Custom, Excise & Service Tax Tribunal
Tyco Electronic Systems India (P) Ltd vs Bangalore-Ii on 4 January, 2024
C/1116, 2708/2011
C/28563/2013
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
1st Floor, WTC Building, FKCCI Complex, K. G. Road,
BANGLORE-560009
COURT-2
Customs Appeal No.28563 of 2013
[Arising out of the Order-in-Appeal No.478/2013-C.E. dated
12.09.2013 passed by the Commissioner of Central Excise
(Appeals-I), Bangalore.]
M/s. Tyco Electronics Systems India (P)
Ltd.
TE Park, 22B, Doddenakundi, ....Appellant
2nd Phase, Industrial Area,
Whitefield Road,
Bangalore - 560 048.
Vs.
The Commissioner of Central Excise
Bangalore-II Commissionerate
PB No.5400, ....Respondent
Queens Road, Bangalore - 560 001.
WITH Customs Appeal No.2708 of 2011 [Arising out of the Order-in-Appeal No. JMJ/25/2011 dated 7.7.2011 passed by the Commissioner of Central Excise and Service Tax, Large Taxpayer Unit, Bangalore.] M/s. Tyco Electronics Systems India (P) Ltd.
TE Park, 22B, Doddenakundi, ....Appellant 2nd Phase, Industrial Area, Whitefield Road, Bangalore - 560 048.
Vs. The Commissioner of Central Excise and Service Tax Large Taxpayer Unit, ....Respondent JSS Towers, 100 ft. Ring Road, Banashankari III Stage, Bangalore - 560 001.
AND Page 1 of 14 C/1116, 2708/2011 C/28563/2013 Customs Appeal No.1116 of 2011 [Arising out of the Letter C. No.IV/16/17/2009 B.II/161 dated 13.01.2011 of the Commissioner of Central Excise (Appeals-I), Bangalore.] M/s. Tyco Electronics Systems India Pvt. Ltd.
100% EOU Unit, ....Appellant
27th KM, Bellary Road,
Doddajala Post,
Bangalore - 562 157.
Vs.
The Commissioner of Central Excise
Bangalore-II Commissionerate
PB No.5400, ....Respondent
Queens Road,
Bangalore - 560 001.
Appearance:
....For Appellant
Mr. N. Anand, Advocate
Mr. Rajiv Kumar Agrawal,
.... For Respondent
Commissioner (AR)
CORAM:
HON'BLE MR. P. A. AUGUSTIAN, MEMBER (JUDICIAL) HON'BLE MRS R. BHAGYA DEVI, MEMBER (TECHNICAL) Date of Hearing: 14.07.2023 Date of Decision: 04.01.2024 FINAL ORDER No._20010 - 20012 of 2024 Per P. A. AUGUSTIAN:
Custom Appeal Nos. C/28563/2013 and C/2708/2011 These appeals are filed against Order-in-Appeal No.478/2013-C.E. dated 12.09.2013 passed by the Commissioner of Central Excise (Appeals-I), Bangalore and Order-in-Appeal No. JMJ/25/2011 dated 7.7.2011 passed by the Commissioner of Page 2 of 14 C/1116, 2708/2011 C/28563/2013 Central Excise and Service Tax, Large Taxpayer Unit, Bangalore, respectively.
2. When the matter came up for hearing, the learned Counsel for the appellant submitted that due to rapid technological development/advancement, the imported raw material/components become obsolete and unfit for manufacture and therefore they sought permission from the jurisdictional authority from time to time to destroy the goods on payment of duty on the scrap value of the destroyed goods. The Learned Counsel also submitted that the impugned order is issued without considering the provisions of Para 6.15(b) of the Foreign Trade Policy r/w Notification No.53/2003-Cus dated 31.03.2003 which reads as:-
"Capital goods and spares that have become obsolete/ surplus, may be exported or transferred to SEZ unit, transferred to another EOU/EHTP/STP/BTP/on payment of applicable GST and compensation cess or disposed of in DTA on payment of applicable GST and compensation cess and duties of Customs leviable under First Schedule of the Customs Tariff Act, 1975. Benefit of depreciation will be available in case of disposal in DTA only when the unit has achieved positive NFE taking into consideration the depreciation allowed. No duty shall be payable other than the applicable taxes under GST laws incase capital goods, raw material consumables, spares, goods manufactured, processed or packaged, and scrap/ waste/remnants /rejects are destroyed within unit after intimation to Customs authorities or destroyed outside unit with permission of Customs authorities. Destruction as stated above shall not apply to gold, silver, platinum, diamond, precious and semi- precious stones".Page 3 of 14
C/1116, 2708/2011 C/28563/2013
3. The Learned Counsel further submits that as per Board Circular No. 60/1999-Cus dated 10.09.1999, in case of supplier of such defective/damaged or otherwise unfit for use, goods, does not insist on re-export of such goods, the same may not be re- exported subject to the condition that such goods shall be either destroyed with the AC in-charge of the unit or cleared into DTA on payment of full customs duty. They have further submitted that the impugned order is issued without considering/following the provisions of Foreign Trade Policy. It is stated that as per the General exemption No.66 Paragraph 3(c) "3. .....
