Custom, Excise & Service Tax Tribunal
Baglan Taluka Grape Growers Co.Op. ... vs Cce Nashik on 17 January, 2019
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NOS: C/785/2010 & E/1810/2010
[Arising out of Order-in-Original No: 01/CUS/2010 dated 27th July
2010 passed by the Commissioner of Central Excise & Customs,
Nashik.]
For approval and signature:
Hon'ble Shri C J Mathew, Member (Technical)
Hon'ble Shri Ajay Sharma, Member (Judicial)
1. Whether Press Reporters may be allowed to see the
Order for publication as per Rule 27 of the : Yes
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of
CESTAT (Procedure) Rules, 1982 for publication : Yes
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
: Yes
Departmental authorities?
Baglan Taluka Grape Growers Co-operative Society Ltd
... Appellant
versus
Commissioner of Central Excise
Nashik ...Respondent
Appearance:
Shri Sachin Chitnis, Advocate for appellant Shri A B Kulgod, Assistant Commissioner (AR) for respondent C/785/2010 & E/1810/2010 2 CORAM:
Hon'ble Shri C J Mathew, Member (Technical) Hon'ble Shri Ajay Sharma, Member (Judicial) Date of hearing: 10/01/2019 Date of decision: 17/01/2019 ORDER NO: A/85107-85108/2019 Per: C J Mathew Appeal lies against order-in-original no. 01/CUS/2010 dated 27th July 2010 of Commissioner of Central Excise & Customs, Nashik Commissionerate confirming recovery of ` 29,87,110/- as duties of customs under section 72 of Customs Act, 1962 and duties of central excise amounting to ` 1,43,745/- under rule 176 of the erstwhile Central Excise Rules,1944. The appellant is a '100% export oriented unit' operating under that scheme in the Foreign Trade Policy and, in terms of 'letter of permission' dated 27th May 1992, was required to export the entire production, excepting rejects up to 5%, for a period of ten years and with minimum value addition of 41.2%. Capital goods, valued at ` 11,71,875/-, were imported foregoing duty of ` 29,87,110/- by recourse to notification no. 13/81-Cus dated 9th February1981 read with notification no. 53/97-Cus dated 3rd June 1997 vide bill of entry no. 1863/08.08.92 besides procuring of indigenously manufactured capital goods, valued at ` 5,01,871/- with duty foregone of ` 1,43,745/-, under notification no. 123/81-CE dated C/785/2010 & E/1810/2010 3 12th June 1981. Commercial production commenced in April 1992 and though obliged to export goods valued at ` 1950.67 lakhs between 1992-93 and 2001-02, the actual export did not exceed ` 30.96 lakhs with consequent deficit of `1919.71 lakhs.
2. On behalf of the appellant it is contended that their failure to fulfill export obligation could be traced to natural causes that affected the entire industry. Drawing attention to substantial changes effected to the scheme by the newly notified Foreign Trade Policy, and reflected in the notification no. 52/2003-Cus dated 31st March 2003, it was contended that the provisions subsisting at the time of debonding and sought for on 4th October 2004 should be applied. Learned Counsel also submitted that though the proceedings were initiated, admittedly, with the concurrence of the licensing authority, the failure to accord the benefit of depreciation vitiated the proceedings. It is further contended by him that the proceedings in relation to capital goods were premature as the process to debond had not yet been initiated.
3. We have heard the submissions of Learned Authorised Representative urging us to uphold the order of the original authority.
4. The 'export oriented unit scheme' in the Foreign Trade Policy is implemented through relevant notification providing for exemptions of duties of customs and duties of central excise issued under section C/785/2010 & E/1810/2010 4 25 of Customs Act, 1962 and section 5A of Central Excise Act, 1944 to which are attached conditions that are to be fulfilled. The scheme envisages procurement of capital goods, consumables and raw materials without payment of duty and, since 2003, the consequent export obligation is prescribed with reference to net foreign exchange outflow though, in the period preceding, the prescription not only obliged the unit to neutralise the outflow but also to add prescribed value in the manufacturing process. Now, units that are net foreign exchange positive on annual, as well as cumulative, performance is to be considered to be compliant with the export obligation prescription. Non-compliant units would be subject to proceedings for recovery of duty foregone on the procurement of raw materials in excess of that utilized for manufacture of export goods and on consumables as well as the amortised value of capital goods in proportion to the ascertained deficiency. Thus, the export oriented unit scheme has undergone changes over a period of time and, more significantly, during the tenor of the 'letter of permission' of the appellant. The amending notifications issued under Customs Act, 1962 and Central Excise Act, 1944 superceded, and substituted, the existing notifications. Hence, the condition subject to which the goods were imported were not the same for the respective years of evaluation for compliance to determine the continuance of the privilege of duty exemption on capital goods and recovery of duties. We hold that the duty liability, if any, should be with reference to notification no.
C/785/2010 & E/1810/2010 5 52/2003-Cus.
5. The duty liability on capital goods, for any period, in which the exports do not match the value of the inputs and consumables, imported and consumed during the period, and the amortised value of capital goods for the period shall be that proportion of duty on the amortised value which it bears to the unfulfilled export obligation. On debonding, duty liability would have to be discharged on the imported inputs and consumables lying in stock while capital goods would be subject to such duties as are applicable on the original value netted for depreciation at 10% per annum. It is also clear from the circular of Central Board of Excise and Customs supra that the value of the machinery is to be written down to 'nil' over a ten year period. Accordingly, at the time of debonding, equipment that has been put to use for ten years would not be liable to duty. The duty that is to be collected on plant and machinery that is yet to complete ten years in the possession of the unit would be such as is leviable on assessable value equal to the original value netted for such annual depreciation of ten percent. In the instant case, that the machinery had been put to use is evident from the finding that 'commercial production' commenced in 1992. With elapse of time since the commencement of 'commercial production', the value of the machinery depreciates to 'nil' and demand of duty is thus erased. At the same time, the proceedings for recovery of duty, under the applicable notification granting the C/785/2010 & E/1810/2010 6 exemption from duty, for annual deficiency is independent, and exclusive, of the proceedings for debonding. In the present dispute, the proceedings appear to have originated with completion of the period of warehousing which should be applicable only if warehoused goods were never put to use and, on completion of the warehousing period, the duty liability would be computed on value as assessed originally without benefit of depreciation. In the present circumstances, owing to utilization, depreciation is not deniable. The depreciation over the entire tenor would result in 'nil' value for the purpose of assessment. Accordingly, the finding on the duty liability of the capital goods is not correct in law.
6. In view of the above, we hold that the demand of duty and imposition of penalty is without the authority, and support, of law for which reason the impugned order is set aside and the appeals allowed.
(Pronounced in Court on 17/01/2019)
(Ajay Sharma) (C J Mathew)
Member (Judicial) Member (Technical)
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