Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

Comments

Print   |    |  Comment

PJ/CASE LAW/2015-16/2927

Whether duty free material imported by 100% EOU can be used for construction of factory?

Case:-  MOSER BAER INDIA LTD. VERSUS COMMISSIONER OF CUSTOMS, NOIDA

Citation:- 2015 (325) E.L.T. 236 (S.C.)

Brief Facts:- The appellant-assessee is engaged in the manufacture of CD (Recordable) and CD-ROM falling under Chapter Heading 85 of the Central Excise Tariff Act, 1985. It is a 100% EOU unit and with that character, the appellant is entitled to import raw material as well as capital goods and other goods specified in the EXIM policy and Custom Notification No. 53/97-Cus., dated 3-6-1997 without payment of duty. It is also an admitted case that as a 100% EOU, the appellant is also entitled to procure raw materials, capital goods and all other goods specified in the EXIM policy under the Excise Notification No. 1/95-C.E., dated 4-1-1995 without payment of excise duty under CT3 certificate.

It had imported certain materials, viz., Epoxy Resin, Pyrolitic Reflective Toughened glass, Silicon Adhesive and sealant, cold rolled M.S. Dec Profile Sheets, etc., after taking permission from the Development Commissioner, Government of India, which was granted to the appellant vide orders dated 13-9-2000.

Some of the goods claimed by the appellant as capital goods were used for construction and decoration of the factory building. It resulted in the issuance of Show Cause Notice dated 27-3-2002 and the demand mentioned in the said notice was confirmed after hearing the appellant. The Commissioner also confirmed the said demand. Even the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as ‘CESTAT’) has affirmed the order of the authorities below thereby dismissing the appeal of the appellant herein. However, insofar as the penalty that was imposed by the Adjudicating Authority is concerned, that has been set aside by the CESTAT on the ground that the declaration submitted by the appellant was bona fide and not contumacious.

Appellant’s contention:-The case of the appellant was that the aforesaid goods were for captive use which were required for the purpose of manufacturing CD (Recordable) and CD-ROM and were also to be used in connection with the production of the aforesaid items and therefore, no duty was paid. Further, the plea of the appellant was that the Show Cause Notice was time barred which was rejected by the CESTAT.

Respondent’s contention:-The Revenue, however, was of the opinion that some duty free items claimed by the appellant as capital goods were used for construction and decoration of the factory building and therefore, were not entitled to the exemption in terms of Notification No. 53/97-Cus. or Notification No. 1/95-C.E. We would also like to state here that the Show Cause Notice dated 23-7-2002 was beyond the normal period of limitation prescribed under Section 28 of the Customs Act and therefore, provisions of proviso to that Section was invoked to claim the extended period of limitation. The appellant had specifically raised the issue that the notice was time barred and it was not permissible for the Revenue to seek shelter under the proviso to Section 28 inasmuch as there was no misdeclaration or misstatement on the part of the assessee-appellant in the declaration that was filed by it while clearing the aforesaid goods.

Reasoning of judgement:-The plea of the appellant contending that the Show Cause Notice was time barred is rejected by the CESTAT in the following words : -

“18.It is also seen that the appellants have executed bond to comply with all the conditions of the two Notifications and for proper use of the said goods. As per the terms and conditions of the bond, the appellants are bound to pay the duty occurring on account of any flout, if noticed subsequently, of provisions of Notifications. Hence the demand made in this case is not hit by any time bar.”

In order to determine the aforesaid issue, it would be necessary to traverse through Exemption Notification No. 53/97-Cus., dated 3-6-1997 as amended from time to time. Relevant portion thereof with which they were concerned reads as under : -

“In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government being satisfied that it is necessary in the public interest so to do, hereby exempts goods specified in the Table below (hereinafter referred to as the goods), when imported into India, or procured from a Public Warehouse or Private Warehouse appointed or licensed, as the case may be, under section 57 or section 58 of the said Customs Act, for the purpose of manufacture of articles for export out of India, or for being used in connection with the production or packaging or job work for export of goods or services out of India or for trading of goods for export out of India as referred to in paragraph 9.21 of the Export & Import Policy, 1997-2002 notified by the Government of India under the Ministry of Commerce Notification No. 1/97, dated the 31st March, 1997, as amended from time to time (hereafter referred to as the said Export and Import Policy) by hundred percent Export Oriented Units approved by the Board of Approvals for hundred percent Export Oriented Units, appointed by the notification of Government of India in the Ministry of Industry, Department of Industrial Policy and Promotion or the Development Commissioner concerned, as the case may be, for this purpose (hereinafter referred to as the said Board), from the whole of duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty, if any, leviable thereon under section 3 of the said Customs Tariff Act subject to the following conditions......”

A reading of the aforesaid notification clearly manifests that it is not necessary that the material which is imported into India has to be used in the manufacture of articles which are to be exported out of India. Even if the said material is used “for the purpose of manufacture of articles” or “for being used in connection with the production or packaging or job work”, the same shall still be covered by the aforesaid notification and thus would not attract any customs duty. The table which mentions the goods that are entitled to exemption specifically include “capital goods”. It could not be disputed that the aforesaid good were imported by the appellant-assessee for construction of its unit from where the goods meant for export were to be manufactured and therefore, these goods are in the nature of capital goods. We, therefore, hold that the CESTAT is not right in taking a contrary view and denying the benefit of the aforesaid Exemption Notification to the appellant.

Even on the question of limitation, they do not agree with the view taken by the CESTAT. No doubt, the appellant had furnished the bond. However, the extended period of limitation could have been invoked if the goods meant for particular purpose were not consumed and used by the assessee itself and instead, the assessee had diverted the said goods in the domestic market by sale thereof to third parties. In such a situation, naturally there would have been infraction of the bond in question and the Revenue was entitled to invoke the larger period of limitation. However, in the instant case, goods were used for the purpose for which they were imported. This is accepted even by the CESTAT and on this very ground, insofar as the penalty is concerned, the same has been set aside. Once, that is done by the CESTAT, it had its implication on the issue of limitation as well. It, thus, turns out to be a case where there is no willful misdeclaration, misstatement or diversion of the goods in question. As stated above, the goods are used for the purpose for which they are imported. If the perception of the Revenue was that these are not captive goods or the benefit of Notification No. 53/97 is not available to the assessee, the period of limitation started at the threshold and therefore, on the facts which were known to the Revenue the Show Cause Notice could have been issued within a normal period of limitation prescribed under Section 28 which was six months at the relevant time.

Decision:- The appeal is allowed.

Comment:- The crux of the case is that material imported duty free by 100% EOU can be utilised for the purpose of manufacture of articles for export or in connection with production or packaging of goods for exports. Therefore it is not necessary that imported raw material is required to be used in manufacture of export product only as imported goods can also be used in connection with the production. Hence, duty cannot be demanded on material imported for the purpose of construction of manufacturing unit. Although the usage is of capital nature, exemption is available as it is used in connection with production of goods for export.

Submitted by:-Somya Jain

 

 

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com