Ashok Jindal, Judicial Member.
1. The appellants are in appeal against the impugned order wherein the ld. Commissioner (Appeals) dismissed the appeals holding that the appellants is an 100% EOU therefore, they are not entitled to avail draw back.
2. The brief facts of the case are that the appellants are a unit in DTA, and are engaged in the manufacture and export of stainless steel pet bowls. They availed drawback on these exports. The appellants set up a separate EOU unit in the same premises and obtained LOP from Development Commissioner on 31.03.2006, which was valid up to 31.03.2009. As per the terms of the LOP, the appellants executed the LUT but could not get the premises customs bonded within the validity period of the said LOP despite getting LOP extended upto 31.03.2010. During the year 2012, the Customs at ICD, TKD sought a clarification from the jurisdictional Central Excise officer as to whether appellants were a functional EOU or not, in which case they would not be eligible for drawback. The Central Excise authorities clarified that the appellant had never functioned as an EOU as they could not get the premises customs bonded within the validity period of LOP. Based on this clarification, Customs ICD, TKD released all the pending drawback claims of the appellants. Subsequently, in the year 2014, the DRI initiated fresh investigations into the matter and came to the conclusion that as the appellants were EOU since they had sought benefits from the Income Tax authorities under Section 10B of the Income Tax Act, 1961 which is available only to a 100%EOU. On the basis of this allegation, the show cause notice was issued to the appellants proposing recovery of draw back sanctioned and paid to them during the period 2006-07 to 2009-10. The appellants contested the show cause notice on the premise that the appellant’s unit is not an EOU as they have no customs bonded premises and therefore, the unit of the appellant is DTA and hence, impugned show cause notice is not required to be issued. The matter was adjudicated an it was held that, as the appellant claimed benefit from the Income Tax authorities under Section 10B of the Income Tax Act showing that they are 100% EOU and therefore, the appellant’s unit is 100% EOU. As such, the demands proposed in the show cause notice was confirmed along with interest and penalties on both the appellants have also been imposed. The said order was challenged before Ld. Commissioner (Appeals) who held that appellant’s unit is 100% EOU and therefore, dismissed the appeals filed by the appellants. Aggrieved from the said order, the appellants are before us.
3. The matter came up for hearing before this Tribunal. The ld. AR raised the preliminary objection that this is a case of claim of drawback and therefore, the appeal is not maintainable before the Tribunal, in terms of proviso (1) to Section 129A of the Customs Act. The objection raised by the ld. AR was strongly opposed by the ld. Counsel for the appellants. Ld. Counsel submits that the appellant is not challenging the issue of drawback as if it is held that appellant unit is 100% EOU there is no case of the appellant. The appellant is challenging the observations of the authorities below that the appellant’s unit is an 100% EOU. Therefore, he prayed that the short issue to be decided by this Tribunal is whether the appellant is 100% EOU or not.
4. Heard the parties. First, the issue to be decided is whether the appeals are maintainable before this Tribunal or not. For better appreciation, proviso (1) to Section 129A of the Customs Act, 1962 are extracted as below:-
'129A. Appeals to the Appellate Tribunal. - (1) Any person aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order-
(a) a decision or order passed by the 301 [Commissioner of Customs] as an adjudicating authority;
(b) an order passed by the [Commissioner (Appeals)] under section 128A;
(c) an order passed by the Board or the Appellate [Principal Commissioner of Customs or Commissioner of Customs] under section 128, as it stood immediately before the appointed day;
(d) an order passed by the Board or the [Principal Commissioner of Customs], either before or after the appointed day, under section 130, as it stood immediately before that day:
[Provided that no appeal shall lie to the Appellate Tribunal and the Appellate Tribunal shall not have jurisdiction to decide any appeal in respect of any order referred to in clause (b) if such order relates to,-
(a) any goods imported or exported as baggage;
(b) any goods loaded in a conveyance for importation into India, but which are not unloaded at their place of destination in India, or so much of the quantity of such goods as has not been unloaded at any such destination if goods unloaded at such destination are short of the quantity required to be unloaded at that destination;
(c) payment of drawback as provided in Chapter X, and the rules made there under:'
As per the said provisions, against the order of Commissioner (Appeals) with regard to payment of drawback, as per proviso and Chapter X and Rules made there under, the appeal will not lie before this Tribunal.
We find that admittedly, against the order of Commissioner (Appeals), dealing with the issue of drawback, appeal is not maintainable before this Tribunal. To that effect, the decision in the case of CCE, New Delhi vs. DCS International Trading Company Pvt. Limited – 2017-TIOL-2093-CESTAT-DEL is applicable.
