Custom, Excise & Service Tax Tribunal
M/S. Maharashtra Seamless Ltd vs Commissioner Of Central Excise, Raigad on 14 October, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO. II
Application No.C/EXTN/96113/14-MUM IN C/61/08-MUM,
AND
APPEAL No. C/221/05-MUM, C/1182/05-MUM & C/61/08-MUM
[Arising out of Orders-in-Appeal Nos. AT/MZ-II/155/2004 dated 11/1/2005, AT/298/RGD/2005 dated 31/5/2005, SRK/403/RGD/2007 dated 25/10/2007 passed by the Commissioner (Appeals), Central Excise Mumbai Zone-II, ]
For approval and signature:
Honble Mr Ramesh Nair, Member(Judicial)
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1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : seen
of the Order?
4. Whether Order is to be circulated to the Departmental: Yes
authorities?
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M/s. Maharashtra Seamless Ltd
:
Appellant
VS
Commissioner of Central Excise, Raigad
:
Respondent
Appearance
Shri. T. C. Nair, Advocate for the Appellant
Shri. D. D. Joshi, Superintendent (A.R.) for the Respondent
CORAM:
Honble Mr. Ramesh Nair, Member (Judicial)
Date of hearing: 14/10/2014
Date of decision /10/2014
ORDER NO.
Per : Ramesh Nair
There are three appeals and one application for extension of stay filed by the appellant as detailed below:-
Sr NO.
Appeal No. Demand (Rs.) SCN dates Period O-in-O dates O-I-A dates
1. C/EXTN/96113/14-MUM C/61/08 84,167+int+ equal penalty [116/117] 29/11/99 4/2/99& 22/3/99 28/2/2007 25/10/2007
2. C/221/05 11,19,721.88+ equal penalty [65(2)(b)][116/117] 7/5/2000 12/4/2001 12/2/2002 4/4/2000 24/4/2000 19/7/2000 & 10/5/2000 21/7/2004 common 11/1/2005 3 C/1182/05 6,72,971+equal penalty [65(2)(b)][116/117] 16/6/1999 2/7/1998 26/5/1998 1/2/1999 4/8/1999 31/5/2005 31/5/2005 Total 18,76,859.88 1.1 The fact of the case is that appellant engaged in import of round Billets without payment of custom duty for the manufacture of Seamless tubes and pipes in the private bonded of warehouse under the custom licence issued under section 65 of Customs Act, 1962 and in terms of notification 20/99 Cus 28/2/99. During course of manufacture, there is generation of steel waste and scrap which is recovered and also 2 to 3 percent burning loss. Recoverable waste and scrap is sold on payment of Custom duty as required under sub section (2) of section 65 of Customs Act, 1962. However, they are not paying any duty in respect of quantity of burning loss. The show cause notices were issued demanding custom duty on the quantum of burning loss contending that in terms of section 65(2) (b), the quantity of waste and scrap also included the short quantity said to be burning loss. In the Adjudication, the adjudicating authority confirmed the duty demand and interest and imposed penalty under section 116/117 of Customs Act, 1962. Aggrieved with the orders in original the appellant preferred appeals before Commissioner (Appeals). Ld. Commissioner (Appeals) vide orders in appeals dated 11/1/2005, 31/5/2005 and 25/10/2007 upheld the orders in original. Hence, the appellant is before me.
2. Shri T.C. Nair, Ld Counsel for the appellant submits that dispute is limited to the issue, whether the burning loss arising out of the manufacturing process in the bonded warehouse is liable to custom duty. He submits that in terms of section 65(2)(b), it applies to physical waste and scrap arises during the manufacturing and cleared from the warehouse for the home consumption. It is his submission that in the present case, as regard burning loss, no material exist, accordingly, no clearance takes place of burning loss from the warehouse for home consumption, therefore no custom duty is required to be paid. He also refers Standard input-output norms (SION) prescribed under Foreign Trade Policy in respect of final product Seamless steel pipes and tubes wherein for 1kg of seamless pipes and tubes, the raw material i.e. alloy, non alloy, round, bar was allowed to be imported is 1.20 Kgs, this evident that in the policy as a whole taking in to account the waste and scrap and also burning loss in every process, input-output norms is fixed. He placed reliance on following judgments.
