CESTAT Finds No Actual Transfer of EOU Machinery, Reduces ₹9.04 Lakh Duty Demand to ₹3.98 Lakh [Read Order]

The Allahabad Bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT )found no actual transfer of machinery imported for a 100% Export Oriented Unit (EOU) and accordingly reduced the customs duty demand from ₹9.04 lakh to ₹3.98 lakh.

UKB Electronics Pvt. Ltd.,appellant-assessee, was engaged in manufacturing electrical components at its Noida unit, which included both a DTA unit and a 100% EOU unit separated by a wall.

In September 2010, Central Excise officers visited the premises and found that the appellant had wrongly availed CENVAT credit of ₹36.13 lakh on capital goods used for job work. The credit was reversed immediately. It was also found that some machines meant for the EOU unit were uninstalled and transferred to other units. A cheque of ₹6.71 lakh was submitted, followed by a letter stating the credit was admissible and would be contested.

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Further investigation revealed that the appellant had undertaken job work for a principal manufacturer without obtaining the required undertaking under Notification No. 214/86-CE. It was also found that imported “Housings” were diverted to the appellant’s Pune unit. Initially, usage details were not submitted and were only provided in August 2012.

A Show Cause Notice was issued in March 2013 alleging wrongful availment of CENVAT credit, diversion of imported goods, and unauthorised transfer of machinery. The Commissioner confirmed the demands through Order-in-Original dated 12.03.2014, with a reduced duty demand of ₹49.60 lakh on the housing issue.

On appeal, the tribunal remanded the matter in September 2018 for fresh adjudication. In the remand proceedings, the assessee submitted new documents and explanations. However, by order dated 10.09.2020, the adjudicating authority again confirmed demands of ₹36.13 lakh, ₹49.60 lakh, ₹9.04 lakh, and ₹32,761, along with interest and penalties. A small demand of ₹1.58 lakh was dropped. Personal penalties were also imposed on the director.

Both the assessee and its director challenged this order before the Tribunal. The department also appealed, seeking enhancement of penalty under Section 114A of the Customs Act.

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The two-member bench comprising P.K. Choudhary (Judicial Member) and P. Anjani Kumar (Technical Member) heard both sides and reviewed the records. The customs duty demand of Rs. 9,04,380/- was based on the claim that machines imported for a 100% EOU unit were transferred to other units.

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Officers visited the premises on 21/22.09.2010 and made a panchnama. It showed that some machines, like the vertical injection moulding machine (TMK-C350) and plug testers, were found uninstalled inside the 100% EOU unit. The DG set was installed on the roof.

The bench found that the machines were still on the EOU premises and the transfer claim was not supported. The statement saying machines were transferred was rejected because the panchnama was considered more reliable.

The duty demand was reduced to Rs. 3,98,149/- by excluding the machines that stayed in the EOU. The extra amount claimed was set aside.

Therefore the appeal was allowed.

To Read the full text of the Order CLICK HERE

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