Customs, Excise and Gold Tribunal - Delhi
Uniworth Textiles Ltd. vs Cce on 13 November, 2006
Equivalent citations: 2007(114)ECC361, 2007ECR361(TRI.-DELHI), 2007(210)ELT537(TRI-DEL)
ORDER M.V. Ravindran, Member (J)
1. This appeal is directed against the order-in-appeal dated 22.06.2004, which upheld the order-in-original vide which confiscation was ordered and penalty was imposed on the appellant.
2. The relevant facts that arise for consideration are, appellant is a 100% EOU and procures inputs for the manufacture of final products under notification No. 13/81-Cus dated 9.2.1981 as amended from time to time. Officers of the Central Excise HQ, Raipur visited the factory premises of the appellant and on physical stock verification found an excess quantity of input Polywool Yarn and seized the same. A show cause notice was issue to the appellant proposing confiscation of the said seized yarn and also for imposition of penalty. Appellant resisted the show cause notice on the ground that they being a100% EOU were under the physical control of the Customs officers and hence there cannot be any movement of the inputs or finished goods from or to their factory without being in knowledge of the department, that the excess input was due to the fact that though the inputs were issued to the production department, the same was not lifted due to space shortage. The adjudicating authority did not accept the contentions and ordered for confiscation of the goods under Section 111(o) of the Customs Act, 1962, with an option to redeem the same on payment of redemption and imposed penalty under Rule 173Q and 226 of the Central Excise Rules, 1944. On an appeal the learned Commissioner (Appeals) concurred with the findings of the adjudicating authority on confiscation but reduced the penalty.
3. The leaned advocate appearing for the appellant submits that the confiscation ordered under Section 111(o) of the Customs Act is not applicable in this case as the said provisions will apply only if there is any violation of the conditions of the exemption notification. It is his submission that the seized inputs were procured by the appellant under notification No. 13/81-Cus as amended and they have not violated any conditions of the said notification. He relies on the decision of the division bench of the tribunal in the case of DSL Software India Ltd. v. CC, Bangalore as reported at for this submission. It is also his submission that penalty has been imposed on the appellant under Rule 173Q and 226 of the Central Excise Rules, 1944 and are not applicable in this case as the appellant is functioning under Rules 100B of Central Excise Rules, 1944 i.e. under Chapter VA, which is excluded from application of provisions of Chapter VII A which incorporates the penalty provisions under Rule 173Q. On merits it is his submission that the appellant being a 100% EOU is under the physical supervision of a Customs officer round the clock, hence there cannot be any inflow or outflow of material without being recorded. Further it was his submission that the appellant has given a total reconciliation of the inputs received and consumed in their factory, which would indicate that there are no excess inputs received in the appellant's factory.
4. The learned DR on the other hand submits that it was for the appellant to maintain the accounts properly in their unit and having not maintained the same it was for the appellant to give a proper explanation. It was his submission that the provisions of Section 111(o) would apply in this case and confiscation is correctly ordered. It is further submitted that though the penalty is imposed under Rule 173Q, the adjudicating authority has also invoked the provisions of Rule 226 for imposition of penalty, and it is clear that the appellant having not maintained proper accounts is liable for imposition of penalty. He submits that the reconciliation submitted by the appellant is of no much consequence as the said reconciliation was submitted belatedly and hence could not be verified.
5. Considered the submissions made by both sides at length and perused the records. The issue involved in this case is whether the provision of Section 111(o) of the Customs Act, 1962 will apply for the confiscation of the excess found inputs in the appellant's factory. It is undisputed that the appellant is 100% EOU and procures the input Polywool Yarn under notification No. 13/81-Cus as amended, for the manufacture of final products. The provisions of Section 111(o) of the Customs Act needs to be read:
any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer
6. It can be noticed that the confiscation of the goods imported can be ordered under Section 111(O) only if they are violating the conditions of exemption notification or any other law for the time being in force. It is noticed from the order of the lower authorities that there are no findings as to that the appellant having violated any of the conditions of the notification No. 13/81 - Cus as amended in respect of the seized inputs and hence the said goods are not liable for confiscation. The confiscation has been ordered only on the ground that the there is a variation between the book stock and physical stock. To my mind for confiscation under Section 111(O) the Customs Act, 1962, it has to be shown that there was violation of the exemption notification. It was the contention of the departmental representative that, the mismatch of the stock would get covered under the second limb of the provisions of the Section 111(o) i.e. violation of or any other law for the time being in force. It would be very difficult to accept the proposition propounded by the learned DR,. It is seen from the wordings of the Section 111(o) that the confiscation can be ordered only if there is violation of the conditions of the exemption granted to the imported goods and not merely that there was violation of any other law for the time being in force. To my mind these provisions are to be read with the words "any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act." The doctrine of "ejusdum generisis" would squarely apply in this case. The Hon'ble Supreme court in the case of Collector of Central Excise, Bombay v. Maharashtra Fur Fabrics Ltd., as reported at has held as under:
6. It is a well established principle that general terms following particular expressions take their colour and meaning as that of the preceding expressions, applying the principle of ejusdem generis rule, therefore, in construing the words "or any other process", the import of the specific expressions will have to be kept in mind. It follows that the words" or any other process" would have to be understood in the same sense in which the process, including tentering, would be understood.
7. The law as settled by the Hon'ble Supreme Court will cover the issue in the present case.
8. A division bench of the tribunal in the case of DSL Software India Ltd., (supra) have also held that:
Confiscation (Customs) - Violation of exemption notification conditions - Only in such case Section 111(o) of Customs Act, 1962 can be invoked, and not in other cases.
9. In view of the facts and circumstances that there is no allegation of the violation of the conditions of the notification No. 13/81-Cus as amended, respectfully following the ratio of the decision of the Hon'ble supreme court and Tribunal, the confiscation of the inputs by the authorities under provisions of Section 111(o) of the Customs act, 1962 is unsustainable. The confiscation is set aside. Since the confiscation is set aside the penalty imposed on the appellant is also liable to be set aside.
10. Accordingly, the impugned order is set aside and appeal allowed with consequential relief.
(Pronounced in the open court on 13/11/06)