Custom, Excise & Service Tax Tribunal
M/S The India Cements Ltd vs Cce, C & St, Hyderabad-Iii on 6 October, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench SMB Court I Appeal No. E/722/2008 (Arising out of Order-in-Appeal No. 57/2008 (H-III) CE dt. 28.07.2008 passed by CC, E & ST (Appeals-III), Hyderabad) For approval and signature: Honble Ms. Sulekha Beevi, C.S., Member (Judicial) 1. Whether Press Reporters may be allowed to see 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 Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? M/s The India Cements Ltd., ..Appellant(s) Vs. CCE, C & ST, Hyderabad-III ..Respondent(s)
Appearance Ms. M. Mariam, Advocate for the Appellant.
Sh. S. Chandra Bose, Advocate for the Respondent.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member (Judicial) Date of Hearing: 06.10.2016 Date of Decision: 06.10.2016 FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.] The appellants are engaged in manufacture of cement and cement clinkers and are registered with the Central Excise Department. They cleared cement and cement clinkers on payment of duty as well as under LUT (Letter of Undertaking) filed to the department from time to time. On completion of the export the appellants had submitted the ARE1s duly certified to the department for admittance of proof of export. On verification of proof of export the department noticed shortage in the quantity of cement clinker exported. Show cause notices were issued covering the period from 2003-04 to 2005-06 for exports made from Kakinada port as well as Vizag port. The appellants defended the SCNs contending that the shortage occurred due to natural/normal/unavoidable handling/transit loss and therefore the losses could not be accounted for. After due process of law the adjudicating authority confirmed the demand of duty amounting to Rs. 23,54,105/- along with interest and also imposed equal amount of penalty. Being aggrieved the appellants filed appeal before the Commissioner (Appeals) and vide the order impugned herein the Commissioner (Appeals) dismissed the appeal upholding the order passed by the original authority. Hence this appeal.
2. On behalf of the appellant the Ld. Counsel Ms. M. Mariyam submitted that the loss/shortage in quantity has occurred only due to natural process. The appellants factory is about 350 KM away from the said ports. The Ld. Counsel explained the various steps undertaken in the loading, transportation and unloading cement clinker in the process of export and stressed that the goods are exported on first come first serve basis and that therefore though loaded from the factory it make take time for the goods to reach port and for loading into the vessel. The goods being cement clinker that it is only natural that a certain percentage is losts during transportation. It is submitted by her that when the loss has exceeded 1% for the period 2004-05 the appellant had paid the duty on the loss exceeding 1%. For the period covered, the entire loss is only 0.51% and being less than 1% the same requires to be condoned. She drew support from judgments laid in the case of UP State Corporation Ltd., Vs Union of India [2002 (145) ELT 513 (All)], UP State Cement Corporation Ltd., Union of India [1996 (86) ELT 6 (All)], Ispat Alloys Ltd., Vs CCE & Cus, Bubaneshwar [2004 (166) ELT 408 (Tri-Kol)]. She also argued that though there is shortage of goods, department does not allege any illegal act of diversion of goods or removal of goods in any manner. The only probability is that the goods (shortage) was lost in transit.
3. On behalf of the department the Ld. AR Sh. S.C. Bose reiterated the findings in the impugned order. He submitted that the appellants ought to have produced proof of export of the quantity that has been declared in the ARE1 documents and on failure to do so they are liable to pay the duty for the short quantity. He referred to Rule 19 of Central Excise Rules, 2002 and submitted that in case of export goods without payment of duty under LUT, the appellants are liable to fulfil the conditions of Notification No. 42/2001-CE-NT dated 26.06.2001 read with instructions in chapter 7 of the CBEC manual. The condition prescribes that on execution of letter of undertaking the appellant has to produce proof of export within 6 months. As the appellants have failed to produce proof of export with regard to the entire quantity as declared in the ARE1s they are liable to pay duty on the shortage of the quantity. Further, that the appellant have not produced any proof that the loss occurred due to natural causes.
4. I have heard both sides and perused records. The short issue to be decided is whether the appellant is liable to pay duty on the short quantity of cement clinker which was cleared from their factory and declared to have exported as per ARE-1 documents. On verification of the ARE1 returns there was a shortage of quantity noticed by the department. The confirmation of demand is on the ground that appellant has not exported entire quantity of cement clinker which was cleared from their factory premises for export under LUT. It is submitted by the appellants that this shortage has occurred due to natural causes during the transportation of the clinker from their factory to the respective ports. The records placed before me show that the appellants have declared the shortage and intimated to the department with regard to the shortage. The shortage is also pointed out to be less than 1% i.e. only 0.51%. It is also to be stated that department does not have a case that the appellant has diverted the cement clinker in any manner or removed them clandestinely. Moreover, in the judgments relied upon by the Ld. Counsel by the appellant, the Tribunal and the various courts have condoned the shortage of cement clinker occurred due to natural causes. In the case of UP State Cement Corporation Ltd., (Supra) [2002 (145) ELT 513 (All)] the Honble Court had occasion to consider the same issue. The Honble Court had given remission of duty to the appellant for the short quantity due to transit loss. The said judgment was challenged by the department before the Honble Apex Court and the SLP filed by department was dismissed on the ground of delay and also on merits. (Union of India Vs UP State Cement Corporation Ltd., - [2016 (331) ELT (A188) SC]). In the said case the Honble High Court observed as under:
3.?The petitioner being a U.P. State Cement Corporation (Public Limited Company), carries on the business of manufacture of Cement at three factory sites Dalla, Churk and Chunar. The important component of the cement is cement clinker which is produced at the factories of Dalla and Churk. The petitioner transports cement clinker from Dalla and Churk to Chunar. In the process of transfer, losses of cement clinker occurred on account of handling and truck loading or wagon loading at intermediate stations also, during a distance of about 110 kms. The petitioner claims exemption from excise duty on the losses of cement clinkers. The Assessing Authority did not grant any exemption for the losses of cement clinkers but the appellate Authority granted exemption to 0.5 per cent of the losses. The Central Government as the Revising Authority raised the exemption limit to 2 per cent of the losses. The assessee felt aggrieved and filed a bunch of 12 writ petitions in this Court. Out of these, nine writ petitions nos. 1785/93, 1786/93, 1787/93, 1788/93, 1789/93, 1790/93, 1791/93, 915/95 and 916/95 were heard and allowed by a common judgment dated 18-12-1995 by Honble M.C. Agarwal, J [1996 (86) E.L.T. 6 (All)]. This Court has held that the loss of cement clinkers in the transport from Dalla and Churk to Chunar factories was a natural loss and full exemption was justified and consequently he quashed the impugned orders and granted full exemption of the losses of cement clinkers. (emphasis supplied)
5. The Honble Court had followed its earlier decision laid in [1996 (86) ELT 6 (All)] to find the issue in favour of the assessee.
6. The department does not allege that the shortage occurred due to any positive act on the part of the appellant like fraud/clandestine removal. In such circumstances, it can be safely concluded that the shortage is due to transit loss. The above case laws uphold that there is a chance of shortage due to transit loss in the case of cement clinker. Therefore, I do agree with the contention put forward by the appellant that the shortage was due to transit loss/natural causes. On appreciation of the facts and by following the decision laid in the judgment rendered by Honble Allahabad High Court (supra) I hold that demand is unsustainable. The impugned order is set aside. The appeal is allowed with consequential reliefs, if any.
(Pronounced & dictated in open court) (SULEKHA BEEVI C.S.) MEMBER(JUDICIAL) Jaya.
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