Custom, Excise & Service Tax Tribunal
Phthalo Colours &Amp; Chemicals India ... vs Valsad on 1 November, 2018
In The Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
Appeal No. E/10145/2015-DB
[Arising out of OIO-VLD-EXCUS-000-COM-002-14-15 dated 14.11.2014 passed by the
Commissioner of Central Excise, Customs and Service Tax-Valsad]
M/s Phthalo Colours & Chemicals India Ltd Appellant
Vs
C.C.E. & S.T., - Valsad Respondent
Represented by:
For Appellant: Shri P. Paranjape (Advocate) For Respondent: Shri Sameer Chitkara (A.R.) CORAM:
HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) HON'BLE MR. RAJU, MEMBER (TECHNICAL) Date of Hearing: 05.10.2018 Date of Decision: 01.11.2018 Final Order No. A / 12527 /2018 Per: Ramesh Nair The appellant is 100 % EOU engaged in the manufacture of Copper Phthalo Cyanine Blue falling under chapter 32 of the First Schedule of Central Excise Tariff Act, 1985. Apart from export of goods, they have also cleared the goods in DTA which was manufactured by using raw-material procured from indigenous Vendor against invalidation of Advance Authorization or procured from another 100 % EOU. They have availed exemption under Serial No. 3 of Notification No. 23/2003- CE dated 31.03.2003. The SCN was issued to the appellant denying the exemption Notification under serial No. 3 of Notification No.23/1003-CE dated 31.03.2003 and contended that the appellant is entitled for exemption under serial No. 2 of the said Notification. The ground for denial of the exemption by Revenue is that in the amended Notification No. 46/2004-CE dated 06.09.2004 explanation (II) was inserted, in
2| E/10145/2015-DB accordance to which the goods received from 100 % EOU shall be treated as imported goods and by a further amended Notification 29/2007-CE dated 06.07.2007 the explanation (II) was substituted, according to which in addition to the goods procured from 100 % EOU, the goods received from DTA under benefit of deemed export under paragraph 8.3 (a) and (b) of the Foreign Trade Policy shall also be treated as imported goods. On this basis the SCN contends that the goods manufactured and cleared in DTA by use of raw-material procured from EOU as well as from indigenous Vendor against invalidation of Advance Authorization are treated as imported goods, hence, the finished goods is not eligible for exemption under serial no. 3 of Notification 23/2003-CE dated 31.03.2003. Accordingly, the demand of Rs. 1,87,87,516/- was proposed under the proviso to Section 11A (1), the interest under Section 11AA was proposed to be demanded, the penalty under Section 11AC was also proposed to be imposed. The show cause notice was culminated into adjudication order which is impugned herein, whereby the proposal made in the SCN were confirmed. The adjudicating authority also directed to enforce B-17 Bond for recovery of the adjudged dues; therefore, the appellant filed the present appeal.
2. Shri. Prasad Paranjape appearing on behalf of the appellant at the outset submits that the entire demand is time barred as the same is pertaining to the period 01.04.2006 to 31.03.2008 for which the SCN was issued on 01.04.2011 invoking extended period. He submits that the appellant was under bonafide belief that since raw material procured by them is manufactured in India, they are entitled for the exemption under serial no. 3 of Notification 23/2003-CE. He further submits that this issue had been decided by Hon'ble Supreme Court in the case of CCE Surat-I Vs. 2012 (278) E.L.T. 145 (SC) wherein the
3| E/10145/2015-DB Supreme Court has allowed the exemption in respect of goods manufactured by EOU by use of raw-material supplied by another EOU on the ground that the finished goods produced is out of raw-material produced or manufactured in India. Though this judgment was for the past period but the appellant was availing exemption on that basis only, therefore, there is no malafide intention on the part of the appellant. He further submits that since the appellant is an EOU, procurement of raw-
material from EOU or from Advance License Holder is well within the knowledge of the department and while clearing the final product, in the invoice as well as in there ER-2 return claimed the exemption Notification under 23/2003-CE declaring the particular serial number 3 of the exemption entry. Therefore, right from procurement of raw-
