Custom, Excise & Service Tax Tribunal
Cce Surat-I vs M/S Sarthi Textiles on 31 December, 2014
In The Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad Appeal No.E/52/2009-SM [Arising out of: OIA No.RKA/725/SRT-I/2008, dt.14.10.2008, passed by: Commissioner of Central Excise & Customs (Appeals), Surat] CCE Surat-I Appellant Vs M/s Sarthi Textiles Respondent
Represented by:
For Appellant: Shri G.P. Thomas, A.R. For Respondent: Shri Hardik Modh, Adv.
For approval and signature:
Mr. P.K. Das, Honble Member (Judicial)
1. Whether Press Reporters may be allowed to see the No 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 of Seen the order?
4. Whether order is to be circulated to the Departmental Yes authorities?
CORAM:
MR. P.K. DAS, HONBLE MEMBER (JUDICIAL) Date of Hearing/Decision:31.12.2014 Order No. A/12349 / 2014, dt.31.12.2014 Per: P.K. Das
1. None appears on behalf of the respondent. There is no application for adjournment in the file. At the request of the Bench, ld.Advocate Shri Hardik Modh assisted the Bench for disposal of the appeal.
2. The relevant facts of the case, in brief, are that the respondent is a 100% EOU engaged in the manufacture of grey fabrics. On 21.01.2000, the Central Excise officers attached to the Preventive unit, made a surprise visit and during the stock checking, the shortage of finished goods was detected. A show cause notice dt.05.06.2000 was issued proposing the demand of Customs duty of Rs.11,00,055.00 along with interest and penalty under Section 28(1) of the Customs Act, 1962 for clandestine removal of finished Grey Fabrics, Rejected Grey Fabrics etc. The adjudicating authority confirmed the demand of duty along with interest and imposed penalty of equal amount of duty under the Customs Act, 1962. The Tribunal by Final Order No.C-II/836/WZB/2004, dt.19.02.2004, set aside the impugned order and held that the nature of duty levied on goods removed from 100% EOU is Excise duty and confirmation of duty demand and penalty under the Customs Act, 1962 cannot be sustained.
3. Thereafter, another show cause notice dt.08.07.2004 was issued, which is the subject matter, in the present appeal. In that notice, it has proposed demand of duty on finished goods under Central Excise Act 1944, and demand of Customs duty on raw material used in the manufacture of finished goods under Customs Act. The adjudicating authority by OIO No.21/ADJ/ADC-SKA/OA/04-05, dt.13.12.2004 confirmed an amount of Rs.11,00,055.00 as duty of Excise on clandestine removal of finished Grey Fabrics, Rejected Grey Fabrics, Yarn Waste and Polyester Twisted Yarn (Raw materials) under Section 11A of the Central Excise Act 1944. It has also confirmed an amount of Rs.17,74,693.00 Customs duty as Excise duty recoverable being the aggregate of all Customs duty leviable on 23483 kgs of polyester texurised yarn utilized in the manufacture of Grey Fabrics, Fabrics waste, Yarn waste removed clandestinely. There is also a demand of interest along with penalty of equal amount of duties. By the impugned order, Commissioner (Appeals) partially allowed the appeal filed by the respondent. Demand of Customs duty of Rs.17,74,693.00 and the penalty of Rs.28,74,748.00 were set aside. Interest would be recovered on Rs.11,00,055.00. Revenue filed this appeal against the setting aside of demand of Customs duty of Rs.17,74,693.00 and penalty of equal amount of duty under Section 11AC of the Central Excise Act 1944.
4. Learned Authorised Representative for the Revenue reiterates the grounds of appeal filed by the Revenue. He submits that the adjudicating authority has rightly confirmed the demand of Customs duty on the raw materials which were utilized in the manufacture of final product. He has seriously raised objection in respect of setting aside of the entire amount of penalty imposed under Section 11AC. It is contended that the Commissioner (Appeals) upheld the demand of Central Excise duty of Rs.11,00,055.00 on clandestine removal of goods and therefore penalty of equal amount under Section 11AC would be imposable.
5. On perusal of the impugned order, I find that the first show cause notice dt.31.01.2001 was issued proposing demand of Customs duty of Rs.11,00,055.00 on the finished goods, which was upheld by the Adjudicating authority. The respondent filed appeal before the Tribunal. By Final Order dt.19.02.2004, the Tribunal set aside the demand of duty under the Customs Act, 1962. Thereafter, the Revenue issued another show cause notice proposing demand of Central Excise duty on the finished goods clandestinely removed and also there is a demand of Customs duty on raw material used in the manufacture of the said finished goods.
