Custom, Excise & Service Tax Tribunal
Samsung India Electronics Private Ltd vs Ce & Cgst Noida on 16 January, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Customs Appeal No.70524 of 2017
(Arising out of Order-in-Original No.01/Pr.Comm./Noida-I/2017-18 dated
11/05/2017 passed by Commissioner of Central Excise, Noida-I)
M/s Samsung India Electronics Pvt. Ltd., .....Appellant
(B-1, Sector-81, Phase-II, Noida)
VERSUS
Commissioner of Central Excise, Noida-I ....Respondent
(C-56/42, Renu Tower, Sector-62, Noida-I)
APPEARANCE:
Shri B.L. Narasimhan, Advocate,
Ms. Nupur Maheswari, Advocate &
Shri Siddhant Indrajit, Advocate for the Appellant
Shri Rajpal Sharma, Special Counsel (Authorised Representative) for
the Respondent
CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL)
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NO.70024/2025
DATE OF HEARING : 13 August, 2024
DATE OF PRONOUNCEMENT : 16 January, 2025
SANJIV SRIVASTAVA:
This appeal is directed against Order-In-Original No.
01/PR.COMMR/NOIDA-I/2017-18 DATED 11.5.2017 of The
Principal Commissioner, Central Excise, Commissionerate:
Noida-I by the impugned order following has been held:
ORDER
(i) I confirm the demand of Customs duty amounting to Rs.
149,33,69,968/- (Rupees One Hundred Forty Nine Crores Thirty Three Lacs Sixty Nine Thousand Nine Hundred Sixty Eight only) and order its recovery from M/s. Samsung India Electronics Pvt. Ltd., B-1, Sector- 81, Phase II, Noida under Customs Appeal No.70524 of 2017 2 the provisions of Section 28(8) and Section 72(1)(a) of the Customs Act, 1962;
(ii) I also confirm the demand of interest, at the appropriate rate, and order its recovery from them under the provisions of Section 28 AA and 72 of the Customs Act, 1962;
(iii) I also impose a penalty of Rs. 14,00,00,000/- (Rupees Fourteen Crores only) upon the party under Section 72(1)(a) and Section 112(a)(ii) of the Customs Act, 1962. If the duty as determined and interest payable hereon is paid within thirty days from the date of communication of the order of the proper officer determining such duty, the amount of penalty liable to be paid by such person shall be twenty- five per cent. of the penalty so determined subject to the condition that such reduced penalty is also paid within the period so specified 2.1 Appellant with address B-1, Sector-81, EHTP Unit, Phase I, Noida were registered with the Central Excise Department, having been granted Registration No.AAACS5123KXM005, as an EHTP Unit for manufacture of excisable goods namely Mobile Phone Handsets falling under Chapter sub-heading of 85171210 and 85171290 of the First Schedule of the Central Excise Tariff Act,1985, and Tablet Computer falling under Chapter sub- heading of 84713090 of the First Schedule of the Central Excise Tariff Act,1985. For manufacture of the said excisable goods, the party was procuring imported and indigenous capital goods, raw materials and consumables at Nil rate of duty by availing the benefit under the provisions of Notification No. 52/2003-Cus dated 31/03/2003. The receipt and consumption of the said raw material and other goods were being reflected in the monthly ER-2 returns filed with the department 2.2 At the very same premises i.e. B-1, Sector 81, Phase II, Noida, M/s. Samsung India Electronics Pvt. was also registered as a Domestic Tariff Area unit with the Central Excise Department, having Central Excise Registration No. AAACS5123KXM001, for manufacture of excisable goods namely Customs Appeal No.70524 of 2017 3 Refrigerators, Televisions etc. (hereinafter referred to as the `said DTA unit).
2.3 Both Appellant and the DTA unit belonged to the same and common company namely M/s. Samsung India Electronics Pvt. Ltd.
2.4 During the course of the audit of the records of the appellant for the period 2014-15 for manufacture and removal of the said excisable goods, on 29.9.2015, 7.10.2015, 14.10.2015, and 23.11.2015 it was observed that the appellant had:
applied for de-bonding of consumables, manuals/ booklets, packing materials, capital goods and raw materials vide their application dated 25/02/2015 addressed to the Deputy Commissioner, Customs and Central Excise, Division V, Noida-I, Sector 62, Noida.
had deposited the duty of Rs. 43,03,53,163/- vide TR-6 challans and also had adjusted duty liability of Rs. 77,14,90,775/-- against EPCG licenses in terms of para 6.18 (d) of Foreign Trade Policy 2009-14 (hereinafter referred to as 'FTP') and para 5.4 of Hand Book of procedure ('HOP' in short) in lieu of de-bonding of consumables, manuals/booklets, packing materials and capital goods (i.e. all the goods except the raw materials imported by the said Party without payment of duty).
in the above referred application dated 25/02/2015 also claimed adjustment of duty liability of Rs. 2,40,71,86,887/- in respect of de-bonding of the raw materials against the Annexure which was to be issued by the Deputy Commissioner in terms of serial No 431 of Notification No. 12/2012-Cus dated 17/03/2012 2.5 Appellant was requested by the Superintendent (Audit), vide letter C.NO. V(I)/Audit-II/MRT/IA/Misc/1125/2015 dated 03/07/15 to intimate and produce the relevant documents pertaining to de-bonding of the goods and consequent discharge of duty liability Customs Appeal No.70524 of 2017 4 2.6 Appellant along with their letter dated 23/11/2015 inter- alia submitted copy of the Annexure-III No.001/14-15 dated 28/02/2015 which was issued by the jurisdictional Deputy Commissioner in terms of serial No. 431 of the Notification No. 12/2012-Cus dated 17.3.2012, and which was utilized by them to discharge/adjust the duty liability payable at the time of de- bonding of the raw materials. The calculation sheet which was attached to the said Annexure-III No. 001/14-15 dated 28/02/2015 was also produced.
2.7. On examination of the said Annexure-III No. 001/14-15 dated 28/02/2015, it was seen that the same was applied by the said DTA unit under the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 (in short the IGCR, 1996) for import of 1294708259 quantity of goods having estimated value of Rs.6,640,687,425.58/- involving Customs duty of Rs.1,493,369,968/-. It was pertinent to mention that the said Annexure III erroneously bore the stamp of the Appellant as the applicant. The error was apparent on the very face of the document because an EHTP could not have applied for availing the benefit under IGCR, 1996, and such benefit was available only to a DTA unit. This anomaly regarding the Appellant (an EHTP unit) being the applicant, was admitted by the DTA unit and was explained to be an inadvertent mistake in the letter dated 08/02/2016 submitted by M/s. Samsung India Electronics Pvt. Ltd (DTA unit) to the jurisdictional authority 2.8 In Table-2 of their letter dated 25/02/2015, the Appellant had mentioned about the adjustment of duty liability of Rs.240,71,86,887/- against the Annexure issued by the jurisdictional Dy. Commissioner, under the IGCR, 1996. This Annexure was stated to have been annexed to their letter dated 25/02/2015 as 'Annexure-D' However, on examination it was also revealed that this Annexure was neither annexed, nor could have been validly annexed as the application for the issuance of the said Annexure was made by the said DTA unit to the jurisdictional Deputy Commissioner only on 28/02/2015 i.e. Customs Appeal No.70524 of 2017 5 after 25/02/2015. The same was issued on 28/02/2015 i.e. subsequent to issue of the said letter dated 25/02/2015. From the entries made in the said Annexure-II No.001/14-15 dated 28.02.2015 it was evident that the Bond for an amount of one thousand Crores was accepted by the department only on 28/02/2015 in respect of Annexure- III issued to the said DTA Unit under IGCR, 1996. Therefore, this bond which came into existence only on 28/02/2015 could not have been utilized on 25/02/2015 as claimed by the Party in their said letter dated 25/02/2015.
2.9 Thus the declaration made by the party in their letter dated 25/02/2015 regarding valid and proper discharge of duty liability of Rs. 240,71,86,887/- towards de-bonding of the raw material was factually incorrect and was a mis-declaration 2.10 On completion of enquiry investigations it appeared that the o subject goods valued at Rs.6,640,687,425.58/- which were removed by the appellant without payment of applicable duty, as mentioned supra, were liable to confiscation under Section-111(o) of Customs Act, 1962. o appellant had contravened the provisions of Notification No. 52/2003-Cus dated 31/03/2003 issued under sub- section (1) of Section 25 of the Customs Act, 1962 in as much as the imported raw materials had been removed, at the time of de-bonding of the EHTP Unit, without payment of the applicable duties and thus rendered themselves liable for penalty under the provisions of Section 72 and Section 112 of the Customs Act, 1962.
2.11 A show cause notice dated 18.02.2016 was issued to the appellant asking to Show cause as to why;
(i) Customs duty amounting to Rs. 149,33,69,968/- Rupees One Hundred Forty Nine Crores Thirty Three Lacs Sixty Nine Thousand Nine Hundred Sixty Eight only) on imported raw material valued at Rs. 6,640,687,425/- removed from bonded area to DTA unit without payment Customs Appeal No.70524 of 2017 6 of duties in contravention of Notification No. 52/2003-Cus dated 31/03/2003 should not be recovered from them in terms of section 28 and 72 of the Customs Act, 1962 and B-17 bond submitted by them should not be invoked to recover the said duty.
(ii) appropriate interest on the above amounts of Customs duty should not be recovered in terms of section 28AA and 72 of the Customs Act, 1962 and the B-17 bond submitted by them should not be invoked to recover the said interest;
(iii) imported raw material valued at Rs. 6,640,687,425/- and involving Custom duties of Rs. 149,33,69,968/- removed from the bonded area without payment of the said duties should not be confiscated under section 111 (o) of Customs Act, 1962; and (iv) penalty under section 72 and 112 and of the Customs Act, 1962 should not be imposed upon them.
2.12 The show cause notice has been adjudicated as per the impugned order referred in para 1 above.
2.13 Aggrieved appellant has filed this appeal.
3.1 We have heard Shri B L Narasimhan, Ms Nupur Maheswari and Shri Siddhant Jain, Advocates for the appellant and Shri Rajpal Sharma, Special Counsel for the revenue.
3.2 Arguing for the appellant learned counsels submit:
Debonded goods are at par with the "imported goods" and the rates in force refer to the effective duty rate. Hence the appellant has rightly discharged „applicable" duty in terms of Par 4 (b) of the Notification No 52/2003 on the de-bonded raw materials. Reliance placed on the following decisions:
o Sahajanand Technologies Pvt Ltd. [2015 (325) ELT 625 (SC)] o DCM [1999 (109) ELT 12 (SC)] o Kesoram Rayon [1996 (86) ELT 464 (SC)] o Shewbuxrai Onkarmall [1981 (8) ELT 298 (Cal)] Customs Appeal No.70524 of 2017 7 Appellant is essentially an private bonded warehouse. On combined reading of Section 15 (1) (b) and Section 68 of the Customs Act, it is evident that the exemption available at the time of clearance for home consumption shal bee available. Such interpretation is in line with the view expressed in D OF No 334/7/2017/TRU dated 01.02.2017 issued by TRU.
