Custom, Excise & Service Tax Tribunal
M/S. Cosmo Ferrites Ltd vs C.C.E. Chandigarh on 16 May, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, WEST BLOCK-2, R.K. PURAM NEW DELHI
PRINCIPAL BENCH, COURT NO. II
Excise Appeal No. E/3648/2006, E/2758/2007, E/334/2008-EX(DB)
[Arising out of Order-in-Appeal No. 814/CE/CHD/2006 dated 6.9.2006/Passed by Commissioner of Central Excise, (Appeal), Chandigarh]
2. Order-in-Appeal No. 283/CE/CHD/2007 dated 17.10.2007
3. Order-in-Appeal No. 700/CE/CHD/2007 dated 7.12.2007.
For approval and signature:
Honble Mrs. Archana Wadhwa, Judicial Member
Honble Mr. Manmohan Singh, Technical Member
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 Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
M/s. Cosmo Ferrites Ltd. Appellants
Vs.
C.C.E. Chandigarh Respondent
Appearance:
Shri J.P. Kaushik, Advocate for the Appellants Shri M.S.Negi, DR for the Respondent CORAM:
Hon'ble Mrs. Archana Wadhwa, Member (Judicial) Hon'ble Mr. Manmohan Singh, Member (Technical) Date of Hearing:25.9.2013 Date of pronouncement : 16/5/2014 FINAL ORDER NO.52136-52138/2014 Per Manmohan Singh Appeal No E/3648/2006 has been filed by Cosmo Ferrites Ltd. against Order- in- Appeal No 814/CE/CHD/2006 dated 6.9.2006 and Appeal Nos. E/2758/2007 & E/334/2008 by the Revenue against Order in Appeal Nos. 283/CE/CHD/07 dated 23.07.07 and 700/CE/CHD/07 dated 7.12.07, respectively. In the Order-in-Appeal dated 6.9.2006 duty has been confirmed against Cosmo Ferrites Ltd and the assessee is in appeal against it. In the Orders in Appeal dated 23.07.07 and 7.12.07 demands have been dropped by the Commissioner (Appeals) and Revenue is against that. As issues involved is common all the Appeals are taken together for disposal.
2. Facts of the case are briefly explained. Assessee was a manufacturer of Soft ferrite powder and Soft Ferrite Components. Their factory was situated in Solan H.P. for the manufacture of the said products. They imported raw materials ferric oxide, manganous manganic oxide, manganous oxide, polyvinyl alcohol and polyethylene at concessional rate of duty under exemption Notification No. 25/1999 Customs dated 28.02.1999 (S. Nos 17 & 54 of Part A of the Notification). For this purpose, they had duly executed Bond with the Assistant Commissioner of Customs & Central Excise Shimla H. P. under Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. Impugned raw materials have been imported by filing Bills of Entry with the Assistant Commissioner of Customs at Mumbai. Due intimation regarding their being registered under Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 was sent by the Assistant Commissioner Shimla to the Assistant Commissioner Customs Mumbai. Based on that information, the impugned raw materials were cleared at concessional rate of duty by the Assistant Commissioner Mumbai under the above said exemption notification. The impugned raw materials were duly accounted for in their statutory Central Excise records and manufacturing of the intended final products was duly certified by the jurisdictional Central Excise officers.
3. The demand arose for the reasons that subsequently Revenue felt that the assessee was not entitled for concessional rate of duty for import of the said raw materials under the impugned exemption notification in as much as the said raw materials were not eligible for exemption under the said S. No (17 and 54) of the Notification as the said S.Nos covered the finished goods Ferrites and not Soft Ferrites or Ferrite powder whereas these final products were, instead, properly covered under S.No. 148 of the same exemption notification. This S. No. 148 of the exemption notification is specifically for Pre-calcined Ferrite Powder but did not cover the impugned raw materials imported by the assessee. Therefore Revenue holds that the impugned raw materials were not eligible for exemption under impugned Notification No. 25/1999 Cus.
