Custom, Excise & Service Tax Tribunal
M/S Beekay Hygine Products vs Cc, Raipur on 26 September, 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 No. 90 of 2006
[Arising out of Order-in-Original No. Commissioner/RPR/42/2005 dated 28/31.10.2005 passed by the Commissioner of Customs (Appeals) New Delhi]
Date of Hearing/ decision: 26.09.2008
For approval and signature:
Hon'ble Mr. Justice S.N. Jha, 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 Beekay Hygine Products Appellant
Vs.
CC, Raipur Respondent
Appearance:
Mr. Sanjay Grover, Advocate for the Appellant
Mrs. Archana P. Tiwari, Jt. CDR for the Respondent
CORAM: Mr. Justice S.N. Jha, President
Mr. M. Veeraiyan, Member (Technical)
O R D E R
Per M. Veeraiyan:
This is an appeal against the order of the Commissioner Commissioner/RPR/42/2005 dated 28/31.10.2005.
2. Heard both sides.
3. The relevant facts, in brief, are as follows:-
(a) The appellant was issued a industrial licence dated 19.4.90 as a 100% EOU to manufacture latexhand glouse and export with annual capacity of 30 million pieces of annual export target of Rs. 168 lacs.
(b) They imported capital goods and inputs duty free and also procured from domestic tariff area duty free raw material totally valued at Rs.2.03 crore which included capital goods valued at Rs. 52,80,833/-. The duty foregone amounting to Rs. 1,92,77,577/-.
(c) The appellant commenced production in March 1990 and exported totally about six million pieces valued about Rs. 4 crores. It is claimed that they face unprecedented competition and the value fell from 470 US$ per thousand pieces 20 per thousand pieces and as a result they stopped the manufacture in 1995 and completed export of whatever goods manufactured by March 1996 and sought for debonding of the unit. They were granted in principle debonding permit by the DGFT authorities vide their letter dated 8th September 1994. Consequent to debonding permit obtained they sought for details of payment of duty and __ of getting the details they received a show cause notice dated 18.4.96 seeking demand of duty of Rs. 95,07,701/- and proposing imposition of penalties.
4. Commissioner vide impugned order confirmed the demand as proposed alongwith interest; he ordered confiscation of capital goods valued at Rs. 5280833/- but allowed redemption fine on payment of fine of Rs. 10 lacs; he also imposed a penalty of Rs. 25 lacs. This decision has been taken on two grounds namely that the appellant failed to fulfill export obligation as per the letter of permission and that they did not achieve value addition as prescribed under Notification No. 13/81-Cus. Dated 9.2.81 and Exim Policy of 1992-97.
5. Learned Advocate submits that the dispute relating to value addition was dealt with by the DGFT authorities; initially a order was issued in 1996 holding that the value addition was minus 19.04 and a penalty of Rs. 25 lacs was imposed. Against the decision they preferred appeal to the appellate Committee of the Commerce Ministry who remanded the matter to the DGFT authorities for denovo consideration. In pursuance of the said remand direction the appellant filed detailed worksheet data indicating through value addition as 49.22 (as against the required value addition of 44.95%) and these particulars were certified by the Chartered Accountant; subsequently at the instance of Development Commissioner, the details were got verified by the jurisdictional Superintendent and ultimately the show cause notice dated 23.8.99 was issued to them stood withdrawn on 31.12.2002 holding that the party has achieved the value addition.
6. Value addition dispute having been settled by the competent authorities. The other issue based on which demand was made to non fulfillment of export obligation. He submits that the capital goods imported have been duly installed and used for the intended purposes and substantial exports have been made using the said capital goods. As regards the raw materials imported duty free, the entire raw materials stands utilized and there is no allegation or finding about any diversion of the material. In addition, the entire finished goods which have been manufactured using the duty free materials stands exported. It has been clearly specified in the reply to the show cause notice that they were only having the capital goods lying in their factory as on 31.3.96.
7. As per the provisions governing debonding they required to pay duty only on the capital goods which was initially valued at Rs. 5280533/- on the written down value as on 31.3.96 which was 2218075/-. He concedes to pay the applicable duty on this value. The order of the Commissioner has demanded duty based on the required export obligation to be fulfilled and presuming that the required raw materials have been imported duty free. Such a view is legally not sustainable.