Further reliance is placed on the following:
o Meneta Automotive Components P Ltd. [2015 (328) ELT 620 (T-Del)] o Circular No 305/83/94-FTT dated 15.09.1994. o Appendix 14-I-L issued in relation to Para 6.18 9d) of the FTP.
o Salora Component Pvt Ltd [2019 (370) ELT 925 9T-
Ahmd)] o Hotline CPT Ltd. [2009 (24) ELT 143 (T-Del)] o Orbit fabrics Ltd. [2011 (264) ELT 53 (Guj)] Notification No 52/2003 does not bar claiming benefits under general exemptions. When the notification is unambiguous and plainly worded, an additional condition cannot be introduced to deny benefit under Notification No 12/2012 read with Notification No 52/2003. Reliance is placed on o M F Rings & Bearing Races Ltd. [2016 9337) ELT 17 (Del)] o Multivac India Pvt Ltd. [2017 (357) ELT 1148 (T-
Del)] Exemption under Notification No 12/2003 was duly allowed by the jurisdictional authorities.
Reliance placed on Para 6.15 is incorrect as Para 6.18 of the FTP is the provision in relation to de-bonding. No objection was raised by the Custom Authorities at the time of de-bonding. Hence they also endorsed the view in favour of admissibility of exemption.
Duty is not recoverable under section 28 and Section 72 of the Customs Act,1962 as the duty that has been paid by Customs Appeal No.70524 of 2017 8 the appellant is on the basis of assessment/ approval by the jurisdictional authorities. Hence there cannot be a case for short levy or non levy. Reliance is placed on the following decisions:
o Cotspun Ltd. [1999 (113) ELT 353 (SC)] o Rainbow Industries [1994 (74) ELT 3 (SC)] o Mahindra & Mahindra Ltd. [200 (120) ELT 290 (SC)] Once the final exit has been given by the Development Commissioner, custom authorities could not have re- opened the matter. Reliance on o Universal Biofuels [2019 (369) ELT 111 (T-Hyd)] o Rajhans Impex Pvt Ltd. [2020 (372) ELT 346 (Guj)] o Reliance Infrastructure Ltd. [2017 (357) ELT 865 (T- Chennai) o Hyderabad Apparels [2008 (221) ELT 69 (T-Bang)] o Stone India Ltd. [2019 (369) ELT 1119 (T-Kol)] Interest is not payable.
The goods are not liable for confiscation As the issue is purely of interpretation penalties under Section 72 and 112 of the Customs Act, 1962 is not imposable 3.3 Learned special counsel for revenue submits:
7. The claim that they were eligible to pay nil rate of duty on the clearance of unutilized raw material at the time of debonding in terms of Para 4(b) of the notification 52/2003-Cus is entirely based on their assumption and presumption that they are eligible to clear goods to DTA unit without payment of duty under notification 12/2012- Cus and 21/2012-cus. It is pleaded that while para 4(b) of the notification 52/2003-cus provides for payment of customs duty at the effective rates of duty prevalent at the time of debonding of goods, the department's case is that this phrase implies the tariff rate of duty and, therefore, an exemption notification, conditional or unconditional, which exempts goods imported in India from the customs duties leviable there on under section 12 and section 3 of Customs Appeal No.70524 of 2017 9 the CTA cannot be availed by an EHTP unit at the time of debonding. This statement is outrightly false and misleading as the department has nowhere, in SCN or the OIO, claimed that the rates in force as referred to in para 4(b) of notification 52/2003-cus means tariff rate of duty only. On the contrary, the SCN and the OIO are based on the clear understanding of the issue that exemption provided under notification no. 12/2012 and 21/2012-cus are not applicable to the appellant's present case for several reasons discussed therein and, therefore, the effective rates of duty in their case was tariff rates only in absence of any other relevan exemption notification applicable to them. In this regard top Para at page 39 of the 010 and at page 182 of the appeal may kindly be seen.But the appellant, instead of addressing this real reason, is trying to twist and turn the whole matter in wrong direction.
The department's case is plain and simple that the appellant was at liberty to de-bond the goods under Notification 52/2003-Cus in accordance with the Foreign Trade policy which was mainly payment of duty on the value of the goods at the time of the import and at rates in force on the date of payment of such duty. Para 6.18 of the FTP relating to Exit from EHTP Scheme categorically provided in clause (a) that such exit shall be subject to payment of Excise and Customs duties and industrial policy in force. The point relating to the condition of payment of duty on the unutilized goods by the EHTP unit for exiting from the EHTP scheme is not disputed by the appellant also. Their claim is that in their case the effective rate of customs duty was nil amount as they were eligible to clear the goods uander exemption Notification 12/2012-cus and 21/2012-cus to their DTA unit against Annexure I issued to them under Customs (Import of Goods at concessional rate of duty for manufacture of excisable goods) Rules,1996 (hereafter IGCR in brief). In Customs Appeal No.70524 of 2017 10 Para 54.11 of the OIO that the goods cleared by the appellant to the DTA unit are not covered under IGCR as the goods cleared by the appellant are not physically imported by the DTA unit from abroad as is envisaged in IGCR, read with Section 2(23) of the Customs Act and Patra 6.15 of the FTP and thus, the condition for availing exemption under Notification 12/2012Cus is not satisfied in the present case.
Thus, reason for denying the exemption under notification 12/2012-Cus is not that the department considers rates of duty at the time of clearance of goods as full rate of duty as is insinuated by the appellant but the exemption is denied purely because the DTA unit and the appellant are not eligible for the exemption due to non-fulfillment of the stipulated conditions for which the appellant has no valid explanation,.
Chapter 6 of the FTP 2009-2014 exclusively dealt with various aspects of 100% EOU/ EHTP units and sub -para 6.15 provided that in case EOU/EHTP was unable to utilize goods and services imported or procured from DTA, such goods could be transferred to another EOU/EHTP or could be disposed of in DTA on payment of applicable duties or exported. Further it is specifically clarified in the said sub-
para itself that such transfer from EOU/EHTP unit to another such unit would be treated as import for receiving unit. Thus, from this clarification it is explicit that transfer/sale of goods to other units, other than EOU/EHTP/STP/BTP unit, is to be considered as domestic clearances on which duty in terms of Notification 52/2003 Cus is payable. The term import is defined in section 2(23) of the Customs Act as" import", with its grammatical variations and cognate expressions, means bringing into India from a place outside India. Thus, as per customs Act import of goods means physical import of goods from outside India. However, for the purpose of FTP even transfer/sale of goods by an EOU/EHTP unit to any such Customs Appeal No.70524 of 2017 11 unit is deemed as import. But no section of Customs Act or any para of the FTP policy support the claim that clearances of goods by an EHTP unit to a DTA unit can be considered as import of goods as is envisaged in IGCR,1996. Statement in Para E that in the impugned Order the commissioner has observed that sale/transfer of unutilized goods from EOU to DTA is to be considered as an import and hence end use-based customs exemption is applicable to such sale is completely false and no specific para of the 010 has been mentioned as source of their above version. The levy of duty equivalent to customs duty on the goods manufactured in an 100% is undisputedly an excise duty and such goods cleared by an EOU does not become import of goods in DTA just because Excise duty equal to aggregate of Customs duty is payable in respect of goods manufactured by EOU. Therefore, the appellant's argument in Para E.7 of the appeal that Para 6.15 nowhere provides that transfer/sale of goods from EOU to DTA shall not be treated as imports is entirely absurd and is not supported by any objective material.
The appellant's another claim that the Commissioner has wrongly relied upon para 6.15 of the FTP despite it is not applicable to them and Para 6.18 of the FTP read with Notification 52/2003-Cus is a complete code (parasE.1 to E.4 of the appeal) is also bereft of any substance as Para 6.15 of FTP does not suggest anywhere that it is not applicable to the cases of sale/transfer of unutilized materials at the time of debonding of the unit. Para 6.15 and para 6.18 are part of the Chapter 6 of the FTP relating to the scheme of 100% EOU/EHTP and deals with the issues such as removal/ transfer of unutilized materials before or as part of debonding and both are supplementary and complementary with each other. These two paras and notification 52/2003 Cus clearly provide that duty is payable on the removal of any materials from the Customs Appeal No.70524 of 2017 12 EOU and Para 6.15 of the FTP which is an integral part of the EOU Scheme speaks that any material removed from EOU to EOU shall be considered as import from which it is implicit that transfer of materials from EOU to other than EOU/EHTP Units will not be considered as import from FTP point of View. In Customs Act, import is already defined as bringing something from out of India. Thus, except the fact that Para 6.15 of FTP does not suit to their scheme of erroneous way of availing exemption from duty payable on unutilized materials, there is no other valid reason to delink this para from Para 6.18 of the FTP Assuming for a while Para 6.15 is not applicable to the EOU/EHTP unit in respect of de- bonded goods and Para 6.18 of the FTP is only applicable as is claimed by the appellant, it is not explained how this averment is helpful to the appellant in this case when even Para 6.18 does not suggest anywhere that goods transferred/sold from EHTP to DTA Unit will be deemed as import of goods. Section 2(23) of the Customs Act which defines "Import" as bringing into India from a place outside India' also does not come to their rescue and rather demolishes their claim that the goods transferred by them is import by the DTA unit under IGCR,1996. Thus, the above argument is devoid of any logic and is completely irrelevant in the present context.
The issue involved in the present proceeding may be further better understood by appreciating the basic fact t hat the Schemes relating to 100 EOU/EHTP etc. as stipulated in FTP and general exemption notification, conditional or unconditional, issued under Section 25 of the Customs Act are separate. While the incentive scheme of EOU/EHTP is having roots in the FTP framed and administered by the Ministry of Commerce, general exemption notification issued under section 25 of the Customs Act is administered exclusively by the Customs department working under Ministry of Finance. Whereas, the exemption on goods imported by the EHTP is provided Customs Appeal No.70524 of 2017 13 under notification 52/2003 Cus in pursuance of FTP on the condition that the imported goods will be used in the manufacture of goods for export purpose to earn specified NFE targets, the exemption from customs duties provided under exemption notification 12/2003-Cus is general for any manufacturer importer for various goods subject to compliance of specified condition like following of IGCR,1996 or other. Being general in nature, such general exemption notification does not have any link with the FTP and the eligibility to such notification is entirely determined by the terms and conditions of each notification.
