Custom, Excise & Service Tax Tribunal
Designer Suits Gokldas Images Pvt Ltd vs Bangalore-Ii on 14 August, 2024
Customs Appeal No. 23559 of 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, BANGALORE
REGIONAL BENCH - COURT NO. 2
Customs Appeal No. 23559 of 2014
[Arising out of Order-in-Appeal No.565/2014-CE dated 22.09.2014 passed
by the Commissioner of Central Excise (Appeals-I), Bangalore]
Designer Suits
(Division of M/s. Gokaldas Images Pvt. Ltd.)
18/A, Khivaraj Building
Industrial Suburb, Yeshwanthapur
Bangalore - 560 022 ......Appellant
Versus
Commissioner of Central Excise
Bangalore - II
PB 5400, C.R. Building
Queens Road
Bangalore - 560 001 ........Respondent
Appearance:
Mr. N. Anand, Advocate for the Appellant Mr. Rajesh Shastry, Authorised Representative for the Respondent Coram:
Hon'ble Mr. P.A. Augustian, Member (Judicial) Hon'ble Mr. Pullela Nageswara Rao, Member (Technical) Final Order No.: 20733 / 2024 Date of Hearing: 16.02.2024 Date of Decision: 14.08.2024 Per: Pullela Nageswara Rao M/s. Designer Suits (Division of Gokuldas Images Pvt. Ltd.), the appellant is a 100% Export Oriented Unit (EOU) engaged in manufacture and export of readymade garments and made ups and duly registered under the Central Excise provisions and has been issued Private Bonded Warehouse (PBW) licence under Section 58 of Customs Act,1962.
2. The brief facts of the case are the appellant had opted for exit from the EOU scheme and sought NOC for debonding of imported Page 1 of 11 Customs Appeal No. 23559 of 2014 capital goods on payment of applicable duty against 2(two) EPCG licences both dated 11.05.2011 issued by DGFT to M/s. Gokuldas Images Pvt., Ltd., endorsing the appellant as the supporting manufacturer. The relevant Customs Exemption Notification for EPCG imports is Notification No. 103/2009-Cus. dated 11.09.2009, which provided for effective rate of BCD of 3% and the balance duties of Customs were fully exempted. On filing of an application for debonding, the jurisdictional Central Excise authorities issued a show-cause notice dated 10.02.2012 proposing to demand Customs duty in respect of some of the (warehoused capital goods) after allowing depreciation up to 19.12.2010, which worked out to Rs.6,23,551/- under Notification No. 52/2003-Cus. dated 31.03.2003 read with Section 72 of the Customs Act, 1962 (appropriate duty and interest has already been paid by the appellant); confiscation of goods under Section 111(o) for violating Notification No.52/2003-Cus. dated 31.03.2003 and to impose penalty under section 112 on Customs Act, 1962. The adjudicating authority confirmed the proposals in the show-cause notice. Aggrieved by the order, the appellant filed first appeal before learned Commissioner (Appeals) which was rejected. Hence, the appellant filed this appeal before the Tribunal.
3. The learned counsel submits that; they have not violated the conditions of Notification No. 52/2003-Cus. dated 31.03.2003 and they have not contravened the provisions of Chapter IX of the Customs Act, 1962; they have achieved positive NFE, which was admitted by Revenue and not disputed; they opted from exit from EOU scheme as per Para 6.18(e) read with Para 6.18(d) of Foreign Page 2 of 11 Customs Appeal No. 23559 of 2014 Trade Policy (FTP); the Revenue has initiated the present Lis, which is contrary to facts and relevant statutory provisions including Board's Circulars; the demand of Customs duty of Rs. 6,23,521/- is contrary to facts, statutory provisions, judicial decisions and Board Circular No. 7/2005-Cus. dated 14.02.2005.
4. The learned counsel has submitted the following:-
(a) Warehousing period of capital goods has not expired. Revenue has presumed that warehousing period has expired, which is untrue.
