principle approval from the Development Commissioner for debonding the unit and have also obtained a EPCG licence from the Joint DGFT for clearance of the capital goods under the EPCG Scheme and in-principle approval has been granted by the Development Commissioner. That being the position the rate of duty applicable would be the rate of duty under EPCG scheme and the duty liability has to be worked out on the depreciated value.
3.1 The appellant relied on a number of decisions in support of the above contentions namely, CE & CE, Vadodada v. Solitaire Machine Tools Pvt. Ltd. - 2003 (152) ELT 384 (T-Mum), Khabros Steel (I) Ltd. v. CCE 2002 9141) ELT 257 (T-Del), Business Process Technologies (I) Pvt. Ltd. v. CC 2010 (249) ELT 248 (T-Bang.) and Indo Pacific Poly Fibres Pvt. Ltd. decision of this Tribunal vide Order No. A/20&21/2012/CSTB/C-I dated 17.01.2012. In the light of the above decisions, they submit that they are eligible for the payment of duty on the depreciated value and at the rate applicable to the EPCG scheme.
4. The learned Addl. Commissioner, A.R. appearing for the Revenue on the other hand reiterates the findings of the adjudicating authority and relies on the judgement of this Tribunal in the case of Asian Alloys Ltd. vs. CCE Delhi 2006(203) ELT 252 (Tri. Del).
5. We have carefully considered the rival submissions.
6. There is no dispute of the fact that the appellant in the instant case imported capital goods and consumables under Notification No. 126/94-Cus dated 03.06.1994 and also procured similar items domestically under Notification No.136/94-CE dated 10.11.1994. It is also on record that the raw materials, consumables etc. have been consumed in the manufacture and export of cut flowers and none is available for debonding. The only items available for debonding are imported/indigenously procured capital goods. These goods have been procured under Notification No. 126/94-Cus. Para 2 of the said Notification reads as follows:-
Without prejudice to any other provisions contained in this notification, (the Assistant Commissioner of Customs or Deputy Commissioner of Customs) may, subject to such conditions and limitations as he may deem fit to impose under the circumstances of the case for the proper safeguard of the revenue interest and also subject to such permission of the Development Commissioner or Board of Approvals where it is exclusively required under the Export and Import Policy, allow the said units to clear any of the said goods for being taken to any other place in India in accordance with the Export-Import Policy
(a) such clearance of capital goods and office equipments may be allowed on payment of an amount equal to the customs duty leviable on such goods on the depreciated value thereof and at the rate in force on the date of payment of such duty;
(b) such clearance of goods (including containers suitable for repeated use) other than those specified in clause (a), may be allowed on payment of customs duty on the value at the time of import and at rates in force on the date of payment of such customs duty;
(c) such clearance of used packing materials such as cardboard boxes, polyethylene bags of a kind unsuitable for repeated use may be allowed without payment of any customs duty :
Provided that the importer shall not be eligible to avail of the exemption applicable to goods falling under heading number 98.01 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), or the exemption available to the imported goods under any Export Promotion scheme other than the Export Promotion Capital Goods scheme permitting import of capital goods at the rate of duty of 15% ad valorem in terms of notifications in force at the time of debonding.
Explanation. - The depreciation in respect of goods covered by clause (a) shall be allowed for the period from the date of commencement of commercial production of the unit or where such goods have been imported after such commencement from the date such goods have come into use for commercial production, upto the date of payment of duty. 6.1 From the perusal of the above it is clear that where the goods were permitted to be taken outside by the Development Commissioner on debonding, the duty has to be charged on the depreciated value in as much as the goods have been imported under Notification No. 126/94. In case of non-fulfillment of export obligation and in case where debonding were permitted by the Development Commissioner, the duty liability has to be computed on the depreciated value as is clear from the above Notification. Further, this Tribunal, in the case of Salitaire Machine Tools Pvt. Ltd. (supra), in a similar situation, held as follows:-
It is clear from the notification that under the EOU scheme imported goods were given exemption from duty as long as they were used for production of export goods. Thereafter, upon debonding the goods are treated as imported goods and subjected to duty as applicable to other import goods. That the original import was under an export obligation scheme makes no difference to duty liability. In the said case the Tribunal further held that the imported goods are eligible for depreciation as provided for in the Notification.
6.2 In Khabros Steel (I) Ltd. (supra) case, this Tribunal in a similar situation held as follows:-
The appellants were permitted to import the capital goods, component parts and raw material etc. as also to procure the same without payment of duty from indigenous sources by availing the exemption under the Notification on the condition that they will export the entire goods for a period of 10 years. But they did not fulfill this condition. They have applied for debonding of their unit which means that they have neither fulfilled their export obligation nor are they willing or are in a position to do the same. In this view of the matter, there is a clear liability on them to pay the customs and central excise duties on the goods which were procured duty free with this obligation. However, the liability of the appellants to pay the duty is only on the depreciated value. The amount of redemption fine and penalty are also to be redetermined in accordance with the depreciated value of the goods. 6.3 In the Business Process Technologies (I) P. Ltd. (supra) case, this Tribunal held that 100% EOU which are debonding, the duty has to be charged on the depreciated value at the rate in force on the date of debonding. 6.4 Again in the case of Bluegold Maritech (International) Ltd. (supra) case, the same view was held and it was ordered that the benefit of depreciation has to be granted as long as the capital goods put to use but due to various reasons, export obligations could not be fulfilled. 6.5 In the Indo Pacific Poly Fibres Pvt. Ltd. (supra) case, this Tribunal held that Notification No. 52/2003 and 22/2003 have no application what-so-ever (in respect of goods imported/procured indigenously prior to the date of issue of these notifications) and (duty liability will have to determined) under the provisions of Notifications under which the goods were imported/procured indigenously and wherever the units were allowed to be debonded, depreciation should be granted in terms of Boards Circular No. 43/98-Cus dated 26.06.1998.
7. Therefore, in the instant case also we hold that the appellant is liable pay duty only on the depreciated value of the capital goods.
8. As regards the rate of duty that should be applied, it is on record that both the Development Commissioner and the Joint DGFT have permitted the appellant to clear the capital goods under EPCG scheme. Therefore, the rate of duty that can be charged on the goods being debonded would be the rate applicable to the capital goods under EPCG scheme at the time of debonding.
9. As regards raw materials, consumables etc. imported/indigenously procured which have been consumed for the production of cut flowers, no duty liability would accrue as the goods have been used for the intended purpose.
10. In view of the above position, we set aside the impugned order and remand the case back to the adjudicating authority for re-computing the duty liability as per the terms discussed above. The appellant may also be permitted to submit whatever documentary evidence they have in support of their claim and be heard before finalizing the matter.
11. Thus the appeal is allowed by way of remand.
(Dictated in open Court) (Ashok Jindal) Member (Technical) (P.R. Chandrasekharan) Member (Judicial) nsk 5