Para 6.15, 6.18 of FTP and Notification 52/2003-Cus concerning EHTP provide for payment of duty on the clearance of unutilized materials. As regards the appellant's eligibility to clear goods at nil rate to the DTA unit by claiming exemption under sl.no.431 of Notification 12/2012-Cus, there is no dispute that a general exemption is provided to any manufacturer on parts and components and accessories for the manufacture of mobile handsets when imported into India subject to condition 5 which is that the importer follows the procedure set out in the IGCR,1996. Thus, the exemption under this notification is available for goods imported in accordance the procedure laid down under IGCR,1996 and it is not extended to the goods already imported under other schemes like EOU or EPCG etc. Rule 2 of IGCR,1996 clarifies at the outset that these rules are applicable to an importer who intends to avail the benefit of an end use exemption notification from which it is explicit that these rules are not applicable to the manufacturer who is not an importer. Other Rules from rule 3 to Rule 5 require the importer manufacturer to obtain a registration, to provide details of estimated quantity, value of goods to be imported and port of import. From these rules and the text of the notification 12/2012- Cus it is crystal clear that the import of parts and components as specified at sl. No. 431 must be from Customs Appeal No.70524 of 2017 14 outside India after having registration and approval from the jurisdictional ACCE/DCCE and procurement of any such materials from domestic source, including EHTP, is not contemplated in the said notification and the IGCR No word or any other hint is used in any of these rules to suggest that exemption is allowed in respect of goods procured from EHTP also. The definition of the word "import" as given in Section 2(23) of the customs Act also demolishes their hypothesis that the goods imported by the appellant earlier as EHTP are also import as envisaged under the said notification. The Tribunal has also held in the case of Vikram Ispat Vs. CCE, Mumbai Il, 2000(120) ELT800(Tri LB), which is followed in several other Tribunal decisions, that the clearance of the goods by 100% EOU is not import in terms of section 2(23) of the customs act. Thus, the appellant cannot belie the basic truth that the goods were imported by them under the 100% EOU/EHTP scheme and not under Notification 12/2012-Cus read with IGCR. Above all, the goods cleared by the EHTP were never imported by the DTA unit after it obtained registration and approval to import part and components under IGCR so as to be covered under notification 12/2012-Cus. Consequently, the case of the DTA is not covered in the notification 12/2012-Cus at all and accordingly the appellant's claim to their eligibility to clear goods to DTA without payment of applicable customs duty is also not maintainable. Considering the text of the exemption notifications, IGCR, FTP paras, Board's various circulars and decisions of the court in Paras 54.8 to 54.11 of the 0I0, the commissioner has correctly held that the benefit of exemption provided in notification 12/2012-Cus could not be availed by the appellant. He has clearly recorded as to how the three circulars as mentioned in Para 54.9 are not applicable and when duty is demanded at the effective rate of duty in the present case there is no disobedience of the apex court's decision in the case of Customs Appeal No.70524 of 2017 15 Goodyear India Itd. Vs. CC, Mumbai, 1997(90)ELT 7 (SC) and Tribunal decision in the case of Trans Freight Containers Ltd.Vs. CCE, 2012 (277) ELT 168 (Tri) wherein it is held that the duty is payable by considering the benefit of exemption notification. Similarly, the decisions of the Supreme Court in the cases of Kesoram Rayon Vs. CC, Calcuttaa,1996(86) ELT 464 (SC) and M/S SBEC Sugar Ltd. Vs. UOI, 2011(264) ELT492 (SC) are also held to be of no help because the department has demanded duty at the rate prevalent at the time of removal o0f goods from the bonded warehouse. The appellant's another defense that assuming that a procedural requirement is not fulfilled, it cannot be a reason to deny the benefit is already discussed in detail in 54.12 of the 010 and their reliance on the decision in the case of Udai Shankar Triyar Vs.Rani Kalewar Prasad Singh, 2005 AIR SCW 5851 is not relevant in the present case as the case does not involve just procedural defects and instead noncompliance of the conditions of the exemption notification claimed by them are of very substantive nature. The decision rather supports the department's case wherein it is held that non-compliance with any requirement should entail an automatic dismissal if the relevant statute or rule so mandates. Further their above plea is not supported by the Supreme Court's decisions in the cases of Eagle Flask Industries Ltd. Vs. CCE,Pune, 2004 (171)ELT 296(SC) and CCE Vs. Harichand Shri Gopal, 2010 (260) ELT3 (SC) wherein it is held that the conditions of the exemption notification is to be strictly complied with to get the benefit and the object and the purpose of the procedure cannot be overlooked.
The submission of the that the phrase 'when imported' in the notification 12/2003-Cus refers to the 'act of importation and not to the 'time of importation' does not have any basis as the said phrase clearly denote the import of goods under the said notification only and not Customs Appeal No.70524 of 2017 16 any other imports on payment or without payment of duties. Hence, the time of importation is essence of the above phrase and act of importation is not sufficient. Since the goods cleared by the EHTP were not imported by the DTA unit under notification 12/2012-Cus by following the procedure prescribed in the IGCR, exemption from duty is not available to the DTA Unit and accordingly the EHTP unit did not have any legitimate basis for clearance of is goods without payment of duty to the DTA Unit. Reliance on the Supreme Court's decision in the case of Purolator India Ltd. Vs. CCE, Delhi I, 2015 (323) ELT 227 (SC) is entirely out of context as this decision is given in a case relating to the valuation of excisable goods and not in reference to the exemption notification under consideration. The argument that the EHTPs is a customs bonded warehouse and thus Customs provisions for warehousing are applicable to the EHTP as well (para-L.2) is also irrelevant as the department has nowhere disputed the application of warehousing provisions to an EHTP unit. The revenue's case is simple that since no exemption notification was applicable to the goods cleared by the appellant at the time of de-bonding, the effective rate of duty was the tariff rate only for which the appellant has furnished no genuine objection.
The plea that non-claiming of notification at the time of importation will not bar the appellant to claim it subsequently is also not pertinent in the present proceeding as, irrespective of whether they can avail it subsequently or not t, the fact cannot be denied that the goods cleared by the EHTP had been imported duty free under notification 52/2003-Cus and not by the DTA Unit under notification 12/2012-Cus by following IGCR procedure and this basic fact annot be altered even if their above submission is accepted. Consequently, the exemption to the DTA in respect of the goods not imported under notification 12/2012-Cus cannot be extended and Customs Appeal No.70524 of 2017 17 the decisions in the cases of Unicom Laboratories. CCE, Bombay, 2002 (7) SCC 145, Lily Foam Industries Vs. CCE, 1990 (46) ELT 462 Tri.), Bakeman's Home products Pvt. Ltd. Vs. CC, Bombay, 1997 (95) ELT 278 (Tri.) and Decora Ceramics Pvt. Ltd. Vs. CCE, Rajkot, 1998 (100) ELT 297 (Tri.) decided in different context are not having any bearing on the present case.
The appellant's contention in Para J of the appeal that duty and interest is not recoverable under Sections 28 and 72 of the Customs Act since demand of duty itself is not sustainable is totally based on their assumption that they have availed the exemption under notification 12/2012- Cus correctly and there is no avoidance of duty on their part. Whereas, in the above paras it has been demonstrated in great detail that they were not eligible to clear goods from EHTP unit to the DTA without payment of duty and have evaded the customs duty by not paying the tariff rate of duty on the unutilized materials. Consequently, the appellant has no legitimate basis to dispute the customs duty confirmed by the Principal Commissioner in his Order under Section 28 of the Customs Act and since Customs duty is held to be payable, interest is automatically recoverable on the duty amount under section 28AA of the Customs Act. This plea was raised before the adjudicating authority also and in para 54.16 of 010 he has clearly held that their claim to exemption notifications 12/2012 Cus and 21/2012-Cus is not maintainable and the onus for being eligible to the exemption notification is not discharged by the appellant as held in the decisions in the cases of Mysore Metal Industries Vs. CC, Bombay, 1988 (36) ELT 369 (SC), Moti Ram Tolaram Vs. UOI, 1999(112) ELT 79 (SC), Presto Industries Vs. CC, 2001 (128) ELT 321 (SC), CCE Vs. Parenteral Drugs, 2009 (236) ELT 625 (SC), 2009 (236) ELT 625 (SC), Hotel Leela Ventures, 2009 (234) ELT 389 (SC) and several other decisions mentioned in Para 54.16 Customs Appeal No.70524 of 2017 18 of the 010. The appellant's submission that interest is not payable for the entire period on the raw materials imported by the EHTP as held in the case of Stelfast India P. Ltd. Vs. CC, Bangalore, 2006 (195) ELT 86 (Tri.) is also validly rejected by the Commissioner in Para 54.17 of the 010 on the ground that no exemption from payment of interest is provided in Notification 52/ 2003-Cus as it was given specifically in the cases relied upon by the appellant.
Reliance placed on the decisions in the case of Salora Components Pvt Ltd and Hotline CPT is misplaced both the decisions are distinguishable.
It is not denied by the department that Annexure III was issued by the jurisdictional DC, CE. But this mere fact cannot be the ground for not taking corrective action afterwards when the approval of the DC was not found to be within four corners of law. Wrong is always wrong and it cannot be bypassed even when it os overlooked by any officer of any rank.
The submission that no objection was raised by the custom authorities while debonding the goods without payment of duty is not relevant here as the action decision of a field officer of any level is not final and department is having full legal authority under section 28 and others to recover duty if not paid or short paid. Mere approval of any wrong action by any officer cannot accord an immunity to any beneficiary against recovery action.
4.1 We have considered the impugned order along with the submissions made in the appeal and during the course of arguments.
4.2 On the merits of the demands impugned order records the findings as follows:
"54.8 Before proceeding further in the case to decide the issue, it would be appropriate to refer to the relevant Customs Appeal No.70524 of 2017 19 provisions of the Notification No. 52/2003-Cus dated 31/03/2003, Notification No. 12/2012-Cus dated 17/03/2012, Notification 21/2012-Cus dated 17/03/2012 and Customs (Import of Goods at Concessional Rate for Manufacture of Excisable Goods) Rules, 1996 and Foreign Trade Policy 2009-14. The same are reproduced below Para 4 of the Notification No. 52/2003-Cus dated 31/03/2003 reads as under:
"4. Without prejudice to any other provision contained in this notification, the said officer may, subject to such conditions and limitations as he may deem fit to impose under the circumstances of the case for the proper safeguard of revenue interest and also subject to such permission of the Development Commissioner, wherever it is specially required under the Foreign Trade Policy, allow the unit to clear any of the said goods for being taken outside the unit, to any other place in India or to debond in accordance with the Foreign Trade Policy:
Provided that no such clearance or debonding of capital goods under the Export Promotion Capital Goods Scheme of Chapter 5 of the Foreign Trade Policy shall be allowed if the unit has not fulfilled the positive NFE criteria at the time of clearance or debonding in terms of Para 6.18 (d) of Foreign Trade Policy.
