Custom, Excise & Service Tax Tribunal
Jj Glastronics Pvt Ltd vs Bangalore-I on 30 August, 2024
Customs Appeal Nos. 22650, 22651, 22652 & 22656/2014
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
BANGALORE
1st Floor, WTC Building, FKCCI Complex, K. G. Road,
BANGLORE-560009
Regional Bench COURT-2
Customs Appeal No. 22650 of 2014
[Arising out of the Order-in-Appeal No.408-411/2014 dated 16.07.2014
passed by the Commissioner of Central Excise (Appeals-I), Bangalore.]
M/s. J.J. Glastronics Pvt. Ltd.,
No.26b, Electronics City,
Hosur Road,
Bangalore - 562 107 .......Appellant
VERSUS
Commissioner of Central Excise,
Bangalore I Commissionerate,
CR Building,
Post Box No.5400, Queens Road,
Bangalore - 560 001. .....Respondent
WITH
(i) Customs Appeal No.22651 of 2014 (M/s. JJ Glastronics Pvt. Ltd., Vs. CCE, Bangalore) [Arising out of the Order-in-Appeal No.408-411/2014 dated 16.07.2014 passed by the Commissioner of Central Excise (Appeals-I), Bangalore.]
(ii) Customs Appeal No.22652 of 2014(M/s. JJ Glastronics Pvt. Ltd., Vs. CCE, Bangalore) [Arising out of the Order-in-Appeal No.408-411/2014 dated 16.07.2014 passed by the Commissioner of Central Excise (Appeals-I), Bangalore.]
(iii) Customs Appeal No.22656 of 2014 (M/s. JJ Glastronics Pvt. Ltd., Vs. CCE, Bangalore) [Arising out of the Order-in-Appeal No.408-411/2014 dated 16.07.2014 passed by the Commissioner of Central Excise (Appeals-I), Bangalore.] Appearance:
Mr. M.S. Nagaraja, Advocate Appeared for Appellant Mr. Rajesh Shastry, Authorized Represntative for Respondent Coram:
Hon'ble Mr. P.A. Augustian, Member (Judicial) Hon'ble Mr. Pullela Nageswara Rao, Member (Technical) FINAL ORDER Nos.__20811-20814 __ of 2024 Date of Hearing: 01.03.2024 Date of Decision: 30.08.2024 Page 1 of 10 Customs Appeal Nos. 22650, 22651, 22652 & 22656/2014 Per: P.A. Augustian The issue in the present 4(four) appeals is whether Appellant being a 100% EOU is liable to pay customs duty in terms of Section 65(2)(b) and Section 72(1)(d) of the Customs Act, 1962 for the raw material consumed in excess of SION norms considering that as improper accounting of imported raw material consumption. The period of dispute is from August, 2004 to March 2006.
2. The brief facts are the Appellant had imported 'Milled Glass Powder' for manufacture and export of multi form 'Bead glass' which is used in the manufacture of 'Electron Guns'. As per the provisions of the wastage norms under SION, only 4.76% of wastage is allowed. However after manufacturing, more than 4.76% of waste was generated. Alleging that the excess wastage generated over and above the permissible limits prescribed under SION norms as notified under duty exemption Scheme amounts to improper accounting of raw material consumption, the Adjudicating authority confirmed duty and interest under Section 72(1) of the Customs Act, 1962 as per the following details;
Demand of
Sl Order-in-
Appeal No. Customs Period
No. Original No.
duties Rs.
50/2012 dated 08/2018 to
1 C/22650/2014 39,86,344
23/27.08.2012 03/2006
57/2012 dated 04/2006 to
2 C/22651/2014 17,37,120
30/31.08.2012 05.07.2007
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Customs Appeal Nos. 22650, 22651, 22652 & 22656/2014 72/2012 dated 06.07.2007 to 3 C/22652/2014 6,13,144 29.10.2012 07/2008 31/2013 dated 08/2008 to 4 C/22656/2014 18,53,004 31.03.2013 07/2012
3. However, Adjudicating authority has not imposed penalty as proposed in the Show cause notice. Aggrieved by said orders, the appellant filed appeals before the Commissioner (Appeals) and Commissioner (Appeals) as per the impugned order confirmed the orders of the Adjudicating authority. Aggrieved by said orders, present appeals are filed. The 4(four) appeals are being decided by this common order, since the issues are similar.
