ORDER
C.N.B. Nair, Member (T)
1. Arjun Industries Ltd., the appellant herein submitted a proposal to the Ministry of Industries for setting up an industrial unit for the salting and roasting of cashew nuts and cryogenic grinding of spices, under 100% Export Oriented Scheme. The scheme was approved and the appellant was issued a Letter of Permission (LOP) in July 1995. In January 1996, the capacity of production at 3600 MTs. for salting and roasting and 5760 MTs. for cryogenic grinding were also approved. Under the EOU Scheme the appellant was also permitted to import capital goods worth about Rs. 4.9 crores. The condition for the said approval was that the appellant shall maintain 83% value addition.
2. In terms of the said LOP, the appellant imported capital goods worth about Rs. 2.5 crores during June 1996 to April 1997 without payment of duty (approx. Rs. 1 crore) under Notification No. 13/81-Cus., dated 9-2-1981 read with Notification No. 53/1997-Cus., dated 3-6-1997.
3. The appellant’s project implementation did not progress. Therefore, it kept on applying for extension of time.
4. Under the impugned order, the Commissioner of Central Excise, Jaipur in whose jurisdiction the manufacturing unit is located, confiscated the imported machinery, imposed penalty on the appellant and demanded duty forgone on the machinery. The ground for doing the same is that in terms of the exemption Notification, the appellant was required to install/use capital goods within a period of one year or extended period as given by the Customs authorities but the appellant failed to do the same.
5. We have perused the records and heard both sides. The submission of the appellant is that the actions of the Commissioner are not warranted in view of the fact that the appellant’s LOP has been extended till 31-3-2008 vide letter dated 9-1-2003 of the Assistant Development Commissioner, Noida Special Economic Zone, Ministry of Commerce and Industry, Government of India. It has been contended that since the LOP was valid till 2008, the Revenue authorities were required to grant permission for installation or use of the machinery also. It is being submitted that two Departments connected with the functioning Export Oriented Unit Scheme should act in harmony and it is well settled [2002 (139) E.L.T. 172] that the Customs authorities cannot act outside the permission granted by Export Promotion authorities.
6. The appellant has also a complaint that most of the machinery remained installed and for failure to install only two machines, the Commissioner could not have confiscated all the machinery under import or demand duty on all of them.
7. Another point raised by the appellant is that the present proceedings are impermissible inasmuch as the same issue had come up in an earlier Show Cause Notice between the parties and the Commissioner had passed his Order No. 23/2000, dated 16-8-2000 holding that since the appellant had obtained extension of time from the Export Promotion authorities, no duty and confiscation were attracted and that the proceedings were premature.
8. Learned SDR has submitted that the Notification allowed granting of time upto 5 years for the purpose of installation and therefore, the Commissioner was right in holding that the exemption notification remains violated. Ld. SDR has highlighted that according to 25-5-1999 letter of the appellant two machines were yet to be installed.
9. We find merit in the appellant’s contentions. Export Oriented Units are allowed duty free import of capital goods and inputs in terms of the EOU Scheme. The Scheme is administered by the Export Promotion Authorities and the unit worked under LOP granted by those authorities. In the present case, taking into account the difficulties pointed out by the appellant, the Assistant Development Commissioner, NOIDA extended the validity of the LOP till 31-3-2008. In such a situation, the Revenue authorities are also required to grant permission to the appellant for the harmonious functioning of the EOU Scheme. Taking of a restricted view by the Revenue authorities would make the scheme unworkable. Such a view also is not warranted as there is no material showing that the appellant had diverted any of the imported goods for any purpose other than use in the EOU premises. The appellant has also a strong case except for two machines, other machines remain installed and the duty demand in the case of installed machines is contrary legal provisions.
10. On the same issue, a Show Cause Notice had been issued earlier by the authorities and the Commissioner dropped the proceedings with the following observations.
“7.1 As regards assessee’s contention that the imported capital goods had already been installed & used for the purpose of production of goods for export out of India, the facts were got verified from Deputy Commissioner, Bhiwadi & I find that the contentions of the assessee are not correct as the capital goods were physically verified by the officers of the Central Excise Range-Ill on their visit to the assessee’s unit on 25-10-1999 when one of the Directors Ms. M. Bhattacharjee was also present in the unit and the imported capital goods mentioned at Section Nos. 2 to 4 to the Annexure to show cause notice were not found installed & this fact was admitted by Ms. M. Bhattacharjee in her letter dated 25-10-1999, addressed to the Superintendent, Central Excise Range-Ill. I also find that no goods have been produced by the assessee’s unit for export out of India. This fact has also been admitted by the assessee in the reply to show cause notice.
7.2 Further I find that licence No. 5/CUS/BHD/95, dated 12-12-1995 issued to the assessee under section 58 of Customs Act, 1962 was valid upto 31-12-1999. The assessee vide letter dated 20-12-1999 had applied for extension of validity of the licence which was not considered in view of the fact that the Building/Plant & machinery were not got insured by the assessee and the assessee was asked to do the needful & it was only on 22-5-2000, when the assessee submitted a copy of insurance cover regarding insurance of the Building, plant & machinery and accordingly validity of licence of the assessee has been extended upto 31-12-2000 by the Assistant Commissioner, Central Excise Division, Bhiwadi.
7.3 Similarly I find that on assessee’s request Noida Export Processing Zone has also extended the time for LOP No, PER/329/95/EOB/309/95, dated 7-7-1995, vide their letter dated 27-6-2000, upto 31-12-2000.
7.4 In view of the above it is held that since validity of assessee’s licence No. 5/CUS/BHD/95 arid LOP No. PER/329/95/EOB/309/95 has already been extended uptill 31-12-2000, the show cause notice is pre-mature and at this stage no duty can be demanded from the assessee.
8. In view of the foregoing, I pass the following order :
ORDER
I drop the proceedings initiated vide show cause notice No. V (09) 283/99/3329, dated 30-3-2000, against M/s. Arjun Industries Ltd., SP-311-B, RIICO Industrial Area, Khushkhera.”
Thus, the dispute was closed between the parties. It was not open to the successor Commissioner to take a contrary view and pass a fresh order.
11. In view of what is stated above, the impugned order is set aside and the appeal is allowed with consequential relief, if any, to the appellant.