Provided further that
(a) such clearance or debonding of capital goods may be allowed on payment of duty ......................
... ..............
(b) such clearance or debonding of goods (including empty cones, bobbins, containers, suitable for repeated use) other than those specified in clause (a) may be allowed on payment of duty on the value at the time of Customs Appeal No.70524 of 2017 20 import and at rates in force on the date of payment of such duty.
Provided further that in a case of exit by a unit where positive NFE criteria is fulfilled in terms of Para 6.18 (g) of Foreign Trade Policy, such clearance or debonding of goods shall be allowed under Advance Authorization as one time option on payment of applicable duty The relevant portion of Notification 12/2012-Cus dated 17/03/2012 is reproduced as under:-
" In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962) and in supersession of the notification of the Government of India in the Ministry of Finance ( Department of Revenue), No. 21/2002-Cust0ms, dated the 1st March, 2002 Published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 118(E) dated the 1st March, 2002, except as respects things done or omitted to be done before such supersession, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods of the description specified in column (3) of the Table below or column (3) of the said Table read with the relevant List appended hereto, as the case may be, and falling within the Chapter, heading, sub-
heading or tariff item of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as are specified in. the corresponding entry in column (2) of the said Table, when imported into India,- (a) from so much of the duty of customs leviable thereon under the said First Schedule as is in excess of the amount calculated at the standard rate specified in the corresponding entry in column (4) of the said Table: (b) from so much of the additional duty leviable thereon under sub-section (1) of section 3 of the said Customs Tariff Act 1975 (51 of 1975) as is in excess of the additional duty rate specified in the corresponding Customs Appeal No.70524 of 2017 21 entry in column (5) of the said Table, subject to any of the conditions, specified in the Annexure to this notification, the condition number of which is mentioned in the corresponding entry in column (6) of the said Table.
Under the SI No. 431 of the aforesaid Notification No. 12/2012-Cus dated 17/03/2012 all goods under any Chapter having following description has been specified as under:
"(i) parts, components and accessories for the manufacture of mobile handsets; (ii) sub-parts for the manufacture of items mentioned at (i) above; (iii) parts or components for the manufacture of battery chargers, PC connectivity cables, Memory cards and hands-free headphones of mobile handsets; and (iv) Sub-parts for the manufacture of items mentioned at (ii) above.
Explanation. - For the purposes of this entry, mobile handsets include cellular phones."
Further, in the Annexure to the Notification No. 12/2012- Cus dated 17/03/2012 against the aforesaid sl no. 431 following condition has been prescribed:
"Condition No. 5:- If the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996."
The relevant portion of the Notification No. 21/2012- Customs dated 17/03/2012 reads as under:-
'In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962) and in supersession of the notifications of the Government of India, in the Ministry of Finance (Department of Revenue), No. 20/2006-Customs, dated the 1st March, 2006, published in the Gazette of India, Extraordinary, part I, Section 3, Sub-section (i), vide number G.S.R. 92 Customs Appeal No.70524 of 2017 22 (E), dated the 1st March, 2006, and No. 29/2010-
Customs, dated the 27th February, 2010, published in the Gazette of Indila, Extraordinary, Part I, Section 3, Sub- section (), vide number G.S.R. 92 (E), dated the 27th February,2010, except as respects things done or omitted to be done before such supersession, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods of the description specified in column (3) of the Table below, falling within the Chapter, heading, sub-heading or tariff item of the First Schedule to the Customs Tariff Act,- 1975-(51 of 1975) as are specified in the corresponding entry in column (2) of the said Table, when imported into India, from so much of the additional duty of customs leviable thereon under sub-section (5) of section 3 of the said Customs Tariff Act, as is in excess of the amount calculated at the standard rate specified in the corresponding entry in column (4) of the Table aforesaid:
Provided that in respect of the goods specified in S. Nos. 2, 46, 70, 87 and 98, imported on or after the 1st day of May, 2012, the exemption contained herein shall apply if the importer, declares, (1) the State of destination where such goods are intended to be sold for the first time after importation on payment of value added tax: and (ii) his value added tax registration number in that State."
Under the SI. No. 1 of the aforesaid Notification No. 21/2012-Cus dated 17/03/2012 goods having following description has been specified:
"1. Any Chapter - All goods which are exempt from the whole of the duty of customs leviable thereon or in case of which "Free" or ."Nil" rates of duty of customs are specified in column (4) under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and which are also exempt from the whole of additional duty of customs leviable thereon under subsection (1) of section 3 of the Customs Appeal No.70524 of 2017 23 said Act, or on which no amount of the said additional duties of customs is payable for any reason.
Further, in the column of Standard Rate under SI. No. 1, 'NIL' rate has been specified Customs (Import of Goods at Concessional Rate of duty for manufacture of Excisable goods) Rules, 1996-
"4. Application by the manufacturer to obtain the benefit.-
(1) A manufacturer who has obtained a certificate referred to in sub-rule (3) of rule 3 and intends to import any goods for use in his factory at concessional rate of duty, shall make an application to this effect to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise indicating the estimated quantity of such goods to be imported, particulars of the notification applicable on such import and the port of import"
"5. Procedure to be followed by Assistant Commissioner of Customs.- (1) On the basis of the application countersigned by the Assistant Commissioner of Central Exclse, the Assistant Commissioner of Customs at the port of importation shall allow the benefit of the exemption notification to the importer.
Para 6.15 of FTP 2009-14 Sale of Unutilized Material
(a) In case an EOU / EHTP / STP / BTP unit is unable to utilize goods and services, imported or procured from DTA, it may be
(i) transferred to another EOU / EHTP./ STP-/ BTP-/-SEZ- unit; or
(ii) disposed off in DTA with approval of Customs authorities on payment of applicable duties and submission of import authorization; or (i) exported. Such transfer from EOU / EHTP / STP / BTP unit to another such unit would be treated as import for receiving unit.
Customs Appeal No.70524 of 2017 24 Para 6.18 of FTP 2009-14 Exit from EOU Scheme
(a) With approval of DC, an EHTP may opt out of scheme. Such exit shall be subject to subject to payment of Excise & Customs duties and industrial policy in force. ............................
............................
54.9 I find that the party has submitted that - "Para 4(b) of the Notification No. 52/2003-Cus dated 31.3.2003 provides that raw material can be de-bonded upon payment of duty on the value at the time of import and the rates in force on the date of payment of such duty. They were eligible to claim benefit of exemption provided under Notification No. 12/2012-Cus dated 17.3.2012 and 21/2012-Cus dated 17.3.2012 and they had cleared the stock of raw material lying on the date of de-bonding after making payment of duty on the value at the time of import and at such rate in force on the date of payment of such duty.
In relation to the above, the party has placed reliance on the Circular F.No. 305/17/86-FTT dated 11.07.1990, F.No. 512/19/93-Cus.VI dated 18.5.1994, F.No. 305/83/94-FTT dated 15.9.1994 and F.No. 305/113/94-FTTdated 19.02.1998 I find that the party has submitted that vide Circular F.No. 305/17/86-FTT dated 11.07.1990 it has been clarified that the goods manufactured by units in EHTP and cleared in DTA, would only be eligible to the benefit of unconditional customs exemption notification which reduces duty generally. I find that in the present case the raw material has been de- bonded under conditional Notification No. 12/2012-Cus dated 17.3.2012. Further, Circular F.No. 512/19/93-Cus.VI dated 18.5.1994 updated vide Circular F.No. 07/2001-Cus dated 06.02.2001 refers to manner of calculation of duty on the goods manufactured and cleared Customs Appeal No.70524 of 2017 25 by EOUs and has clarified that duty payable shall not be less than excise duty on like goods manufactured in India.
Similarly vide Circular F.No. 305/83/94-FTT dated 15.9.1994 it has been clarified that Export Oriented Units are permitted to clear goods manufactured by them into Domestic Tariff Area in accordance with the provisions of the Exim Policy on payment of applicable duty of excise/customs. The duty payable on the manufactured goods is linked to aggregate of Customs duty leviable on the like goods if imported into India read with any exemption notification under Section 25(1) of the Customs Act, 1962 for the time being in force. Central Board of Excise and Customs has further clarified that benefit of end-use based Notification are also applicable to clearances made from EOUs and that the end-use bond can be taken from the domestic buyer treating them as if they were an importer. It is relevant to mention that the aforesaid Instructions have been issued specifically in the case of the goods manufactured by the EOU and the aforesaid Instructions have consciously chosen not to allow clearance of the unutilized raw materials by the EOUs to DTA units without payment of duties of Customs.
I find that as per CBEC's Circular No. 91/2002-Cus dated 20.12.2002, in case the EOUs are unable, for valid reasons, to utilize the goods imported or procured duty free, such unutilized goods may be allowed to be sold/cleared in DTA on full payment of duty or may be allowed to be transferred to other EOUs under and in accordance with Para 6.16 of Exim Policy. Such supply from one EOU to another such unit (EOU) shall be treated as import for recipient unit and necessary endorsement to this effect may be made on all the documents pertaining to such inter- unit transfers. It is noticeable that such transfer from one EOU to another such unit (EOU) has been treated as import for recipient unit and the same treatment cannot be given to the goods cleared to a DTA unit. Further, CBEC in the Circular No. 8/2004-Cus Customs Appeal No.70524 of 2017 26 dated 28.1.2004 issued regarding De-bonding of EOU/EHTP/STP units, in Para 6, has emphasized that duty on the non-duty paid raw materials, non- duty paid Capital goods and Finished manufactured Goods has to be discharged before the unit is allowed to de-bond.
54.10 I find that the party has submitted that - "The Hon'ble Apex Court in case of Goodyear India Ltd. vs. CC, Bombay [1997 (90) ELT 7 (S.C.)], held that the rate of duty had to be calculated after granting the benefit of exemption notification. Further, reliance is placed on the case of Trans Freight Containers Ltd. vs. CCE [2012 (277) ELT 168 (Tri.)], in which it has been held that at the time of de-bonding, an EHTP shall pay customs duty on unutilized raw material which are lying in the stock at the rate of duty prevalent at the time of payment of duty on the original value of importation." I find that the department is also stressing the same i.e the rate of duty should be calculated after granting the benefit of applicable exemption notification.
