Customs, Excise and Gold Tribunal - Tamil Nadu
T. Gayathri Reddy vs Commissioner Of Customs on 3 October, 2000
Equivalent citations: 2003(159)ELT1034(TRI-CHENNAI)
ORDER S.S. Sekhon, Member (T)
1. These stay applications and appeals have come up against the decision of the Commissioner, who vide the impugned order against the 100% EOU imposed penalty under Rule 173Q of the Central Excise Rules and also demanded duty under Section 11A of the Central Excise Act, 1944. By the same order under Section 28(1) of the Customs Act, 1962, he confirmed the duty demand on the capital goods of the EOU and under Section 111 of the Customs Act, 1962, he ordered confiscation of 585 pieces of outer-body quilted garments and gave an option to redeem the same on payment of fine of Rs. 2,50,000/- and imposed penalty under Section 112 of the Customs Act on the EOU and under Section 114 of the Customs Act on the same EOU. Penalties have also been imposed under Section 112 & 114 on the Managing Director Shri T.V. Reddy and on Kum. T. Gayatri Reddy, Director of the EOU company.
2. The appellant company is a 100% EOU set up for the manufacture of readymade garments and it was observed that they had imported capital goods for affecting the intended manufacture of readymade garments duty free for export. It was observed that certain machines were removed to Madras for repairs and brought back and the appellant company had not exported any garments manufactured, on the contrary 585 pieces of the outer-body quilted garments were found manufactured using these machines, when the officers visited the factory by surprise. The appellants were found to have undertaken job work for another exporter without obtaining permission from the competent authority to do these job works for the other exporter. It was also alleged that the appellant company had made exports under claim for drawback.
3. Heard Shri R. Thiagarajan, Sr. Advocate for the appellants. He submitted that the quantity of quilted garments found in the premises on the date of surprise visit of the officers were garments, received from the another supplier for training of the employees on the imported machines and were not required to be exported since they were rejects. As regards the job work done for M/s. Gokul Das Export Pvt. Ltd., as alleged it was done for 100% EOU and a letter obtained from M/s. Gokul Das Export Pvt. Ltd. was produced before the adjudicator, who has not considered and given a finding thereof. As regards the allegation of no exports having been made, he relied on an affidavit filed today by Shri T. Venkatarama Reddy, Managing Director of the appellant company, wherein the exports made from 16-4-97 to 16-1-98 were shown to the tune of Rs. 43,05,189.80 and for the period from June, 1994 to July, 1995 to the tune of Rs. 23,47,8775.05 (sic) and therefore, the allegation that no exports were made is not correct.
4. Heard Shri S. Kannan, learned DR for the Revenue, who relied on the adjudication order and submitted that the condition of Notification No. 13/81-Cus. which provided that 100% of the goods manufactured under EOU should have been exported and in this case that has not taken place. He further submitted that even if the job work done for another unit by the appellant company is considered, it does not mean that total export obligations caused on this 100% EOU have been met, the machines which were removed to Madras for repairs were removed without permission and no permission was taken for doing the job work, therefore, the conditions of the said Notification have been violated which were required to be strictly complied with and the duty of customs on the capital goods thus became liable for payment. To a question from the Bench as to how the penalty under Section 173Q has been imposed when Rule 173A(2) specifically excludes manufacturers working under Chapter VA of the Central Excise Rules i.e. 100% EOU from the operation of Rule 173Q, he replied that the Commissioner's order impugned is very clear on this point and he had no further submissions to make.
5. We have considered the material and after the consent of both sides, we take up the stay applications and after waiver of pre-deposit take up the appeals to decide the matter for final order. We find -
(a) A plain reading of Section 3 of the Central Excise Act, 1944 with Rules 100A to 100H in Chapter VA and Rule 173A of Chapter V1I-A of the Central Excise Rules would reveal that Central Excise Levy and Control is only on such goods which are allowed to be sold in India and not on any other goods manufactured, produced, removed otherwise since production/manufacture & octroi system of the provisions, of Chapter IX of Customs Act, 1962 specially provision of licence under Sections 9, 61, 65 would be applicable. A 100% EOU being a "manufacturing bond" under Customs Act & Excise Policy has used different words i.e. SOLD in para 9.9 & 9.20 of the policy and SUPPLY in para 9.10. therefore there can be no duty of Central Excise on goods not sold. We rely on the Supreme Court decision in the case of Siv Industries Ltd. [2000 (117) E.L.T. 281 (S.C.) = 2000 (37) RLT 583] wherein in para it has been held by the Apex Court. -
".....it also becomes apparent that in view of the EOU scheme as modified from time to time and corresponding amendments to Section 3 of the Act the expression "allowed to be sold in India" in proviso to Section 3(1) of the Act is applicable only to sales made up to 25% of production by 100% EOU in DTA and with the permission of the Development Commissioner...."(underlining supplied). No such material has been brought about in this case that the demands of Central Excise Duty in this case relate to 25% of sales allowed to be sold in DTA by the permission of Development Commissioner. Therefore, the duty demanded under Section 11A cannot be upheld. The penalty under Rule 173Q cannot be upheld since Rule 173A(2) excludes the provision of Rule 173Q to units operating under Chapter VA i.e. 100% EOUs.
(b) As regards the findings on the demands of customs duty on capital goods and penalties for non use of these goods for failing to commence production for export within the stipulated period and/or issues like non-fulfilment of export obligation, action could be initiated only after the Development Commissioner has been informed and action to confirm the demands of duty should be confirmed only after a definite conclusion has been arrived at by the Development Commissioner. However show cause notices could be issued, as directed by the Ministry of Finance vide Circular No. 21/95-Cus., dated 10-3-1995 and Circular No. 122/95-Cus., dated 28-11-95. There is no finding that such an action has been complied with. The Commissioner is bound by these directions. Therefore, the subject demands under the Central Excise Act, 1962 and penalties thereunder cannot be sustained as arrived at in the order impugned. The order therefore is required to be set aside.
(c) The exports made, as claimed by the appellants and the findings whether outer-body quilted garments were for training or manufacture and/or export has to be established and determined afresh.
6. In view of our findings, we would set aside the order and remand it back to the Adjudicator to re-decide the matter after following the instructions in the Ministry's circulars & thereafter granting a hearing to the appellants. Appeal allowed on remand in the above terms.