Custom, Excise & Service Tax Tribunal
M/S Vishal Footwear Limited vs Cc (Exports), New Delhi on 24 November, 2008
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL,
R.K. PURAM, W.B. NO.2, PRINCIPAL BENCH
NEW DELHI, COURT NO.I
Customs Appeal Nos. 136 - 137 of 2006
[Arising out of Order-in-Original No. 2/HKM/2005/10485 dated 30.11.2005 passed by the Commissioner of Customs (Exports), New Delhi]
Date of Hearing/ Decision : 24.11.2008
For approval and signature:
Hon'ble Ms. Jyoti Balasundaram, Vice President
Honble Mr. M. Veeraiyan, Member [Technical]
,,,,,,,,,1. Whether Press Reporters may be allowed to see 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 CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3 Whether Their Lordships wish to see the fair copy of the Order?
4 Whether Order is to be circulated to the Departmental authorities?
,,,,,,,,,M/s Vishal Footwear Limited Appellant
[Mr. J.M. Sharma, Consultant for the Appellant]
Vs.
CC (Exports), New Delhi Respondent
[Ms. Archana P. Tiwari, Jt. CDR for the Respondent] CORAM: Ms. Jyoti Balasundaram, Vice President Mr. M. Veeraiyan, Member [Technical] O r d e r Per M. Veeraiyan Heard both sides.
2. The appellant company imported capital goods worth about Rs. 2 crore during the period from September 1992 to 1994 for their unit in NEPZ and installed the same. The goods were imported duty free in terms of Notification No. 339/85 and 133/94 and other notifications on procurements of indigenous goods. They exported only one consignment on account of one show after manufacturing and using the capital goods imported duty free. They faced problem in running the unit and got in principle approval for debonding vide letter dated 2.6.2005 from the Development Commissioner. Meanwhile, they were issued with show cause notice dated 13.11.2004 seeking to demand customs duty/excise duty on the capital goods imported by them inasmuch as they have not fulfilled the export obligation stipulated. The appellant have been contending that it was a case of failure of business and that they wanted to relinquish title to the goods and sought for destruction of the capital goods without attracting duty liability as provided for in para 7 of the Notification No. 133/94.
3. Commissioner by the impugned order did not accept the plea and confirmed demand of duty of Rs. 80,65,384/- along with interest; he confiscated the capital goods and allowed the same on payment of redemption fine of Rs. 5 lakhs. He also imposed penalty of Rs. 7 lakhs on appellant company, Rs. 10,000/- on Dr. K. Singh under section 112 of the Customs Act, 1962 and Rule 26 of the Central Excise Rules, 2002 respectively.
4. Learned Consultant appearing for the appellants submits that the imported goods were not diverted and were not used for any other purpose on the intended purpose. They have used only for producing small quantity of goods which were exported in view of the unprecedented problem faced by them and in view of the failure of the business. They sought for waiver of the duty liability and destruction of the capital goods imported by them. They have incurred heavy business loss and no malafide has been alleged /confirmed against them. Under these circumstances, the Commissioner not granting the permission to destroy the goods and allowing benefit of waiver of the duty and also imposing penalties are not legal and proper.
5. Learned Joint CDR reiterated the findings of the Commissioner. She submits that the appellant have not fulfilled export obligation any significant extent. The question of their relinquishing title when the goods have been confiscated does not arise. She seeks upholding of the order of the Commissioner (Appeals).
6. We have carefully considered the submissions and perused the records. No allegation of any irregularity in the import or any diversion of the imported/ locally procured goods for the purpose other than the intended purpose have been made or found. This is a peculiar case where the appellants seek permission to destroy the goods which they have after investing large sum of money in the absence of any allegation of malafide, it is viewed as a case of failure of business. The Notification No. 133/94 specifically provides for such a situation. The relevant portion of the notification is reproduced:-
(7) Subject to the satisfaction of the Assistant Collector of Customs, duty shall not be leviable in respect of-
(i) the said goods used for imparting training to workers,
(ii) the said goods or goods manufactured, produced, processed or packaged in the unit, if such goods are destroyed within the Zone,
(iii) the scrap or waste material or remnants arising in the course of such production, manufacture, processing or packaging, if such scrap or waste material or remnants are destroyed within the zone.
Explanation For the purpose of this notification, Export-Import Policy means the Export and Import Policy, April, 1992 March, 1997, published under the Ministry of Commerce Public Notice No. 1-ITC(PN)/92-97, dated the 31st March, 1992, as amended from time to time.
2. Notwithstanding anything contained in paragraph 1, in the case of units engaged in the development of computer software, the exemption contained therein shall also apply to goods imported by such units for training, and for development of software on site abroad:
Provided that-
(a) the conditions stipulated in this notification are complied with by such software development unit; and
(b) the procedure specified by the Assistant Collector of Customs is followed Explanation.- The consultancy fees received by software development units in convertible foreign currency/ for consultancy service for development of software on site abroad shall be deemed to be exports for the purposes of fulfilment of export obligation under this notification.
Further, the CBEC has issued circular F. No. 305/215/97-FTT dealing with destruction of goods imported under Notification No. 133/94 as such. The relevant portion of the circular is re-produced below:-
The issue has been examined by the Board. It is clarified that action taken under the rescinded seven notifications will be deemed to have been done or taken under the corresponding provisions of the current notification No. 133/94 and the goods which were imported under any one of the earlier notifications could be allowed destruction under present notification. Under para 7(ii) of notification No. 133/94-Cus the imported goods as such may be allowed destruction and under para 7(iii), the scrap/waste obtained in the process of manufacture may also be allowed destruction. In the cases where goods cannot be destroyed within the Zone because of the safety reasons or Municipal Corporations regulations, the Commissioner may permit destruction outside the Zone subject to such conditions as may be prescribed by the Commissioner since this is only a procedural requirement and non-substantive in nature.
7. We find that the goods imported have been kept in the EPZ unit which is the customs specified area. The appellant has also executed a bond binding themselves using the capital goods for the intended purpose. Normally goods in a bonded warehouse are permitted to be relinquished title, the importer is permitted to relinquish title to the goods in the warehouse. However, in the present case, the goods have been used for manufacture after executing bond with the customs authorities. The facility of relinquishing of the title may not be strictly available in this case. Perhaps taking this fact into account the Notification No. 133/94 has specifically provided for seeking permission for destruction of the capital goods waiving liability to duty. Therefore, we are of the view that the present case squarely covered by the situation envisaged in para 7(ii) of the Notification No. 133/94. Under these circumstances, there is no scope for demand of duty, confiscation of the goods and imposition of penalties which are accordingly to be set aside. However, the learned Advocate is not challenging the confiscation. The impugned goods may be destroyed as can be disposed of destroyed in accordance with law.
8. Appeal is disposed of in the above terms.
[Dictated and pronounced in the open Court] [Jyoti Balasundaram] Vice President [M. Veeraiyan] Member [Technical] [Pant]