5. We find that, in this case, the appellant has not challenged the issue of draw back and have disputed the status of the appellant whether the appellant is 100% EOU or not. The contention of the ld. Counsel for the appellant is that if the appellant’s unit is 100% EOU, then they are not disputing repayment of drawback already sanctioned to them but if they are not 100% EOU and it is a DTA unit, that issue is to be decided by this Tribunal.
6. We find that as the appellant has not disputed the issue of claim of drawback and in the case of M/s. Fancy Images & Others vs. CC, New Delhi – 2017-TIOL-410-CESTAT-DEL, but the appeal was entertained against the order of Commissioner (Appeals) in the case of disallowance of drawback, therefore, we have to see what is issue before us. A similar issue has come up before the Punjab & Haryana High Court in the case of Principal Commissioner of Central Excise & Service Tax vs. M/s. Raja Dyeing, Ludhiana in CEA-18-2016 (O&M) and the Hon'ble High Court vide order dated 14.03.2017 has made the following observations:-
'18. In Commissioner of Central Excise vs. Vimla Roling Mills – 2015 (317) ELT 702 (Del.), the following order was passed:-
[Order]. - In these appeals by the Revenue, substantial question of law were framed on 24th February, 2014 and 25th February, 2014. However, the High Court does not have jurisdiction to entertain the present appeals under Section 35G of the Central Excise Act, 1944. In the order-in-original, several issues were decided including the question whether the activity undertaken by the respondent-assessee amounts to manufacture. The said question or dispute pertains to levy of duty, which is a question relating to rate of duty as held in CEAC No. 12/2013, Commissioner of Service Tax v. Ernst and Young Pvt. Ltd. and other connected cases decided on 25th February, 2014 [2014 (34) S.T.R. 3 (Del.)]. In this decision, it has been observed that the issues and contentions decided in the order-in-original would determine whether an appeal would lie before the High Court under Section 35G of the Central Excise Act, 1944 or before the Supreme Court under Section 35L of the aforesaid Act. The issue decided by the Tribunal and raised before the appellate court would not be relevant on the question of jurisdiction of the Supreme Court or the High Court under Section 35L or 35G of the aforesaid Act. This was apparent from the language and words of the two provisions and a contrary interpretation would lead to unacceptable results with one party filing appeal under Section 35G and the other party under Section 35L of the said Act. Further, the respondent may be denied right to file cross objections. It is noticeable that in the first round also, against the order of the Tribunal, an appeal was preferred before the Supreme Court by the assessee.
2. In these circumstances, the appeals are returned as they are not maintainable before the High Court. It is open to the appellant-Revenue to file an appeal under Section 35L of the Central Excise Act, 1944, if so advised, and in accordance with the law.'
We, however, must express a reservation regarding the observation that the issues and contentions decided in the order-in-original would determine whether an appeal would lie in the High Court under Section 35G or in the Supreme Court under Section 35L. In our view, it is not the order-inoriginal i.e. the order of the adjudicating authority but he order of the Tribunal that would determine the issue as to whether the appeal lies to the High Court under Section 35G or to the Supreme Court under Section 35L. Section 35G provides for an appeal to the High Court from every order passed in appeal by the appellate Tribunal. It is, therefore, the order of the Appellate Tribunal that must determine the issue. Moreover Section 35G restricts the ambit of the appeal to orders of the Tribunal 'not being an order relating, among other things, to the determination... ... ....' The words 'an order' relate to the order passed in appeal by the Appellate Tribunal.