8. Learned Advocate submits that having obtained the licence on 19.4.90 gestation period ends on 18.4.91 and the five years period for determining value addition norms should be from 1991-92 onwards.
9. Learned Joint CDR submits that the notification under which the goods have been imported duty free envisages fulfillment of condition including the value addition norms. The Customs authorities are empowered independently look into the satisfaction of the said condition notwithstanding any contrary decision of the DGFT authorities. In this regard she relies on the following decision-
i) Exports Apparel Group Ltd., vs. Union of India 1997 (91) ELT 307 (Del.)
ii) Sheshank Sea Foods Pvt. Ltd., Vs. Union of India
iii) Jacsons Thevara vs. CC&CE 1992 (61) ELT 343 (SC) She reiterates the finding of the Commissioner relating to adoption of five year period for determining of value addition norms starting from 1989-90 onwards on the ground that they commenced production in the month of March 1990 i.e. few days earlier to the close of the financial year.
10. We have carefully considered the submissions from both sides. This is a case where the appellant apparently failed to fulfill export obligation in terms of letter of permission due to circumstances beyond their control. It is not a case of diversion of the capital goods for purpose other than the intended purpose; it is also not a case where any part of the raw materials procured duty free has not been used for export production and resultant product not accepted. In other words the entire inputs imported duty free have been used for producing the goods in the resultant product has been exported. The manner of determining value addition has been disputed by DGFT authorities and finally settled by them vide their order dated 31.12.2002. There has been initial finding of minus 19.04% as against the value addition claimed by the appellant at 49.22%. Such variation appears to reconciliation on the grounds with the manner of taking five year period was found to be erroneous and the exports made only upto 1994 at the time of seeking for debodning has been taken into account and no subsequent exports. The very same issue has been raised by the Customs authorities as well. No doubt the customs notification is subject to condition which includes conditions imposed under EXIM policy. The 100% EOU is governed by EXIM policy with corresponding exemption Notifications under the Customs Act/ Central Excise Act. It is interlinked scheme. There are certain responsibilities and powers given to DGFT authorities like taking action for non fulfillment of export promotion within the specify period not adhere to value addition norms etc. Even if the customs authorities are to consider the value addition norms as one of the condition for fulfilling the notification the decision of DGFT authorities cannot be overlooked on brushed aside. It would have been appropriated that if the decision of the DGFT authorities in this regard was found not acceptable as per Exim policy they all to taken issue up to DGFT for change of the decision of the under the law. This is not the case here. Therefore, we do not hold that the value addition norm have not been satisfied by the appellant. We also find that admittedly the appellant after all a 100% EOU scheme prematurely and they were required to 10% CIF value as penalty as a consequence. The duty liability arising out of debonding has to be provided for in the exim policy and which condition has been stipulated in the concerned exemption notification as well.
(6) The importer executes a bond in such form and for such sum and with such authority, as may be prescribed by the Assistant Commissioner of Customs, binding himself to fulfil the exporter obligations and conditions stipulated in this notification and in or under the said Export and Import Policy and to pay on demand an amount equal to the duty leviable on the goods as are not proved to the satisfaction of the Assistant Commissioner of Customs to have been used in the manufacture of articles for export.
10. In this case there is no raw material or finished goods which are required to pay duty at the time of debonding. We do not agree with any duty liability can be fastened on the basis of assumed notional production and the duty involved on such inputs should be demanded when there is no actual import of such input.
11. As regards the capital gods, as already mentioned they have been put to use and finished goods have also been exported. They asked for debonding as on 31.3.96. The debonding permit should be held effective from 31.3.96 to grant any depreciation beyond that date amount to granting extra benefit for a present premium for the delay in applying for debonding. Therefore, we hold that they shall pay applicable duty on the capital goods on the written down value which is admitted said to be paid Rs. 22,18,075/- as on 31.3.96 alongwith interest.
12. In the given facts and circumstances of the case, the question of confiscation of the capital goods or imposition of penalty is not justified.
13. The appeal is disposed of on the above terms.
[Justice S.N.Jha] President [M. Veeraiyan] Member (Technical) [Pant]