Custom, Excise & Service Tax Tribunal
Asian Peroxides Ltd vs Vijayawada on 6 March, 2024
1 Appeal No. C/1716/2012
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
HYDERABAD
REGIONAL BENCH - COURT NO. - I
Customs Appeal No. 1716 of 2012
(Arising out of Order-in-Original No.09/2012-Customs (Commr.) dated 31.01.2012
passed by Commissioner of Customs, Central Excise & Service Tax, Guntur)
Asian Peroxides Ltd., .. APPELLANT
Kotapolur Village,
Sullurpet Mandal,
Nellore District,
Andhra Pradesh - 524 123
VERSUS
Commissioner of Central Tax .. RESPONDENT
Vijayawada D. No. 55-17-3, 2nd Floor, C-14, Road No. 2, Industrial Estate, Vijayawada, Andhra Pradesh - 520 007.
APPEARANCE:
Shri Ch Sumanth, Advocate for the Appellant.
Shri P Amaresh, AR for the Respondent.
CORAM: HON'BLE Mr. ANIL CHOUDHARY, MEMBER (JUDICIAL) HON'BLE Mr. A.K. JYOTISHI, MEMBER (TECHNICAL) FINAL ORDER No. A/30187/2024 Date of Hearing:29.08.2023 Date of Decision:06.03.2024 [ORDER PER: ANIL CHOUDHARY] This appeal is filed by M/s Asian Peroxides Limited (100% EOU), Kotapolur Village, Sullurpet Mandal, Nellore District (hereinafter referred to as the Appellants) against Order-in-Original No. 09/2012-Cus dated 31.01.2012 passed by the Commissioner of Customs, Guntur whereby he has:
(a) Demanded Customs and Central Excise duty of Rs. 6,12,93,229/-, being the differential duty on the value of clearances made during the period from 01.04.2005 to 11.01.2006 under the provisions of Notification No. 23/2003-CE dated 31.03.2003 read with proviso to Section 3(1)(b) of the Central Excise Act, 1944;2 Appeal No. C/1716/2012
(b) Appropriated a sum of Rs. 2,84,72,590/-, being the Central Excise Duty paid during the period 01.04.2005 to 11.04.2006 towards the duty demand made above. To pay the differential amount of Rs. 3,28,20,709/-
(c) Imposed penalty of Rs. 1 Crore under Rule 25 of the Central Excise Rules, 2002.
2. The above demands are made on the ground that the M/s Asian Peroxides Ltd., Plant-II, Kotalpur, Nellore District (hereinafter referred to as the Appellants), being a 100% EOU, made clearances into the DTA during the period 01.04.2005 to 11.01.2006 and paid only the applicable Central Excise Duty and not the aggregate of Customs Duties as required to be paid under Notification No. 23/2003-CE dated 31.03.2003 read with proviso to Section 3(1)(b) of the Central Excise Act, 1994.
FACTUAL POSITION 3.1 The Appellants were a 100% Export Oriented Unit (EOU) engaged in the manufacture and export of Hydrogen Peroxide classifiable under Chapter Sub Heading 28.47 of the Central Excise Tariff Act, 1955.
3.2 The appellants submit that the said the said 100% EOU unit was set up in the year 1995 in terms of the letter of permission granted by the Secretariat of Industrial Approvals in the Ministry of Industry, Department of Industrial Development, New Delhi vide No. PER:471/(1993)EOB/409/93 dated 03.12.1993.
3.3 Pursuant to the above and letter of permission the 100% EOU obtained the necessary Private Bonded Warehouse License under Section 58 of the Customs Act.
3.4 The Appellants submit that in addition to export of the products manufactured by them, they were also selling the manufactured goods to other 100% EOUs, which was in turn used by them in further manufacture. These clearances made to other 100% EOUs were also considered by the Development Commissioner, VSEZ, Visakhapatnam, towards discharge of export obligations.
3 Appeal No. C/1716/20123.5 In terms of the relevant provisions of the EXIM policy 1992-97, 1997- 2002 and 2002-2007, the Appellants applied to the Development Commissioner, VSEZ, Visakhapatnam from time to time for granting necessary approval for clearance of a certain portion of the manufactured excisable goods viz., Hydrogen Peroxide into the DTA, on payment of applicable duties. The Appellants accordingly undertook DTA sales of the product on payment of concessional excise duties as laid down under Notification No. 2/95-CE, as amended from time to time. There is no dispute on the quantum of duty paid on these clearances during the period 1993 to 31.03.2005.
