Custom, Excise & Service Tax Tribunal
Cce, Allahabad vs M/S. Hi- Tech Medical Products Ltd on 14 March, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
Court No.-II
Custom Appeal No.C/580/2008 -CUS[DB]
[Arising out of Order-in-Appeal No. 60-CE/ALLD/2008 dated 27.05.2008 passed by custom (appeal), Allahabad]
CCE, Allahabad Appellant
Vs.
M/s. Hi- Tech Medical Products Ltd. Respondent
Present for the Appellant : Shri R.K. Mishra, DR Present for the Respondent : Shri J.M. Sharma, Consultant Coram: Honble Mr.D.N.Panda, Judicial Member Honble Mr.Rakesh Kumar, Technical Member Heard and reserved on: 06.11.2013 Pronounced on: 14.03.2014 Final ORDER NO. 51084/2014 DATED: 06.11.2013 PER: D.N.PANDA Cannulae and Needles were imported duty free by the appellant availing exemption granted under Notification No. 53/97-CUS dated 03.06.97 for use in the manufacture of Disposable syringes with or without needles. On enquiry, it was noticed that the appellant had imported 20,72,50,000 pcs of Cannulae and 20,49,03,815 pcs of Needles during the period November, 96 to April, 2003 and issued 12,16,50,000 pcs of Cannulae and 20,49,03,815 pcs of Needles for the manufacture of finished goods. Out of such issue, 65,52,285 pcs of cannulae and 3,26,64,788 pcs of needles were claimed to be waste and scrap.
2. Repeated requests were made to appellant to provide year-wise details of Needles and Cannulae imported duty free and waste and scrap generated in manufacturing of finished products for the period 1996-97 to April, 2003. But appellant provided details in respect of Cannulae only for the period 1997-98 to 2001-02 and no details were provided in respect of needles. Summons dated 13.01.2006, 24.01.2006 and 02.02.2006 were issued to call for information from the appellant. But that was in vain with the above out come. By letter dated 01.12.2005 appellant informed that some wrong information was submitted by it which may not be considered.
3. 6,78,800 pcs of Cannulae were issued for production of finished goods by the appellant during the period April, 2002 to April, 2003. But entire quantity of Cannulae was claimed to be waste as no finished goods were produced out of this quantity. As per norm prescribed, only 5% of input was admissible towards waste which comes out to be 33,940 pcs. Hence 6,44,860 pcs of Cannulae (6,78,800-33,940=6,44,860) were inadmissible as waste and scrap. Similarly 2,24,19,597 pcs of Needles claimed to be waste and scrap was beyond the permissible limit of 5% during the period December, 2000 to April, 2003.
4. According to ld. Adjudicating Authority, Appellant did not maintain proper records to establish the correct quantity of wastage that was generated during the course of production. He found claim of loss during the period April, 2002 to April, 2003 was unreasonable and appellant followed dilatory tactics to explain its case of arising of wasted beyond SION. He dealt dutiability as to the excess generation of waste and scrap relying on para -7 of the Notification No. 53/97-Cus dated 03.06.97 granting duty free benefit which reads as under:
Notwithstanding anything contained in this Notification the exemption herewith shall apply to goods which on importation into India are used for the purpose manufacture of articles within 100% EOU and such articles (including rejects, waste and scrap material arising in the course of such articles) even if not exported out of India, are allowed to be sold in India, in accordance with the Export and Import Policy, on payment of duty of excise leviable thereon under Section-3 of the Central Excise Act, 1944 or where such articles (including rejects, waste and scrap material) are excisable, on payment of Customs duty on imported goods used for the purpose of manufacture of such articles in an amount equal to the Customs duty leviable on such articles, as if imported as such.
5. In the light of above, it was held that customs Duty was leviable on excess waste/scrap generated beyond 5% admissible limit. Ld. Authority also relied on Para-114 of EXIM POLICY 1992-97 and para 9.20 EXIM POLICY, 1997-2002 to disallow the wastage claimed and dealt the manner how scrap shall be disposed.
DISPOSAL OF SCRAP:
(para-114 of EXIM POLICY, 1992-1997):-
Sale or disposal of scrap/waste/remnants arising out of production process in the DTA may be permitted on payment of applicable duties and taxes. Percentage of such scrap/waste/remnants shall be fixed by the Board and notified by a Public Notice issued in this behalf by the D.G.F.T. (Para 9.20 of EXIM POLICY? 1997-2002):-
Scrap/waste/remnants arising out of production process or in connection therewith may be sold or disposed of in the DTA on payment of applicable duties. However, there shall be no duties/taxes/remnants in case the same are destroyed with the permission of Customs Authority. Para-12 of Notification No. 53/97-Cus dated 03.06.97 empowers an Assistant Commissioner of Customs to prescribe the conditions to permit destruction of reject, waste and scrap material without payment of duty within the 100% COU or outside the said unit when it is not possible to destroy the same within the said unit. In the instant case, Assistant Commissioner has granted the permission for destruction under the permissible limit. The Assistant Commissioner has accorded the permission in his letter dated 10.02.2004 as under:
In this regard the necessary permission is hereby granted for destruction of waste scrap under the admissible limit in the case of M/s Hi-Tech Medical Products Ltd., GIDA, Gorakhpur.
