Case Law Details
Commissioner of CGST & Excise Vs National Aluminium Company Limited (CESTAT Kolkata)
The case of Commissioner of CGST & Excise vs. National Aluminium Company Limited (CESTAT Kolkata) involves a dispute regarding the transition of a 100% Export-Oriented Unit (EOU) to the Export Promotion Capital Goods (EPCG) Scheme and the fulfillment of export obligations. The Revenue appealed the adjudicating authority’s decision to drop proceedings against the respondent.
Detailed Analysis:
- Proceedings were initiated against National Aluminium Company Limited (NALCO) for alleged wrong availment of exemptions in violation of certain notifications and trade policy provisions due to their failure to achieve the minimum Net Foreign Exchange Earnings (NFEP) as required by the Foreign Trade Policy.
- NALCO was engaged in the manufacture of aluminum and took over another company, International Aluminium Products Limited, which operated as a 100% EOU. NALCO requested permission to transition from the EOU Scheme to the EPCG Scheme because they couldn’t fulfill their export obligation. Permission was granted, and they were required to discharge duty liability on capital goods procured duty-free under the EOU Scheme.
- NALCO assessed the duty liability and submitted details to the relevant authorities, which confirmed the liability. They deposited the assessed amount and subsequently received a no dues certificate.
- After exiting the EOU Scheme and merging with their DTA (Domestic Tariff Area) unit, NALCO was issued a show-cause notice for the recovery of duty on imported and locally procured capital goods.
- The Development Commissioner issued an EPCG License, determining the duty-saved amount and setting export obligations.
- The adjudicating authority dropped the proceedings against NALCO on November 30, 2017.
- The Revenue challenged the decision in the appeal.
Conclusion:
The Tribunal observed that the adjudicating authority had considered the transition proceedings, the payment of duty, and the issuance of a no dues certificate by the relevant authorities. Furthermore, NALCO had fulfilled their export obligations and received the Export Obligation Discharge Certificate (EODC).
As a result, the appeal filed by the Revenue was dismissed, and the Cross Objection filed by NALCO was disposed of in favor of the respondent.
This case demonstrates that if export obligations are fulfilled and the necessary procedures are followed during the transition from EOU to EPCG, no duty liability should be imposed.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The Revenue is in appeal against the impugned order, wherein the ld. Adjudicating Authority has dropped the proceedings against the respondent.
2. The facts of the case are that the proceedings were initiated against M/s NALCO Limited, a 100% EOU, Nalco Nagar, Angul, holder of private Bonded Warehouse for wrong availment of exemption in contravention of provisions of Notification No. 1/95-CE dated 04.01.1995, Notification No. 22/03-CE dated 31.03.2003 as amended by Notification No. 53-97-Cus dated 03.06.1997 and Notification No. 52/2003-Cus dated 31.03.2003 as amended read with Para 6.5 of the Foreign Trade Policy 2004-2009 inasmuch as they failed to achieve the minimum NFEP under 6.5 of Chapter 6 of Foreign Trade Policy, 2004-2009, 6.10.1 of Hand Book Procedure Volume I of Foreign Trade Policy 2004-09.
2.1 The respondent is a Public Sector Undertaking under the Ministry of Mines, Government of India and is engaged in the manufacture of aluminium metal, in its smelter plant located at Angul, Odisha.
2.2 Another Company, namely, International Aluminium Products Limited, a 100% EOU, was situated at Angul for manufacture of aluminium rolled products, out of the hot metal manufactured and supplied by the respondent’s Smelter’s Unit.
2.3 The respondent took over M/s IAPL, with all its assets and liabilities, pursuant to Government Notification No.817 dated 09.11.2011 by the Ministry of Law, Justice & Company Affairs, Government of India. Consequent upon take over, the unit is registered with the Registrar of Companies in the name and style of M/s NALCO Limited to operate as a 100% EOU. The LOP was issued by the Ministry of Industry, Government of India in favour of M/s IAPL, was transferred in favour of the respondent. The production commenced on 15.06.2002.
2.4 The export obligation could not be fulfilled by the respondent and applied to Development Commissioner, Falta Export Processing Zone, Kolkata, for grant of permission to exit from EOU Scheme to EPCG Scheme in terms of the Foreign Trade Policy, 2004-09 on 07.02.2007.
2.5 On 21.02.2007, the permission for one-time exit, was accorded by the Development Commissioner subject to discharge of duty liability under EPCG Scheme in respect of the capital goods procured duty-free under EOU Scheme.
2.6 On 28.02.2007, the duty liability was assessed by the respondent in terms of Para 6.18 (e) of the Foreign Trade Policy and the details were submitted to the jurisdictional Deputy Commissioner of Central Excise & Customs, for his confirmation. Upon confirmation of the liability by the Deputy Commissioner, the amount was deposited by the respondent. The said duty liability was computed at the prevailing rate of 5% of BCD fixed under Para 5.1 of the Foreign Trade Policy. No dues Certificate was issued by the Deputy Commissioner of Customs & Central Excise, Cuttack Division.
2.7 Thereafter, on 15.05.2007, the final De-Bonding order was issued by the Deputy Commissioner and 100% EOU ceased to exist and merged with the respondent’s Smelter Unit (DTA Unit) to operate under the EPCG Scheme and fulfill its obligation under the said Scheme.
2.8 Thereafter, on 08.06.2007, a show-cause notice was issued to the respondent for recovery of duty on the imported and indigenously procured capital goods procured duty-free in terms of the Foreign Trade Policy read with relevant exemption Notification.
2.9 On 18.07.2007, the Development Commissioner issued EPCG License determining the duty-saved amount and fixing the export obligation at eight times of the said amount to be fulfilled in eight (8) years from the date of authorization.
2.10. The show-cause notice was adjudicated and proceedings were dropped against the respondent on 30.11.2017.
2.11 The said order was challenged by the Revenue before us.
3. The main contention of the Revenue is that as the respondent could not fulfill their export obligation, therefore, the impugned order is to be set aside.
4. The respondent has also filed a Cross Objection and submitted that on post adjudication, the respondent has completed the export obligation and the Export Obligation Discharge Certificate (EODC) was issued by the Deputy Director General of Foreign Trade, Cuttack, in favour of the respondent. In that circumstances, the appeal filed by the Revenue is to be set aside.
5. Heard the parties and considered the submissions made from both sides.
6. We find that in this case, without considering the proceedings taken by the Development Commissioner and the payment of duty by the respondent, the Deputy Commissioner of Central Excise & Customs, opted for existing from EOU Scheme to EPCG Scheme in terms of the Foreign Trade Policy, 2004-09 on 07.02.2007 and after payment of duty, no dues certificate was issued. The show-cause notice was issued and the adjudicating authority has gone into this case and development taken before the Development Commissioner as well as the payment of duty by the respondent at the time of opting out from EOU Scheme to EPCG Scheme and the adjudicating authority dropped the proceedings against the respondent.
7. We further take note of the fact that after adjudication, the respondent has fulfilled their export obligation and obtained for EODC on 09.03.2018.
8. In that circumstances, no proceedings are sustainable against the respondent.
9. Accordingly, we dismiss the appeal filed by the Revenue and also disposed off the Cross Objection filed by the respondent in the above terms.
(Operative part of the order was pronounced in the open court)
Author Bio