(i) Western Metal Caps Ltd. Vs Commissioner of C. Ex., Ahmedabad- 2004(170) ELT 451(Tri-Mumbai)
(ii) Hindustan Copper Ltd. Vs Commissioner of Central Excise, Belapur-2013 (290) ELT 701(Tri.-Mumbai)
(iii) Ram Steel Rolling & Forgoing Mills Vs Commissioner of C. EX., Mumbai -II -2006(204) ELT 87 (Tri-Mumbai)
(iv) Narbada Steels Ltd. Vs Commissioner of C. EX., Jammu -2007(217)ELT 469 (Tri-Delhi) 2.1 He further submits that in any case, duty can be levied only in respect of physical clearance of the goods from the warehouse and not otherwise. On these submissions he placed reliance on following judgments.
(i) Paras Fab International Vs. Commissioner of C. Ex., Kandla - 2010(256) E.L.T. 556(Tri-LB)
(ii) Commissioner of Central Excise, Indore Vs. STI India Ltd. - 2014(300) E.L.T. 518(Tri. Del)
3. On the other hand, Shri D.D. Joshi Ld. Superintendent (A.R.) reiterates the findings of the lower appellate authority given in the impugned order. He further submits that since there is specific provision for levy of custom duty on waste and scrap arising in the course of manufacturing in bonded warehouse, the burning loss is also part of the waste and scrap, therefore, quantum of burning loss also levieable to customs duty. He placed reliance on the judgment of this Tribunal in case of Kochin Shipyard Ltd. Vs CC Cochin [2011(267)E.L.T. 387 (Tri.-Bang.)].
4. I have carefully considered the submissions made by both the sides.
5. In all the appeals, the common issue is that whether the burning loss arising in the manufacturing process carried out in the custom bonded warehouse is leviable to custom duty in terms of section 65(2) (b) of Customs Act, 1962. As regard the claim of the appellant regarding the nature of burning loss and quantum thereof there is no dispute. The raw material for manufacturing of Seamless pipe was imported by the appellant under notification no. 20/99 Cus dated 28/2/99(Sr. No. 183), which is reproduced below:-
In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods of the description specified in column (3) of the Table below or column (3) of the said Table read with the relevant List appended hereto, as the case may be, and falling within the Chapter, heading No. or sub-heading No. of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as are specified in the corresponding entry in column (2) of the said Table, when imported into India, -
(a)?from so much of the duty of customs leviable thereon under the said First Schedule as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table;
(b)?from so much of the additional duty leviable thereon under sub-section (1) of section 3 of the said Customs Tariff Act, as is in excess of the rate specified in the corresponding entry in column (5) of the said Table, subject to any of the conditions, specified in the Annexure to this notification, the condition No. of which is mentioned in the corresponding entry in column (6) of the said Table:
Provided that nothing contained in this notification shall apply to goods specified against serial Nos. 174, 175, 176, 177, 178 and 179 of the said Table on or after the 1st day of April, 2000.
Explanation. - For the purposes of this notification, the rate specified in column (4) or column (5), is ad valorem rate, unless otherwise specified.
TABLE S.No. Chapter or heading No. or sub-heading No. Description of goods Standard rate Additional duty rate Condition No. (1) (2) (3) (4) (5) (6)
183. 84 or any other Chapter Parts and raw materials for manufacture of goods to be supplied in connection with the purposes of off-shore oil exploration or exploitation Nil Nil 35
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If, -
(a) the parts and raw materials are used in the manufacture of goods in accordance with the provisions of Section 65 of the Customs Act, 1962 (52 of 1962); and
(b) a certificate is produced in each case to the Assistant Commissioner of Customs from a duly authorised officer of the Directorate General of Hydro Carbons in the Ministry of Petroleum and Natural Gas, Government of India, to the effect that the goods are required for the purposes of off-shore oil exploration or exploitation.