54.11 I find that the party has submitted that they have imported parts and components for manufacture of mobile handsets under SI. No. 431 of Notification No. 12/2012-Cus dated 17.3.2012. I find that Notification No. 12/2012-Cus dated 17.3.2012 provides conditional exemption, whereby under Condition No. 5 it has been specified that the importer has to follow the procedure set out in Customs (Import of Goods at Concessional Rate of duty for manufacture of Excisable goods) Rules, 1996 (here-in-after referred to as IGCR, 1996).
I find that Para 6.15 of the FTP 2009-14 expressly stipulates that such unutilized materials may either be transferred to another EOU(s), or cleared to DTA on payment of applicable duties/submission of import authorization, or exported. Further, the Para 6.15 of the FTP 2009-14 expressly stipulates that only when unutilized materials are transferred from EOUs to another such unit, such transfer Customs Appeal No.70524 of 2017 27 would be treated as import for the receiving unit. In other words, in terms of the Para 6.15 of the FTP 2009-14 disposal of such unutilized materials in any other manner except transfer to another EOU unit cannot be treated as imports. Accordingly, the clearance/debonding of unutilized raw materials by the said Party (an EHTP unit) to the said DTA unit cannot be treated as imports in terms of the Para 6.15 of the FTP 2009-14.
Further, as per Rule 4(1) of the IGCR, 1996, it has been provided that a manufacturer who intends to import any goods for use in his factory at concessional rate of duty, shall make an application to this effect to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise indicating the estimated quantity of such goods to be imported, particulars of the notification applicable on such import and the port of import Hence, as per Rule 4(1) of the IGCR, 1996, it has been provided that in the application for getting benefit under these Rules, port of import has to be specified. Further, vide Rule 5(1) of the IGCR, 1996, it has been provided that on the basis of the application countersigned by the Assistant Commissioner of Central Excise, the Assistant Commissioner of Customs at the port of importation shall allow the benefit of the exemption notification to the importer. As such following the Rule 5(1) of the IGCR, 1996, the benefit under the exemption notification shall be allowed by the Assistant Commissioner of Customs at the port of importation. Accordingly, the IGCR, 1996 have been provided, specifically, for import of goods from a place outside India. The said DTA unit has obviously not complied with the conditions of the IGCR, 1996 in so far as the clearance/de- bonding of unutilized raw materials by the said Party (an EHTP unit) to the said DTA unit is concerned.
I find that as per Section 2(23) of the Customs Act, 1962 the word "import", with its grammatical variations and cognate expressions, means bringing into India from a Customs Appeal No.70524 of 2017 28 place outside. Further, in case of the goods cleared from 100% E.O.U. to any place in India, the Larger Bench of Tribunal in the case of Vikram Ispat v. CCE, Mumbai- III [2000 (120) E.L.T. 800 (Tribunal - LB)] held that -
"Export Oriented Units - Clearance of the goods by 100% EOU are not import in the terms of Section 2 (23) of Customs Act, 1962. - The clearance of the goods by 100% E.O.U. are not import in the terms in which it has been defined under Section 2(23) of the Customs Act, according to which import, with its grammatical and cognate expression means bringing into India from a place outside India."
I find that the above decision of Larger Bench has been followed in a number of decisions such as Winsome Yarns v. CCE, Chandigarh [2001 (127) E.L.T. 833 (Tri.)], Parle Soft Drinks (P) Ltd. v. CCE, Chennai [2004 (177) E.L.T. 584 (Tri.)], Sarla Polyster Ltd. v. CCE, Vapi [2008 (226) E.L.T. 238 (Tri.)], Molex (India) Pvt. Ltd. v. CCE, Banglore-I[2016 (341) E.L.T. 463 (Tri.)] and CCE v. H.K. Moulders [2011 (268) E.L.T.43 (Guj.)] Therefore, in view of the said provisions of IGCR, 1996 read with para 6.15 & 6.18 of FTP 2009-14, clarifications issued vide Board's Circular No. 91/2002-Cus dated 20.12.2002 & Circular No. 8/2004-Cus dated 28.1.2004 and following the ratio of judicial pronouncements, I find that the clearance/de-bonding of said raw material by the party (an EHTP unit) to the DTA unit cannot be treated as "import" by the said DTA unit. Hence, the said DTA unit cannot be said to have complied with the conditions of IGCR, 1996 in so far as the clearance/de-bonding of unutilized raw material by the party to the said DTA unit is concerned. Therefore, the benefit of exemption under the Notification No. 12/2012-Cus dated 17/03/2012 cannot be extended to the said DTA unit on such clearance/de-bonding of raw materials Customs Appeal No.70524 of 2017 29 54.12 I find that the party has placed its reliance on the case of Udai Shankar Triyar v. Rani Kalewar Prasad Singh and Another [2005 AIR SCW 5851], wherein the Supreme Court held that procedure, a hand maiden to justice, should never be made a tool to deny justice or perpetuate injustice, by any oppressive or punitive use. The relevant para is reproduced here as under :-
"17. Non-compliance with any procedural requirement relating to a pleading, memorandum of appeal or application or petition for relief should not entail automatic dismissal or rejection, unless the relevant statute or rule so mandates. ................The well recognized exceptions to this principle are:-
(i) where the Statute prescribing the procedure, also prescribes specifically tile consequence of non-
compliance
(ii) here the procedural defect is not rectified, even after it is pointed out and due opportunity is given for rectifying it;
(iii) here the non-compliance or violation is proved to be deliberate or mischievous"
I find that vide above judgment it has been held that non- compliance with any requirement should entail an automatic dismissal if the relevant statute or rule so mandates Further, the Hon'ble Supreme Court in the case of Eagle Flask Industries Ltd. Vs CCE, Pune [2004 (171) E.L.T. 296 (S.C.)] held that "Exemption notification - Conditions thereto to be strictly complied with for availing its benefit - Condition of filing declaration/undertaking under exemption notification not merely procedural, hence exemption to be denied for non-observance of said conditions - Section 5A of the Central Excise Act, 1944 and Rule 174 of the erstwhile Central Excise Rules 1944. [para 6]"
Customs Appeal No.70524 of 2017 30 Similarly, in the case of CCE Vs. Harichand Shri Gopal [2010 (260) ELT 3 (S.C.)] 5 Member Constitutional Bench of the Supreme Court held that object and purpose of the procedure should not be overlooked. Procedures are put in place to see that the goods be not diverted or utilized for some other purpose, in the guise of the exemption notification. The Supreme court also rejected the plea of "substantial compliance" and "intended use".
I find that Notification No. 52/2003-Cus dated 31.3.2003 is a conditional exemption notification. At Para 4(b) of the same, it has been stipulated that raw material can be de- bonded upon payment of duty on the value at the time of import and the rates in force on the date of payment of such duty. Further, as discussed at para 54.11 above, the said DTA unit is ineligible for exemption under Notification No. 12/2012 dated 17.3.2012 in respect of the clearances/de-bonding of raw material from their EHTP unit. Therefore, as per the provisions of Notification No. 52/2003-Cus dated 31.3.2003 and following the ratio of above referred judicial pronouncements, the party should have de-bonded the raw material upon payment of duty, i.e. on the tariff rates in force on the date of payment of such duty 54.13 I find that the party has relied on the decision passed in the case of Kesoram Rayon vsS. CC, Calcutta [1996 (86) E.L.T. 464 (S.C.)], wherein it was held that the duty would be payable at the rate applicable on the date of the deemed removal from the warehouse. Same view has taken in the case of M/s. SBEC Sugar Limited & Another vs. Union of India [2011 (264) E.L.T. 492 (S.C.). I find that the department is following the ratio of these judicial pronouncements, as duty has been demanded at the rate prevalent on the date of the removal of the goods from the warehouse Customs Appeal No.70524 of 2017 31 54.14 I find that the party has submitted that - "At the time of importation of the parts, components and accessories of mobile phones, in the capacity of an EHTP, the benefit of exemption was available in the nature of Notification No. 12/2012-Cus dated 17-03-2012 and Notification No. 52/2003-Cus dated 31-03-2003. Merely because they did not claim Notification No. 12/2012-Cus dated 17-03-2012 at the time of importation does not mean that it is not entitled to do so. In this regard, reliance is placed on the decisions in the cases, Unichem Laboratories Ltd. vs. Collector of Central Excise, Bombay [(2002) 7 SCC 145] and Share Medical Care vs. UOI [2007 (209) E.L.T. 321 (S.C.)], whereby it has been held that if the notification applies, the benefit there under must be extended.' The party has submitted that merely because it did not claim Notification No. 12/2012-Cus dated 17.3.2012 at the time of importation does not mean that they are not entitled to do so. I find that in respect of Bills of Entry, against which the said import has been made, assessment orders have become final. I find that while dismissing the petition filed by the petitioner, the Hon'ble High Court of Calcutta, in the case of Alom Extrusions Ltd. v. Dy. Commr., Central Excise [2010 (256) E.L.T. 379 (Cal.)], held that:
"Order of Joint Commissioner confirming duty demand, penalty and interest, not challenged, refund claim for 75% penalty not maintainable -No infirmity and/or illegality warranting interference under Article 226 of Constitution of India - Refund claim for penalty rightly declined."
Further, the High Court of Madras, in the case of CC (App.) v. Ace Designers [2015 (329) E.L.T. 109 (Mad.)], held that "Refund claim without challenging order of assessment - Refund cannot be claimed when order of assessment not challenged."
Customs Appeal No.70524 of 2017 32 The Apex Court in the case of Priya Blue Industries Ltd. Vs CC(Prev.) [2004 (172) E.L.T. 145 (S.C.)], while dismissing the review-petition-filed by the appellant, held that "Once an Assessment Order is passed the duty would be payable as per that order Unless that order has been reviewed under Section 28 and/or modified in an appeal, that order stands. So long as the assessment order stands, the duty would be payable as per that order [paras 6, 8]"
Similarly in the case of CC, Banglore v. BPL Ltd. [2015 (325) E.L.T. 467 (S.C.)] the Apex Court allowed the petition of the department and held as follows "Refund - Maintainability of - Assessment order, non-
challenge to - Tribunal in its order merely discussing classification of equipment of television broadcasting without dwelling on real issue of refund - Classification issue having already been settled earlier, refund claim not maintainable.......... [para 2]"
Therefore, following the ratio of above judicial pronouncements, I find that the party's claim that merely because it did not claim Notification No. 12/2012-Cus dated 17.3.2012 at the time of importation does not mean that they are not entitled to do so, is liable to be summarily rejected, as in respect of the Bills of Entry, against which said import has been made, assessment orders have become final.