4. During the hearing, the Learned Counsel for the Appellant submitted that; the demand was raised for the period from August, 2004 to March 2006; when actual waste generated during the production was more than the prescribed 4.76% as per SION norms related to the subject goods, Appellant had taken up the issue with Development Commissioner, Cochin Special Economic Zone (CSEZ) vide letter dated 07.12.2004 for amending the wastage norms. Considering the same, Assistant Development Commissioner vide letter No. 1/72(2) EOU CEPZ 10517 dated 15.12.2004 conveyed the approval of the Development Commissioner fixing the percentage of waste and scrap generated as 20.34% on adhoc basis for a period of 6(six) months. Thereafter, Board of Approvals (BoA) for 100% EOU in its 4th meeting held on 14.06.2005 decided that adhoc norms fixed by the Development Commissioner, Special Economic Zone to continue till regular norms are approved by the Board of Approval. However, SCN Page 3 of 10 Customs Appeal Nos. 22650, 22651, 22652 & 22656/2014 was issued demanding customs duty on the ground that as per Para 6.8(b) of the Exim Policy 2003-2007 read with Appendix 14-I of the Hand Book of Procedure and Para 6.8(e) of Foreign Trade Policy 2004- 2009, the Development Commissioner is not empowered to fix the SION in respect of the items for which SION was already fixed. Hence the norms fixed by the Development Commissioner cannot be considered for computation of wastage.
5. Learned Counsel for the Appellant further submits that the waste generated during the process is still available with the EOU. The Learned Counsel drew our attention to the Circular No.12/2008-Cus dated 24.07.2008, where it is clarified that, "however, if any item in addition to those given in SION are required as input or where generation of waste, scrap and remnants is beyond 2% of the input quantity, consumption shall be allowed on the basis of self-declared norms for a period of three months till the jurisdictional Development Commissioner fixes ad hoc norms subject to an undertaking by the unit that self-declared/ad hoc norms shall be adjusted in accordance with norms as finally fixed by Norms Committee of DGFT for the unit". Further a provision has been made to consider such cases by Board of Approvals for appropriate decision in case of difficulty in fixation of SION by the Norms Committee. The Norms fixed by Norms Committee shall be applicable to a specific Unit.
6. The Learned Counsel further submitted that as per Circular No. 21/1995-Cus dated 10.03.1995, demand cannot be concluded without concurrence of the Development Commissioner. The Learned Counsel further submitted that the Development Commissioner allowed excess wastage only after considering the facts and circumstances of the case Page 4 of 10 Customs Appeal Nos. 22650, 22651, 22652 & 22656/2014 and in order to facilitate the trade. In case, any contravention by the Appellant, then the Development Commissioner would have initiated the proceedings, which were not initiated in the present case. Once Development Commissioner, who is empowered for modification of the SION norms had permitted the Appellant regarding the generation of waste in excess than the SION norms, and when not proceeded against the appellant, respondent have no jurisdiction to proceed with demand of duty.
7. The Learned Counsel further submitted that the demand under Section 65(2)(b) is on scrap and Section 72(1)(d) pertains to not duly accounted goods. Even if the waste generated is in excess than the SION norms, same cannot be considered as not accounted to the satisfaction of the proper officer to confirm demand under the above provisions. As regards Para 6.8(e) of the EXIM Policy/Foreign Trade Policy referred by Adjudicating authority, said provision only deals with sale of Scrap/Waste to DTA under concessional rate. However in Appellant's case the goods are still available in the EOU and not removed to DTA. The Learned Counsel further submits that once the Adjudicating authority accepted that the Approval Committee is one of the Committee to give relaxation, considering the communication made by the Approval Committee vide letter dated 14.06.2005, should be considered as the relaxation given and demand should not have been made against the Appellant. Provision of Paras 6.8(d) and 6.8(e) of the Foreign Trade Policy is related to sale of the scrap to Domestic Tariff Area (DTA), whereas there is no such attempt made by the Appellant for sale of the scrap.
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8. The Learned Counsel further submitted that Section 72 of the Customs Act, 1962 relates to goods improperly removed from warehouse...etc, whereas in Appellant's case, they have not removed any goods. Goods were properly accounted and are still lying in the stock. Thus, demanding duty in terms of Section 72(1)(d) is not proper and the impugned orders are liable to be set aside for the said reason, alone. The Learned Counsel further submitted that if the Authority invoked Section 65(2)(a), there is an option for the Appellant to destroy the waste and scrap or pay duty considering such scrap as imported.
9. The Appellant also challenged the jurisdiction of the Adjudication authority. As per Circular No. 21/1995-Cus dated 10.03.1995, demand cannot be concluded without concurrence of Development Commissioner. In the present case, the stand taken by the Development Commissioner is conflicting with the finding given by the Adjudication authority. The Learned Counsel relied on the following decisions in this regard:-
i. M/s Kuntal Granites Ltd., Vs. CC-2001 (132) E.L.T 214 (Tri) ii. M/s ABN Granites Ltd., Vs. CC (2001 (133) E.L.T 483 (T) iii. M/s Vishal Footwear Ltd., Vs. CC (1999 (114) E.L.T 60 (T)
10. The Learned Counsel further submitted that since the Board of Approval, which is the competent authority to fix the SION as approved the wastage norms as communicated vide letter dated 05.07.2005, the same was binding on the Customs authority. Therefore the Adjudication authority could not have rejected the approval of adhoc wastage norms approved by Board of Approval in the present case. The Learned Counsel drew our attention to the following finding of the Tribunal in the Page 6 of 10 Customs Appeal Nos. 22650, 22651, 22652 & 22656/2014 case of M/s PSA Sical Terminal Ltd Vs,. CC (2004 (165) E.L.T 109 (Tri-Chennai) , wherein it is held:-
"19. The further point raised by the Sr. Counsel was pertaining to the issue of show cause notice being pre-mature and in the circumstance, when they have already complied with the terms of the EXIM Policy and the licence having not been cancelled by the DGFT, i.e. the licensing authority, then it is a well settled point that the department could have approached DGFT to seek clarification, if they so required before proceeding to issue show cause notice. In the case of Mechano Paper Machines Ltd. v. CC, Calcutta (supra) such a premature action has not been appreciated by the Tribunal."