material from EOU/Advance License Holder, manufacture of finished goods and clearances thereof were very much within the knowledge of the department, therefore, there was no suppression of fact. He further submits that the Ld. Commissioner has discarded the aforesaid submission of the appellant on limitation by alleging that since the appellant have given B17 Bond, limitation for issue of demand under Section 11A will not applicable. He further submits that once the proviso to Section 11A(1) invoked than the ingredient of said proviso must be satisfied for raising demand for longer period under Section 11A (1) and proviso thereof. Since, there is no suppression of facts even though the B17 Bond was filed, the demand for extended period could not have been made. In support of his submission, he placed reliance on the following judgments:-
Anand Nishikawa Co. Ltd Vs. CCE, Meerut, 2005 (188) ELT 149 (SC)
4| E/10145/2015-DB Meghmani Industries Ltd. Vs. CCE, Ahmedabad-I, 2010 (261) ELT 411 (tri.Ahmd.) Jain Grani Marmo Pvt. Ltd Vs. CCE, Jaipur- II, 2009 (246) ELT 754 (Tri.Del.) Emcure Pharmaceuticals 2014 (307) ELT 180 (T) affirmed by Hon'ble Bombay High Court in 2016 (342) ELT 172 (Bom.) Madhu Silica Pvt. Ltd 2016 (344) ELT 1072 (T)
3. He submits that the Revenue had also issued no dues certificate to the appellant at the time of their exit from EOU scheme, thereby the Revenue had sufficiently examined the record of the appellant and therefore the charges of suppression and consequently, invoking of extended period and levy of penalty under Section 11AC is not sustainable. As regard, enforcement of Bond B17, he submits that the department has no power to enforce the Bond and the same can be done only by the Civil Court as held by this Tribunal in the case of Shri Dudhganga- Vedganda SSK Ltd. 1987 (29) E.L.T. 22 (T). As regard merit of the case, he submits that as per the Hon'ble Supreme Court judgment in the case of Favourite Industry, the appellant is entitled for Exemption. He submits that as per the condition 3(i) of Exemption Notification that the appellant should produced the finished goods from the raw materials, produced or manufactured in India. In the present case, as per the explanation (II) the raw material procured by the appellant is deemed imported goods but the respective suppliers have manufactured those goods in India, hence they continue to fulfil condition 3(i) of the Exemption Notification. He alternatively submits that up till the period, the explanation (ll) was substituted w.e.f 06.07.07. they were entitled to exemption as claimed by them on clearance of finished product manufactured out of the raw material
5| E/10145/2015-DB procured from Vendor who had availed deemed export benefit. The deeming fiction regarding the raw material procured from Vendor who had availed deemed export benefit is imported of goods, was made effective only from 06.07.07., without prejudice he submits that as per the condition prior to 06.07.07, the exemption claimed by the appellant on this category of finished goods manufactured will be valid. Without prejudice, he submits that the demand stands duplicated as in four cases removal of finished goods was considered at its original stage as well as re-issue stage, this demand has to be reduced to this extent.
4. Sh. Sameer Chitkara Ld. Additional Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order.
5. We have carefully considered the submissions made by both the sides and perused the records, we find that the issue involved is that whether the appellant is entitled for exemption under Serial No. 3 of Notification No. 23/03-CE. In the given facts that the finished goods cleared in DTA were manufactured out of the raw material received either from 100% EOU or from the Vendor whose supply of raw material is under deemed export category. After hearing both the sides, we are of the opinion that the appeal can be disposed of on the ground of limitation itself. We find that the appellant is a 100% EOU. Since the dispute relates to the Exemption Notification 23/03-CE which is based on the condition that such goods is manufactured out of raw material produced or manufactured in India. The case is related to the raw material procured from 100% EOU and/or from Holder of Advance Licence. In both the cases, the procurement of raw material was permitted by the departmental authority and CT3 procedure was followed. The sample of CT3 is scanned below:
6| E/10145/2015-DB
7| E/10145/2015-DB From the above CT3, it can be seen that the CT3 was signed by Jurisdictional Superintendent permitting the appellant for procurement of raw material. It is also observed that the appellant in their ER2 Return, filed from time to time to the department, has clearly declared that they are availing the Exemption Notification No. 23/03-CE under particular serial number, i.e. serial number 3. The sample copy of the ER2 Return is also scanned below:
8| E/10145/2015-DB It is also observed that the appellants excise records were also audited during the relevant period. As a token of proof of such audit copy of appellants' record being confirmation of audit is scanned below:
9| E/10145/2015-DB From the above undisputed facts, it is clear that the procurement of raw material from 100% EOU/Advance License Holder, the manufacture of goods out of such raw material and removal of finished goods in DTA under Exemption Notification 23/03-CE under exemption serial No. 3 were disclosed to the department, therefore, there is absolutely no suppression of fact on the part of the appellant. Moreover, the issue involved is of grave interpretation of Notification. The Supreme Court in the case of Favourite Industry (Supra) extended the benefit of same notification interpreting same issue involved in the present case, therefore, the appellant had bonafide belief that since the raw material procured is produced or manufactured within India, they are entitled for exemption on the DTA clearances; therefore, we agree with this proposition that the appellant had no malafide intention to evade the duty of excise. The adjudicating authority despite the fact that there is no suppression of fact or mis-declaration on the part of the appellant contended that limitation shall apply in the case of 100% EOU. We do not agree with the contention of the Ld. Adjudicating authority for the reason that Bond B17 can be enforced only in case where the demand of duty is determined in accordance with law. In the present case undisputedly a SCN was issued and demand was proposed under proviso to section 11A(1), wherein there is no explanation carried out for the purpose of limitation of 1 year or 5 years for clearance made from 100% EOU. Therefore, once the demand is raised under proviso to section 11A(1), the ingredient of proviso for invoking longer period of 5 years should exist in the facts of the case. B17 Bond is only enforced for recovery of the confirmed demand otherwise whole process of adjudication such as issuance of SCN, adjudication, appeal, etc will not be required and straight away, the Revenue can enforce Bond and 10 | E/10145/2015-DB recover the duty without exercising the process of adjudication. Such provision is not available in the statute. In the identical facts and on the legal points, this issue has been considered with reference to the limitation particularly against 100% EOU units in the case of Emcure Pharmaceuticals 2014 (307) ELT 180 (T) which was affirmed by Hon'ble Bombay high Court rejected in 2016 (342 ) ELT 172 (Bom.), the Tribunal held as under :
"Revenue is in appeal against Order-in-Original No: 08/CEX/2010 dated 19/04/2010 passed by the Commissioner of Central Excise, Pune, I Commissionerate.
2. Vide the impugned order, the learned adjudicating authority has set aside the demand of duty on M/s. Emcure Pharmaceuticals Ltd., amounting to ` 2,20,95,478/- as time- barred and accordingly dropped the proceedings initiated vide show cause notice dated 03/07/2009. Aggrieved of the same, the Revenue is before us.
3. In their appeal memorandum it has been urged that under the self-removal procedure, it is the responsibility of the assessee to determine and discharge correct duty liability and, therefore, if this responsibility cast on the assessee is not discharged, then duty demands can be enforced in terms of the B-17 Bond executed without any time-limit. Reliance is placed on the decision of the Tribunal in the case of Endress + Hauser Flowtec (I) Pvt. Ltd. vs. Commissioner of Central Excise, Aurangabad 2009 (237) ELT 598.
3.1. The learned Additional Commissioner (AR) appearing for the Revenue reiterates the grounds urged in the appeal memorandum.
4. The learned counsel for the respondent submits that the impugned order merits to be sustained inasmuch as the appellant had intimated to the department vide letter dated 14/06/2004 informing the jurisdictional Dy. Commissioner that they had obtained permission for advance DTA sale and they would be effecting clearances on payment of appropriate Central Excise duty. In the ER-2 returns filed by the respondent, the respondent had clearly indicated that they have been effecting advance DTA clearances under Notification 23/2003. Thus, the fact of clearing the gods at concessional rate of duty was clearly know to the department. Despite such declarations, show cause notice dated 03/07/2009 has been issued demanding duty for the period April 2004 to March, 2006 and therefore, the demands are clearly time-barred and accordingly he pleads that the impugned order be upheld.
