Isgec Heavy Engineering Ltd Vs C.C.-Ahmedabad (CESTAT Ahmedabad)
CESTAT Ahmedabad held that as appellant has not exited from Special Economic Zone (SEZ), they are not eligible for clearing capital goods under the prevalent Export Promotion Capital Goods Scheme (EPCG Scheme).
Facts- The appellant is engaged in manufacturing heavy machinery falling under Chapter 84 of Customs Tariff Act, 1985. It filed a bill of entry No.485 dated 30.7.2012 for import / procurement of imported capital goods viz. Plate Bending machine Model HDR-HY-3500-5000 consisting of three rollers, mobile control panel, air cooler.
The said bill of entry was provisionally assessed under which the subject capital goods/ machineries were removed to EPCG licensee (license no.0530158560/2/11/00 dated 15.6.2011 holder in DTA to their sister concern M/s ISGEC Hitachi Ltd, Dahej Unit. The subject capital goods were imported vide Bill of entry No.DSEZ/013/2011-12 dated 20.6.2011 in the SEZ unit from Switzerland by M/s Saraswati Industries Syndicate Ltd, Plot No.Z-89, SEZ, Dahej. The assessable value of said capital goods was taken as Rs.218083271/- and total duty forgone was amounting to Rs.52140999/- and Bill of entry was assessed on 20.6.2011.
The clearance of the said capital goods under EPCG scheme was allowed under provisional assessment as per provisions of SEZ Act/Rules. The department’s case was that appellant has not exited from Special Economic Zone and they were not eligible for clearing the capital goods under the prevailing Export Promotion Capital Goods Scheme, as removal of capital goods from SEZ unit under EPCG is only available as per the Rule 74(4) of the SEZ Rules, 2006. Therefore, it is clear that there is no absolute bar on clearance of Capital goods from SEZ to DTA under EPCG, but following the condition that a Unit can opt for EPCG scheme only at the time of exit, as per SEZ Rules 2006 with one time permission from the Development Commissioner. Therefore, the appellant was required to pay full applicable Customs duty on the assessable value of Rs.218083271/- amounting to Rs.56379934/- in respect of the Capital goods cleared vide the said provisionally assessed BoE no.00485 dated 30.7.2012.
Being aggrieved, the present appeal is filed.
Conclusion- In the present instance, stipulation of one time availment of EPCG Scheme at the time of exit cannot be read as permitting availment of EPCG Scheme under Rule 34 of SEZ Rules, 2006. Particularly under expression “on license” appearing in that Rule.
Further the Export Promotion schemes since 1994 after existence of T.O are being made by member countries as compliant to the W.T.O provisions requiring no element of subsidy to be allowed even entering through procedural mechanism. Switchover thus from one scheme to another of capital goods needs to be construed strictly through specific mandate of the legislature and not liberally. We find that E.P.C.G. till exit from SEZ unit is not available.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
Brief facts of the case are that the appellant is engaged in manufacturing heavy machinery falling under Chapter 84 of Customs Tariff Act, 1985. It filed a bill of entry No.485 dated 30.7.2012 for import / procurement of imported capital goods viz. Plate Bending machine Model HDR-HY-3500-5000 consisting of three rollers, mobile control panel, air cooler. CNC control unit and all related complete items and accessories falling under Chapter heading 84622990 of CTA, 1985, to its sister concern unit viz. M/s ISGEC Heavy Engineering Ltd Plot No. 13-B, GIDC, Dahej (DTA buyer) in terms of Rule 48(1) of the Special Economic Zone Rules, 2006, read with Section 30 of the SEZ Act, 2005 against Release Advice No.4 dated 6.7.2012 issued by Assistant Commissioner of Customs, New Customs House (EPCG Section) Mumbai against EPCG licence no.0530158560 dated 15.6.2012 issued in the name of M ISGEC Heavy Engg. Ltd., Plot No.13-B, GIDC, Dahej (DTA Buyer). The said bill of entry was provisionally assessed under which the subject capital goods/ machineries were removed to EPCG licensee (license no.0530158560/2/11/00 dated 15.6.2011 holder in DTA to their sister concern M/s ISGEC Hitachi Ltd, Dahej Unit. The subject capital goods were imported vide Bill of entry No.DSEZ/013/2011-12 dated 20.6.2011 in the SEZ unit from Switzerland by M/s Saraswati Industries Syndicate Ltd, Plot No.Z-89, SEZ, Dahej. The assessable value of said capital goods was taken as Rs.218083271/- and total duty forgone was amounting to Rs.52140999/- and Bill of entry was assessed on 20.6.2011.
2. The clearance of the said capital goods under EPCG scheme was allowed under provisional assessment as per provisions of SEZ Act/Rules. The department‟s case was that appellant has not exited from Special Economic Zone and they were not eligible for clearing the capital goods under the prevailing Export Promotion Capital Goods Scheme, as removal of capital goods from SEZ unit under EPCG is only available as per the Rule 74(4) of the SEZ Rules, 2006. Therefore, it is clear that there is no absolute bar on clearance of Capital goods from SEZ to DTA under EPCG, but following the condition that a Unit can opt for EPCG scheme only at the time of exit, as per SEZ Rules 2006 with one time permission from the Development Commissioner. Since the unit had not exited from the SEZ nor any such permission from the Development Commissioner was taken. Therefore, the capital goods cleared is in contravention to the provisions of SEZ Act/Rules and hence liable to re-workout the value as per the provisions of the Section 30 of the Special Economic Zone Act, 2005 read with Rules 30, 34, 47(4) and 49(l) of the SEZ Rules, 2006. While finalizing the assessment of said provisionally assessed Bills if Entry the unit was asked to discharge the duty liabilities accordingly. Therefore, the appellant was required to pay full applicable Customs duty on the assessable value of Rs.218083271/- amounting to Rs.56379934/- in respect of the Capital goods cleared vide the said provisionally assessed BoE no.00485 dated 30.7.2012.
