Custom, Excise & Service Tax Tribunal
M/S Moonlight Exim (P) Ltd vs Cce, Jaipur on 28 October, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi 110 066.
Date of Hearing: 15.9.2016
Date of Pronouncement: 28.10.2016
Appeal No. C/34/2012-CU.(DB) with C/Misc./51508/2016
(Arising out of Order-in-Original No. 60/2011(CE)- Commissioner dated 22.11.2011 passed by the Commissioner, Central Excise, Jaipur)
M/s Moonlight Exim (P) Ltd. Appellant
Vs.
CCE, Jaipur Respondent
Appearance Shri S. Vasudevan, Advocate - for the appellant Shri T.M. Sharma, Advocate Shri S.K. Sheron, DR - for the respondent CORAM: Honble Mr. S.K. Mohanty, Member (Judicial) Honble Mr. Ashok K. Arya, Member (Technical) Final Order No. 54591/2016 Per Ashok K. Arya :
Both sides have been heard.
2. The matter mainly concerns with confirmation of customs duty along with interest and imposition of penalty as the appellant M/s Moonlight Exim Pvt. Ltd. failed to fulfil export obligation and the conditions of benefit Notification No. 53/1997-Cus. dated 3.6.1997.
3. The appellant, an EOU, was granted Letter of Permission (LOP) on 20.13.2000 and was required to export goods of US $ 407.80 lakhs within five years as per LOP. The appellant failed to achieve its export obligation and did not provide any proof of realization of foreign exchange against the exports made.
4. The appellant based on the strength of written submissions inter alia submits as follows:
(i) The appellant imported mixed metal scrap which was segregated and processed in the EOU and a quantity of 2200.077 MT of various items including waste was recovered.
(ii) The appellant exported goods worth Rs. 298.98 lakhs (physical exports of Rs.81.1 lakhs and deemed exports of Rs.217.87 lakhs.). Thus, the export obligation of the appellant to the extent to Rs.217.87 stands fulfilled.
(iii) Further the clearances by the appellant to DTA in terms of para 6.9(b) of FTP have been done on payment of full duties. Even the waste has been cleared by the appellant on payment of full duties. Therefore, the duty paid by the appellant should be offset against the present demand against them.
4.1 The ld. Advocate for the appellant mentions that they had imported the goods having CIF value of Rs.377.61 lakhs whereas custom authorities increased it to make the assessable value of Rs.385.36 lakhs, which at the time of import was not objected to as there was no duty involvement.
4.2 The appellant also pleads that actually the foreign exchange outgo for the imports is only to the tune of Rs.377.61 lakhs which is the CIF value of the goods and therefore liability to foreign exchange realization for the exports against their imports has to be measured in terms of CIF value of the imports only.
5. The appellant also refers to the Notification no. 52/2003 dated 31.3.2003 whereunder it has been mentioned that if there is a failure to achieve positive foreign exchange earning, EOU would have the liability of the payment of duty in the same proportions as the unachieved portion of Net Foreign Exchange Earnings bears to the positive Net Foreign Exchange Earnings (NFEE) to be achieved along with interest. The Notification No. 52/2003 (supra), in this regard inter alia mentions as follows.
The goods imported by respective export oriented undertaking are exempted from whole of duty of customs subject to the following conditions, namely:-
(1).............
(2)...............
(3) The unit executes a bond in such form and for such sum and with such authority, as may be specified by the said officer, binding himself -
(a).............
(b)..............
(c)..............
(d) To pay on demand-
(1) an amount equal to duty leviable on the goods and interest at a rate as specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue) issued under Section 28AB of the said Customs Act on the said duty from the date of duty free import of the said goods till the date of payment of such duty, if
(i)................
(ii)...........
(iii)..........
(II) In case of failure to achieve the said positive Net Foreign Exchange Earning, the duty equal in amount to the portion of the duty leviable on the said goods but for the exemption contained in this notification and the duty so payable shall bear the same proportion as the unachieved portion of Net Foreign Exchange Earning bears to the positive Net Foreign Exchange Earning to be achieved along with interest at the rate as specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue) issued under Section 28AB of the said Customs Act, on the said duty to be paid on demand from the date of importation or procurement of the said goods till the payment of such duty. 5.1 The appellant further refers to CBEC Circular No. 29/2003 dated 3.4.2003 inviting attention to clause 7(vii) saying that in case of failure to achieve NFEP, the demand of duty along with interest could be in proportion to default as was provided in SEZ scheme. This circular makes a mention that notification No. 52/2003-Cus dated 31.3.2003 and also Notification No. 22/2003-CE dated 31.3.2003 incorporates these provisions which govern duty free procurement and import by EOUs etc. 5.2 The appellant has referred to following case laws:
(i) Natural Stone Exports Ltd. Vs. CC 2006 (198) ELT 440 (Tri.-Bang.) saying that liability to duty is only in proportionate to non-achieved portion of NEF.
(ii) CC Vs. Natural Stone Exports Ltd. 2013 (288) ELT 341 (Kar.).
(iii) Mavi Industries Ltd. Vs. CCE - 2013 (289) ELT 72 (Tri.-Mumbai).
(iv) Nikhil Industries Pvt. Ltd. Vs. CC 2005 (180) ELT 321 (Tri.-Del.)
(v) Pudumjee Plant Laboratories Ltd. Vs. CCE 2013 (295) ELT 593 (Tri.-Mumbai).
(vi) Paras Fab International Vs. CCE 2010 (256) ELT 556 (Tri.-LB).