11. The above said judgment was affirmed by the Hon'ble High Court of Madras. Thus, it is settled that in case Customs Department had any difference regarding wastage norms with the Board of Approval, the Customs Department ought to have taken up the matter with CBIC and DGFT for clarification instead of confirming the demand against 100% EOU. Thus the demand of Customs duty on the raw materials imported and consumed in the manufacture of export goods and generation of waste in excess of quantity fixed as per the SION is contradictory to law.
12. The Learned Counsel also submitted that the decision of the Tribunal in the matter of M/s Goodluck Garments Pvt Ltd Vs. CCE & Cus, Surat-II-(2006 (206) E.L.T 911 (Tri.Mum) was set aside by the Hon'ble High Court of Gujrat vide judgment - 2019 (365) E.L.T 893 (Guj). Learned Counsel also relied on the judgment of the Hon'ble Madras High Court in the matter of M/s IOCEE Exports Ltd Vs. Page 7 of 10 Customs Appeal Nos. 22650, 22651, 22652 & 22656/2014 Commissioner of Central Excise, Chennai - 2021 (376) E.L.T 311 (Mad).
13. Learned Counsel also submitted that as per Para 6.8(f) of EXIM Policy/Foreign Trade Policy EOU is permitted to destroy the waste with the permission of Respondent without payment of duty. There shall be no duties/taxes on scrap/waste/remnants, in case the same are destroyed with permission of Customs authorities and under supervision of the Customs officers in terms of Para 6.8(f) of the FTP. Consequently, the demand of Customs duties with interest as confirmed in the impugned orders does not sustain and are required to be set aside. In such a case, the Appellants be permitted to apply to the Customs Authorities in terms of Para 6.8(f) of Foreign Trade Policy for destruction of the waste and scrap lying in the factory without payment of duty.
14. Learned Authorised Representative (AR) for the Revenue reiterated the finding in the impugned order and submitted that since the waste generated is in excess than the SION norms and without regularisation of excess wastage by Board of Approval, the Appellant is liable to pay duty as confirmed by the Adjudication authority/Appellate authority.
15. Heard both sides perused the records.
16. we find that it is an admitted fact that the appellant had imported the raw-material for manufacture and as per the information available on record, they have fulfilled the export obligations. When the actual waste generated during the production was more than 4.76% as per norms related to subject goods, Appellant had take-up the issue with Development Commissioner, Cochin Special Economic Zone (CSEZ) vide Page 8 of 10 Customs Appeal Nos. 22650, 22651, 22652 & 22656/2014 letter dated 07.12.2004 for amending the wastage norms. Considering the same, Assistant Development Commissioner vide letter No. 1/72(2) EOU CEPZ 10517 dated 15.12.2004, conveyed the approval of the Development Commissioner fixing the percentage of waste and scrap generated as 20.34% on adhoc basis for the period of 6(six) months. Thereafter, as evident from letter dated 05.07.2005, Board of Approvals for 100% EOU in its 4th meeting held on 14.06.2005 decided that Adhoc norms fixed by the Development Commissioner, Special Economic Zone to continue till regular norms are approved by the Board of Approval. From the above facts and considering the judgment of Hon'ble High Court of Gujrat in the matter of M/s Goodluck Garments Pvt Ltd (supra), merely if wastage is in excess of the input-output norms, without anything more, would not be sufficient for the Adjudicating authority to arrive at the conclusion that the imported goods have not been used for the manufacture of the articles for export. Further, it cannot be read in this manner, despite the fact that the Appellant is in a position to show that the entire material has been used for the purpose of manufacture of goods and there is no allegation with regard to the diversion of goods. We find that, if the Appellant has fulfilled the export obligation and when waste generated over and above SION norms is available in EOU, merely because the wastage norms are not satisfied, no presumption can be made to the effect that the goods have not been used for the manufacture of articles for export. Further it cannot be treated as improper accounting of raw material consumption to demand duty under 65(2)(b) and 72 (1)(d) of the Customs Act, 1962 as held by adjudication authority.
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16. In the light of above discussion, the appeals succeed and are accordingly allowed. Consequently, the recovery of duty and interest confirmed in the impugned orders are also set aside.
(Order Pronounced in Open court on 30.08.2024) (P.A. Augustian) Member (Judicial) (Pullela Nageswara Rao) Member (Technical) Ganesh Page 10 of 10