(b) CBIC Circular No.7/2005-Cus. dated 14.02.2005 read with instruction No. DGEP/FTP/07/2015 dated 15.02.2016 has been fully ignored. The Circular clarified that warehousing period of capital goods is coextensive with the Private Bonded Warehouse licence period.
(c) The private bonded warehouse licence and IBMSO has been renewed extended up to 30.11.2011 and not till 19.03.2010 as wrongly acknowledged by the Revenue.
(d) As a result, the duty computed on the depreciated value on the warehoused capital goods in the show-cause notice is excessive. The actual duty payable on the depreciated value upto 30.11.2011 is Rs.1,97,98/- and not Rs. 6,23,551/-.
(e) The issue is no longer res integra and is settled by the following decisions:
(i) Steer Engg. Pvt. Ltd. Vs. CCT - 2019 (369) E.L.T. 1303 (Tri.-Bang.)
(ii) Sun Micro Systems India Pvt. Ltd. Vs. CC - 2008 (225) E.L.T. 120 (Tri.-Bang.)
(iii) Macmillan India Ltd. Vs. CC - 2008 (223) E.L.T. 449 (Tri.-
Bang.) Page 3 of 11 Customs Appeal No. 23559 of 2014
5. Further the learned counsel submitted that they are entitled under para 6.18 (d) of FTP to exit from EOU scheme on payment of duty on capital goods under the prevailing EPCG scheme for DTA units; accordingly, the DTA unit (Gokuldas Image Pvt. Ltd.) to whom the warehoused capital goods had to be cleared/debonded obtained EPCG licence with the appellant as supporting manufacturer; thus, the impugned order is contrary to the statutory provisions.
(i) Para 6.18 of FTP;
(a) With approval of DC, an EOU may opt out of scheme. Such exit shall be subject to payment of Excise and Customs duties and industrial policy in force.
(b) If unit has not achieved obligations, it shall also be liable to penalty at the time of exit.
(c) --------------------------------------------------------------
(d) An EOU/EHTP/STP/BTP unit may also be permitted by Development Commissioner, to exit from the scheme at any time on payment of duty on capital goods under the prevailing EPCG Scheme for DTA Units. This will be subject to fulfillment of positive NFE criteria under EOU scheme, eligibility criteria under EPCG Scheme and standard conditions indicated in HBP v 1.
(e) Unit proposing to exit out of EOU scheme shall intimate DC and Customs and Central Excise authorities in writing. Unit shall assess duty liability arising out of debonding and submit details of such as-----------------
(ii) Proviso to para 4 inserted in Notification No. 52/2003-Cus. dated 31.03.2003 by amending Notification No. 47/2008-Cus. dated 11.04.2008 reads as under:-
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Customs Appeal No. 23559 of 2014 "in the paragraph 4, in the proviso, for the words "Provided that", the words "Provided further that" shall be substituted and before the proviso as so amended, the following proviso shall be inserted, namely:- "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.";
(iii) Circular No. 12/2008-Cus. dated 24.07.2008, relevant extract;
"4. Exit from EOU scheme to EPCG scheme Para 6.18 (d) of FTP has been amended to allow exit from EOU scheme to Export Promotion Capital Goods scheme only when EOU has fulfilled positive NFE criteria on the date it wishes to de-bond or migrate to EPCG scheme.
The EOU notifications have been suitably amended by Notifications No. 47/2008-Cus. and No. 24/2008-C.E. both 11.04.2008 so as to allow clearance or debonding of capital goods in the event of exit from the EOU scheme to the EPCG scheme provided the EOU has fulfilled the positive NFE criteria. Thus, if a unit has not achieved NFE taking into consideration depreciation allowable, it cannot exit to the EPCG scheme.