5. We have carefully considered the submissions made by both the sides. From the records it is clearly seen that the respondent had declared to the department that they would be availing the benefit of Notification 23/2003 in respect of advance DTA sales 11 | E/10145/2015-DB to be effected by them in terms of the permission granted by the Development Commissioner as early as in 2004 itself. Therefore, the respondent cannot be said to have withheld any information from the department. The respondents plea that they were entitled for the benefit of exemption under Notification 23/2003 under the belief that they were entitled for benefit of such Notification cannot be said to be a mis-declaration as held by the honble apex Court in Northern Plastics Ltd. vs. Collector of Customs & Central Excise AIR 1998 SC 2371. If the department felt that the respondent was not entitled to such exemption, they should have issued the show cause notice within the period stipulated under Section 11A. Revenues reliance on the decision of the Tribunal in the case of Endress + Hauser Flowtec (I) Pvt. Ltd. (supra) does not come to their rescue for the reason that B- 17 Bonds are executed not only by the 100% EoUs but also units in the DTA. If Section 11A is applicable in respect of units in DTA who have executed B-17 Bonds before the department, the same logic would apply in respect of 100% EoUs as well. Therefore, the argument that merely because the respondent has executed a B-17 Bond they would fall outside the purview of Section 11A is illogical and irrational. One cannot interpret the law in such a way so as to make the provisions of law redundant.
6. In these circumstances, we find no merit in the appeal filed by the Revenue. Accordingly, we dismiss the same as devoid of merits."
The judgment of the Hon'ble Bombay High Court affirming above Tribunal decision is reproduced below:
"We have heard Mr. Bangur, appearing for the appellant. He submits that the questions proposed at pages 5 and 6 are all substantial questions of law.
2. He would submit that they arise from the erroneous understanding of the Tribunal with regard to the applicability of Section 11A of the Central Excise Act, 1944 and secondly, the concessional rate of duty in terms of serial No. 3 of Notification No. 23/2003-C.E., dated 31-3-2003. These are substantial questions of law, according to Mr. Bangur, for the show cause notice was issued on 3-7-2009, within a period of five years. The assessee was working under a scheme of self removal procedure and it was for them to have availed of the Notification if that was applicable. In the present case, there was a wilful misstatement and until the evasion was discovered, it was not possible for the Revenue to proceed. The extended period of limitation is rightly invoked.
3. Upon a reading of the Tribunal's order, we are unable to agree. The Tribunal found and as a matter of fact that whatever may be the procedure adopted and if it contravenes the law, the Department should have taken prompt action. The Department though in the know of things on 14-6-2004, allowed the assessee to avail of the benefit of the above Notification. The Tribunal found that the returns were filed in which the assessee indicated that it effected advance Domestic Tariff Area clearances under Notification No. 23/2003. Thus the fact was known to the Department and hence issuing a show cause notice dated 3-7- 2009 covering a period April, 2004 to March, 2006 was barred.
4. These very facts were, therefore, appreciated by the Tribunal and in arriving at the conclusion that the show cause notice and 12 | E/10145/2015-DB the proceedings in pursuance thereof were barred by limitation. It may be that the Tribunal dealt with an incidental contention of the Revenue. Merely because that incidental question has been dealt with, we cannot loose sight and shift the focus from the main question. The main question was the applicability of Section 11A and invocation of the extended period thereunder. The extended period could not have been invoked in the absence of the requisite ingredients and to be found in Clauses (a) to (e) of sub-section (4) of Section 11A of the Central Excise Act, 1944. This is clearly a finding of fact and reached in the backdrop of the assessee's peculiar case. We do not think that such findings raise any substantial question of law. The Tribunal's view cannot be said to be perverse. It is a possible view of the matter. The appeal is devoid of merits and is dismissed."
Similarly in the case of Madhu Silica Pvt. Ltd, despite the 100% EOU executed B17 Bond, the demand was held time barred in a case where the same Notification No. 23/03-CE was involved. In the said judgment following order was passed:
"4. Heard both sides and perused the case records. Following issues are mainly required to be addressed in these appeals:-
(i) Whether a corrigendum issued after holding a personal hearing in the present proceedings is only a correction of arithmetic error in calculation or has changed the very basis of the original show cause notice dated 14.12.2014?
(ii) Whether no time limit is applicable for raising demands on DTA clearances when a general B-17 Bond has been executed by the main appellant?
(iii) If answer to (ii) above is negative whether extended period of 5 years can be invoked in the present proceedings?
(iv) Whether appellants agitated the issue on merits before the Adjudicating authority?