(c) To dispose of the goods or services, the articles produced, manufactured, processed and packaged in the unit, or the waste, scrap and remnants arising out of such production, manufacture, processing or packaging in the manner as provided in the [Foreign Trade Policy]and in this notification; "
And also, to dispose of the goods, the said condition was further relaxed by Condition 8
8. Subject to the satisfaction of the said officer, duty shall not be leviable in respect of
(i) the capital goods, if such capital goods are destroyed within the unit or outside the unit, when it is not possible or permissible to destroy the same within the unit, in the presence of Customs or Central Excise Officer;
(ii) the scrap or waste material or remnants arising in the course of production, manufacture, processing or packaging, if such scrap or waste material or remnants are destroyed within the unit or destroyed outside the unit when it is not possible to destroy the same within the unit:
Provided that this condition shall not apply in the case of unit engaged in manufacture and export of gem and jewellery.
4. Ld. Counsel further submitted that said condition of 8 Notification No.53/2003-Cus dated 31.03.2003 was substituted by Notification No. 34/2015-Cus dated 25.05.2015 wherein it is Page 4 of 14 C/1116, 2708/2011 C/28563/2013 specifically mentioned that duty shall not be leviable. Condition of 8 is reproduced hereinbelow:
"(8) Subject to the satisfaction of the said officer, duty shall not be leviable in respect of capital goods, raw material, consumables, spares, goods manufactured processed or packaged, and scrap or waste or remnants or rejects are destroyed within the unit after intimation to Customs authorities or destroyed outside the unit with permission of Customs authorities:
Provided that this condition shall not apply in case of unit engaged in manufacture and export of gold, silver, platinum, diamond, precious and semi precious stones."
5. Regarding Sale of Surplus/unutilised goods, Condition No.25 reads as follows:
"25. Sale of surplus/unutilised goods:
25.1 EOUs are allowed to sell surplus/unutilized goods and services, imported or procured duty free, into DTA on payment of duty on the value at the time of import/procurement and at rates in force on the date of payment of such duty, in case the unit is unable, for valid reasons, to utilize the goods. The permission for such DTA sale is given by the jurisdictional Assistant/Deputy Commissioner of Central Excise and Customs.
25.2 Unutilized goods and services may also be transferred to another EOU/EHTP/STP/BTP/SEZ unit or exported.
Such transfer to another such unit would be treated as import for receiving unit.
25.3 Obsolete/surplus capital goods and spares can either be exported, transferred to another EOU/EHTP/STP/BTP/SEZ unit or disposed of in the DTA on payment of applicable duties. The benefit of depreciation, as applicable, will be available in case of disposal in DTA only when the unit has achieved positive NFE. Duty is not charged in case of obsolete/surplus capital goods, consumables, spares, goods manufactured, processed or packaged and scrap, waste, remnants are destroyed within the unit after intimation to Central Excise & Customs authorities or destroyed outside unit with the permission of Central Excise & Customs authorities.
6. Regarding disposal of such obsolete items, Circular No. 18/1998-Cus dated 16.03.1998. Same is reproduced below:-
EPZ/FTZ -- Destruction of Scrap/waste in the Export Processing Zone Page 5 of 14 C/1116, 2708/2011 C/28563/2013 Circular No. 18/98-Cus., dated 16-3-1998 [From F. No. 305/215/97-FTT] Government of India Ministry of Finance (Department of Revenue) New Delhi Subject : Destruction of scrap/waste in the Export Processing Zones - Matter regarding.
