Custom, Excise & Service Tax Tribunal
M/S Aurobindo Pharma Ltd vs Commissioner Of Central Excise on 9 November, 2010
IN THE ,CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, FKCCI COMPLEX, K.G. ROAD,
BANGALORE 56009.
DATE OF HEARING : 09/11/2010
DATE OF DECISION : 09/11/2010
Central Excise Appeal No. 237 of 2009
[Arising out of Order-in-Original No. 82/2008 C. Ex. Dated 22.12.2008, passed by the Commissioner of Customs & Central Excise, Hyderabad)
For approval and signature:
Honble Shri M. V. Ravindran, Member (Judicial)
Honble Shri P. Karthikeyan, Member (Technical)
1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not ? No
3. Whether Their Lordships wish to see the fair copy of the Order? Seen
4. Whether Order is to be circulated to the Departmental authorities? Yes
M/s Aurobindo Pharma Ltd. Appellant
Versus
Commissioner of Central Excise, Respondent
Hyderabad.
Present for the Appellants : S/Shri C. T. Krishnamurthy and
Muralidhar, Advocates
Present for the Revenue : Shri M. M. Ravi Rajendran, JDR
CORAM : Honble Shri M. V. Ravindran, Member (Judicial)
Honble Shri P. Karthikeyan, Member (Technical)
ORDER No..Dated 09/11/2010
PER : M. V. RAVINDRAN
This appeal is directed against the Order-in-Original No.82/2008 C. Ex. dated 22.12.2008, passed by the Commissioner of Customs and Central Excise, Hyderabad. The relevant facts that arise for consideration that the appellant herein is 100% E.O.U. engaged in the manufacture of formulations falling under Chapter Heading 30 of CETA, 1985 and they were granted Customs Private Bonded Warehouse License. The appellant had executed bond under the provisions of the Customs Act, the Central Excise Act and the Rules and Regulations made thereunder in respect of the goods procured without payment of duty. During the period from 17.11.2005 to 31.8.2007, the appellant filed various intimations to the jurisdictional Additional Commissioner intend to clear certain raw materials procured duty free to the original suppliers as they were not conforming to the specifications. Without waiting for the approval of the Proper Officer, these goods were cleared by the appellant. Coming to a conclusion that this was in violation to the bond executed and the conditions of Notification No. 22/2003-CE dated 31.3.2003, and Para 6.15 of the Foreign Trade Policy, the lower authority issued two show-cause notices demanding duty and seeking to impose penalties and also seeking interest on the amounts forgone by the Revenue. The appellant contested the show-cause notices on merits and submitted various documents in support of their defence and also relied upon Para 6.17 of the Foreign Trade Policy. They also took defence that the goods cleared were only defective/rejected goods and such defective materials had been returned back to the original supplier for suitable replacement. The adjudicating authority after following the principles of natural justice did not accept the contents raised by the appellant and confirmed the demand, sought interest on the confirmed demand and also imposed penalties. Hence the appellants are before us.
2. The learned Counsel Shri Krishnamurthy, assisted by Shri R. Muralidhar, Advocate, appeared on behalf of the appellants. Ld. Counsel draws our attention to the allegations made in the show- cause notices. He also draws our attention to Para 6.17 of Foreign Trade Policy and submits that the adjudicating authority has only placed reliance on Para 6.15 of the Exim Policy which talks about sale of unutilized materials. He submits that the appellant had not sold the unutilized materials but in fact, sought replacement of the defective goods. He draws our attention to the various letters written by the assessee to the jurisdictional Assistant Commissioner indicating therein the nature of the defects and that the defective goods had been cleared under the cover of AR 3A. He draws our attention to the various AR 3A forms issued by the appellant, in respect of removal of such goods from the EOU and also re-warehousing done by the respective recipient unit. It is the submission that when the goods were received back by the original suppliers and had been warehoused as per re-warehousing certificate, the question of demand of duty does not arise. He also draws our attention to this Benchs Final Order No 61/2010 dated 28.01.2010, in the case of Dr. Reddys Laboratories Ltd. Vs. CC & CE, Hyderabad and submits that the issue is identical in that case.