(v) Whether penalties are imposable upon the appellants in these proceedings?
5. So far as issue mentioned at Para 4(i) above is concerned the main show cause notice dated 14.12.2011 was issued demanding duty of Rs. 1,33,22,958/- as duty payable according to Serial No. 2 of table to Notification No. 23/2003-CE. Provisions contained in Serial No.2 were amended periodically under Notification No. 22/2006-CE dated 01.3.2006 and 10/2008-CE dated 01.3.2008. In view of these amendments carried out in Notification No. 23/2003-CE rate of duty, as per Serial No. 2 of the table to this exemption, was required to be reduced by 75% for the period 01.3.2006 to 28.02.2006 and by 50% with effect from 01.3.208. These changes proposed in the corrigendum dated 18.6.2012 have been suggested as per paragraph 2(d) of the corrigendum as follow:-
"2(d) In view of the above amendments, as per S. No. 2 of the Table of the said exemption Notification No. 23/2003-Central Excise dated 31st March, 2003, the rate of Basic Customs Duty was reduced by 75% from 01.03.2006 to 28.02.2008 and by 13 | E/10145/2015-DB 50% with effect from 01.3.2008 and whereas other duties are leviable at full tariff rate on DTA sale of finished goods by a 100% EOU. Thus, M/s. MSPL is liable to pay Basic Customs duty at the rate of 2.5% up to 28.02.2008 and subsequently, w.e.f. 01.3.2008, they were liable to pay Basic Customs Duty @ 5% along with other duties at full tariff rate on DTA sale of their various finished goods. However, M/s. MSPL had paid duty i.e. equal to excise duty as per Serial No. 3 of the table of the aforesaid notification, thereby M/s. MSPL had short paid duty on DTA sale of their finished goods."
In the remaining part of the corrigendum, it is proposed that for the words instead of paying an amount equal to 50% of duty leviable under Section 3 of the Central Excise Act, as per Serial No. 2 of the said Notification in the original show cause notice the words instead of paying Central Excise duty leviable under Section 3 of the Central Excise Act, as per Serial No. 2 of the said Notification shall be substituted. However, in Para 2(d) of the corrigendum dated 18.6.2012 the words alongwith other duties at full tariff rate on DTA sale of their finished goods is also added. These words have added altogether new parameter by the investigation through the corrigendum dated 18.6.2012 which was not the subject matter of the original show cause notice dated 14.12.2011. Corrigendum dated 18.6.2012 issued suggesting duty calculations change by virtue of amending Notification No. 22/2006-CE dated 01.3.2006 and 10/2008-CE dated 01.03.2008 is permissible as it does not change the basis of the original show cause notice. But suggesting to change all other duties to be paid at full tariff rate on DTA sale of appellants various finished goods, in Para- 2(d) of corrigendum 18.6.2012, is a new point not coming out from the original show cause notice dated 14.12.2011. We are accordingly of the view that corrigendum dated 18.6.2012 is also changing the very basis of duty demand originally proposed in show cause notice dated 10.12.2011. It is thus not correct on the part of the Adjudicating authority, as held in Para 55 of OIO dated 08.1.2013, that no fresh ground is taken in the corrigendum.