6. The Adjudicating authority confirmed the demand of Central Excise duty on the clandestine removal of the finished product and also the demand of Customs duty on the raw material used in the manufacture of finished goods. Shri Hardik Modh, ld.Advocate, at the request of the Bench, placed the decision of the Tribunal on this issue as under:
i) CCE Surat Vs Sanjari Twisters 2009 (235) ELT 116 (Tri-Ahmd) [upheld by Honble Supreme Court 2010 (255) ELET A 15 (SC)]
ii) Dupont Synthetics Pvt.Ltd. Vs CCE Surat 2010 (259) ELT 408 (Tri-Ahmd)
7. The relevant portion of the decision in the case of M/s Sanjari Twisters (supra) is reproduced below:-
5.?After hearing the ld SDR, we find that the main issue involved relates to the determination of FOB value of export to arrive at the quantum of eligible domestic clearances and whether the same should include only physical export or it should include deemed export as well. If deemed exports are held to be not included, then the quantum of clearances permitted in DTA will be accordingly reduced. This issue has been decided by the Tribunal in favour of the assessee on a number of precedent decisions, holding that the value of deemed export should be included while determining the FOB value of export, based on which DTA clearances are permitted. However, in this case, the assessee is not in appeal before us. The duty on finished goods stands demanded on the ground that the same is in excess of the permissible limit for the purpose of DTA clearance. The departments claim is to the effect that the raw material used in such finished products cleared in DTA should be treated as not used for the intended purposes and the duty on import should be demanded. We do not agree with this view. In this case, it can not be said that the raw materials have not been used for the intended purpose. Even if there was clearances in excess of permissible limit it may amount to be case of diversion of finished goods, the duty shall be payable in respect of finished goods and no duty become demandable on the raw material used in the manufacture of such diverted goods.
8. I find that the Commissioner (Appeals) had given a detailed finding in the impugned order as under:-
The Order-in-Original has confirmed a demand of Central Excise duty of Rs.11,00,055.00 on the fabrics, rejects of fabrics and yarn waste cleared to DTA. The duty has been worked out based on proviso to Section 3(1). In addition, the OIO has confirmed an amount of Rs.17,74,693.00 as Central Excise duty on Polyester Filament Yarn deemed consumed in the goods cleared to DTA. Once the duty is recovered on DTA clearances under proviso to Section 3(1) i.e. equivalent of aggregate duties of Customs, the duty liability on inputs is extinguished. Further the demand of Rs.17,74,693.00 in addition to demand of Rs.11,00,055.00 in the second notice is hit by the principle of law elaborately discussed earlier. The duty liability is determined as Rs.11,00,055.00. The penalty imposed is set aside on the principle of Res Judicata.
9. I am unable to accept that the findings of the Commissioner (Appeals) in so far as the applicability of principle of Res Judicata. It is well settled that the principle of Res Judicata would not apply in the tax matters. But, I agree with the findings of the Commissioner (Appeals) in other issues in so far as the demand of duty on raw materials cannot be sustained when the demand was raised on the final product. This view is supported by the decision of the Tribunal in the case of M/s Sanjari Twisters (supra) which is upheld by the Honble Supreme Court.
10. I find force in the submissions of the ld.A.R. in so far as the setting aside of entire amount of penalty under Section 11Ac of Central Excise Act 1944. Commissioner (Appeals) accepted that the clandestine removal of the final product involving demand of duty of Rs.11,00,055.00. On a query from the Bench, ld.A.R. submits that the respondent has not filed any cross objection. Hence, the imposition of penalty under Section 11AC of Central Excise Act 1944 in respect of the demand of duty of Rs.11,00,055.00 is warranted. The Honble Supreme Court in the case of Union of India Vs Dharmendra Textile Processors 2008 (231) ELT 3 (SC) held that the demand of duty on extended period of limitation as well as the ingredients available under Section 11A, a mandatory penalty would be imposed.
11. In view of the above discussion, the impugned order passed by the Commissioner (Appeals) is modified to the extent an amount of Rs.11,00,055.00 as penalty under Rule 209 of Central Excise Rules 1944 (Rule 25 of Central Excise Rules 2002) read with Section 11AC of Central Excise Act 1944 is upheld. The appeal filed by the Revenue is partially allowed.
(Dictated & Pronounced in Court) (P.K. Das) Member (Judicial) cbb 6