6. Upon examination of above provisions it was opined by ld. Adjudicating Authority that excess waste and scrap claimed to have been generated beyond norm was not permitted to enjoy exemption benefit for which appellant was liable to pay Customs duty forgone on such excess wastage of imported duty free. Appellant never informed the department regarding the excess generation of waste/scrap beyond permissible limit of 5%. Accordingly provisio to Section 28 of Customs Act, 1962 for the extended period was invoked for violation of condition of LOP dated 22.09.95 read with Notification No. 53/97-Cus dated 03.06.97 for imposition of duty. It was also held that Appellant was liable to penalty under Section 117 of the Customs Act, 1962.
7. Appellants plea that debonding was allowed by the Development Commissioner, Noida on 25.03.3004 on the basis of No Objection Certificate issued by the Range Superintendent did not get appreciation of ld. Adjudicating on the ground that at the time of debonding, there was no confirmed demand pending against appellant and the Show Cause Notice was issued much later in the year, 2006.
8. Appellants plea based on the para-2 of Boards Circular No. 21/95-Cus dated 10.03.95 contending that if the Development Commissioner initiates action against the unit for non-fulfilment of export obligation etc., customs authorities should not issue show cause notice for failure to comply with the conditions of Notification No. 13/81-Cus dated 09.02.1981 and no demand of customs duty arise also failed to get support from Adjudicating Authority. That Authority viewed that Boards Circular speaks about the case of non-fulfilment of export obligation and the action to be taken in the situation. But in the case of excess generation of waste/scrap of inputs beyond permissible limit, duty liability cannot dispensed.
9. On the basis of above observation and findings, ld. Authority confirmed the duty demand of Customs duty amounting to Rs. 29,66,379/- (Rupees twenty nine lakhs sixty six thousand three hundred seventy nine only) raised against M/s Hi-Tech Medial Products Ltd., GIDA, Gorakhpur under Section 28 of Customs Act, 1962 with appropriate interest payable under Section 28 AB of the said Act. So also penalty of Rs. 10,000/-(Rupees Ten Thousand only) was imposed on the appellant under Section 117 of the Customs Act, 1962.
10. Appellant argued that there is no whisper in the Show Cause Notice about diversion of the import. 5% of the quantity of the goods imported was allowed as waste under law. When the process carried out by the appellant resulted with some loss, the authority should have appreciated such natural loss that had occurred in the course of manufacture. Further, the demand raised in adjudication is barred by limitation. Appellant also relied on the certificate of destruction issued on 12.03.2004 which according to appellant shows that there was arise of waste and scraps in the course of manufacture which were destructed and such loss is within the limit for which demand is not sustainable.
11. Revenue submits that in the Show Cause Notice it was clearly brought out that only 5% of input was admissible towards waste. But the appellant claimed beyond such permissible limit of 5% under SION. Therefore Appellant is not entitled to the exemption and sympathy may not be shown to appellant who did not furnish information to Department nor maintained any books and record to prove its claim. Further, when import of input was duty free, showing loss beyond permissible limit, appellant defrauded Revenue. Accordingly proceeding was not time barred. The destruction certificate has no value since loss for each year needs examination to ascertain permissibility thereof under SION. Revenues further submission was that the certificate of destructions is irrelevant since violation of SION denies exemption from the levy of duty and duty forgone by Revenue at the time of import is to be recovered.
12. Heard both sides and perused the record.
13. It is strange that the ld. Authority below has not looked into arise of waste and scrap relating to each financial year covering November 1996 to April 2006. He only looked into the wastage for the financial year 2002-2003. When he made a finding that no records were maintained by the appellant to establish generation of waste and scrap, quantum of goods destroyed does not provide any basis to pass a summary order by him. His order is not self speaking. Appellant after providing information for solitary period again requested to ignore the same having mistakes crept therein. No records being maintained by the appellant to provide year wise reconciliation, ld. Authority should have carefully examined quantum of import of input and issue thereof for use in manufacture, arise of output out of such manufacture and quantum of loss occurred in the process in each case to apply the low. A sketchy picture was drawn by him without year wise analysis. When there is fraud against Revenue no plea of time bar is available to appellant following the ratio laid down in CC Vs. Candid Enterprises reported in 2001 (130) ELT 404 (SC) since fraud nullifies every solemn act.
14. Keeping the observation above in view, the matter is remitted back to the Adjudication Authority to look into the quantity of input (both goods) imported in each financial year, quantity there of issued and waste and scrap generated out of use thereof in manufacture of finished goods during different financial years covered by the period from November 1996 to April 2006 and ascertain whether each years wastage was within the prescribed limit of SION. Depending on his finding, ld. Authority granting fair opportunity of hearing shall pass appropriate speaking order.
15. Appellant to file an application within a week of receipt of this order before learned adjudicating authority for fixation of hearing. Upon such application, ld. Authority shall fix hearing and pass order within 3(three) months of last date of hearing. Appellant shall not seek adjournment. Entire facts and figures relating to aforesaid aspects shall be placed by the appellant.
[Order pronounced in the open court on14/03/2014]
(RAKESH KUMAR) (D.N.PANDA)
TECHNICAL MEMBER JUDICIAL MEMBER
Neha
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