I am directed to refer to Notification No. 133/94- Cus., dated 22-6-1994 governing 100% EOUs set up in various Export Processing Zones/Free Trade Zones. Under the above notification, seven earlier notifications each governing 100% EOU in an Export Processing Zone, were rescinded. In this connection, the following doubts have been raised;
(i) Whether the actions taken earlier under these seven Notifications which were issued for seven Export Processing Zones, are deemed to have been done or taken under the corresponding provisions of the current Notification No. 133/94-Cus., which has rescinded all these seven notifications.
(ii) Whether defective or sub-standard computers and its parts which are not required (useful) for current production and have also not been used can be destroyed outside the zone i.e. whether the goods which were imported under an earlier notification could be allowed destruction under the present Notification No. 133/94-Cus.
(iii) Whether the goods which are permitted for destruction within the zones can be taken for destruction outside the zones, as the notification only provides for destruction within the zone?
2. 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 Corporation's regulations, the Commissioner may permit destruction outside the Zone subject such conditions as may be prescribed by the Commissioner since this is only a procedural requirement and non-substantive in nature.
Page 6 of 14
C/1116, 2708/2011 C/28563/2013
3. Pending cases may be processed accordingly and the receipt of this letter may kindly be acknowledged.
7. The Learned Counsel further submitted that the issue is squarely covered by the findings of this Tribunal in the matter of M/s. Saint Gobin Crystals reported in 2018 (364) E.L.T 1095), M/s Mac Million India Vs CC, Bangalore reported in 2008 (223) E.L.T 449 and in the case of M/s. Indian Actuators Pvt Ltd. reported in 2009 (244) E.L.T 573, where it was held that :-
"3. We have heard both sides. We find force in the submission of the appellants that since the relevant Exim policy had already been amended prior to the issue of show cause notice, and it provides for destruction of obsolete capital goods, raw materials and finished goods and the request for destruction was made after the issue of the show cause notice, and the impugned order was passed well after the Notification itself had been amended to provide for destruction with the permission of the Assistant Commissioner, and since there is no dispute that the capital goods and raw materials had become unfit for manufacture and become obsolete in the market for actuators, the permission sought for destruction of the capital goods, raw materials and finished goods etc. by the appellants can be accepted. We find that Circular No. 18/98-Cus., dated 16-3-1998 issued by the CBEC clarifies that destruction of waste/scrap obtained in the process of manufacture in the Export Processing Zone when goods were imported under earlier notification not providing for destruction could be permitted under the notification currently in force. The Circular reads as under :-
"Destruction of scrap/waste in the Export Processing I am directed to refer to Notification No. 133/94-Cus., dated 22-6-1994 governing 100% EOUs set up in various Export Processing Zones/Free Trade Zones. Under the above notification, seven earlier notifications each governing 100% EOU in an Export Processing Zone, were rescinded. In this connection, the following doubts have been raised;
(i) Whether the actions taken earlier under these seven Notifications which were issued for seven Export Processing Zones, are deemed to have been done or taken under the corresponding provisions of the current Notification No. 133/94-Cus., which has rescinded all these seven notifications?
(ii) Whether defective or sub-standard computers and its parts which are not required (useful) for current production and have also not been used can be destroyed out side the zone i.e. whether the goods which were Page 7 of 14 C/1116, 2708/2011 C/28563/2013 imported under an earlier notification could be allowed destruction under the present Notification No. 133/94-
Cus.?
(iii) Whether the goods which are permitted for destruction within the zones can be taken for destruction outside the zones, as the notification only provides for destruction within the zone ?
(2) The Issue has been examined by 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 Corporation's regulations, the Commissioner may permit destruction outside the Zone subject such conditions as may be prescribed by the Commissioner since this is only a procedural requirement and non- substantive in nature.
(3) Pending cases may be processed accordingly and the receipt of this letter may kindly be acknowledged."
4. In the light of the above discussion, we direct that the application for permission to destroy the obsolete goods be allowed by the appropriate authority in terms of Notification No. 71/2000-Cus., dated 22-5-2000.