54.15 Further, vide their additional reply dated 23.02.2017, the party has submitted that - "As in the context of Excise, the expression 'when sold' has been interpreted to mean the 'act of sale of goods', the similar expression used in subject Notification No. 12/2012-Cus dated 17-03-2012 shall mean the 'act of importation of imported goods' and not their time of importation' in the result, if the goods are imported into India but are cleared from customs bond (EHTP unit) subsequently at the time of de-bonding into Customs Appeal No.70524 of 2017 33 DTA the said exemption would continue to be available to the EHTP unit as in the Judgement in the case Purolator India Ltd. Vs CCE, Delhi-II[2015 (323) E.L.T. 227 (S.C.)], it has been held that-
"Discounts -......... .Stipulated in agreement of sale between assessee and its buyers - Known at or prior to clearance of goods - Hence, they must be deducted from sale price in order to arrive at value of excisable goods "at time of removal"
Further, the same is the interpretation placed by the Hon'ble Apex court while calculating the CVD on the goods imported into India. Some of the decisions of the Apex court in this regard are reproduced below:
a. Thermax Private Ltd. Versus Collector of Customs 1992 (61) E.L.T. 352 (S.C.) "11. The assessee here has imported the goods and is selling them for use in a factory, ..... .... ? use which qualifies for the concession under the Section 8 notificatio.............t.ould not be correct to deny it to a supplier of such goods on the ground that he is an importer and not manufacturer. That aspect is provided for by Section 3(1) of C.T. Act which specifically mandates that the CVD will be equal to the excise duty for the time being leviable on a like article if produced or manufactured in India. In other words, we have to forget that the goods are imported, imagine that the importer had manufactured the goods in India and determine the amount of excise duty that he would have been called upon to pay in that event. Thus, if the person using the goods is entitled to the remission, the importer will be entitled to say that the CVD should only be the amount of concessional duty and, if he has paid more, will be entitled to ask for a refund. . The above Judgment in the case of Thermax Private Ltd has been followed in the cases of Hyderabad Industries Ltd. Versus Union Of India Customs Appeal No.70524 of 2017 34 1999 (108) E.L.T. 321 (S.C.) and Aidek Tourism Services Pvt. Ltd. Versus Commissioner Of Cus., New Delhi 2015 (318) E.L.T. 3 (S.C.)."
I find that vide decision in the case of Purolator India Ltd. Vs CCE, Delhi-III [2015 (323) E.L.T. 227 (S.C.)], supra, it has been held that if a benefit is allowable, the same should be allowed. However, as discussed at para 54.14 above, the benefit under Notification No. 12/2012-Cus dated 17.3.2012 to the party (an EHTP unit) is not allowable in the present case. The party has further submitted that following the ratio of the Judgment passed in the case of Thermax Private Ltd, Versus Collector of Customs 1992 (61) E.L. T. 352 (S.C.), supra, the exemption under Notification No. 12/2012-Cus dated 17.3.2012 should be extended to them. I find that in the case of Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal [2010 (260) ELT 3 (SC)], a Constitution Bench of the Apex Court considered the decision of Thermax Private Limited v. The Collector of Customs (Bombay), (supra), and held that - "a provision for exemption, concession or exception, as the case may be, has to be construed strictly and if the exemption is available only on complying certain conditions, the conditions have to be complied with. In the aforesaid decision, the Constitution Bench further held that detailed procedures have been laid down in Chapter X of the Rules so as to curb the diversion and utilization of goods which are otherwise excisable and the plea of substantial compliance or intended use therefore has to be rejected." I find that the above Judgment of the Constitutional Bench in the case of M/s Hari Chand Shri Gopal has been followed in the cases of Supreme Lamps v. CCE, Meerut [2013 (296) E.L.T. 45 (Tri. - LB)], Parshva Overseas v. Joint Secretary [2011 (274) E.L.T. 496 (Del.)], CCE, Coimbatore v. Universal Radiators Ltd. 2011 (273) E.L.T. 20 (S.C.)], Indian Oil Corporation Ltd. v. CCE, Vadodra [2012 (276) E.L.T. 145 (S.C.)], B.P.L Ltd. v. CCE, Cochin-II [2015 (319) Customs Appeal No.70524 of 2017 35 E.L.T. 556 (S.C.)] and B.P.L. Limited v. Commissioner [2015 (324) E.L.T. A79(S.C.)] Further, as discussed earlier at para 54.11, the clearance of the goods from 100% E.O.U. to any place in India cannot be treated as imports, following the ratio of judicial pronouncements in the cases of Vikram Ispat v. CCE, Mumbai-III [2000 (120) E.L.T. 800 (Tribunal - LB)], supra, Winsome Yarns v. CCE, Chandigarh [2001 (127) E.L.T. 833 (Tri.)], supra, Parle Soft Drinks (P) Ltd. v. CCE, Chennai [2004 (177) E.L.T. 584 (Tri.)], supra, Sarla Polyster Ltd. v. CCE, Vapi [2008 (226) E.L.T. 238 (Tri.)], supra, Molex (India) Pvt. Ltd. v. CCE, Banglore- I[2016 (341) E.L.T. 463 (Tri.)], supra, and Commissioner v. H.K. Moulders [2011 (268) E.L.T. 43 (Guj.)], supra, I hold that party's claim that their DTA unit is eligible for exemption under Notification No. 12/2012 in respect of the clearances made from their EHTP unit cannot be accepted,."
4.3 The only issue for consideration in the present case is admissibility of Notification No 12/2012 by an EOU/ EHTP in respect of the imported goods at the time of debonding along with the notification No 52/2003. The contention of revenue is that the benefit of Notification No 12/2012 would not be admissible in terms of the condition prescribed by the Notification No 52/2003. Both the notification have been reproduce in the impugned order.
4.4 By the letter D O F No 334/7/2016-TRU dated 01.02.2017, JS TRU has clarified as follows:
ANNEX III CLARIFICATION The Sub-section (1) of Section 3 of the Central Excise Act, 1944, provides for levy of excise duty, on goods produced or manufactured in India at rates specified in the First and Second Schedule to the Central Excise Tariff Act, 1985. However, as per the proviso to the said sub-section, goods produced or manufactured by Export Oriented Units [EOUs] Customs Appeal No.70524 of 2017 36 units and cleared to domestic tariff area [DTA] are liable to excise duty equal to the aggregate of duties of customs leviable on like goods when imported into India. For such clearances from EOUs to DTA, Notification No. 22/2003-CE dated 31.03.2003 prescribes effective rates of excise duty on such DTA clearances under different circumstances.
2. In this context, proviso to sub-section (1) of section 5A of the Central Excise Act, 1944 states that unless specifically provided in a notification, no exemption therein shall apply to excisable goods which are produced or manufactured by an EOU and cleared to the DTA.
3. Further, EOUs are eligible for duty free import or domestic procurement of their inputs or raw materials under Notification No. 22/2003-CE dated 31.3.2003 and Notification No. 52/2003- Customs dated 31.03.2003.
However, as per a proviso [the second proviso to para 6 in case of Notification No. 22/2003-CE and first proviso to para 3 in case of Notification No. 52/2003- Customs], if the goods produced or manufactured by EOUs and cleared to DTA if imported are either non-excisable or leviable to Nil basic customs duty [BCD] and additional duty of customs [CVD], then EOUs cannot avail the exemptions under these notifications on inputs utilized in manufacture/processing/packaging etc. of such goods [cleared to DTA].
4. In addition, there are a number of customs and excise duty exemption notifications which prescribe concessional [including Nil] duty rates on specified goods [inputs/raw materials etc.] for use in manufacture of specified goods, subject to conditions prescribed. In this context, it has been stated that EOUs are not able to avail benefit of such exemptions on inputs imported or procured domestically by them.
5. The matter has been examined. As mentioned in para 2 above, non-applicability of exemptions under notifications Customs Appeal No.70524 of 2017 37 issued under section 5A of the Central Excise Act, 1944 is only in respect of excisable goods produced or manufactured by an EOU and cleared to DTA and not in respect of inputs/raw materials procured by them domestically and utilised for production/manufacture of goods which are cleared by them to DTA.
6. In view of the above, it is hereby clarified that EOUs will also be eligible to import or procure raw materials/inputs at other concessional/Nil rate of BCD, excise duty/CVD or SAD, as the case may be, provided they fulfill all conditions for being eligible to such concessional or Nil duty. For these purposes, if an EOU is already registered with the jurisdictional Central Excise Authority, it will not be required to take any fresh registration under the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2016 or the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable and Other Goods) Rules, 2016, as the case may be. Further, there will be no need for an EOU to separately comply with the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2016 for availing the CVD exemption, if the procedure under the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rule, 2016 is followed by it for availing exemption / concession from BCD on imports of inputs/raw materials.
4.5 In terms of the above clarification issued by the JS (TRU) benefit of the exemption as per notification No 12/2012 would be admissible to the EOU/ EHTP subject to fulfillment of the conditions of the notification. The benefit of the said exemption would be available to them at the time of importation of the goods or even at the time of removal of the goods either on debonding or otherwise. The condition 4 of Notification No Customs Appeal No.70524 of 2017 38 52/2003 referred in the impugned order, cannot be reason for denial of the said benefit. Undisputedly the condition prescribed by the said notification had been complied and a bond for Rs 1000 crores was accepted by the jurisdictional authorities on 28.02.2015 as required in terms of IGCR, 1996.
4.6 From the clarification issued by the TRU referred above, it is evident in case the EOU/ EHTP can claimed the benefit of the said notification at the time of import of the said goods even without seeking fresh registration under Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2016 or the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable and Other Goods) Rules, 2016. The said clarification also provides that the benefit of the said Notification will be admissible even without separately comply with the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2016 for availing the CVD exemption, if the procedure under the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rule, 2016 is followed by it for availing exemption / concession from BCD on imports of inputs/raw materials.