7. In the light of the decision of the Hon'ble High Court, we have to see what the prayer of the appellant in their appeal is and, what are the observations of the ld. Commissioner (Appeals) in the impugned order. In the impugned order, ld. Commissioner (Appeals) has observed as under:-
'5. Discussion and findings:
I have carefully gone through the contents of impugned Order, grounds of appeal, and oral as well as written submissions made by the appellants. I find that the issue for discussion and determination in the case is whether findings of the adjudicating authority in impugned order are legally tenable or not. From perusal of evidence on record, I find that acting on an intelligence that EOUs had adopted a modus operandi for availing simultaneous export benefits under different Export Promotion Schemes from different Authorities/Departments by resorting to misdeclaration, the appellant unit i.e. M/s Avanti Overseas Pvt. Ltd. was taken up for investigation by DRI. During the course of investigation,1it was found by DRI that the unit had, wrongly availed duty drawback on the exports done by them and simultaneously had availed exemption from Income Tax Department by declaring themselves as an operational EOLJ. I find the appellant no.1 had set up a unit at Village-Diwana, Distt. Panipat as 100% EOU. A license called Letter of Permission (LOP) was issued by NSEZ authorities and a Legal Undertaking (LUT) was executed V by the unit to abide by the terms and conditions of the LOP. The appellant have contended that the EOU was never set up and the warehousing licence granted, was of no avail, as the LOP had already expired. I find that it would be appropriate to look into the scheme of Export Oriented Units. Under the EOU scheme, the units are allowed to procure locally without payment of duty all types of materials, components, packing material, consumables, spares and various other specified categories of equipments including material handling equipments, required for export production or in connection therewith. The exporters are treated as a special class. I find that it is on record that the appellant had set up a unit as 100% EOU and letter of permission to this effect was issued by NSEZ authorities. I find that the fact, which is undisputed, is that at the time of exportation, tie appellant unit did not disclose their identity of being an EOU to Customs and claimed duty drawback on the exported goods. I find that having been accepted the terms and conditions of LOP through executing Legal Undertaking (LUT), it was incumbent upon the appellant unit to declare the true status of unit while exporting the goods from India. Fron3 perusal of ANNEXURE A regarding Details relating to the claim by the exporter for deduction under Section 10 of the Income Tax Act, 1961 for the Assessment year 2007-08, I find that date of commencement of manufacture of production is shown as 01.06.2000. I find that claim of the appellant that unit was non operational fall flat on this count only. From combined reading of the provisions of Customs Act, 1962, Foreign Trade (Development Policy) Act, 1992, Foreign Trade (Regulation) Rules, 1993, Customs & Central Excise Duties Drawback Rules, 1995, it is evident that the regulations relating to All Industry Drawback prohibit the benefit of drawback on the goods manufactured and exported by a unit licensed as a 100% ECU. All Industry drawback is prohibited to ECU vide Notification No. 68/2007-Cus (NT) dated 16.07.2007 as amended. Duty drawback scheme and ECU scheme are mutually exclusive scheme. The appellant have contended that the unit never implemented under ECU scheme as the Customs Bonded warehouse was issued by the Customs Authority on 13.04.2010 i.e. only after expiry of validity period of extended LOP and as such it remained non functional during the relevant time I find that it is on record that the appellant unit had declared the status of the unit as operational EOU with the Income Tax Department and at the same time claimed that the unit was not EOU. I find that the contention of the appellant is not in consonance with the scheme of EOU. I find that Duty Drawback notification’s have carried the Condition/Notes-' the rates of Drawback specified in the schedule shall not be applicable to export of a commodity or product if such commodity or product is manufactured and/or exported by a unit licensed as hundred percent export-oriented unit in terms of the provisions of the relevant Export and Import Policy and the Foreign Trade Policy'. Thus the necessary inference that emerges is that an Export Oriented Unit which has been issued an LOP by Development Commissioner is not entitled to claim duty drawback benefits irrespective of the fact whether it has claimed any benefit under Income Tax laws, or not and irrespective of the fact whether it has been issued Public Bonded Warehouse License under Section 58 and 65 of the Customs Act, 1962 and the unit may be treated as functional EOU. I find that CBEC’s instruction vide F.No. DGEP/EOU/01/2014 dated 01 .05.2014 has clarified the position in this regard. I have gone through the recorded statement of Appellant No.2 in which he has admitted that they declared their unit as functional EOU to the Income Tax Authorities and that their company had never declared the status declared to Income Tax with Customs and Central Excise authorities. I am in. agreement with the findings of the adjudicating authority that Appellant No.2 was the key person for following modus operandi of availing simultaneous benefits under different export promotion schemes. I find that the penalty imposed in the impugned order is just and proper and no interference is warranted. The ratio of the cases referred to b the appellant is confined o the facts and circumstances of the particular case and I find that all the sad judgments were case specific and need to be applied provided the conditions/circumstances remains same. Further, there was nothing on record to suggest that the circumstances/conditions which prevailed in these judgments were existing in the present case. The appeal filed by the appellants does not merit consideration.'
We find that in the impugned order, the ld. Commissioner (Appeals) has examined the issue whether the appellant unit is an 100% EOU or not and held that appellant is 100% EOU and therefore, dismissed their appeals. Therefore, in the spirit of the judgment of the Hon'ble High Court of Punjab & Haryana in the case of M/s. Raja Dyeing (supra), from the impugned order itself, it can be seen that the issue has been considered in the impugned order and that is the grievance of the appellant. Admittedly, in the impugned order, ld. Commissioner (Appeals) has decided the issue whether the appellant is 100% EOU or not and the same is the prayer of the appellant before us. In that circumstance, we hold that, in terms of Section 129A, the appeal is maintainable before the Tribunal.
8. Now, we deal with the merits of the case that the appellant is 100% EOU or not. We find that the sole ground to hold that unit is 100% EOU by the Revenue is that the appellant has claimed benefit from the Income Tax department, under Section 10B of the Income Tax Act, 1961 as 100% EOU. We further take note of the fact that, as per the Foreign Trade Policy, Para 9.24, an Export Oriented Unit means a unit for which an LOP has been issue by the Development Commissioner. Once the LOP is granted then in terms of LOP, the applicant is required to execute an LUT and get the unit customs bonded. In this case, although the appellant executed LUT but their unit could not be customs bonded within the validity period of LOP. The said fact has been affirmed by the office of the Commissioner of ICD, Tughlakabad. The relevant part of the said clarification is reproduced hereunder:-
'It is further mentioned that the party during the period from 13.04.2010 to 30.05.2012 continued to export Stainless Steel Utensils under claim of duty drawback.
The party has contended vide aforesaid letters dated 24.10.2011 and 31.05.2012 that
(i) They have never set up 100% EOU due to financial constraints and conditions of raw materials prevailing in international markets.
(ii) The party has submitted that no plant and machinery was got installed by them during the validity of LOP as per conditions laid down in the LOP. Meanwhile LOP was expired on 31.03.2010 which was not further extended.
(iii) Further the party has submitted that no benefit under the EOU scheme were claimed by them as all the goods exported have been manufactured out of duty paid raw materials and the same fact has also been confirmed by jurisdictional excise department vide their letter C.No. CE-20/misc/Excise/R-III/PNP/10/578 dated 17.01.2011 (copy enclosed). (iv) The party has submitted that after expiry of their LOP on 31.03.2010 they could not have acted as 100% EOU unit and they are eligible for drawback benefit all along exports made after 31.03.2010.
In view of above circumstances, it appears that the said unit has never operated as an EOU.'
9. We further taken note of the fact that, as per letter dated 05.10.2006, issued by the Development Commissioner, in which it has been clearly stated that the appellant unit will be treated as working under 100% EOU scheme from the date from which it starts working in customs bonded and as per the clarification given by the office of the Commissioner of Customs, ICD, Tughlakabad dated 24.07.2012 that the appellant has never functioned as an EOU and released the pending drawback claims. We find that without customs bonding, the unit cannot be considered as an EOU. Further, as per the Customs Manual of supplementary instructions, Para 3.4, which is reproduced below, the EOU must be custom bonded:-
'3.4 On approval for setting up an EOU by Unit Approval Committee, a letter of Permission (LOP/LOI) is issued by the jurisdictional Development Commissioner. It mentions inter alia the capacity and items of manufacture and export, capital goods permitted to be imported/ procured. Thereafter, the unit has to execute a legal undertaking with the Development Commissioner The LOP/ LOI issued is construed as a license for all purposes. After obtaining the LOP and execution of legal undertaking, the unit is required to apply for a license for Private Bonded Warehouse and In-bond manufacturing sanction order under provisions
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of section 58 and 65 of the Customs Act, 1962 respectively from the jurisdictional Assistant/ Deputy Commissioner of Central Excise and Customs.' In fact, without customs bonding, the department will never permit the unit to receive any raw material, inputs or capital goods as duty free. The same has been clarified in CBEC Circular No. 09/2008-Cus dated 25.06.2008, wherein it has been clarified as under:- '3. The matter has been examined in the Board. For the purpose of ensuring uniformity in practice and also to prevent misuse of the facility, the aforesaid instructions issued vide Board’s Circular No. 68/95-Cus. dated 15-6-1995 and Circular No. 132/95-Cus., dated 22-12-1995 entrusting the specified functions to the Commissioners are hereby reiterated. However, it is clarified that in case of 100% EOUs, the licensing u/s 58 and grant of permission for in-bond manufacturing facility u/s 65 of the Customs Act, 1962 shall continue to be considered and decided by Assistant Commissioner of Customs or Deputy Commissioner of Customs. 10. We further take note of the fact that appellant has never opted for any benefit of duty under Central Excise or Customs as an EOU scheme in respect of inputs/ capital goods. The sole case of the Revenue is that, as the appellant has claimed the benefit of Section 10B under Income Tax Act as 100% EOU, therefore, the appellant is 100% EOU. Merely by claiming a wrong benefit under the different Act, which is not relevant for the Customs Act, it cannot be held that appellant is 100% EOU and taking benefit from the Income Tax department cannot determine the status of the appellant as 100% EOU. Once, under the Customs Act, there is specific provision for claiming the benefit of 100% EOU and for that, certain conditions have to be fulfilled, which the appellant has failed to do so. The Revenue has failed to establish that appellants were functioning as 100% EOU under the provisions of Customs Act or Foreign Trade Policy. In that circumstance, we hold that the appellant’s unit is not 100% EOU and it is only a DTA Unit. 11. In view of the above terms, the impugned order is set-aside and the appeals are allowed with consequential relief to the appellants.