By TIOL News Service

MUMBAI, NOV 14, 2018: THIS is a Revenue appeal filed against the order of CCE, Aurangabad dropping the demand of duty and vacating the seizure in respect of goods seized.

Respondents are manufacturers of Electrical Motors and were operating as an 100% Export Oriented Unit (EOU). They are having another unit (a DTA) in the adjacent premises engaged in manufacture Electrical Motors, AC Generators & AC Drives.

The respondent EOU intimated the Development Commissioner regarding exit from EOU scheme in terms of Para 6.18(e) of the Foreign Trade Policy, 2004-09. They discharged the duty liability arising on account of de-bonding activities of EOU and obtained "No Dues" Certificate on 21.08.2007. Thereafter, all manufacturing activities in the unit were stopped and ER-2 returns showing nil production and clearance filed.

During the visit of preventive officers on 14.07.2008, it was observed that manufacturing activities were being conducted in the unit and upon enquiry it was informed that these manufacturing activities were being undertaken on behalf of their adjacent DTA unit. Since the unit was not in position to show the final de-bonding order, investigations were initiated for alleged contravention of Customs Act, 1962.

Alleging that the respondent had fraudulently manipulated the records to give an impression that goods being manufactured and cleared from EOU were actual production of DTA unit, a SCN dated 25.11.2008 was issued proposing confiscation of the seized goods and demanding duty on the electric motors cleared by EOU to DTA unit.

The CCE, Aurangabad relied upon the decision in Sterlite Optical Technologies Ltd. - 2005-TIOL-565-CESTAT-MUM and held that date of de-bonding is the date of order of final de-bonding; that there is no dispute with regards to actual export of the goods manufactured and cleared by the EOU unit to DTA unit, the demand of duty is just a technical demand and the violations are procedural in nature. In fine, the adjudicating authority dropped all the demands and vacated the seizure.

As mentioned, Revenue is aggrieved with this order and has filed an appeal before the CESTAT contending that the Commissioner had erred in assessing the circumstances of the case and had dropped the proceedings without assigning proper legal reasoning.

The Bench considered the submissions and observed -

"5.1 … From the appeal memo and ground of appeals mentioned in the said appeal memo, the only ground urged is "In view of above, the learned Commissioner has erred in assessing the circumstances of the case and dropped the proceeding without assigning proper legal reasoning." We are at loss to understand which circumstances have been erroneously assessed by the Commissioner while dropping the demand. The review committee having two Chief Commissioner could have done a better job if they could have at least pointed out a single circumstance which has been wrongly assessed by the Commissioner in his order dropping the demand. The manner in which this appeal has been filed appears to be very mechanical without application of mind to the case. Nothing atleast appears to be mentioned in the appeal memo or review order."

Holding that there are no merits in the appeal filed by the Revenue, the same was dismissed as unsubstantiated.

(See 2018-TIOL-3424-CESTAT-MUM)