6. Regarding issue at Para 4(ii) above, Revenue is of the argument that when a general B-17 Bond has been executed by a 100% EOU then no time limit is applicable. Learned AR has relied upon the order of Mumbai CESTAT in the case of Endress+Hauser Flowtec (I) Pvt. Limited vs. CCE, Aurangabad (supra) and made the Bench go through Para 39 of this order. A carefully reading of this order reveal that issue involved in that case was valuation of the goods cleared in DTA sales and a passing remark was made by the Bench that demand can be raised against a 100% EOU by enforcing B-17 Bond without any time limit. It is also observed that the same Bench later in the case of Sterlite Optical Technologies Limited vs. CCE, Aurangabad [2011 (270) ELT 266 (Tri. Mum.)], after considering Endress+Hauser Flowtec (I) Pvt. Limited vs. CCE, Aurangabad (supra) earlier decided by the same Bench, gave an opinion that Section 28 of the Customs Act, 1962 is the only provision to demand duty if the conditions of a notification are not fulfilled. Still a later case law of CESTAT Mumbai in the case of CCE, Pune vs. Emcure Pharmaceuticals Limited (supra) also distinguished the case law Endress+Hauser Flowtec (I) Pvt. Limited vs. CCE, Aurangabad (supra) by making following observations in Para 5:-
14 | E/10145/2015-DB "5.?We have carefully considered the submissions made by both the sides. From the records it is clearly seen that the respondent had declared to the department that they would be availing the benefit of Notification 23/2003 in respect of advance DTA sales to be effected by them in terms of the permission granted by the Development Commissioner as early as in 2004 itself. Therefore, the respondent cannot be, said to have withheld any information from the department. The respondents plea that they were entitled for the benefit of exemption under Notification 23/2003 under the belief that they were entitled for benefit of such Notification cannot be said to be a mis-declaration as held by the Honble Apex Court in Northern Plastics Ltd. v. Collector of Customs & Central Excise - AIR 1998 SC 2371 = 1998 (101) E.L.T. 549 (S.C.). If the department felt that the respondent was not entitled to such exemption, they should have issued the show cause notice within the period stipulated under Section 11A. Revenues reliance on the decision of the Tribunal in the case of Endress + Hauser Flowtec (I) Pvt. Ltd. (supra) does not come to their rescue for the reason that B-17 Bonds are executed not only by the 100% EOUs but also units in the DTA.
If Section 11A is applicable in respect of units in DTA who have executed B-17 Bonds before the department, the same logic would apply in respect of 100% EOUs as well. Therefore, the argument that merely because the respondent has executed a B- 17 Bond they would fall outside the purview of Section 11A is illogical and irrational. One cannot interpret the law in such a way so as to make the provisions of law redundant."
6.1 It is also observed from the language of Bond B-17 executed by main appellant on 30.6.2004, that the same is mainly with respect to inputs and machinery procured duty free. Rather a subsequent B-17 Bond executed on 17.12.2009 in Annexure-I to the Bond, gives the duty foregone and involved in the Bond. There is no mention of duty with respect to DTA clearances. Para 3 and 11 of the B-17 Bond dated 30.6.2004 talks of said goodsand to be paid within 10 days of a demand made by such officers. Opening Para of the Bond dated 30.6.2004 gives the description of goods as dutiable goods, imported/sourced indigenously by appellant from time to time for manufacture of goods. A Bond is executed by a person binding him to pay duty on certain goods which are being allowed duty free or partially exempted i.e. binding him to pay duty forgone at the time of receipt of goods. The enforcement of B-17 Bond directly under Section 142(1) of the Customs Act, 1962 will be applicable only to the goods procured duty free because a 100% EOU may take more than 5 years from the date of import/ procurement to fulfil its export promotion. No doubt a Clause in Para 12 of the B-17 Bond dated 30.6.2014 exists for goods manufactured and cleared in DTA which reads as follow:-
"12. We, the obligators, shall if the articles so manufactured are and are allowed to be sold in India in such quantity and subject to such other limitations and conditions as may be specified in this behalf by the Director General of Foreign Trade, pay duty of excise leviable on such articles under Section 3 of the Central Excise Act, 1944 and shall pay duty of excise leviable on such article under Section 3 of Central Excise Act, 1944 and duty of Customs & Central Excise leviable on the Raw materials/ Component part used in the manufacture of such 15 | E/10145/2015-DB articles as are not allowed to be sold in India in accordance with the provisions of Exim Policy."
No condition so specified in this regard by DGFT has been brought to our notice. As no duty is foregone even Notification No. 23/2003-CE dated 31.3.2003, as amended, does not require execution of a Bond for DTA clearances by the appellant when the same is issued under Section 5A(1) of the Central Excise Act, 1944. Main appellant has been filing duty payment returns and all intimations of receipt of inputs which are duly assessed by the jurisdictional Central Excise offices. The duty demand with respect to DTA clearance can not be recovered by enforcing B-17 Bond executed by the main appellant, as exemption under Notification No. 23/2003-CE is claimed independently by the appellants and returns filed by the appellants were assessed and deBonding allowed. Accordingly, we hold that provisions of Section 11A of the Central Excise Act, 1944 will be applicable for demanding duty from the main appellant in case conditions of Notification No. 23/2003-CE are not fulfilled.
