ORDER
M. Veeraiyan, Member (T)
1. This is an appeal against the order of the Commissioner (Appeals) No. 640/2006/558(RAJ)/Commr(A)/RP/Raj dt.30/11/2006.
2. Heard both sides.
3. The relevant facts, in brief, are as follows:
a) The appellant had an unit in Kandla Free Trade Zone and obtained duty free materials; they were required to fulfill export obligation with a certain minimum value addition as prescribed in the Exim Policy. The appellant sold their unit with the concurrence of the Development Commissioner in 1998 and according to the appellant, the liabilities were also taken over by the successor company.
b) An order was passed in 2003 by the original authority demanding duty of Rs. 4,36,594/- and on appeal by the appellant, the Commissioner (Appeals) rejected the appeal as filed beyond the prescribed time limit and matter was reheard by him in pursuance of the remand order dated 13-7-06 of the Tribunal and he by his order dt. 5/12/2006 again upheld duty demand of Rs. 4,36,594/-.
4.1 Ld. Advocate submits that The demand raised relates to the period 92-93, when the appellant was running the unit and it is claimed that the unit was sold with assets and liabilities to M/s. Star Scrap Recycling. The Development Commissioner vide a communication dt. 8/1/1998 have taken note of the facts that the liabilities of the appellant were taken over by M/s. Star Scrap Recylcing. He submits that the duty demand should be on the successor company and further duty demand should have been worked out in proportion to value addition not met in pursuance of the guidelines prescribed by CBEC circular No. 305/178/92-FTT dt. 19/8/1992.
4.2 Ld. Advocate also submits since a final de-bonding has been given by the Development Commissioner vide their letter dt. 11/2/2000, the short levy, if any, be demanded within 6 months from the date of final de-bonding. He also submits that in this case there is no justification for imposition of penalty.
5. Ld. SDR submits that notification claiming exemption from customs duty has to be strictly construed in accordance with the conditions mentioned therein; the duty demand relates to the period when the appellant was running the factory; the arrangement between the appellant and a third party regarding the take over of the factory cannot absolve the appellant’s liability to the customs duty payable to the customs department; they have not produced any evidence before the Original Authority and Commissioner (Appeals) to prove that the liability stands specifically accepted by the successor in business.
6. I have carefully considered the submissions from both sides. The appellant was under obligation to meet certain value addition in respect of the goods exported by them; they have availed several benefits including duty free imports as an incentive for fulfilling the export obligation in terms of the above notification; they have executed the bond for fulfilling their obligations. It has not been shown to me how their responsibility in terms of the bond got legally shifted to the successor company who has purchased the unit. Mere non-conducting of stock taking at the time of transfer of ownership of the unit to a successor firm does not automatically lead to extinguish liabilities if any on the appellant. It is not a case where that the successor firm has stepped in to fulfill the obligation to the customs department. The customs department has no commitment from the successor firm at the time of take over of the unit and the appellant has also not proved that the successor firm was only to deal with the liabilities. The appellant has not proved that the liabilities have been passed on to the successor firm. Therefore the appeal is liable to be rejected on this aspect.
7. However, the submissions before the Commissioner (Appeals) that the demand should have been worked out in proportionate to value addition not met by them as per the guidelines of the CBEC circular dt. 19/8/1992 has not been dealt with by the Commissioner(Appeals). Further I find the order of the Original Authority dt. 30/6/2003 itself has taken note of the short fall as 11.71% but has not indicated whether the demand is in conformity with the guidelines of the CBEC. This aspect requires to be gone into afresh.
8. In the light of the above, I set aside the order of the Commissioner (Appeals) and remand the matter to the Original Authority to consider the above issue afresh. The appellant shall make submissions, if any, within 45 days from today and the Original Authority shall decide expeditiously thereafter and within two months after the expiry of time limit given for filing submissions by the appellant. The Original Authority shall also grant a reasonable opportunity of hearing to the appellant before the issue is decided.
9. Appeal is disposed of on the above terms.
(Dictated and Pronounced in Court)