3. After due process of law, the lower authority ordered finalization of assessment and reassessed the duty vide BoE No.00485 dated 30.7.2012 and ordered to levy the duties amounting to Rs. 56379934 /-, in respect of the clearance of Capital goods from SEZ unit to DTA unit as per the provisions of SEZ Act/Rules along with applicable interest as per Section 18 of the Customs Act, 1962. The amount of Rs.6328957/- already paid against the BOE was appropriated and adjusted accordingly. On appeal the order of specified officer was upheld by Commissioner (Appeals). On appeal the order of specified officer was upheld by Commissioner (appeals)
4. Being aggrieved with the impugned order of Commissioner (Appeals) the appellant has filed the instant appeal on the below mentioned grounds and has contended, inter alia, that:
i. the order passed by the Commissioner (Appeals) is violative of the principles of natural justice as it is non-speaking order,
ii. the order has to set out reasons, and without reason the order is bad in eyes of law and relied on case laws:
a. ACCT, Kota vs Shukla Bros-2010(4)SC 785
b. Mangalore Ganesh Bedi Works vs CIT-2005(2)SC 329
c. Kranti Associates (P) Ltd vs Masood Ahmed Khan-2010(9)SC496
iii. the application of the Rules specifically to the facts of the case has been omitted in the impugned order and there is no finding against the submissions advanced by the appellant so violation of principles of natural justice and is liable to set aside;
iv the appellant is legally permitted to sell capital goods to a DTA buyer under an EPCG scheme;
v. there is agreement to the fact that the appellant had validly imported the Plate Bending machine for its authorized operations, however, there is no provisions under the SEZ Act, 2005 or SEZ Rules, 2006, which prohibits the sale of a capital goods held by an SEZ unit either to a buyer in the DTA or outside India:
vi that the department is incorrect in interpreting that the removal of capital goods under EPCG is only available as per Rule 74(4) of the SEZ Rules, 2004 i.e. only at the time of exit of a unit from SEZ and that there is a bar on otherwise claiming benefits under the EPCG scheme at the time of clearance of goods into the DTA; as none is specifically mentioned.
vii. Sale of plate bending machine into the DTA is to be considered as an import of capital goods into India; Import of capital goods into India can avail the benefits of EPCG scheme provided at Chapter 5 of the FTP:
viii. liability to pay duty upon removal of such goods is on the DTA buyer as the Bill of Entry for Home consumption is to be filed by the buyer of the goods;
ix. bond cannot be enforced against the appellant SEZ unit as under the law it is not liable to pay any duty for clearance of goods to the DTA; appellant being seller of goods is not liable to pay duty as it is not the importer on record; it is DTA unit which has procured the EPCG authorization; so DTA unit has to pay duty and interest;
x. SEZ authorities erred in issuing SCN to the appellant, the impugned order confirmed the recovery of customs duty after denial of benefit to the DTA buyer under the EPCG authorization; the EPCG authorization issued to the appellant is perfectly valid and neither withdrawn nor cancelled by DGFT, there cannot be a demand of duty from the SEZ authorities:
xi. the EPCG authorization is valid and not cancelled by the appropriate authority, the customs authority cannot challenge the validity of the same under proceedings initiated under Section 28 of the Customs Act, therefore, the impugned order is liable to be set aside on this ground also.
5. During the course of hearing, Appellants emphasized the following grounds:-
THE SEZ UNIT OF THE APPELLANT IS LEGALLY PERMITTED TO SELL THE IMPUGNED GOODS TO THE DTA BUYER UNDER EPCG AUTHORIZATION.
A.1 SEZ law itself envisages the sale of capital goods from a SEZ Unit to DTA– Section 30 of SEZ Act read with Rules 47, 48 and 49 of SEZ Rules deals with provisions relating to domestic clearance of goods by SEZ units. The said provisions mention that any goods (including capital goods) can be removed from an SEZ to DTA, subject to the conditions specified in SEZ Rules and upon payment of applicable duties which were otherwise payable at the time of import. Thus, the statute, specifically the aforementioned Section and Rules, itself envisages sale of capital goods from a SEZ Unit to DTA. Hence, the Appellant is legally permitted to sell the impugned goods from its SEZ Unit to its DTA unit.
A.2 It is further noted that multiple judicial decisions have already held that Section 30 creates a deeming fiction whereby goods cleared into the DTA from an SEZ shall be chargeable to the same duty as in the situation of actual imports. This means that any clearance into the DTA shall be at the same effective rate of duty as in the situation of import, meaning thereby that exemptions available at the time of import shall also be available to a DTA buyer. Reference is made to the following judicial decisions:
