Customs, Excise and Gold Tribunal - Tamil Nadu
Dyna Lamps And Glass Works Ltd. vs Commissioner Of Customs on 27 June, 2003
Equivalent citations: 2003ECR41(TRI.-CHENNAI), 2003(157)ELT73(TRI-CHENNAI)
ORDER
1. Jeet Ram Kait, Member (T) (Oral) - This appeal is directed against the Order-in-Original No. S8/C.(APPG 53/99, dated 31-1-2001 passed by the Commissioner of Customs (Seaport), Chennai by which the Commissioner has confiscated capital goods valued at Rs. 5 crores (Rupees Five crores) imported under EPCG Licence under Section 111(o) of the Customs Act 1962, (the Act for short), with an option to redeem the same on payment of fine of Rs. 50,00,000 (Rupees fifty lakhs). He has also demanded duty of Rs. 3,05,11,954 with interest @ 24% from the date of import as envisaged in the Customs Notification No. 169/90, dated 3-5-90, apart from enforcing the Bank guarantee of Rs. 2,64,000/- and Rs. 40,04,000/-. A penalty of Rs. 5,00,000/- has also been imposed on the appellants-importer under Section 112(a) of the Act.
2. The brief facts of the case are that the appellants are a joint Sector Project with the Tamil Nadu Industrial Development Corporation holding 26% equity in collaboration with Coming glass USA and STT Badalex PLC UK and they had obtained two EPCG licences. Based on specific information the DRI officers investigated the import of capital goods worth Rs. 8.88 crores under EPCG licence No. P/CG/2199184, dated 27-1-92 and P.CG/2100383, dated 31-7-92 by the appellants herein and it was revealed that the importer had not fulfilled the export obligation within the prescribed period as stipulated in the licence. The following capital goods were imported against licence No. EPCG/P/CG/2129184, dated 27-1-92 and were supplied by M/s. Corning Incoporated USA :
(1) Forehearth Super Structure Refractories (2) Forehearth firing system with control (3) Forehearth Thermocouple Hardware (4) Wind Cooling system with control (5) Stirrers (6) Stirrers doives etc. These goods were cleared vide Bill of Entry Nos. (a) 3506/20-4-92 (b) 4003, dated 11-5-92. The total value of the capital goods imported against the said licence works out to Rs. 8,88,90,507/-, The importer vide other import licence cited above has imported automatic bulb blowing machine valued at Rs. 96,12,006/-vide Bill of entry No. 1032/12-3-92. The appellants-importer had claimed the benefit of Notification No. 169/90, dated 3-5-90 and paid the concessional rate of duty at the rate of 15% ad valorem. In terms of the EPCG licence they were permitted to import capital goods worth Rs. 9,75,69,227/- with a condition that they fulfil the export obligation within a period of five years from the date of first import and accordingly they have executed bonds binding themselves to pay the differential duty in case of non-fulfilment of the export obligation. On enquiry Shri Bharat V. Epur Executive Vice President of the appellants inter alia stated that the Company initially managed to do some exports but could not continue to export due to shortage of working capital and cut throat competition and they have exported only 1.1% of the export obligation. He has also stated that they were doing job work for M/s. Osram, Bajaj, Wipro, Philip and Anchor and that profit is less when compared to the manufacture of their own brand. He has also stated that validity of both the licences have expired on 31-7-92 and 17-3-98 respectively. In the circumstances show cause notice was issued to the appellants-importer which culminated in the order of adjudication passed by the Commissioner as noted above against which the present appeal has been filed.
3. Shri Rajasimha, learned Consultant appearing on behalf of the appellants submitted that the seizure in this case was effected on 6-10-98 and the show cause notice dated 1-4-99 was despatched only on 15-4-1999 and was received by the appellants only on 21-4-1999 whereas the period of six months expired on 6-4-1999. Therefore, the show cause notice issued is beyond the time limit prescribed by law. Therefore, when the show cause notice itself is hit by time, the impugned order is not legal and on that score alone, the impugned order is liable to be set aside. He submitted that in the circumstances, confiscation of the goods was unwarranted and so also levy of redemption fine and imposition of penalty. He has also invited our attention to the judgment rendered by the Hon'ble High Court of Allahabad in the case of Overseas Paints Linkers v. UOI, reported in 2001(127) E.L.T. 42 (All.) wherein it has been held that if show cause notice is not given within six months, goods are required to be released unless the period of show cause notice is extended by the Commissioner. It was also held therein that 'given' means service of the notice and not mere issuing of it. He has also relied upon the judgment of this Bench in the case of PAL Industries Ltd. v. CC, Chennai, reported in 2003 (106) ECR 291 wherein it has been held that in the absence of any statutory provisions, interest cannot be demanded. He therefore submitted that demand of interest is not legal and proper and is required to be set aside. He has also referred to Notification No. 169/90, dated 3-5-90 and 160/92, dated 20-4-92 which have been issued granting exemption from duty in respect of capital goods imported by specified importer under the Export & Import Policy and submitted that none of these notifications stipulate anything regarding payment of interest. He has also referred to para 10(i), (ii) and (iii) of the show cause notice wherein the show cause notice referred to Notification No. 169/90. He has also referred to the proceedings before the Board for Industrial and Financial Reconstruction under which the company has been declared as a Sick Unit. He has particularly referred to para 7 wherein, the Board has ordered that the company shall not alienate any of its assets in terms of Section 22 of the Act. He has also invited our attention to the judgment rendered by the Hon'ble Apex Court in the case of Tata Davy Ltd. v. State of Orissa, and Ors. reported in (1977) 6 SCC 669 wherein the Supreme Court had occasion to interpret the words "any other law" occurring in Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 and held that it covers even laws made under the State list and hence without the Board's consent, arrears of sales tax under a State Act, (Orissa Sales Tax Act) could not be recovered from the sick company during the continuance of the implementation of the scheme. He, therefore, prayed for setting aside the impugned order and allowing the appeal.
4. Smt. Bhagyadevi, learned SDR appearing on behalf of the department defended the impugned order and submitted that show cause notice was issued on 1-4-99 and was well within time. She submitted that ample opportunities were afforded to the appellants to defend their case, but they have failed to appear in person or through their representative. In the circumstances the Commissioner was constrained to pass the order as the matter could not be kept pending. She submitted that in this case the appellants have just met 1.1% of the export obligation and hence they are liable for penal action. As regards consent of the BIFR before proceeding with the case under the Central Excise as contended by the learned Counsel for the appellants and. their reliance in the judgment of the Hon'ble Supreme Court (surpa) she submitted that, that was a case dealing with Sales Tax under the State Act and the Hon'ble Apex Court has ruled that recovery of the sales tax cannot be made without seeking the consent of the BIFR. She has also referred to the comments received from the Deputy Director, Dte. of Revenue of Intelligence, a copy of which was made available to the Court on the date of hearing wherein it is stated inter alia that the goods under seizure were handed over to the appellants for safe custody and for their uninterrupted use with the condition that the appellants should not sell or part with the same without the permission of the department. She in the circumstances prayed for rejection of the appeal.
5. We have carefully considered the rival submissions and gone through the case records. In this case the appellant-company was started as a Joint Sector Project with Tamil Nadu Industrial Development Corporation. The appellants were granted two Export Promotion Capital Goods (EPCG) licences on furnishing indemnity-cum-surety bond with DGFT. The Project was set up for the purpose of manufacture of fluorescent tubes lightings and general lighting bulbs. In terms of the licences, capital goods were imported availing the exemption under Customs Notification No. 169/90, dated 3-5-90 and 160/92 as applicable to EPCG Scheme which cast an obligation on the appellants to export goods and accordingly they had executed bonds with the Bank Guarantees binding themselves to pay the differential duty on demand in case of non-fulfilment of export obligations. The appellants utterly failed to fulfil the export obligations cast on them within a period of five years from the date of first import and in fact they could only export 1.1% of the export obligation cast on them and they have expressed their inability to fulfil the export obligations. The reasons put forward by them was lack of working capital as the Banks have not provided the amount required for the purpose. As a result, proceedings were drawn by the BIFR for declaring the unit as a Sick Unit and the unit was declared as Sick by the proceedings of the hearing held on 19-2-1997 and a copy of the proceedings has been filed in the paper book. We observe that here is a case where the appellants have come out truthfully as to how they were disabled from fulfilling the export obligations and they have not hidden anything from the Department. They have also stated that in view of the cut throat competition in the market, they had to resort to undertaking job work for the companies such as Philips, Bajaj, Anchor etc. There is no allegation in the show cause notice that the appellants have intentionally sought to avail of the benefit of Notification No. 169/90, dated 3-5-90. In the backdrop of the facts and circumstances, as narrated above, now we proceed to answer the various questions posed before us.
(i) Whether Show cause notice was issued in time and confiscation of the goods was in order.
We find from the records that the goods were seized on 6-10-98 and the show cause notice is dated 1-4-1999. The comments received from the Commissionerate itself states that the show cause notice was despatched only on 154-1999. The same was received by the appellants on 21-4-1999 as could be seen from the photocopy of the envelope addressed to the appellants filed in the paper book. Therefore/the claim of the Revenue that the show cause notice was issued well within time is not correct. We note that the Hon'ble High Court of Allahabad in the case of Overseas Paints Linkers v. UOI, reported in 2001 (127) E.L.T. 42 (All.) has held that the date of service of show cause notice is reckoned as the date of issue and not the date of mere issue. It is not understandable as to how it took two weeks time for the Department to despatch the show cause notice to the assessee. The Department could have pin pointed the responsibility for such lapses on the part of the concerned section rather than trying to defend their action by stating that the show cause notice has been issued well within time while at the same time admitting the fact though the show cause notice is dated 1-4-99 and it was despatched only on 15-4-1999. We take note of the fact that the Hon'ble Supreme Court in the case of Chaganlal Gainmull v. CCE, reported in 1999 (109) E.L.T. 21 (SC) has held that if the show cause notice is not issued within six months from the date of seizure, the only consequences would be that the person from whom the goods were seized would become entitled to their return, but the adjudicating authority would not be denuded of the power to initiate proceedings even thereafter. What flows from the judgment is that when a person is entitled to get the goods back, the question of its confiscation does not arise. In view of the fact that in the instant case, admittedly, the show cause notice has not been served on the appellants within the six months, the confiscation of the goods is not legal and proper and so also the demand of redemption fine. We, therefore, set aside the order of confiscation of the goods and demand of redemption fine.