4.7 Basic difference between para 6.15 & 6.18 of the Foreign Trade Policy is well evident from the decision of Hon‟ble Supreme Court in the case of SIV Industries [2000 (117) E.L.T. 281 (S.C.)]. Explaining the concepts of bonding and de-bonding in respect of the EOU, Hon‟ble Supreme Court held as follows:
"18. Contention of the Revenue is that permission to withdraw from scheme is itself a permission to sell in India, i.e., when unit is permitted to debond, it would be deemed to have been permitted to sell the goods in India. But then permission to sell in India has to be in terms or in accordance with the provisions of the export import policy. Permission to sell in India by 100% EOU consists of all those factors like value addition, fulfilment of export obligation, sale of a Customs Appeal No.70524 of 2017 39 general currency licence holder, item being not mentioned in the negative list and then there being a limit of 25%, etc. When permission to debond is given, none of these criteria or aspects are applied by Board of Approvals (BOA) to the closing stock of finished goods. Board of Approvals is a statutory authority, which permits debonding. It is created under the Industrial (Development and Regulation) Act. On the other hand permission to sell the goods in India under and in accordance with the import policy has to be given by the Development Commissioner in the Ministry of Commerce. Board of Approvals and the Development Commissioner are two different authorities constituted for two different purposes. Permission to debond is a statutory function exercised by one statutory authority. On the other hand permission to sell in India is to be exercised by different statutory authority. If reference is made to para 102 of the relevant import export policy permission of the Development Commissioner is required for selling the goods in India up to limit of 25% by 100% EOU. Para 117 of the policy deals with debonding of 100% EOU. Thus it is apparent that debonding and permission to sell in India are two different things having no connection with each other. It also becomes apparent that in view of the EOU Scheme as modified from time to time and corresponding amendments to Section 3 of the Act the expression "allowed to be sold in India" in proviso to Section 3(1) of the Act is applicable only to sales made up to 25% of production by 100% EOU in DTA and with permission of the Development Commissioner. No permission is required to sell goods manufactured by Customs Appeal No.70524 of 2017 40 100% EOU lying with it at the time approval is granted to debond.
19. Revenue has proceeded on the assumption that by debonding permission has been granted by the BOA for selling the closing stock of finished goods in India. This cannot be so. BOA does not concern itself with the manner of the disposal of the closing stock of the finished goods. After debonding it is open to the erstwhile 100% EOU, which is now like any other manufacturing unit in India to sell the goods in India or export it by following the normal procedure.
.....
23. Concept of bonding or debonding is well understood both under the Act and the Customs Act, 1962. The entire operations of an EOU are to be in customs bonded factory, unless otherwise specifically exempted from physical bonding. The approved unit is required to execute a bond/legal undertaking with the Development Commissioner concerned in the form prescribed. Under the conditions laid for EOU, bonding period for units under the EOU Scheme is ten years. This period may be reduced to five years by the Board of Approvals in case of products liable to rapid technological change. On completion of the bonding period it shall be open to the unit to continue under the Scheme or opt out of the Scheme. Such debonding is, however, subject to industrial policy in force at the time the option is exercised. On the satisfaction of the Board of Approvals, EOU may be debonded on its inability to achieve export obligations, value addition or other requirements. Such debonding is subject to such penalty as may be imposed and levy of the following duties:-
(a) Customs duty on capital goods at depreciated value but at rates prevalent on the dates of import;
Customs Appeal No.70524 of 2017 41
(b) Customs duty on unused raw materials and components on the value on the dates of import and at rates in force on the dates of clearance."
This decision of Hon‟ble Supreme Court was followed subsequently by the Hon‟ble Supreme Court in following cases:
NCC Blue Water Products Ltd. [ 2010 (258) E.L.T. 161 (S.C.)] Sarla Performance Fibers Ltd. [2016 (336) E.L.T. 577 (S.C.)] The present case being of debonding of the goods needs to be determined in terms of para 6.18 of the Foreign Trade Policy by treating the goods to be debonded from the private bonded warehouse as if cleared on importation. Thus the argument advanced in the impugned order and by the special counsel during the course of argument vis a vis para 6.15 of Foreign Trade Policy needs to be rejected. Also the argument advanced by relying on the decision of larger bench in the case of Vikram Ispat, needs to be rejected.
4.8 In case of Sahajanand Technologies Pvt Ltd. [2015 (325) ELT 625 (SC)] following was observed:
5. The Tribunal, in the impugned judgments, construed the said section as referring only to the Customs Act and not the Central Excise Act, and also relied upon the circulars issued by the Board from time to time to arrive at the conclusion that exemption notifications issued under the Customs Act would be applicable in the facts of the present cases. The Tribunal held :
"We have considered the submissions. The basic issue to be determined is whether the clearances made by 100% EOUs are entitled to concessional rate of Customs duty provide under EPCG Schemes. The adjudicating authority has laid a great emphasis on the fact that what is payable under Section 3 of the Central Excise Act by the 100% EOUs in respect of DTA clearance is the Central Excise duty and not Customs Appeal No.70524 of 2017 42 Customs duty and therefore, the exemption notification issued under Customs Act and the exemption notification issued under Section 5A will not be applicable in respect of clearances effected by 100% EOUs unless specifically provided for in the notification itself. We, however, find that the Commissioner has failed to observe that even though what is required to be paid is in the nature of central excise duty but through a legal fiction, clearances by 100% EOUs have been placed at par with the imports and it is for this reason that the duty required to be paid is equal to the aggregate of Customs duty payable on such like goods if produced or manufactured outside India and imported into India. Therefore, all clearances by 100% EOUs have to be treated as imports for the purpose of calculating the duty. What is required to be determined/quantified is the Customs duty and not the Central Excise duty. Once Section 3 itself creates a legal fiction of levying customs duty and treating clearances by 100% EOUs at par with imports, the question of altering nature of levy and the exemptions by circulars does not arise. The Commissioner has totally misunderstood the circulars which made it abundantly clear that notifications applicable to units working under EPCG schemes shall be equally applicable to goods being procured from 100% EOUs. The emphasis on Section 5A of the Central Excise Act is totally misplaced. It refers to exemption notifications issued under Section 5A and not under the Customs Act. Therefore, the exemption notification issued under Central Excise Act cannot be made applicable to 100% EOUs unless specifically provided for in that notification. But the same cannot be applied to notifications issued under Customs Act where Section 5A of the Central Excise has no application whatsoever. The three circulars issued by the Board in 1994, 1-12-2004 and May, 2005 make it very clear that the concessional rate of duty shall be leviable in respect of clearances effected by 100% EOUs to EPCG units and even the condition of import Customs Appeal No.70524 of 2017 43 through specific ports has been clarified to be inapplicable as clearance by 100% EOUs have been considered as clearance from any port in India including the specified port. We, therefore, hold that the concessional rate of duty has been rightly availed of by the appellants and there is no case for further demand of duty. Since there has been no evasion of duty the question of imposition of any penalty on any of the appellants does not arise. We therefore, set aside all the three orders-in-original and allow the appeals of all the appellant."
6. We find no infirmity in the aforesaid findings of the Tribunal and of the judgments which follow it. The appeals are accordingly dismissed.
4.9 Thus we have no hesitation in holding that at the time of debonding, the value of raw material cleared has to be value at the time of importation and the rate of duty is the effective rate of duty leviable on the imported goods at the time of debonding. In the case of Maneta Automotive Components P Ltd. [2015 (328) ELT 620 (T-Del)] following has been held:
"7. As regards the exemption from Basic Customs Duty under Notification No. 21/2002-Cus. (Sl. No. 200) in respect of Steel scrap cleared into DTA, this exemption notification exempts fully and unconditionally, the "melting scrap"
imported into India. In respect of the DTA clearances of scrap made by the appellant, the duty is payable in terms of proviso to Section 3(1) of Central Excise Act, 1944 and the quantum of this duty payable would be the Basic Customs Duty plus Additional Customs Duty plus Special Additional Customs Duty (SAD) plus education cess & S&H cess. Notification No. 23/2003-C.E. prescribes the concessional rate of duty in respect of DTA clearances subject to the conditions specified in para 6.8 of the Foreign Trade Policy. Irrespective of whether the duty on the DTA clearances is paid at the concessional rate under Notification No. 23/2003-C.E. or the duty is paid without availing of this Customs Appeal No.70524 of 2017 44 exemption on the full rate prescribed under proviso to Section 3(1), the Basic Customs Duty would have to be calculated at the rate applicable to the import of like goods into India, read with any customs duty exemption notification issued under Section 25 of the Customs Act, 1962 and if in respect of any imported goods, the effective rate of duty is nil, it is the that rate which would have to be adopted and the basic Customs duty component of the excise duty payable on the DTA clearances would be nil. Thus if some goods imported into India are fully and unconditionally exempt from Basic Customs Duty by some exemption notification, while calculating the Central Excise Duty leviable on the DTA clearances of those goods, the Basic Customs Duty would have to be taken as nil, even if those DTA clearances are not in accordance with the conditions prescribed in para 6.8 of the Foreign Trade Policy. It is seen that same view has been taken by the Board in its Circular No. 305/83/94-FTT, dated 15-9-1994.
7.1 The other ground taken by the Department for denying basic customs duty exemption under Notification No. 21/2002-Cus. (Sl. No. 200), is that the scrap, in question, is not melting scrap, is absurd, as the nature of the scrap cannot be determined on the basis as to whether it has been sold the actual users or the dealers, as only use to which Iron and Steel Scrap can be put, is by melting the same to make some other Iron and Steel products. Same view has been taken by the Tribunal in its judgments in the case of Indo Deutsche Trade Links v. CC (Imports), Chennai reported in 2014 (303) E.L.T. 442 (Tri.-Chennai) (para 33) of the judgment.
7.2 In view of this, the part of the impugned order confirming the duty demand on the basis of denial of exemption under Notification No. 21/2002-Cus. in respect of Basic Customs Duty is not sustainable and the same has to be set aside.
Customs Appeal No.70524 of 2017 45
8. As regards the exemption from the portion of the Central Excise Duty equivalent to the Special Additional Customs Duty (SAD) payable under Section 3(5) of the Customs Tariff Act, the Department's contention is that the SAD would be payable as the clearances are not in terms of para 6.8 (a) of the Foreign Trade Policy and as such the exemption in terms of Sl. No. 1 of the table annexed to exemption Notification No. 23/2003-C.E. would not be applicable.
8.1 Since on the goods sold into DTA, VAT levied by the State Government has been paid, and in this regard, there is no dispute, the conditions of exemption Notification No. 102/2007-Cus., dated 14-9-2007, as applicable to the DTA clearances of a 100% EOU, have been substantially satisfied and hence the goods would be fully exempt from SAD as, in our view, the benefit of this notification, which has been issued for the goods imported by a person for subsequent sale and whose condition have been prescribed accordingly, cannot be denied in respect of DTA clearances of a 100% EOU if the condition as applicable mutatis mutandis to DTA sales are satisfied. The duty demand based on this issue is also not sustainable."
In case of Salora Components referred by the appellant at the time of arguments, following has been held:
"4. We have carefully considered the submission made by both the sides and perused the records. The following issues arise to be decided in this appeal :
(a) Whether the value of imported goods enhanced at the time of filing of into bond, bill of entry can be challenged against the ex-bond bill of entry.
(b) Whether the appellant is entitled for exemption notification Nos. 25/2002-Cus., dated 1-3-2002 and 25/1999-Cus., dated 28-2-1999 in a case when the Customs (Import of Goods at Concessional Rate of duty for Customs Appeal No.70524 of 2017 46 Manufacture of Excisable Goods) Rules, 1996 was not followed at the time of debonding of EOU.