5. The appeal is disposed of in the above terms.
8. The Learned Counsel further submits that once the Notification52/2003 is amended vide Notification No.34/2015-Cus. dated 25.5.2015 to incorporate the condition laid down with para 6.15 of the FTP to bring parity between the two provisions the above amendment would necessarily have retrospective effect from the date of the original notification. To substantiate the same, he has drawn our attention to the judgment of Hon'ble Supreme Court in the matter of Government of India Vs Indian Tobacco Association reported in 2005 (187) E.L.T 162 (SC); CCE vs. Fosroc Chemicals reported in 2015 (318) E.L.T 240, Page 8 of 14 C/1116, 2708/2011 C/28563/2013 M/s. Mehler Engineered Products India Pvt. Ltd. Vs Union of India: 2018 (364) ELT 27(Mad.).
9. It is also submitted that the Department had in the past permitted for destruction of obsolete goods and to pay duty on the scrap value vide orders in C.No.VIII/48/280/2002 EOU IV dated 28.02.2009 and C.No.VIII/48/73/2003 EOU IV dated 28.07.2009 and therefore, the Revenue cannot contradict itself with its previous permissions in the appellants own case.
10. The learned Counsel for the appellant also draws our attention to the Order-in-Original CX NO. 9/2005 in similar case where adjudication authority itself has dropped the proceedings initiated against the assesses and aggrieved by said order, the Revenue filed appeal before this Tribunal. This Tribunal held that the Adjudication Commissioner has passed detailed speaking order, telling all aspect of the case. Further Adjudicating authority has taken note of the fact that the assessee from time to time had given notice for destruction of the scrap or waste materials and remnants and only after considering the entire aspect, demand of duty was dropped. Thus, appeal filed by the Department is rejected vide Final Order No. 46/2010 dated 27.01.2010.
11. Learned Authorized Representative draws our attention to the finding of the Hon'ble Supreme Court in the matter of CC Hyderabad Vs Pennar Industries (2015 (322) E.L.T 402 (SC) wherein it is held that since conditions of the exemption Notification are not fulfilled and the law required strict compliance Page 9 of 14 C/1116, 2708/2011 C/28563/2013 of the exemption notification, assessee became liable to pay import duty which was payable but for the benefit of Exemption Notification No.30/1997 which were obtained by the assesse. Ld AR further submits that the issue is also considered in similar cases by the Hon'ble Supreme Court in the matter of M/s SK Pattanaik Vs State of Orissa: 2000 (115) E.L.T 9 (SC). Learned AR also relied following orders in this regard.
a) M/s. Sunrise Biscuits Co Ltd Vs State of Assam (2006 (148) STC 587
b) Vadilal Chemicals Ltd Vs State of Andhra Pradesh (2005 (142) STC 76 (SC)
c) Saint Gobin Crystals & Detectors (I) Ltd Vs CC Bangalore (2018 (364) E.L.T 1055 (Tri.-Bang)
d) India Actuators Pvt Ltd Vs CCE (2009 (244) E.l.t 573 (Tri.)
e) Macmilan India Ltd Vs CC Bangalore (2009 (244) E.L.T 573 (Tri,)
f) CCE Vs Pure Rice Ltd (2007 (217) E.L.T 173 (P&H)
g) CCE Hyderabad Vs Dr. Reddy Laboratories Ltd (Final Order No. 46/2010 dated 27.01.2010)
h) Government of India Vs Indian Tobacco Association (2005 ( 187) E.L.T 162 (SC)
i) CCE Vs Fosroc Chemicals (I) Pvt Ltd (2015 (318) E.L.T 240 (Kar.)
j) Mehler Engineered Products India Pvt Ltd Vs Union of India (2018 (364) E.L.T 27 (Mad)
k) BPL Display Devices Ltd Vs CCE (2004 (174) E.L.T 5 (SC)
l) Jayaswals Neco Ltd Vs CCE (2006 (195) E.L.T 142 (SC)
m) Marsons Fan Industries Vs CCE (2008 ( 225) E.L.T 334 (SC)
12. Learned Authorised Representative on behalf of the Revenue reiterated the finding in the impugned order and submitted that once the appellant failed to use the goods for the Page 10 of 14 C/1116, 2708/2011 C/28563/2013 specific purpose within the prescribed time limit, they are liable to pay customs duty. The waste scrap or remnant arising in the course of manufacture only can be destroyed without payment of duty but duty has to be paid on obsolete goods. The Learned AR relied on the Final order of the Tribunal in the matter of Santox Pvt Ltd reported in 2012 (278) E.L.T 259 (Tri.-Mumbai) and M/s. S.K Patnaik reported in 2000 (115) E.LT 9 (SC).
13. We have considered the submissions made by both the side. As regard to the judgment of Hon'ble Supreme Court in the mater of CC Hyderabad Vs Pennar Industries (supra), in the above matter, the importer has claimed Exemption Entitlement Certificate under DEEC Scheme and imported the goods on actual use of condition but unable to export goods produced by them using imported material. Thereafter DGFT allowed them to meet the export obligation through 3rd party with a finding that they were neither mis utilization of raw material nor violation of any other conditions of license to the cost of exchequer. In the above circumstances, Apex Court held that DGFT order was not binding on Customs authorities for taking action under Customs Act, 1962. In the present case, there is no allegation that appellant had not fulfilled the export obligation. Moreover this Tribunal considered the issue in detail in assessee's own case and allowed the appeals vide Final Order No.21269-21272 of 2023 dated 20.11.2023. Following the same, the appeals are allowed. Page 11 of 14
C/1116, 2708/2011 C/28563/2013 Customs Appeal No.1116 of 2011
14. This appeal is filed against Letter C. No.IV/16/17/2009 B.II/161 dated 13.01.2011 of the Commissioner of Central Excise (Appeals-I), Bangalore.
15. The facts of this appeal are similar to the Custom Appeal Nos. C/28563/2013 and C/2708/2011, which are stated and decided above. Appellant vide letter dated 21.09.2010 sought permission for destruction and disposal of obsolete components which were unfit for manufacture and the department vide letter dated 4.11.2010 had communicated that there are no provisions in Customs / Central Excise to allow destruction of unutilised components and therefore, they are required to pay applicable duties in full before destruction. Aggrieved by this letter, appellant filed an appeal before the Commissioner (A), who in turn rejected their appeal as premature. Hence, this present appeal.
16. We find that the appellant has filed an appeal before us against a letter issued by the Commissioner (A), wherein the Commissioner (A) has observed as under:
"1. Please refer to the appeal filed in this office on 03.01.2011 by you based on the letter issued by the jurisdictional Range Officer, on perusal of the said appeal, it is observed that you have paid the duty under protest vide TR-6 Challan No.015 dated 19.11.2010 Rs.6,31,717/- towards payment of duty for destruction and disposal of obsolete raw materials/components based on the instructions in the letter cited supra by the Superintendent of Central Excise Yelahanka -I Range.Page 12 of 14
C/1116, 2708/2011 C/28563/2013
2. In view of the payment of duty paid under protest, Show-cause notice needs to be issued by the concerned adjudicating authority to vacate the said protest and the same has be processed by him, adjudicating authority would follow the principle of natural justice and call upon the appellant to submit their views. You are advised to put forth your arguments before the adjudicating authority along with supportive documents with respect to your case. Hence, filing the appeal in this office at this stage is premature hence it is rejected."
17. We find that the Commissioner (A) was right in disposing off the appeal filed by the appellant as premature. Since the appeal was based on the letter of the jurisdictional Range Officer. However, we find that the jurisdictional Range Officer had issued the letter based on the decision taken by the Divisional Assistant Commissioner, which has been approved by the Assistant Commissioner of EOU Cell. Since adjudication authority as well as Commissioner (A) have not dealt on the merits of the case and considering the view taken by this Tribunal in Final Order No.21269-21272 of 2023 dated 20.11.2023 and based on the discussions and findings as above in Custom Appeal Nos. C/28563/2013 and C/2708/2011, we remand this matter to the Adjudication authority to decide the issue afresh based on the above findings. Consequently, this appeal is allowed by way of remand.
Page 13 of 14
C/1116, 2708/2011 C/28563/2013
18. In the result,
(i) Customs Appeal No.28563 of 2013 and Customs Appeal No. 2708 of 2011 are allowed;
(ii) Customs Appeal No.1116 of 2011 is allowed by way of remand.
(Order pronounced in open court on 04.01.2024.) (P. A. AUGUSTIAN) MEMBER (JUDICIAL) (R. BHAGYA DEVI MEMBER (TECHNICAL) rv Page 14 of 14