6. The learned counsel as regards demand of interest under Section 72 of the Act submits that interest accrued on Customs duty payable on warehoused goods under Chapter IX is fully exempt from 1995. Reliance is placed on the following:-
(i) Notification No. 132/2004-Cus. (NT) dated 25.11.2004; Page 5 of 11
Customs Appeal No. 23559 of 2014 Warehoused goods EHTP or STP units Exemption to interest accrued for imports of specified products by EOU, In exercise of the powers conferred by sub-section (2) of section 61 of the Customs Act, 1962 (52 of 1962) (hereinafter referred to as said Act) and in supersession of the notification of Central Board of Excise and Customs, No. 67/95 (N.Τ.)- Customs, dated the 1st November, 1995 vide number S.O. 870 (E), dated the 1st November, 1995, the Central Board of Excise and Customs, being satisfied that it is necessary so to do in the public interest, hereby exempts interest accrued on the customs duties payable on the capital goods, components and spares of capital goods and material handling equipment (fork-lifts, overhead cranes, mobile cranes, crawler cranes, hoists and stackers), office equipment, captive power plants including captive generating sets, spares of captive power plants and captive generating sets, tools, jigs, gauges, fixtures, moulds, dies instruments and accessories, (other than raw materials, components and consumables) authorised to be imported by an export oriented undertaking or an Electronic Hardware Technology Park (EHTP) unit or a Software Technology Park (STP) Unit and warehoused under Chapter IX of the said Act, at the time of clearance from Customs Bonded Warehouses under section 68 of the said Customs Act.
Explanation. For the purposes of this notification, -
(i) "Electronic Hardware Technology Park (EHTP) unit" means a unit established under and in accordance with the Electronic Hardware Technology Park Scheme notified by the Government of India in the Ministry of Commerce, vide, notification No. 5 (RE-95)/92-97, dated the 30 April 1995 and approved by the Inter-Ministerial Standing Committee:
(ii) "export-oriented undertaking" has the same meaning as assigned to "hundred per cent export-oriented undertaking" in clause (ii) to the Explanation 2 to sub-section (1) of section 3 of the Central Excise Act, 1944 (1 of 1944); and Page 6 of 11 Customs Appeal No. 23559 of 2014
(iii) "Software Technology Park (STP) unit" means a unit established under and in accordance with the Scheme notified by the Government of India in the Ministry of Commerce, vide, notification No. 4/(RE-95)/92-97, dated the 30th April, 1995 and approved by the Inter-Ministerial Standing Committee.
(ii) Verifone India Pvt.Ltd Vs. CC-2011 (272) E.L.T. 303 (Tri.- Bang.)
(iii) Stelfast India Pvt.Ltd. Vs. CC - 2006 (195) E.L.T. 86 (Tri.-Bang.)
7. The learned counsel submits that they have not contravened any of the conditions of the Notification No. 52/2003-Cus dated 31.03.2003 and also any provisions of the Customs Act, 1962; they have achieved positive NFE and have fulfilled export obligation and there is no dispute on this aspect. Hence, the question of confiscation under Section 111(o) and payment of redemption fine and imposition of penalty under Section 112 is unsustainable.
8. Learned Authorized Representative for the Revenue reiterated the findings in the impugned order.
9. Heard both sides and perused the records.
10. We find that the Commissioner (Appeals) in the impugned order decided on the issues (i) whether the extension of warehousing period of the capital goods is automatic with the renewal of the warehousing period as per Board Circular No. 7/2005 dated 14.02.2005 (ii) whether the appellants are eligible for concessional duty under EPCG Notification No. 103/2009-Cus. dated 11.09.2009 and held that; the extension of warehousing period as per the Board Circular, which gives the facility of synchronization of warehousing period with the validity of the warehousing licence and it does not imply that if the appellant applies only for renewal of Page 7 of 11 Customs Appeal No. 23559 of 2014 warehousing licence, the extension of warehousing period of capital goods is automatic; the appellant should have applied for extension of warehousing period along with renewal of warehousing licence, licence for warehousing and extension period of warehousing are different events and procedures, thus the appellants have contravened the provisions of Act and are liable for penalty; the case-laws cited by the appellant are not applicable as the issues involved in those matters are different from the issue in this case, the original authority has distinguished these case-laws.
