Whether further demand can be raised when duty already paid on conversion from EOU to EPCG Scheme?

PJ/Case Laws/2012-13/1304

CASE:M/s UNIVERSAL BIOFUELS PVT. LTD. V/s COMMISSIONER OF CUSTOMS, VISHAKHAPATNAM

CITATION:2012-TIOL-1519-CESTAT-BANG

BRIEF FACTS: The brief facts of the case are that Appellants were granted LOP on 24/1/2007 to operate as a 100% EOU and they have imported duty free capital goods and also procured capital goods duty free. The duty foregone on the capital goods is around Rs.2.86 crores. Admittedly the appellants have not made any exports till July 2009 due to unfavourable market conditions. As they were not in a position to export under the EOU scheme, they sought permission for switching over from EOU Scheme to EPCG Scheme. In-principle permission of the Development Commissioner was granted on 20/11/2008 and thereafter, in pursuance of direction of the Customs Authorities Rs 36,23,626/- was paid towards duty treating the capital goods as if procured under EPCG Scheme and the rate of duty adopted was 3%. Commissioner, thereafter, issued a show-cause notice dated 18/12/2009 proposing demand of differential duty of Rs 2,51,01,962/- primarily on the ground that the appellants have failed to achieve NFE. The Original Authority, vide Impugned order dated 31/5/2011, confirmed the demand as proposed in the show-cause notice and imposed penalties.

APPELLANT’S CONTENTION:The learned advocate assails the order of the Commissioner mainly on the following grounds:
(a) This is a case in which, with the concurrence of the Development Commissioner, the department has assessed the duty payable at the time of switching over from EOU scheme to EPCG scheme and the assessed duty was paid. The appellants have taken the obligation to export over Rs 19,00,00,000/- in terms of the EPCG Scheme and they have since exported over Rs 47,00,00,000/- (He fairly concedes that during the adjudication proceedings, they submitted about export of only about Rs 14,00,00,000/- made in August 2009 which has been disregardedby the Commissioner).
(b) Alternatively if they were required to pay Rs 2.86 crores as duties, they would be eligible for CENVAT credit of entire amount except to the tune of Rs 88,00,000/- and that they could have utilized the same for paying duty on other goods manufactured and cleared by them in DTA.
(c) They have paid the major part of the duty assessed by the department consequent to switching over from EOU scheme to EPCG scheme on 10/6/2009 and the balance on 19/6/2009. If there was any short-levy involved, they should have issued the demand within six months and the present demand confirmed in pursuance of show-cause notice dated 18/12/2009 is barred by limitation. He also submits that they are facing acute financial hardship. In support of the same balance-sheet for the year ending March 2011 was produced.

RESPONDENT’S CONTENTION:The learned Additional Commissioner, reiterating the findings and reasoning of the Commissioner, submits that since the appellants have not fulfilled the NFE conditions the merit rate is applicable. He further submits that the claim for eligibility of CENVAT credit of CVD which might be payable and the time bar aspects have not been taken before the Commissioner. He also submits that part of the amount was paid only on 19/6/2009 and therefore the show-cause notice has been issued within six months.

REASONING OF JUDGEMENT: Wehave carefully considered the submissions from both sides and perused the records. Undisputedly the Development Commissioner gave in principle approval for switching over from the EOU scheme to EPCG scheme and the department has followed it up with a demand of about Rs 36 lakhs and substantial amount of the same stands paid on 10/6/2009. The submission of the learned advocate that in the event of their paying differential duty amounting to Rs 2.8 crores they shall be eligible for CENVAT credit of CVD amounting to about Rs 2 crores is prima facie valid. Further, the appellants have claimed that they have made exports to the tune of Rs 47,00,00,000/. This claim was made across the bar on behalf of the appellants. In view of this submission, it appears that the appellants have since made exports which is more than their obligation under the EPCG scheme.

Taking all these facts into account, it is deemed as appropriate to waive pre-deposit of dues as per the impugned order and stay recovery thereof till disposal of the appeal.

DECISION:Stay Granted.

COMMENT:The analogy drawn from this case is that when substantial conditions have been complied with that are essential for conversion from EOU Scheme to EPCG Scheme, further raising of demand, without considering the factual position of the case is not warranted.

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PJ/Case Laws/2012-13/1304

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