Clearance of Imported Raw Materials by EOU after Payment of Customs Duty & Interest: CESTAT quashes Additional Demand of Interest [Read Order]

Clearance of Imported Raw Materials by EOU after Payment of Customs Duty & Interest: CESTAT quashes Additional Demand of Interest

While quashing an additional demand of interest by the Customs department, the Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the demand is not sustainable in view of the fact that the importer, a 100% EOU has cleared the goods after payment of customs duty along with interest.

The appellant, Lonsen Kiri Chemical Industries Limited is 100% EOU, imported certain raw materials and warehoused the same in 100% EOU. Since the goods could not be used in the manufacture, they cleared after four years. At the time of clearance, the appellant had paid customs duty and also paid interest after the period of three years of bonding.

The department was of the view that appellant is required to pay interest after expiry of 90 days in terms of Section 61 (2)(ii). It was contended that since the appellant have not used the goods imported, it cannot be said that the same was intended for use by 100% EOU. Accordingly, the same is covered under Section 61(1)(b) and in terms of sub-Section 2(ii), the appellant is required to pay interest after expiry of 90 days.

Mr. Ramesh Nair (Judicial Member) observed that “in the present case, the assessee being 100% EOU, imported goods exempted under Notification No. 50/2003-Cus. There is no dispute about the intention of the said goods to be used in the manufacture of final product in the 100% EOU unit of the appellant. Section 61(1) does not provide that goods should be used in the manufacture but it only requires that the goods imported with intention of use in 100% EOU. As regards the intention for use, it is not disputed. Therefore, appellants clearances fallsunder Section 61(1)(aa), according to which the interest provisions provided under sub-Section (2)(i) shall apply, which provides that interest to be charged only after expiry of three years till the date of payment of duty. The appellant have discharged the customs duty along with interest beyond three years till the date of payment. Therefore, as per statutory provisions, as discussed above under Section 61, the demand of interest over and above the interest paid by the appellant is not sustainable.”

Shri Anil Gidwani, Advocate represented the Appellant-assessee.

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