3.6 During the year 2003 the EXIM policy and the Hand Book of Procedure permitted existing 100% EOUs, to exit from the 100% EOU Scheme into the EPCG Scheme, as a one time option, subject to certain conditions, to be scrutinized and accepted by the jurisdictional Development Commissioner. In terms of these amended provisions, the Appellants exercised their option to exit from the 100% EOU Scheme and debond into the EPCG Scheme. They accordingly, made an application to the Development Commissioner, Visakhapatnam seeking approval to exit from the 100% EOU Scheme for switching over to EPCG Scheme. This approval was communicated to the Appellants vide letter dated 20.11.2003 of the Development Commissioner, a copy of which was also endorsed to the jurisdictional Deputy Commissioner of Customs and Excise, Nellore Division.
3.7 Since the formalities for exit could not be completed within the stipulated period, the Appellants requested for further extension by six months of "in-principle" permission to exit from the EOU Scheme and switch over to the EPCG Scheme. This was acceded to by the Development Commissioner VSEZ, Visakhapatnam vide letter dated 15.06.2004 and further time was granted up to 18.11.2004.
3.8 The further developments in this matter are set out in the form of a Table below containing the list of dates and events:
Sl.No. Date Event 1. 29.10.2004 ACCE, Nellur Division furnished a list of capital goods with the
depreciated value to the Development Commissioner, VSEZ to enable conversion into EPCG Scheme.
2. 01.11.2004 Development Commissioner, ESCZ grants 'No Objection Certificate' for conversion of the EOU into EPCG Scheme under 4 Appeal No. C/1716/2012 Para 6.18(d) of Foreign Trade Policy and Para 5.4 of the Hank Book of Procedure
3. 03.12.2004 EPCG License No. 0430002134 dated 03.12.2004 granted to Appellants by JDGFT, Chennai
4. 31.01.2005 Appellant submits a letter to CCE, Guntur requesting for acceptance of Bank Guarantee of Rs. 27.50 lakhs to enable switch over to EPCG Scheme
5. 11.02.2005 Commissioner accepts the request for reduction of Bank Guarantee and fixes an amount of Rs. 22.00 lakhs as Bank Guarantee to enable the Unit to Debond
6. 25.03.2005 Consequent to exit from the EOU scheme, the Range Officer assesses the Bills of Entry for payment of Customs and Central Excise Duty on imported and locally procured goods. Further directions were issued to pay interest on the differential duty paid due to price escalation in respect of DTA sales made during the perod May, 2004 to October, 2004
7. 30.03.2005 Appellant submits copies of challans evidencing payment of Customs Duty and Excise Duty on capital goods, on raw material consequent upon de-bonding along with:- (1) Bank Guarantee of Rs.22.00 lakhs towards confirmed/unconfirmed (2) Bank Guarantee of Rs.4.00 lakhs towards duty suffered against imported capital goods converted into EPCG goods; (3) Undertaking for land & building; (4) Undertaking for confirmed/unconfirmed payments; (5) Bond for Rs.13,27,400/- towards duty suffered on capital goods on account of conversion into EPCG Scheme
8. 09.04.2005 Appellant contests requirement of payment of duty on one item of capital goods imported into EOU namely Heat Recovery Boilers, which is subject matter of Show Cause Notice issued on 24.03.2005
9. 09.04.2005 Appellant request for issue of the No Objection Certificate without insisting on payment of duty towards Heat Recovery Boilers
9. 05.04.2005 Appellants start their clearances under the EPCG scheme on payment of duty.
10. 30.04.2005 Appellant reiterates request for issue of final de-bonding Order
11. 24.06.2005 Letter of the Range Officer, stating that the Audit had observed short payment of duty from 30.03.2005 in respect of DTA sales on the ground that while aggregate of Customs Duty was payable only Central Excise Duty was paid
12. 28.06.2005 Letter to the Department clarifying that the Central Excise duty applicable after de-bonding had been correctly discharged by the Company
13. 01.06.2005 Letters to Asst. Commissioner of Central Excise, Nellore 21.07.2005 requesting for urgent issue of final de-bonding order 02.09.2005 07.10.2005 22.11.2005
14. 20.10.2005 Letter from Asst. Commissioner of Central Excise, Nellore stating that (1) all goods, except Heat Recovery Boilers to be de-bonded on execution of Bank Guarantee (2) Heat Recovery Boilers from being de-bonded after deposit of 10% Duty; (3) D.G.Set installed outside the premises being excluded from de-bonding
15. 24.11.2005 Issue of No Objection Certificate
16. 12.01.2006 Final de-bonding order of Development Commissioner, VSEZ effective from 30.03.2005
17. April 2005 to Appellants continuously undertakes clearances under the EPCG January 2006 Scheme on payment of duty. This is duly reflected by them in their monthly returns, illustrative copies of which are collectively enclosed in Appeal Memo
18. 14.08.2008 Submission of documents to JDGFT, Chennai for redemption of EPCG licence and issue of EODC SHOW CAUSE NOTICE 5 Appeal No. C/1716/2012 4.1 In the above factual background, a Show Cause Notice dated 14.06.2010 was issued to the Appellants making the proposals as set out in para-1 (supra).