11. The learned Commissioner (Appeals) as regards the eligibility of EPCG Notification No. 103/2009, held that; it is not in dispute that exit from EOU to EPCG scheme is allowed, if the EOU fulfills positive NFE criteria, which the appellants have fulfilled, however, the appellants are not holders of the said EPCG licence and the licence is in the name of M/s. Gokuldas Images Pvt., Ltd., and the name and address of the appellant is shown to be the premises, where capital were to be installed; the appellants are not in a position of getting exit from EOU scheme without finalization of the present case in hand as they have contravened the provisions under Section 61 & 72 of the Act. Hence, the exemption under EPCG Notification No. 103/2009-Cus dated 11.09.2009 is not available; as there is violation of provisions as discussed, the confiscation of goods under 111(o) of the Act and imposition of penalty under Section 112 are proper.
12. We find that in the impugned order Commissioner (Appeals) has held that the application for extension of warehousing licence does not automatically mean that application for extension of Page 8 of 11 Customs Appeal No. 23559 of 2014 warehousing period is also submitted. The appellant contended that as per the Board Circular No. 07/2005-Cus.dated dated 14.02.2005, wherein it is clarified that EOU should not be denied permission to de-bond even if a show-cause notice is pending against them. We find the appellant has already paid duty on the capital goods which are still in the warehouse and there is no show-cause notice pending against them except the present notice and therefore, the adjudicating authority should have permitted the exit from EOU and allowed de-bonding of the capital goods as requested by the appellant. We find that Board Circular No. 07/2005 dated 14.02.2005 has taken cognizance of the fact that the practice of having to approach the Department for getting extension of the warehousing period distracts the attention of the EOU from export production and the units are always busy in preparation of obtaining timely extension of warehousing to avoid action under law for delay and only to obviate the difficulties of EOU/EHTP/HTP units that the Board has decided to allow extension of warehousing of all capital goods installed and put to use simultaneously at the time of renewal of warehousing licence, irrespective of the fact that warehousing period of capital goods are due for extension or not. We find that the adjudicating authority had admitted that warehousing licence was valid up to 30.11.2010, we find that, when the private bonded warehouse licence is renewed the warehousing period of the capital goods also gets automatically extended as clarified in Para 3 of the Board Circular No. 7/2005 dated 14.02.2005, which is extracted below:
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Customs Appeal No. 23559 of 2014 "3. As you are aware that the EOU/EHTP/STP units are required to obtain private bonded warehousing licence u/s 58 of the Customs Act. The said licence is valid for a period of 5 years and the units are required to apply for renewal after every 5 years. The Board in order to obviate the difficulties of the EOU/EHTP/STP units has decided to allow extension of warehousing of all the capital goods installed or put into use, simultaneously at the time of renewal of warehousing licences irrespective of the fact that the capital goods are due for extension or not. The period of extension would be allowed for such a period so that the capital goods need further extension only on the date of renewal of warehousing license. The period of extension, therefore, may be adjusted accordingly for every piece of capital goods. However, the maximum period of extension at a time would not be allowed for a period for more than five years.
[Illustration: In case of an EOU/EHTP/STP unit having obtained a warehousing license on 1-1-99 would fall due for renewal after initial 5 years period on 1-1-2004. In this case,
(i) Assume a C.G has been warehoused on 1-1-2002. Hence, its extension of warehousing falls due on 1-1-2007
(ii) The warehousing license under Section 58 becomes due for renewal on 1-1-2004, and the same would be renewed for further five-year period i.e. up to 1-1-2009
(iii) Extension of warehousing period for C.G. at (i) above would also be given on 1-1-2004 along with renewal of warehousing license for a period up to 1-1-2009.]".
13. In view of the above discussion, the appellant is entitled for the benefit of Notification No. 52/2003-Cus. dated 31.03.2003 and also the benefit of Notification No. 103/2009-Cus dated 11.09.2009. Further as the warehousing period also gets extended the depreciation on the capital goods requested for debonding has to be Page 10 of 11 Customs Appeal No. 23559 of 2014 computed up to 30.11.2010 and the duty has to be redetermined, accordingly.
14. The appeal is allowed in the above terms with consequential relief, if any, as per law.
(Order pronounced in Open Court on 14.08.2024) (P.A. Augustian) Member (Judicial) (Pullela Nageswara Rao) Member (Technical) iss...
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