3. The learned DR submits that the entire allegation in the show-cause notice is regarding non-following of the procedure by the assessee as envisaged in the Notification No. 22/2003-CE dated 31.3.2003. He specifically draws our attention to clause 8 of the Notification and submits that once the goods are taken outside premises, the user industry is liable to pay duty leviable on such goods. It is the submission that the appellants have not followed the procedure and did not wait for the approval of the concerned authorities before clearing the goods from the E.O.U.
4. We have considered the submissions made by both sides and perused the records. On perusal of the impugned order, we find that the adjudicating authority has not recorded any finding as regards the appellants claim that the goods were cleared from the factory premises under AR 3A document as rejected goods to the original suppliers and the suppliers received back the same and taken on records. It seems that the adjudicating authority has proceeded only on the ground that the appellants have not complied with the condition No. 3 to Para 1 of the Notification No. 22/03-CE. The entire order-in-original proceeded on the ground that the appellant herein has not used the said goods for production, manufacture, process and packaging in user industry. It is also seen that the adjudicating authority has proceeded on the ground that the appellant has not taken permission from the Proper Officer for removal of the goods and has not discharged the duty.
5. In our considered view, the adjudicating authority has misdirected himself on the entire issue. The provisions of Para 6.17 of the Foreign Trade Policy very categorically lays down that the goods which have been procured from GTA and found to be defective, can return under Chapter X procedure of erstwhile Central Excise Rules, 1944, as per the provisions of Chapter X procedure and Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods), Rules, 2001, are para-materia. On a perusal of the evidence produced by the appellant before us, we find that the appellant had informed the jurisdictional Assistant Commissioner and the Range Officer as regards the clearance of rejected materials back to the manufacturer/supplier. The receipt of the same in the factory premises of the supplier has been also verified by the Range officials. We find force in the submissions made by the learned Counsel that the issue involved in case on hand is covered by the Final Order No. 61/2010 dated 28.1.2010 in the case of M/s Dr. Reddys Laboratories Ltd. The said order is reproduced herein below :
Heard both sides. The appellant is an EOU which received the impugned raw material under Notification No. 22/2003-CE duty free against CT-3 certificate. Condition (6) of the Notification required the appellants to follow the procedure contained in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. Rule 6 of the said rules allowed return of the surplus raw materials duty free to the original supplier who was required to add the same to his non-duty paid stock. It is submitted before us that the appellants with due permission from the Department followed the aforesaid rule and returned the surplus goods to the original supplier.
2. As such, we are of the view that no duty demand can be sustained against the appellants who have taken the prior permission and have followed the conditions of the notification and the provisions of the rules for return of the surplus raw materials to the original supplier. The reference made by the ld. SDR to Condition (8) of the impugned notification is not relevant and in any case, the same has been provided without prejudice to the Condition (6) which has been followed by the appellants.
Accordingly the impugned order is set aside and the appeal is allowed. It can be seen from the above reproduced order of this Bench that the facts are identical and we have held that the condition (8) in the Notification is not relevant and if the duty free goods are returned to the original supplier and it is added to the non-duty paid stock, the question of demanding duty does not arise. We find that the issue is covered by this Bench decision in favour of the assessee. At the same time, we are not able to ascertain the fact whether the supplier of the raw materials had added those goods to their non-duty paid stock, in the absence of any evidence. Accordingly, holding that the appellants are not required to discharge the duty liability as the defective inputs were returned back to the original supplier, we at the same time, remand the matter back to the adjudicating authority for only a limited purpose of verifying the records regarding evidence as to whether the original manufacturer/supplier had received back the defective goods from the appellant and added the same in their non-duty paid stock. If it is found recorded, then the question of further action in this case does not arise. Accordingly the impugned order is set aside and the appeal is disposed of as indicated herein above.
(Operative portion of the order was pronounced in the court on conclusion of hearing on 9/11/2010) (P. Karthikeyan) (M. V. Ravindran) Member (Technical) Member (Judicial) /vc/