Custom, Excise & Service Tax Tribunal
M/S. K.G. Denim Ltd vs Cc, Coimbatore on 8 September, 2017
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
C/2/2009
(Arising out of Order-in-Original No. 7/2008 dated 07.10.2008 passed by the Commissioner of Customs, Coimbatore)
M/s. K.G. Denim Ltd. : Appellant
Vs.
CC, Coimbatore : Respondent
Appearance Shri P. Sridharan, Advocate, for the Appellant Shri A. Cletus, ADC (AR) for the Respondent CORAM Honble Ms. Sulekha Beevi C.S., Member (Judicial) Honble Shri B. Ravichandran, Member (Technical) Date of Hearing / Decision: 08.09.2017 FINAL ORDER No. 42007/2017 Per: B. Ravichandran The appeal is against the order dated 07.10.2008 of the Commissioner of Customs & Central Excise, Coimbatore. The appellants are engaged in the manufacture of Denim fabrics. They have applied and obtained EPCG Licence dated 11.10.1996 for import of capital goods worth Rs. 26.82 Crores. The licence was issued in terms of Exim Policy 1992-97. As per the policy, zero rated import under the licence is allowed if capital goods value is above Rs. 20 Crores. The Customs Notification No. 111/95-Cys dated 05.06.1995 extended full exemption for such imports on the condition that a minimum value of capital goods imported should be Rs. 20 Crores. The appellant could import only capital goods valued at Rs. 13.24 Crores within the validity of the licensing period. It was extended upto 31.10.2000. Out of these imports, goods valued at Rs. 11.24 Crores were imported without payment of duty of Rs. 3.35 Crores. Since they could not fulfill the conditions of the Notification for minimum threshold limit of value of the import of capital goods, Revenue initiated proceedings for demand and recovery of additional duty forgone on the said imports. The impugned order has decided the issue against the appellants. The original authority held that the appellants failed to fulfill the condition No. 6 of the said notification regarding minimum value of import of capital goods and as such are not eligible for exemption and the duty foregone on already imported consignments should be paid back.
2. The Ld. Counsel appearing for the appellants submitted that they could not import full value of licence dated 11.10.96 due to various reasons. The appellants had another unit operating as 100% EOU with similar business. They approached the licencing authority for de-bonding the said EOU and for clearing the capital goods valued at Rs. 8.46 Crores under another EPCG licence. Their request was accepted another EPCG licence covering de-bonding capital goods was issued on 31.03.2000. As they could not fulfill the threshold import limit of capital goods in the first licence, and had the licence of EPCG for de-bonding EOU they approached the DGFT with a request to consider capital goods covered in these two licences together for extending the concession under Notification No. 111/95-Cus for zero rated import. The DGFT considered the request of the appellants and accordingly vide letter dated 30.01.2002 permitted them to retain the concession of zero rated import for the licence dated 11.10.96. The Ld. Counsel submitted that such permission given by the DGFT was not accepted by the original authority on the ground that the conditions of notification shall be independently interpreted and there is mis-representation by the appellant before the DGFT by stating that they have imported and cleared goods under these two EPCG licences by paying 10% CVD in terms of notification No. 70/97-Cus dated 16.09.97 which amended the Notification No. 111/95-Cus. introducing 10% rate off duty. The Ld. Counsel submitted that as per the directions of DGFT, for examining their request for zero rated import of capital goods, they have submitted all the Bills of Entry for import of capital goods already made and there is no mis-representation. Apparently the DGFT and the Commissioner construed duty payments on all imports which is not factually correct as there was no duty applicable prior to 16.09.1997. In other words, for the imports which are covered by the present proceedings which were imported prior to 16.09.97 no duty liability arises in case of imports under EPCG. Hence, there is no question of payments or misrepresentation. For imports after 16.09.97, even under EPCG the duty of 10% is prescribed which is discharged by the appellant for those capital goods imported from that date. The Ld. Counsel drew our attention to some of the Bills of Entry covering period post 16.09.97. As such, it is the submission of he appellant that the licensing authority has examined all the issues and by combining both the licences allowed the appellants to retain the concession as available under the licence dated 11.10.96. The Commissioner by ignoring the permission granted by the licensing authority, fell in error and accordingly the Ld. Counsel requested for setting aside the order.
3. Ld. AR reiterated the findings of the original authority. He submitted that at the time of import, the conditions are specific and the appellants have failed to import the capital goods of required threshold value. Thereafter, they have approached the DGFT and it would appear that DGFT issued the permission to retain the earlier concession without properly appreciating the facts and the conditions of the said notification. He submitted that original authority is competent to examine the fulfillment of the conditions in Customs notification to determine the duty liability in accordance with such notification. Since, the appellants did not fulfill the condition No.6 of the Notification No. 111/95, there is no question of extending the concession to the appellants. The Ld. AR submitted that the letter dated 30.01.2002 of DGFT does not absolve the appellants from duty liability by denying exemption under Notification No. 111/95.
4. We have heard both sides and perused the appeal records.
5. The dispute in the present case is with respect to eligibility of the appellants for zero rate of duty in respect of capital goods imported under EPCG licence dated 11.10.96. The facts as narrated above are not in dispute. The only point on which the original authority disallowed the claim of the appellant is that condition No. 6 of the Notification has not been fulfilled by them. We note as the appellant approached the licensing authority and as narrated above got the matter resolved by letter dated 30.01.2002. DGFT categorically stated that both zero rated EPCG licences were meant for the same export products and the total utilized value of both the zero duty licences put together exceeds Rs. 20 Crores, the Committee decided to permit the appellant to retain the facility of zero duty benefit against EPCG licence dated 11.10.96.
6. Further, we note that the capital goods which were imported have been put to intended use and the goods manufactured out of the same have been exported and the obligation of export has been discharged duly by the licensing authority vide letter date4d 24.10.2005. The said letter recognizes the fulfillment of export obligation under the EPCG licence dated 11.10.96 and advised the appellants to approach the customs authorities for release of B.G./LUT executed. It is clear that the licensing authority was fully aware of the facts of the case and issue of licences, further permission to continue the use of licence and fulfillment of export obligation of capital goods, on material facts supplied by the appellants. With reference to misrepresentation discussed in the impugned order, we note that there is no duty liability prior to 16.09.97 on the impugned capital goods. Certain goods were cleared prior to that date and some other after that date. Wherever duty is applicable, after 18.09.97, the same appears to have been paid as seen from the copies of the Bill of Entry perused by us. There cannot be any duty payment prior to 16.09.97 as there is no duty applicable. As such there is no question of mis-representation in this regard. Even otherwise, the licensing authority has merged two EPCG licences and allowed the appellants to continue to have zero rated facility in respect of the licences dated 11.10.96. We note EPCG scheme is formulated/implemented by the DGFT authorities. The licensing powers are with the said authorities. Unless the licences are held to be invalid for the stated reason by the specific authority, the same cannot be repudiated by the authorities who are to peruse and follow the same for the Customs. In the present case, there is no findings that the said licences were held to be invalid by any competent authority. We are not in agreement with the findings of the original authority who declined to consider the communications issued by the licensing authority and proceeded on independent interpretation on Customs Notification, which does not stand legal scrutiny. The licence which was validated is for the said notification only.
7. In view of the above discussions and analysis, we find no legal justification in confirming duty demand against the appellants. Accordingly, the impugned order is set aside and the appeal is allowed.
(Order dictated and pronounced in the open court)
(B. RAVICHANDRAN) (SULEKHA BEEVI C.S.)
Member (Technical) Member (Judicial)
BB
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