CASE OF THE DEPARTMENT IN THE SHOW CAUSE NOTICE 5.1 The Show Cause Notice alleged that the Appellants switched over from 100% EOU Scheme to the EPCG Scheme on 04.04.2005 without any permission from the Development Commissioner and without obtaining a "No Dues Certificate" from the jurisdictional Assistant Commissioner in contravention of the procedures specified in Para 6.18 (d) and Para 6.18 (e) of Foreign Trade Policy 2004-09.
5.2 The Appellants being a 100% EOU made clearances into the DTA from the period April 2005 to 11.01.2006 without any proper permission and without paying applicable duties in contravention of Notification No. 23/2003-CE dated 31.03.2003 with an intention to evade payment of duty.
5.3 The Appellants have violated Condition no. 3 of Annexure to the LOP and also Condition no. 12 of B-17 Bond executed by them in respect of clearance of goods into the DTA from April 2005 to 11.01.2006.
5.4 Pursuant to the above allegations, it is alleged that the Appellants, being a 100% EOU are liable to pay the total aggregate of all customs duty amounting to Rs. 6,12,93,229/- on the Hydrogen Peroxide cleared from April 2005 to 11.01.2006 under the provisions of Notification No. 23/2003-CE dated 31.03.2003 as amended, read with the conditions of the LOP and B-17 Bond executed, and also under the proviso to Section 3(1)(b) of the Central Excise Act, 1944.
Reply to Show Cause Notice
6. The Appellants contested the allegations set forth in the Show Cause Notice by filing a reply.
7. After granting an opportunity of personal hearing, the Commissioner has passed the impugned order confirming the proposals in the Show Cause Notice as stated in para 1 (supra).
6 Appeal No. C/1716/20128. Aggrieved by that part of the impugned order, the present appeal is filed on the following grounds amongst others:
SUBMISSIONS:
8.1 The appellants submit that Order-in-Original has been issued without appreciating the factual and the legal position in the proper perspective and is therefore liable to be set aside on this ground alone.
8.2 APPELLANTS CEASED TO BE 100% EOU W.E.F. 30.03.2005 AND THEREFORE ONLY CENTRAL EXCISE DUTY WAS PAYABLE 8.3 It is undisputed position that the Appellants were functioning as a 100% EOU and undertook exports as detailed above.
8.4 Para 6.20(d) of the EXIM Policy, 2002-07 provided for an option for existing EOUs to exit from the 100% EOU Scheme, subject to certain conditions specified under Appendix-141 of HOP. With the introduction of Foreign Trade Policy 2004-09 w.e.f. 10.09.2004 this exit Scheme was continued. Para 6.18 of the Foreign Trade Policy 2004 provided for the various methods applicable to an EOU to exit from the Scheme.
8.5 The one time exit option as provided under Para 6.20(d) & 6.18(d) of the policy was subject to the condition that the Units proposing to exit from the EOU Scheme should obtain permission for "in-principle approval" from the Development Commissioner. The details of imports and exports are required to be submitted to the Central Excise/Customs Authority, who will assess the duty payable and thereafter issue a "No Due Certificate".
8.6 The only prohibition during the period of conversion was that the 100% EOU would not be entitled to import of procure locally without payment of duty any inputs or capital goods, in the interregnum.
8.7 It is undisputed position that the Development Commissioner granted "in-principle" permission to exit from the EOU Scheme vide letter dated 18.11.2004 and since the Excise Department did not issue the necessary NOC the validity period of the "in-principle" permission was extended upto 18.11.2004.7 Appeal No. C/1716/2012
8.8 It is also undisputed factual position that the Company has been furnished with a letter on 25.03.2005 by the Jurisdictional Superintendent of Central Excise, who after assessing the goods, directed payment of Customs and Excise Duty payable for de-bonding of the Unit.
8.9 Pursuant to the letter dated 25.03.2005 of the Jurisdictional Superintendent of Central Excise, the Appellants paid the assessed duty and furnished necessary Bonds and Bank Guarantee as required by the department and by its letter dated 30.03.2005, furnished the details of duty payment and execution of Bonds to the Assistant Commissioner, Nellore Division, Nellore.