7. Having held that provisions of Section 11A will be applicable in these proceedings it has to be decided whether extended period is invokable as per issue framed at Para 4(iii) above. Adjudicating authority has upheld invocation of extended period on the grounds that appellants have never disclosed to the department that supplier GHCL was taking deemed export benefit under Para 8.3(a) and (b) and that it was the responsibility of the main appellant to take sufficient precautions when availing an exemption notification as department can not presume availment of such benefits. It is observed from the statements of Director of the main appellant Ms. Neepa Mehta and Shri Darshak R. Shah that none of them ever stated that they were having knowledge that GHCL was availing the benefit of Para 8.3(a) and (b) of the FTP. It is only after being explained by the investigation that they stated that GHCL was availing the benefit of Para 8.3(a) and (b). However, there is a force in the arguments of the learned Advocate that none of the documents received by them from M/s. GHCL indicate anywhere that GHCL was availing the deemed export benefit under Para 8.3(a) and
(b). It is seen from one such invoice No. 0004806 dated 21.5.2009 that following typed endorsement is existing:-
Supplies without payment of duty under CT-1. DIFA File No. 08/91/076/000 71/AM 09 There is no indication on the documents that GHCL is taking deemed export benefit under Para 8.3(a) and (b) of FTP. It is also observed from the case records that appellant was availing benefit under Notification No. 23/2003-CE on similar documents from January 2004, when said amendment was made operative from 06.7.2007. Main appellant was filing due intimations of receipt of these goods alongwith copies of the invoices. If field formation can not presume that supplier of goods was taking benefit under Para 8.3(a) and (b) of FTP then appellants also can not presume of such benefits being availed by the supplier. There is no evidence on record that appellants were aware of GHCL availing deemed export benefit under Para 8.3(a) and (b) of FTP. Revenue is not able to bring any evidence on record that GHCL has availed the benefit of Para 8.3(a) and (b) of the FTP. 16 | E/10145/2015-DB It is observed from the case records that M/s. GHCL Limited vide letter dated 28.11.2011 written to Senior Intelligence Officer, Office of the DGCEI, Navarangpura, Ahmedabad did send copies of two DFIA Licenses No. 0810079587 dated 27.4.2009 and 0810081427 dated 14.07.2009. No copy of these DFIA licenses was furnished by the Revenue before the Bench and also there is no indication whether appellants were shown copies of these DFIA licenses during investigation to the fact that these licenses had endorsements of paragraph 8.3(a) and (b) of Foreign Trade Policy on the face of these DFIA licenses. In view of the above, extended period of five years can not be invoked against the main appellant under proviso to Section 11A of the Central Excise Act, 1944 as there is no evidence of prior knowledge and suppression with intention to evade duty on the part of the appellants.
8. Regarding issue at Para 4(iv) above, learned AR argued that on merits appellants did not agitate the issue before the adjudicating authority. On a plain reading of Para 43 of OIO dated 08.1.2013 passed by the Adjudicating authority it is observed that it clearly convey that appellant has not contested their disentitlement to exemption under Serial No. 3 of Notification No. 23/2003-CE. In the statements of the Directors, it is stated that after having understood the aforesaid Notification we say that DTA supplies were received under Para 8.3(a) and
(b) as per endorsement made by GHCL on invoices. As already observed actual inspection of some of these invoices does not indicate that supplier availing deemed export benefit of paras 8.3(a) and (b) of FTP. Paras 19.1 and 19.2 of OIO dated 08.1.2013, contained in reply of the appellant to show cause notice are relevant and reproduced below:-
19.1 They further stated that much emphasis was laid by the Revenue on the invoices of M/s. GHCL, but even invoices of this raw material supplier also did not clearly show that they had claimed or availed deemed export benefits under paragraph 8.3
(a) & (b) of the FTP for the goods sold and supplied to them.
Since the Revenue had now raised the present dispute, they had closely examined the documents under which GHCL supplied materials to them and they found that only DFIA file number was written on their invoices, but there was no reference at all to para 8.3 (a) & (b) of the FTP on the invoices or ARE-3s of M/s. GHCL also. They were however not aware that DFIA file number shown on the invoices of a raw material supplier would mean that they had availed deemed export benefits under paragraph 8.3 (a) & (b) of the FTP for such supplies and therefore there was o knowledge or information on their part about any such benefits of deemed export having been availed by any raw materials suppliers, and it is also a matter of fact that any of these suppliers had actually not availed any such benefits as was clarified by two raw material suppliers interrogated by the investigating officers in this case.