4. Ld. Counsel assailed the Revenues case on merits, limitation as well as on jurisdiction. Regarding jurisdiction, counsel claimed that the matter pertained to the exemption of import duty of Customs where the Bills of Entry have been duly assessed by the Assistant Commissioner of Customs, Bombay whereas the Show Cause Notice has been issued by the Assistant Commissioner of Central Excise Shimla; that Assistant Commissioner Central Excise has no jurisdiction in the matter as Bills of Entry have been assessed by the Assistant Commissioner Customs Bombay. He also relied on Tribunal decision in the case of Molex India Ltd. vs. CC Bangalore reported as 2012 (275) E.L.T. 607 (T). He referred to the charging clause in the Show Cause Notice was Section 11A of the Central Excise Act, whereas the exemption pertained to Customs import duty. He contended that on this account, demand was not sustainable.
5. On limitation, the ld. Counsel submitted that the entire matter was in the knowledge of the Revenue and the exemption was availed with due approval of the Assistant Commissioner, Shimla; that therefore Revenue could not allege any suppression of facts on part of the assessee. On the merits of the case, he submitted that Ferrites includes Soft Ferrites and Ferrite Powder as these were only intermediate products for manufacture of Ferrites; that the notification did not differentiate between Soft Ferrites and Ferrites as claimed by the Revenue and therefore S. No. 17 and 54 of the impugned notification would cover Ferrite in any form i.e. Powder Soft (Pre Calcined) Ferrites and Calcined Ferrites.
6. Ld DR on the other hand submitted that the jurisdiction is a fresh issue taken up by the assessee before the Tribunal and was not argued by them before the lower authorities; that in of Supreme Court decision in the case of Pahwa Chemicals Pvt Ltd 2005 (181) ELT 339 (SC) it was held that in case the SCN has been issued by an authority not having proper jurisdiction then the same is to be remitted to the authority having proper jurisdiction; that the SCN in such a situation should not be dismissed for jurisdiction alone. He further argued that the assessee was working under Bond in terms of Notification No. 25/1999 Customs read with Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996, and had furnished Bond with undertaking with the Assistant Commissioner Central Excise Shimla; that therefore for any default the jurisdictional Assistant Commissioner was the proper authority to enforce the Bond; that therefore issuance of SCN by Assistant Commissioner, Shimla was proper. He also relied upon Tribunal decisions in the case of Samtel Color Ltd. vs. Collector reported as 2000 (126) E.L.T. 1256 (T) and Tribunal Larger Bench decision in the case of Ferro Alloys Corpn. Ltd vs. CCE reported as 1995 (77) E.L.T. 310 (T). He also drew our attention to Rule 8 of the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 in terms of which rule it is the jurisdictional Central Excise Assistant / Deputy Commissioner who is to enforce recovery in such cases.
7. On the issue of charging of duty under Section 11A of Central Excise Act, 1944 instead of Section 28 of the Customs Act, Ld. DR submitted that it was a condonable mistake of misquoting of the legal provision when the issue clearly was recovery of the import duty as was clearly made out form all the SCNs and that in any case in the 3rd SCN (pertaining to Appeal No E/334/2008) the provisions are correctly invoked as Section 28 of the Customs Act, 1962.
8. On merits of the case the ld. DR contended that the Notification No. 25/1999-Cus. initially had only Ferrites as final product under S. No. 17 and 54 but that the Notification was subsequently amended and S. No. 148 was added on 1.3.2002 vide Notification No.26/2002-CE dated 01.03.2002 and Sl. No. 189, 191, 192 and 193 were added on 08.01.2004 vide Notification No. 9/2004-CE dated 08.01.2004. Out of these Sl. Nos. 148 was for finished goods Pre Calcined Ferrite Powder (Spray Dried) and S. Nos. 189, 191 and 192 are for Pre Calcined Ferrite Powder / Soft Ferrite Parts while S. No. 193 is for Ferrites. He stated that S. No. 17 and 54 are for finished goods Ferrites. Therefore, clearly the amending Notification makes a distinction between granting exemption to eligible goods for import for manufacture of the finished goods Pre-Calcined Ferrite Powder / Soft Ferrite Parts and the Ferrites; that the impugned raw materials imported by the assessee were eligible only under S. Nos. 17 and 54 where the finished goods were Ferrites. It was contended that the assessee was not producing Ferrite and thus they were not eligible under other S. Nos. of the Notification; that as the notification itself differentiates between Ferrite Powder/ Soft Ferrits and Ferrites i.e. Calcined Ferrites, therefore assesses submission that these are all covered under Ferrites should not be admitted. He also submitted that the Exemption Notifications are to be strictly read and interpreted and no extra concessions, to what has not been specifically provided in the exemption notification, is to be allowed. It was also explained that the main difference between Soft (Pre Calcinated) Ferrites and Hard (Calcinated) Ferrites is that Soft Ferrites do not retain magnetization whereas in Hard Ferrites magnetization is permanent and that this property which is called coercivity is of importance in electronics where Ferrites are used. He also pointed out that M/s Cosmo Ferrites in their classification list and ER1 had declared Soft Ferrites Parts under sub heading 8529 and Pre Calcined Ferrite Powder under sub heading 3824.90 of the Central Excise Tariff Act, 1985 and no goods have been declared as Ferrites by them.