8.10 In the meanwhile, the Development Commissioner of ESEZ had issued a "No Dues Certificate" on 04.11.2004 for conversion of the existing EOU into the EPCG Scheme.
8.11 From the list of dates and events furnished above, it would be evident that during the period from April 2005 to 22.11.2005, the Appellants had written numerous letters to their jurisdictional Assistant Commissioner for issue of necessary "No Dues Certificate". Finally, on 03.01.2006 the jurisdictional Assistant Commissioner informed the Development Commissioner vide letter C.No. IV/16/57/2003-T2 dated 03.01.2006 that the Appellants had executed undertaking and Bank Guarantee with valuation and paid all the amounts due on 29.03.2005 and 30.03.2005 for the purpose of de-bonding and no dues are pending with the Department for the purposes of de-bonding/exit from the EOU Scheme.
8.12 The Development Commissioner, VSEZ vide letter dated 12.01.2006, after taking note of the above facts issued an order cancelling Green Card after taking note of the fact that the Appellants had fulfilled their obligations under the EXIM policy and the Foreign Trade Policy.
8.13 The Development Commissioner, after taking due note of the fact that the Appellants had fulfilled all their obligations to exit from the EOU Scheme and conversion into a EPCG Unit had clearly noted in his order dated 12.01.2006 that the unit ceased to be a 100% EOU w.e.f. 30.03.2005. That is to say, exit from the 100% EOU Scheme to switch over to EPCG Scheme was effective from 30.03.2005 itself.8 Appeal No. C/1716/2012
8.14 In other words, the Appellants started functioning as a DTA Unit under the EPCG Scheme w.e.f. 30.03.2005 pursuant to which they started exports under EPCG Licence from 05.04.2005 onwards and thereafter completed the export obligations there under.
8.15 The Appellants submit that the status of the Unit has been categorically stated to be that of a DTA working under EPCG Scheme w.e.f. 30.03.2005 by the Licensing Authority namely Development Commissioner, CSEZ. The relevant portion of the final de-bonding order dated 12.01.2006 is reproduced below for reference: -
"Whereas the aforementioned unit vide their letter dated 8.9.2005 has informed that they had obtained EPCG Licence No. 0430002134 dated 3.12.2004 from the Office of the Jt. Directir General of Foreign Trade, Chennai and also complied with all the standard conditions for exit from EOU Scheme to switch over EPCG Scheme as stipulated 'in-principle' permission letters dated 18.11.2003 and dated 4.11.2004 and has requested for issue of Final Order to Exit from EOU Scheme.
Whereas the Assistant Commissioner of Customs & Central Excise, Nellore Division, S.M. Towers, Dargamitta, Nellore vide his letter C.No.IV/16/57/2003-T2 dated 3.1.2006 has informed that M/s Asian Peroxides Ltd., had executed undertaking and bank guarantee with them and paid all the amounts on 29.3.2005 & on 30.3.2005 for the purpose of debonding and no dues are pending with the department for the purpose of debonding / exit from EOU Scheme.
Whereas the unit has commenced commercial production on 27.9.95. The export performance of the unit for the cumulative period from 1.4.2000 to 31.3.2005 (second block of five years) has been reviewed as per monitoring guidelines. During the period the unit has earned a Net Foreign Exchange Earnings for a value of Rs. 3705.80 lakhs. There are no show cause notices issued under FT(DR) Act, 92 pending adjudication against the EOU.
Now since the Assistant Commissioner of Customs & Central Excise, Nellore vide his letter dated 3.1.2006 has confirmed that the unit has discharged all it's liabilities by 30.3.2005 and no dues are pending for the purpose of debonding, the said M/s Asian Peroxides Ltd., (Plant-II) covered under Letter of Permission No. PER 471(1993)/EOB/409/93 dated 3.12.93 as amended from time-to-time is allowed to exit from 100% EOU Scheme to switch over to EPCG Scheme from the date of discharge of all its duty liabilities (i.e.) 30.3.2005 in terms of Para 6.18 (d) of Foreign Trade Policy read with para 5.4 of Hand Book of Procedures, 2004-09.
The Green Card No. 160/VEPZ dated 5.2.97 valid upto 26.9.2005 issued to M/s Asian Peroxides Ltd., under 100% EOU Scheme is hereby cancelled."
8.16 The Appellants therefore, submit that the Authority competent to recognize the Unit as a 100% EOU or DTA Unit has stated that the LOP granted to the 100% EOU ceased to be in force w.e.f. 30.03.2005 from 9 Appeal No. C/1716/2012 which date the EPCG License started to operate in so far as the Appellants are concerned.