19.2 They, in the above premises, submitted that Revenue has not established that they were aware that the raw material suppliers had availed deemed export benefits under para 8.3 (a) & (b) of the FTP for the raw materials supplied to them, the 17 | E/10145/2015-DB Revenue has also not established whether they knew that the raw materials received by them were to be treated as imported goods for the purpose of Notification No. 23/2003-CE, the Revenue has also not established that they were required to pay excise duties on DTA clearances at the rate prescribed underSI.No.2 of the above Notification because they had used raw materials procured in the above manner for manufacture of the finished goods cleared in DTA, and the Revenue has also not established that they had deliberately suppressed certain relevant facts though they knew about the same and that therefore they were guilty of deliberate suppression of facts with an intent to evade payment of Central excise duty on DTA clearances. The larger period of limitation is therefore invoked illegally and without jurisdiction.
8.1 In view of the above, it is not correct to say that appellants have not contested the issue on merits. However, the argument taken by the appellants that DFIA licenses could also be issued under paragraphs 8.4.2, 8.4.3, 8.4.4 (iv) and (v) before this Bench, was not taken up before the adjudicating authority.
9. Regarding issue at Para 4(v) above, as regards imposition of penalties upon the appellants, it is observed for the reasons recorded above that Revenue is not able to bring any evidence on record that appellants were aware of GHCL taking deemed export benefits under paragraph 8.3(a) and (b) of the FTP, therefore, extended period is not applicable and no penalties are imposable upon the appellant.
10. In the light of our observations made in Para 5 above, corrigendum dated 18.6.2012 does change the very basis of the duties calculated in the original show cause notice by also suggesting calculation of other duties at tariff rates. As the corrigendum dated 18.6.2012 has been issued after a period of one year from the relevant dateand is accordingly held to be time barred. However, the original show cause notice is issued on 14.12.2011 and the period of demand is 06.7.2007 to April 2011, therefore, the entire period is not time barred. For this matter, the case will be required to be remanded back to the adjudicating authority for quantification after providing documentary evidence to the main appellant that supplies made by the GHCL to the main appellant were under Para 8.3(a) and
(b) of the relevant FTP. Needless to say that Adjudicating authority will give an opportunity of personal hearing to the main appellant before deciding this limited issue in remand proceedings, in view of observations made in Para 8 and 8.1 above.
11. Except to the extent indicated in Para 10 above, appeals filed by the appellants are allowed.
In the case of Jain Grani Marmo Pvt. Ltd (Supra), the demand against 100% EOU was held time barred on the ground that there is no suppression of fact and mis-declaration. The Hon'ble Gujarat High Court in the case of CCE Vs. Meghmani Industries Ltd. 2013 (288) ELT 514 18 | E/10145/2015-DB (Guj.) affirmed the Tribunal decision whereby the demand of extended period was dropped in the case of 100% EOU. The relevant para of the order is reproduced below:
"43. Thus, the principles of law discernible from the authoritative pronouncements referred to above are plain and clear. To make the demand for duty sustainable beyond the period of six months and upto a period of five years in view of the proviso to Section 11A of the Act, the Revenue is obliged to establish by cogent evidence that the duty of excise has not been levied or paid or short-levied or short-paid or erroneously refunded by reasons of either fraud or collusion or wilful mis- statement or suppression of facts or contravention of any provision of the Act or rules made thereunder, with intent to evade payment of duty.""
6. In view of above judgment, the contention of Ld. Commissioner that since B17 Bond was executed by the appellant limitation shall not apply is not sustainable. As per our above discussion and settled legal position on the issue of limitation particularly in respect of 100% EOU, the demand is not sustainable on limitation as the SCN was issued beyond the period of 1 year. Accordingly, the impugned order is set aside only on the ground of limitation without going into the merit of the case. The appeal is allowed.
(Pronounce in the open court on 01.11.2018)
(Raju) (Ramesh Nair)
Member (Technical) Member (Judicial)
Seema