6. It can be seen from the notification and condition-35 appended thereto that the exemption in respect of raw material has been provided for manufacturing the goods in accordance with the provision of section 65 of the Customs Act, 1962. The burning loss is occurring during the course of manufacture of final product i.e. seamless pipes. The burning loss is nothing but quantity consumed in the manufacture and become invisible. Therefore, exemption notification is applicable even on the quantity of the burning loss. The revenue contended that in terms of 65(2)(b) of Customs Act, 1962 the waste and scrap includes the burning loss also and such burning loss will also attract custom duty in the same manner as it is levied on waste and scrap. On carefully reading of Section 65(2)(b) of Customs Act, 1962, it applies only to such waste and scrap which resulted from manufacturing operations and are cleared from the warehouse for home consumption. In the present case the burning loss does not exist physically, therefore it is neither capable of being cleared from the warehouse nor factually cleared from the warehouse. Therefore, the burning loss occurred in the manufacturing process is nothing but the consumption in the manufacture, though physically not available, hence, the same does not get cleared from the warehouse. With this fact, the burning loss will not fall under the clause (b) of Section 65(2). Accordingly, no duty can be charged on nonexistent quantity of burning loss. It is very important to note that in any processing industry, apart from recoverable waste and scrap, smaller part of the burning loss is also generated. Keeping this aspect into mind the legislators consciously made explicit provision for lavy of custom duty on the waste and scrap, which is physically available and cleared from the warehouse. However, as regard the burning loss, no such explicit provision was made. This might be for the reason that the quantity of imported material consumed in the final product includes burning loss also as it has same nature as the raw material which gets consumed in the manufacturing of final product. I am therefore of the considered view that the custom duty can not be charged on the quantity of the burning loss for two reasons- i.e. This quantity stands consumed in the manufacture of final product and it does not contain in the quantity of waste and scrap and second, it is not cleared physically for home consumption from the custom bonded warehouse. The issue that whether use of imported goods in the manufacturing within the bonded warehouse is removal for home consumption or otherwise has been considered by larger bench of this Tribunal in the case of Paras Fab (supra) where in larger bench answered reference as follows_ In view of the law as spelt out and our findings as above, we answer the reference as follows:-
(a) The entire premises of a 100% EOU has to be treated as a warehouse if the licence granted under section 58 to the unit is in respect of the entire premises.
(b), (c) and (d) Imported goods warehoused in the premises of a 100% EOU(which is licensed as a Customs bonded warehouse) and used for the purpose of manufacturing in bond as authorized under Section 65 of the Customs Act, 1962, cannot be treated to have been removed for home consumption.
(e) The decision of the Tribunal rendered in the case of STI India(Supra) holding that imported goods were not cleared from the warehouse and hence there cannot be any demand of duty on the same is the correct view in law. 6.1 Applying the ratio of the above judgment, it is clear that the quantity of burning loss, since, neither cleared out of the custom bonded warehouse for home consumption nor otherwise disposed of, but factually it got consumed in the manufacturing, no custom duty is leviable on the same. As regard the reliance placed by the Ld. Supdt., (A.R.) on behalf of Revenue on the judgment of Cochin Shipyard Ltd.(Supra), on carefully reading, it is observed that the fact of the said judgment is related to physical waste and scrap generated during manufacture and cleared for home consumption, whereas in the present case the duty demand was made on the invisible burning loss which is not cleared from the warehouse for home consumption. Hence the ratio of the Cochin Shipyard judgment is not applicable, hence, the same is distinguished.
7. In view of my above discussions, I am of the considered view that orders of the lower appellate authority are unsustainable in the facts and in law, and the same are set aside. The appeals are allowed with consequential relief, if any, in accordance with law. Since the appeals have been disposed of, the application for extension of stay stands infructuous.
(Pronounce in Court on ..) Ramesh Nair Member (Judicial) sk 2