YUIL MEASURES INDIA LTD Vs. CC

JUDGEMENT

(1.) THE Commissioner in the impugned order confiscated capital goods valued at Rs. 3,63,62,019/ - and raw materials valued at Rs. 36,84,288/ - and gave the appellants an option to redeem the same on payment of fine of Rs. 40 lakhs. The Ld. Commissioner of Customs confirmed the demand of duty of Rs. 2,09,54,801/ - and also imposed a penalty of Rs. 10,00,000/ - on M/s. Yuil Measures India Ltd. and Rs. 1,00,000/ - on Shri Sanjeev Kumar Gupta, Director of the appellant's firm.

(2.) THE facts of the case briefly stated are that the appellant was approved for manufacture and export of thermometers. During the years 1991 to 1994, this unit imported various raw materials, consumables and capital goods free of duties of Customs availing the benefit of Notification Nos. 339/85 -Cus dt. 25.11.1985 and 133/94 -Cus dt. 22.6.1994. It was alleged that as per para I (vii) of the said Notification No. 339/85, the capital goods and raw materials were to be installed/used in the zone or re -exported within a period of one year from the date of importation; that the unit also procured capital goods from DTA free of Excise Duty availing the benefit of erstwhile Notification No. 5/86 -CE dt. 28.1.1986; that under the provisions of the aforementioned notifications, the unit executed General Bonds separately for raw materials and capital goods binding it to use them as stipulated under the said notifications; that as against the export obligation of Rs. 1,150 lakhs for the first five years stipulated in the aforesaid letter of approval, the unit could effect exports worth Rs. 57 lakhs only; that the last export made was in the month of Nov. '94; that the unit failed to use the said imported raw materials for the purpose of export production within a period of one year from the date of import as stipulated under the aforesaid notification No. 339/85; that the raw material imported free of duty under the said Notification No. 133/94 was found unutilised by the unit for more than two years; that the capital goods imported as well as procured from DTA free of duties as mentioned in para I above were found unused by the unit for a long time i.e. 2 years. It was also alleged that the appellant could not use the said capital goods for the purpose for which they were imported/procured as is evident from the production performance of the unit which could export finished goods worth Rs. 57 lacs only as against export obligation of Rs. 1,150/ - lakhs for the first five years as stipulated in the Letter of Approval. It was further alleged that the unit had imported/procured from the DTA the aforesaid goods free of duty availing the benefits of above mentioned notifications but failed to meet the conditions imposed in the said notifications and Rules and thereby contravening the provisions of Section 111(o) of the Customs Act, 1962 and Rule 173Q(d) of the Central Excise Rules, 1944. The appellants were directed by the Asstt. Commissioner on 7.6.1996 followed by reminder on 24.6.1996 to produce their books of accounts, so that duty could be worked out but they failed to do so. Demand was, therefore, worked out on the basis of records available with the Noida Export Processing Zone customs and the SCN was issued to the appellant asking them to explain as to why duty amounting to Rs. 7,42,42860/ - should not be demanded or recovered from them, why goods should not be confiscated and why penalty should not be imposed. In reply to the SCN, the appellants submitted that the imported goods in question have already been installed/commissioned and used and are still lying within the Export Processing Zone which is Custom Bonded area as per provisions of Notification No. 339/85 as amended from time to time; that the appellant was a Limited Company and they entered into the technical collaboration with M/s. Yuil Measures Mfg. Co. of Korea; that they were approved by the Min. of Commerce to set up industrial unit in Noida Export Processing Zone for manufacture of 31.50 lacs thermometers per annum; that the appellant had 100% buy back arrangement with their collaborators for a period of 10 years; that they imported various capital goods and raw -materials and claimed the benefit of duty free clearance under Notification No. 339/85 (now 133/94) and 5/86 -CE; that capital goods were installed in the zone by a team of Korean technician and the installation was completed by July, 1991; that commercial production was started in Oct. 1991; that the appellants were not given permanent electricity and LPG connections; that on this account there was delay in production; that various export orders had to be cancelled due to continued uncertainty and inordinate delays in procuring LPG connections; that on 19.6.1991, that Director of the noticee company was kidnapped; that this fact was widely reported in the media; that the foreign collaborators lost interest in the affair of the project; that in 1993, China introduced very cheap thermometers in the international market; that this adversely affected the prices of thermometers all the worldwide; that the noticee company incurred huge losses and became sick; that they moved a reference application before BIFR for its rehabilitation which was still pending; that the goods are still lying in the zone; that the Department had misinterpreted the provisions of Section 61 of the Customs Act as the same is not applicable in the case of EPZ unit which are a separate category; that a SCN was issued prematurely since at the time of issue of the notice the appellant's unit had not completed five years; that it is only the Asstt. Commissioner of Customs who was competent to issue the SCN and not the Commissioner of customs; that Customs duty leviable has not been correctly calculated in as much as import value of capital goods and not its depreciation value was taken that the duty has been calculated at the rates prevailing at a time of import. The Commissioner after hearing the submissions decided the issue as indicated in the preceding paragraph.

(3.) SHRI J.M. Sharma and Shri A.H. Khan, Consultants appeared for the appellants and submitted that the appellant is a Public Limited Company engaged in the manufacture of clinical thermometers in technical collaboration with M/s. Yuil Measures Mfg. Co., Korea; that the appellant had obtained necessary permission from Govt. of India and imported its approved requirement of capital goods, raw -materials and the consumables etc. under the relevant Customs and Excise Notifications during the period 1991 to June '94; that the said imported capital goods were then installed in July '91 and production started on 18.10.1991 and exported the first consignment on 12.11.1991; that the appellant company had difficulties in obtaining electricity and LPG connections that the price of Thermometers in the International market in the meantime changed to the disadvantage of the appellant; that the Hon'ble BIFR has declared the appellant company a sick company under the provisions of SICA.