As regard the challenge to assessment of ex-bond bill of entry as regard enhanced value which was done in into bond bill of entry, we find that into bond bill of entry is only for the purpose of inbonding of goods in the Custom bonded warehouse. On the basis of into bond bill of entry, neither the goods are cleared for their consumption nor any payment of duty is made. Therefore, the assessment of into bond bill of entry is deemed to be provisional assessment. The final assessment is done only in ex-bond bill of entry for home consumption whereby the customs duty is actually paid when the goods are cleared from the bonded warehouse. The ex-bond bill of entry is final assessment order which is appealable. Hence, the appellant had a legal right to challenge the ex-bond bill of entry contesting all the issues. It is observed that in the into bond bill of entry, value was enhanced over the amount of invoice value without any evidence which is not legal and proper. Therefore, consequently, the enhanced value adopted in ex- bond bill of entry is also not correct. We, therefore, hold that the original value of the .goods should be taken as per the invoice and not on the basis of enhanced value adopted in the into bond bill of entry as well as ex-bond bill of entry. Therefore, the enhancement of the value is set aside.
As regard the entitlement of the exemption notification Nos. 25/1999-Cus., dated 28-2-1999 and 25/2002-Cus., dated 1-3-2002, we find that the lower authorities have denied this exemption only on the ground that the appellant have not followed the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. In this regard we find that in the peculiar facts of the present case, initially when the goods were imported, the same were received in the factory of the appellant who was 100% EOU and admittedly used within the 100% EOU. The exemption is claimed only at the time of debonding of 100% Customs Appeal No.70524 of 2017 47 EOU. The procedure provided under Customs Rules, 1996 is mainly for the purpose of movement of goods from port of Custom up to the factory and use thereof. In the present case, since the goods were imported by 100% EOU which were cleared under notification 52/2003-Cus., dated 31-3- 2003. Even as per this notification, the goods are cleared on the presentation of the exemption certificate issued by the jurisdictional officer and on that basis, the movement of goods from the port up to the factory of the appellant is done under bond. More or less the similar procedure is followed either in notification 52/2003 or under notification 25/1999-Cus. and 25/2002-Cus. Therefore, the movement of goods imported by the appellant from Custom port up to the factory as well as use thereof is completely within the monitoring of the department. Even in the case of procedure prescribed under Customs Rules, 1996, similar procedure is followed. Therefore, even if the procedure of Customs Rules 1996 was not followed but practically the similar procedure was followed with reference to notification 53/2003-Cus., if any lapse on the part of the appellant it is mere procedural lapse. For this reason, the substantial benefit of notification Nos. 25/1999-Cus. and 25/2002-Cus. cannot be denied. The judgments cited by the Ld. Commissioner (A) is in the facts of the case where the goods are cleared from the Customs and received by DTA unit which are not under the control of Customs/Excise department whereas the facts of the present case is different as the appellant is a 100% EOU. Therefore the judgments cited by Revenue stand distinguished. As per the above discussion, we are of the view that the appellant is entitled for exemption under notification 25/2002-Cus. and 25/1999-Cus. Accordingly, the impugned order is set aside. Appeals are allowed."
Special Counsel appearing for the revenue had strenuously sought to distinguish the said case from the facts of the present case We do not find any merits in the said distinction. The facts Customs Appeal No.70524 of 2017 48 of the case as recorded in para 4 of the above order clearly point that benefit of exemption has been allowed at the time of debonding even when the same was not claimed at the time of importation of goods by the EOU. We find that the ratio of this decision is squarely applicable to the facts of present case. We also note that civil appeal filed by the revenue against this order has been dismissed by Hon‟ble Supreme Court as reported at [2020 (371) E.L.T. A87 (S.C.)] observing as follows:
"Delay condoned.
We are in agreement with the view of the Customs, Excise and Service Tax Appellate Tribunal that there was substantial compliance on the part of the respondent in regard to the conditions prescribed for availing the benefit of the exemption notification for converting the 100 per cent Export Oriented Unit as a Domestic Tariff Area Unit.
The Tribunal having allowed the benefit of the notification, we are not inclined to entertain the Civil Appeal, in the facts and circumstances of the present case.
The Civil Appeal is accordingly, dismissed.
Pending application(s), if any, shall stand disposed of."
4.10 Impugned order sought to deny the benefit of said exemption notification to the appellant for the reason that appellant had not claimed the same at the time of importation of these raw materials and hence could not have claimed the same subsequently at the time of clearance from EOU on de-bonding. Interestingly impugned order relies on the decision in case of Priya Blue and other similar cases to deny the claim made by the appellant. While doing so in the same breath they have justified that demand for short levy could have been made in respect of the duty paid as per the approval/ assessment made by the jurisdictional authorities at the time of de-bonding. In case of Orbit Fabrics [2011 (264) ELT 53 (Guj)] Hon‟ble Gujarat High Court held as follows:
Customs Appeal No.70524 of 2017 49
6. The Tribunal, after considering the submissions advanced on behalf of the assessee observed that the assessee had filed bill of entry which was assessed by the proper officer, who, never pointed out that the countervailing duty or special additional duty was also required to be paid by the assessee. The Tribunal was of the view that no objection having been raised at the time of assessment of the bill of entry, the assessee could not be saddled with any mala fide intention or suppression so as to justifiably invoke the longer period of limitation. According to the Tribunal, this was the case of mistake or lack of knowledge on the part of the assessee as also on the part of the Customs Officer assessing the bill of entry, in which case, the extended period of limitation was not available to the revenue.
7. The facts as emerging from the record of the case indicate that the assessee had filed the bill of entry No. OFL/Debonding/01/2003-04, calculating the Basic Customs Duty @ 5% amounting to Rs. 6,90,875/- on the capital goods availing exemption under Notification No. 21/2002-
CUS, dated 1-3-2002. The said bill of entry came to be assessed by the proper officer who at the relevant point of time, did not raise any objection or point out to the assessee that it was liable to pay countervailing duty or special additional duty. According to the adjudicating authority, the assessee had not mentioned the serial number and list number applicable for the removal of capital goods with deliberate intention to mislead the assessing officer regarding the rate of duty applicable. The aforesaid view of the Adjudicating Authority is fallacious, for the reason that in case the assessee had not indicated the serial number of the relevant notification, it was for the concerned Assessing Officer to point out the same to the assessee and call upon it to state the proper facts. Without calling upon the assessee to state the serial number under which the goods would fall, and without pointing out any defect in the Customs Appeal No.70524 of 2017 50 bill of entry filed by the assessee, the concerned officer had assessed the bill of entry and had not raised any demand of countervailing duty or special additional duty. The assessee had rightly or wrongly claimed liability to pay duty at a particular rate. At the time of assessing the bill of entry, it is for the concerned officer to ascertain the actual duty liability. Mere non-mentioning of the serial number under which the goods would fall cannot be equated with suppression, because it was for the concerned officer to even otherwise verify from the description of the goods as to under which item number the same would fall and assess the duty liability accordingly. The concerned officer having failed to do so, the onus cannot be thrown on the assessee.
4.11 In case of Hotline CPT, Delhi bench observed as follows:
"5.1 Learned Advocate for the respondents submits that due to unforeseen circumstances, they had to exit from the EHTP scheme; they were allowed to pay duty under 52/2003 at the time of de-bonding. When the goods are removed from the bond the duty is payable at the rate of duty prevalent at the time of clearance; that the benefit of the notifications which were available should be extended. The unit has converted from being an EHTP unit to DTA unit and the same does not involve any change of premises. The jurisdiction under the Customs Act and subsequently the jurisdiction under the Central Excise Act are with the same Superintendent, Range I, Malanpur. The formalities of taking registration certificate under the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods), Rules, 1996 was also taken from the same officer. There can be no doubt about the end-use conditions having been fulfilled in this case.
5.2 He relies on the decision of the Hon'ble Supreme Court in the case of Thermax Private Ltd. v. Collector of Customs [1992 (61) E.L.T. 352 (S.C.)] where in it has been held that the condition of not following Chapter X Procedure while Customs Appeal No.70524 of 2017 51 extending the benefit of CVD exemption so claimed deeming the goods as having been manufactured. He also relied on the decision of the Tribunal in the case of Commissioner of Customs, Amritsar v. Malwa Industries Ltd. [2008 (229) E.L.T. 233 (Tri-Del)] wherein the following decision in the case of Thermax Private Ltd., decision was taken that use within the factory of production would mean that the goods in question should not be used in any other factory i.e. anywhere other than the factory for the purpose of manufacture of textile and textile articles. He submits that in both the case, the decision emphasises on substantive compliance of the conditions rather than on the procedure.
6.1 We have carefully considered the submissions from both the sides. The goods were imported at nil rate of duty as per the Notification available to such imports by EHTP unit. We find that as a unit in EHTP, they were having a warehouse under the Customs Act and were operating under section 65 of the Customs Act for manufacture under Customs bond.
6.2 For some unforeseen reason, they were not able to produce and export and therefore, sought to exit from the scheme and the permission has been granted to do so by the competent authorities. The final exit order from the scheme will be given only on payment of dues as stipulated under condition of Notification No. 52/2003. The concession otherwise available is sought be denied as final exit order was not given by the STPI authorities at the time of assessment. If this reasoning is taken to logical end then, as the unit is still EHTP only nil duty can be assessed. Such an approach would lead to a situation where they would never be able to exit. This cannot be the intention of the policy. The procedure should work as hand maid of the policy and not the other way of about. The Commissioner was correct in holding that the duty was being demanded only in pursuance of the decision taken to exit from EHTP scheme.
Customs Appeal No.70524 of 2017 52 6.3 It is a case where the assessee from the zero rated scheme is moving to another scheme with a higher (higher than zero) but concessional rate of duty. It is also a case of clearance from warehouse consequent to de-bonding. If the Department was satisfied they have received the goods and accounted for under the zero-duty scheme, they can not entertain doubt about receipt of the goods for the intended use. It was also submitted that there was no change of premises and before and after conversion of the status the unit was with the jurisdiction of the same officers. To hold that in such a situation they shall not be eligible for benefit of any notification and that they are available only at the time of import will be contrary to the understanding and practice in respect of clearance from warehouses. The procedural violations, if any, are only of technical in nature and there can be, in the given facts and circumstances of the case, no allegation of any possible diversion. In fact, there is no such allegation or finding."
4.12 Thus we do not find any merits in the impugned order.
5.1 Appeal is allowed.
(Order pronounced in open court on- 16 January, 2025) (P.K. CHOUDHARY) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp