The Kolkata Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) set aside the demand and penalty against the assessee, confirming 23.03.2004 as the date of commercial production for the purpose of de-bonding the unit from the Export-Oriented Unit (EOU) scheme.
Manaksia Aluminium Company Limited,appellant-assessee,was engaged in the manufacture of Aluminium Sheet/Coil, Aluminium Alloy Ingot, Copper Alloy Ingot, Aluminium Dross, and Copper Slag under various headings of the Central Excise Tariff Act, 1985. The assessee obtained a Letter of Permission (LOP) from the Development Commissionerate, F.S.E.Z., Kolkata, on 20.08.2002, and commenced commercial production on 23.03.2004, within three years from the date of the LOP.
The assessee complied with the reporting requirements by submitting the Annual Progress Report (APR) and Quarterly Progress Report (QPR), which were duly accepted by the Development Commissioner.
In 2010, the assessee intended to exit the EOU scheme and requested permission for de-bonding. After fulfilling the necessary formalities, including payment of applicable duties on raw material and goods stock, the appellant received the final de-bonding order from the Development Commissioner, FSEZ, on 04.01.2011, and transitioned to a Domestic Tariff Area (DTA) unit.
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However, in February 2012, the Customs Audit Department raised concerns regarding the assessee’s claim for excess depreciation on imported capital goods. The Customs department issued an audit query, which led to the issuance of a show-cause notice demanding a duty of Rs.58,68,773/- along with interest, along with penalties for the excess claim of depreciation. The matter was adjudicated, and the proposed demand along with interest was affirmed, and a penalty was imposed on the assessee.
The two member bench comprising Ashok Jindal (Judicial Member) and Rajeev Tandon(Technical Member) heard the parties and reviewed the records. The main issue was whether the date of commercial production should be 23.03.2004 or 27.11.2004, the date of the assessee’s first export.
The appellate tribunal noted that the Development Commissioner had certified that commercial production started on 23.03.2004. Based on this certification, the tribunal accepted the date as 23.03.2004.
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Since the production date was confirmed as 23.03.2004, the tribunal found that no demand was due from the assessee, and the depreciation was correctly calculated. As a result, the tribunal set aside the entire demand and ruled that no penalty could be imposed.
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