Customs, Excise and Gold Tribunal - Delhi
Vishal Footwear Ltd. vs Commissioner Of Customs on 4 August, 1999
Equivalent citations: 2000(67)ECC281, 1999(114)ELT60(TRI-DEL)
ORDER Jyoti Balasundaram, Member (J)
1. In this case, the Customs duty demand of Rs. 80,65,374/- has been confirmed against M/s. Vishal Footwear for contravention of the provisions of Notification No. 339/85-Cus., dated 21-11-1985 as amended and Notification No. 133/94-Cus., dated 22-6-1995, Central Excise duty of Rs. 1,13,394/- has been confirmed in terms of Notification No. 5/86-Cus., dated 20-1-1986, penalty of Rs. 5 lakhs has been imposed on M/s. Vishal Footwear Under Section 112 of the Customs Act, 1962, penalty of Rs. 20,000/- under Rule 173Q of the Central Excise Rules, 1944 has been imposed; further a penalty of Rs. 25,000/- has been imposed on the Managing Director of the company under the provisions of Customs Act and penalty of Rs. 5,000/- under the provisions of Central Excise Act. Imported goods valid at Rs. 2,18,98,263/- have been ordered to the confiscated Under Section 111(o) of the Customs Act, 1962 with option to redeem the same on payment of a fine of Rs. 12 lakhs.
2. The brief facts of the case are that M/s. Vishal Footwear which was a unit in the NOIDA Export Processing Zone, approved for manufacture and export of leather footwear, was allowed to import capital goods and raw materials etc. free of duty for manufacture and export of final products in accordance with the provisions of Notification 339/85-Cus. and Notification 133/94-Cus. They were also entitled to procure capital goods and raw material, etc. indigenously without payment of Central Excise duty under Notifications 5/86 and 126/95. The importer could not implement and start commercial production within the period stipulated in the letter of approval issued by the Development Commissioner in the Ministry of Commerce. Extension of the period on validity was sought from time to time and latest extension was granted till 30th September, 1996 and subsequently revalidated upto 31-3-1999.
3. The Department issued a show cause notice dated 31-1-1997 proposing recovery of both Customs and Central Excise duty on the ground that conditions of Customs and Excise Notifications had not been fulfilled as the unit had not commenced manufacture and export of final products in the manufacture of which goods imported duty free and goods obtained indigenously free of duty, were utilised. The demands were confirmed by the Adjudicating authority whose order is in challenge before us.
4. The learned Consultant Shri J.M. Sharma submits that the stage for demand of duty has not yet arisen and draws our attention to Ministry of Finance Circular No. 29/95-Cus., dated 10-3-1995 which clearly stipulates that the demand of duty should be confirmed only after a definite conclusion has been arrived at by the Development Commissioner in case of failure to export goods or closure of unit after exporting a few consignments in terms of duty free benefits granted under the Customs and Excise Notifications. He submits that the demand is premature since the Development Commissioner has not approved de-bonding of the unit and the importers have applied for further extension of the validity period to the Development Commissioner. He therefore, prays that the demand of duties and penalties imposed in the impugned order may be set aside.
5. Opposing the prayer, Shri Sangia, learned DR submits that the duty amounts are owing to the Government; that the Customs authorities are entitled to recover money and that if the demand is not upheld, units will be able to continue to delaying payment to the Government, which is not in accordance with the rights and interest of the Department to secure the money in the form of duty payable to it.
6. We have carefully considered the rival submissions and we see great force in the submissions of the appellants. Extract from the Ministry of Finance Circular is reproduced below :
"Issue of show cause notice for recovery of customs duty on goods imported by 100% EOU :
A number of instances have come to the notice of the Board where 100% EOUs had imported capital goods, raw materials and other permissible items under Notification No. 13/81-Cus., dated 9-2-1981 but have failed to export any goods or have closed down after exporting a few consignments. A question has been raised as to the stage at which the customs authorities should proceed to recover duties on imported goods and other goods lying in the factory premises of the 100% EOU.
The matter has been examined by the Board in the context of an Audit objection and I am directed to say that the Board has taken a view that liability of customs duties on goods imported by 100% EOUs arises either at the stage of the unit being de-bonded or if any of the conditions of the exemption Notification No. 13/81, dated 9-2-1981 has been violated or remains unfulfilled. In this regard, it is seen that one of the conditions of the exemption notification is that the importer exports out of India 100% or such other percentage, as may be fixed by the Board of articles manufactured wholly or partly from the goods for the period stipulated by the Board or such extended period as may be specified by the said Board. It is thus clear that if the Board of Approval or the Development Commissioner concerned determines that the units failed to export the fixed percentage of articles for the specified period, then in such case it may be held that the conditions of the exemption notification has been violated. At this stage, it will be open for this Department to issue a show cause notice to the unit for demanding the due duty on the imported goods.
Normally the customs authorities should immediately inform the Development Commissioner in case a 100% EOU ceases production prematurely or fails to commence production or export within the stipulated period. In case the Development Commissioner initiates action against the unit for non-fulfillment of export obligation etc. simultaneously, the customs authorities should issue show cause notice for failure to comply with conditions of Notification 13/81-Cus., dated 9-2-1981. The demand of duty should be confinned only after a definite conclusion has been arrived at by the Development Commissioner."
7. The above circular makes it very clear that even in the event of failure to make or continue exports, the Development Commissioner 's recommendation is required before duty demands can be confirmed by the Customs authorities. In this case, there is no definite conclusion arrived at by the concerned authority namely the Development Commissioner. On the other hand, the Development Commissioner has vide its letter dated 22-12-1998 extended the period of validity for a further period upto 31-3-1999 and the importers have further requested for further extension. Therefore, in the present case, the duty demand is premature and we see no option but to set aside the same. The penalty imposed on the appellants is also set aside. The order of confiscation is also set aside. Needles to say, it will be open to the Adjudicating authority to take appropriate action for recovery of duties in the event of the recommendations of the Development Commissioner in this regard, in accordance with law.
The impugned order is set aside and the appeals are allowed.
The Misc. application is dismissed as not pressed.