6. Revenue has been represented by ld AR Dr. S.K. Sheron, who reiterates the findings of the impugned order passed by Commissioner, Central Excise, Jaipur-I. He further inter alia pleads as follows:
(i) The Development Commissioner, Noida, Special Economic Zone in his order No. 247/2000 dated 17th Sept, 2009 gave the findings that unit was found NFE negative; unit did not submit APR/QPR since 2005-06 and it did not apply for renewal of LOP which had expired on Feb. 2006. The Development Commissioner in this order dated 17th Sept. 2009 also mentions about Jurisdiction Central Excise to initiate action for recovery of Customs/Central excise duty. Development Commissioner cancelled the LOP dated 20.12.2000 issued to appellant unit. Therefore, in terms of the Notification No. 53/1997 Cus. dated 3.6.1997 and B-17 bond, the duty along with interest on the duty free imports made by the appellant are recoverable.
(ii) Under EOU Scheme when export obligation fixed have not been met by the appellant, duty has to be demanded. The appellant contravened the conditions of Notification No. 53/1997 dated 3.6.1997 and conditions laid down in the bonds and PW licence.
7. We have carefully considered the facts along with the submissions of both the sides and the case laws cited.
8. The main charge against the appellant which had been sustained in the impugned order is non-fulfilment of the conditions under Notification No. 53/1997 and the conditions of the bond executed at the time of setting up the EOU. The impugned order is mainly based on the following findings:
(i) Assessee has shown export of the goods countable towards fulfillment of export obligation amounting to Rs. 298.98 lakhs. (para 24 of the impugned order).
(ii) But the appellant did not produce any documentary evidence in respect of receipt/realization of foreign exchange/export proceeds in respect of physical exports, the goods supplied to EOUs and sold to DTA in terms of para 9.10 (b) and 6.5 of the EXIM Policy applicable (para 24 of the impugned order).
(iii) Assessee claimed clearance of goods valued at Rs.217.89 lakhs to DTA against the payment of foreign exchange in terms of para 9.10(b) and 6.5 of EXIM policy and RBI Circular No. 4 dated 31.3.2000 which was countable towards fulfillment of export obligation. In this case the assessee did not produce any documentary evidence showing realization of export proceeds, thus said export valued at Rs.217.87 lakhs cannot be considered towards fulfillment of export obligation (para 24 of impugned order).
(iv) The assessee did not produce any documentary evidence on the receipt of payment in respect of goods physically exported as well as supplied against CT-3 to the EOUS (para 24 of the impugned order).
(v) The total value of the goods exported towards fulfilment of export obligation works out to Rs.2,98,97,628/- (which has not been realized) whereas CIF value of imported goods was Rs. Rs.3,77,61,542/-. The assessee did not achieve positive NFEE (Net Foreign Exchange Earnings) as their total accountable export 2,98,97,628/- minus total CIF value of Rs. 3,77,61,542/- which is negative and clearly indicate that the assessee had not achieved the positive NEF; thereby the assessee violated the provisions of para 9.5 of EXIM policy, condition No. 1 of Notification No. 53/1997-Cus. dated 3.6.1997 (para 25 of the impugned order).
9. The impugned order has not given the proportionate benefit of the exports made by the appellant though it is a fact that their net foreign exchange earnings are not positive. However, considering the contents of Circular No. 29/2003-Cus dated 3.4.2003 issued by CBEC [its clause 7 (vii)] and considering Condition 3 (d) of notification No, 52/2003-Cus dated 31.3.2003 (though this notification was issued rescinding the notification No. 53/1997-Cus.) and considering the CESTAT Bangalore decision in case of CC Vs. Natural Stone Exports Ltd (supra) and CESTAT Delhi decision in the case of Nikhil Industries Pvt. Ltd. (supra) and CESTAT Mumbai decision in the case of Mavi Industries Ltd. (supra), we are of the considered view that the appellant is entitled to the proportionate benefit of exports made against which they claim to have realized the foreign exchange. The impugned order did not give the assessee appellant the benefit of exports saying that they did not produce any documentary evidence showing realization of export proceeds. The duty liability against the appellant is only to the extent of the gap between the foreign exchange realised on the exports made and the foreign exchange outgo for the imports made by the appellants as per the clarifications in the Circular No. 29/2003-Cus. (supra) and the contents of the Notification No. 52/2003-Cus. referred above.
10. We find that the impugned order has also ordered confiscation of the raw material for which redemption fine of Rs. 25 lakhs has been imposed under Section 125 of Customs Act. There is no need of any confiscation of the goods if the assessee has used the said goods for manufacturing export goods. But for the remaining goods which were not used for manufacturing export goods they are liable to make payment of customs duty foregone on account of duty free imports allowed to them as an EOU in terms of Notification No. 53/1997-Cus and the relevant bond filed by the appellant.
10.1 The impugned order also imposes penalty equivalent to the demand of Customs duty confirmed amounting to Rs. 2,05,59,822/-. In the light of above findings and discussions, this penalty is also liable to be set aside.
10.2 As per above discussion, we are holding that liability of duty against the appellant would be limited to the gap between the foreign exchange outgo for the imports and the foreign exchange earned on account of exports made. To hold the assessee liable for the duty foregone in case of all the imports is illogical, which is clear from the contents of the Notification 52/2003-Cus. (supra) and the case laws cited above ; and it naturally flows that the appellant is entitled to the proportionate benefit of the exports made and foreign exchange realised though for which they had not produced the documentary evidence before the adjudicating authority.
11. Considering the above discussions and the case laws cited the impugned order is hereby set aside and the matter is remanded back to the Commissioner, Central Excise, Jaipur-I who shall decide it afresh in the light of the findings made above within four months of receipt of this order after giving opportunity of personal hearing and that of production of necessary evidence/documents. Misc. application is also disposed of.
(Pronounced in Court on 28.10.2016) (S.K. Mohanty) Member (Judicial) (Ashok K. Arya) Member (Technical) RM 1