8.17 The Appellants, therefore, submit that they cannot be considered to be 100% EOU after 30.03.2005 and consequently, all clearances of excisable goods made by them from that date have to be levied to normal Central Excise Duty under Section 3(1) of the Central Excise Act, 1944 and not at the rate applicable to a 100% EOU under the proviso to Section 3(1) of the Central Excise Act, 1944.
8.18 It is evident from the letter dated 03.01.2006 of the jurisdictional Assistant Commissioner of Central Excise, Nellore Division addressed to the Development Commissioner, VSEZ that all formalities related to exit from the EOU Scheme had been complied with by the Appellants on 29.3.2005 and 30.3.2005 itself. This is the reason that the Development Commissioner states in his letter of 12.01.2006, that the unit ceased to be a 100% EOU effective 30.03.2005.
8.19 It is also clearly evident from the table containing the list of dates that the Appellants have been pursuing the Excise department during the period April 2005 to January 2006 to issue the necessary No-objection/no-dues certificate, which has been acceded to only in January 2006. The Appellants submit that the department cannot take advantage of the delay caused by it and contend that during the period covered by the delay in issue of the no- objection/no-dues letter, the Appellants are to be considered as a 100% EOU. It is also evident that the letter issued in January 2006 stating that the Appellants have completed the necessary formalities as on 30.3.2005 could have been issued on 31.3.2005 itself, which would have rendered these proceedings wholly avoidable.
8.20 The Appellants submit that it is now settled law that the department cannot be permitted to take advantage of the delay caused by it and raise a duty demand. In this regard, the Appellants rely on the following decisions:
(i) Priyanka Overseas Vs UOI [1991 (51) ELT 185 (SC)]
(ii) Kuil Fireworks Inds. Vs CCE [1997 (95) ELT 3 (SC)] 10 Appeal No. C/1716/2012 8.21 The Appellants, therefore, submit that this demand having emanated entirely due to the delay caused by the department in issuing the necessary communication to the Development Commissioner, is not sustainable in law.
9. Learned AR for Revenue relies on the impugned order.
10. Having considered the rival contentions, we find that appellant was granted permission to exit from 100% EOU status to EPCG Scheme by in-
principle permission to exit on 20.11.2003. Thereafter, it seems the Excise/Customs Department did not issued the necessary No Objection Certificate within the reasonable time of 2 to 3 months. The validity of the period for in-principle permission was extended upto 18.11.2004 by the Development Commissioner. Jurisdictional Superintendent issued the demand directing payment of customs and excise duty after assessing, only on 25.03.2005, in pursuant thereto appellant have within a weeks time deposited the necessary and the requisite duty/taxes on 29.03.2005 and 30.03.2005 under intimation of Revenue, and also furnished the details of duty payment and execution of bond to the Assistant Commissioner, Nellore Division. In the meanwhile, Development Commissioner had issued no due certificate on 04.11.2004 for conversion of existing EOU Scheme into EPCG Scheme. Thereafter, after delay of several months, 'no dues' is issued by the Jurisdictional Commissioner on 03.01.2006. All throughout the period from April 2005 to 3, January 2006, the appellant was pursuing the Excise Department to issue necessary no objection/no due certificate which was issued after much delay on 03.01.2006. Thereafter, the appellant was allowed exit finally from the 100% EOU scheme to switch over to EPCG scheme, from the date of discharge of its duty liability i.e. 30.03.2005 in terms of para 6.16(d) of FTP read with para 5.4 of HBP 2004-09.
11. We find that DGFT who are the competent authority have allowed the de-bounding from 100% EOU to switch over to EPCG Scheme with effect from 30.03.2005 and admittedly had discharged all the dues as assessed by the excise/customs department, being pre-condition for de-bonding.
12. We further find that the delay occurred in the final de-bonding order to be issued by DGFT, due to delay wholly attributable to Customs/Excise Department, who have taken a time of almost one year or 11 months in issuing the no dues certificate. We hold that the appellant have rightly paid tax/duty on the goods cleared with effect from 01.04.2005 as a DTA unit under EPCG Scheme.
11 Appeal No. C/1716/201213. Accordingly, we allow the appeal and set aside the impugned order. Appellant is entitled to consequential benefits as per law.
(Order Pronounced in open court on 06.03.2024) (ANIL CHOUDHARY) MEMBER (JUDICIAL) (A.K. JYOTISHI) MEMBER (TECHNICAL) jaya