(ii) Whether duty of Rs. 3,05,11,954 with interest @ 24% from the date of import is demand able or not and whether imposition of penalty is warranted or not.
We observe that there is no dispute that the appellants have failed to fulfil the export obligations cast on them in terms of the licences granted to them read with Notification No. 169/90. In view of this, duty is demandable from the appellants and we uphold the demand of duty. So far as demand of interest is concerned, we observe that similar case came up for consideration before this Tribunal in the case of FAL Industries v. CC, Chennai, reported in 2003 (106) E.L.T. 291 wherein it was held that while duty is demandable, interest is not demand-able. Confiscation of the goods and imposition of penalty was also set aside by the Tribunal. In that case the Tribunal had followed the ratio of the decision of the West Regional Bench of the Tribunal in the case of Philips India Ltd v. CC, Mumbai, reported in 2001 (137) E.L.T. 458 (Tri.) and a decision of the Settlement Commission in the case of Rajshri Plastiwood Ltd. reported in 2001 (130) E.L.T. 295. In the present case the Notification involved is 169/90-Cus. dated 3-5-90. We have gone through the Notification and we find that there is no stipulation in the Notification in regard to payment of interest along with duty. Para (b) (ii) of the said Notification prescribes that the importer shall make declaration before the Assistant Commissioner binding himself to pay on demand an amount equal to the duty leviable on such capital goods but for the exemption contained therein. Therefore, in the absence of any provision in the Notification regarding recovery of interest, the Revenue authorities cannot demand interest. In this view of the matter, we set aside the order of demand of interest. In view of the fact that we have set aside the order of confiscation of the goods imported, we hold that there is no warrant for imposition of penalty in this case and we set aside the order of imposition of penalty.
(iii) Whether Bank Guarantee can be enforced by the Customs.
We observe that the appellants have taken a plea that the proper officer to enforce the Bank Guarantee is the DGFT and not the Commissioner of Customs, Chennai. We observe that the Bank Guarantees were furnished by the appellants while obtaining the EPCG licence towards the Customs duty in the event of failure to fulfil the export obligation as per the terms of the licence. Customs duties are collected by the Customs authorities and not by the DGFT. Therefore, we hold that the Bank Guarantees have been correctly enforced by the Commissioner under the impugned order.
(iv) Whether the Commissioner of Customs was required to take consent of the BIFR before initiating the proceedings under the Customs Act against the appellants.
The appellants have taken a plea that the Commissioner has totally ignored that the provisions of Section 22 of the Sick Industrial Companies (Special Provision) Act, 1985 (SICA) override the provisions relating to recovery contained in the other Acts. In support of their plea they have pressed into service the judgment of the Hon'ble Apex Court in the case of Tata Davy Ltd. v. State of Orissa, reported in (1997) 6 SCC 669 wherein the Hon'ble Apex Court had occasion to interpret the words "any other law" occurring in Section 22(1) of the SICA, 1985 and the Apex Court has held that the term "any other law" covers even laws made under the State List and hence without the Board's consent arrears of sales tax under a State Act could not be recovered from the sick company during the continuance of the implementation of the scheme. They have, therefore, pleaded that order of confiscation of the capital goods of the sick unit and any coercive recovery action has to be held in abeyance by the Commissioner without the consent of the BIFR. We have gone through the judgment of the Hon'ble Apex Court and we note that in the cited case what the Apex Court had held was that the Respondents in that case (State of Orissa) cannot recover the arrears of sales tax from the assessee without first seeking the consent of the Board in that behalf. In the instant case, the Commissioner of Customs has proceeded against appellants herein under the Provisions of the Customs Act, because of the breach of specific conditions as stipulated in the licence and the Notification. The appellants were fully aware of the commitments undertaken by them while obtaining the licence and having breached the same, they cannot clothe themselves with their plea that their Unit has been declared as a Sick Unit. In any case, the appellant cannot be extricated from the duty liability which has arisen and for which they had executed Bank guarantee. In our view, the judgment of the Hon'ble Apex Court cannot come to the rescue of the appellants as the facts and circumstances in the present case are entirely different. Therefore, we are of the considered opinion that the Commissioner was right in proceeding against the appellants under the Customs Act. In any case the thrust of the plea of the appellants vide para 6 of the grounds of appeal was that the order of confiscation of the capital goods was not legal. We have held above that the order of confiscation of the goods was not legal and proper and we have set aside the order of confiscation of the goods.
6. The appeal is thus disposed in the above terms.