9. As regard limitation ld. DR claimed that the assessee had mislead the Revenue and that the impugned raw materials were not eligible for exemption under Notification No. 25/1999- Cus as the final products being manufactured by the assessee were Pre Calcined Ferrite Powder and Soft Ferrite Parts which were covered under S. No. 148 of the Notification and not under S. No. 17 and 54 of the Notification. He pointed out that the raw materials imported were only eligible for S. No. 17 and 54 of the Notification and were not eligible for exemption under S. Nos. 148 of the Notification. He also submitted that entire demand was not under extended period.
10. Heard both sides and also gone through the case records.
11. It is observed that there are three appeals under consideration. One appeal has been filed by the assessee and two by the Revenue. Brief details are given below:-
Sl.No. Appeal No. Period Duty involved in Rupees
1. Revenue Appeal No. E/2758/2007 10.12.2004 to 30.6.2006 Rs.1,64,684/-
2. Revenue Appeal No. E/334/2008-EX 01.7.2006 to 30.4.2007 Rs.1,01,185/-
3.
Assessees Appeal No. 3648/2006-EX January 2000 to November 2004 Rs.27,62,007/-
Issue raised in all three Appeals revolves around three matters relating to jurisdiction, time bar and merit. First we will test the matter relating to jurisdiction and time bar and later consider merit, if required. Appellants have raised these matters relying upon CESTAT's judgment in the case of M/s Molex (I) Ltd. 2012(275) E. L. T. 607 (Tri. Bang.) that two show cause involved in Order-in-Appeal No.814/CE/CHD/2006 dated 06.09.2006 and Appeal No. E/2758/2007 issued by the Revenue were without jurisdiction as demand has been raised under Section 11A of the Central Excise Act when demand could have been raised only under Section 28 of the Customs Act, 1962. Further issue relating to Central Excise Officer not being proper officer has also been raised. It is contended that demand could be raised by Customs Authorities of concerned port only. Ld. DR in reply has relied upon Tribunal's judgment in the case of Samtel Colour Ltd. 2000(126) E. L. T. 1256 and Ferro Alloys Corpn. Ltd vs. CCE reported as 1995 (77) E.L.T. 310 (T- LB). He also referred Rule 8 of the Customs (Import of Goods at Concessional Rate of Duty from Manufacturer of Excisable Goods) Rules, 1996 which reads:
8. Recovery of duty in certain case. - The Assistant Commissioner of Central Excise shall ensure that the goods imported are used by the manufacturer for the intended purpose and in case they are not so used take action to recover the amount equal to the difference between the duty leviable on such goods but for the exemption and that already paid at the time of importation.
12. On going through the Tribunal decision in the case of Molex (I) Ltd vs. CC, Bangalore we find that the demand for Customs duty was raised by the Deputy / Assistant Commissioner Central Excise, Bangalore and the same was confirmed by the original authority under Rule 8 of the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. Tribunal after considering the matter held that recovery under Rule 8 of the Rules, ibid by the Deputy/ Assistant Commissioner of Central Excise was without jurisdiction. We note that the same is not the case here as the duty of Customs is not being recovered by the Revenue under Rule 8 ibid but under Section 11A of Central Excise Act or Section 28 of the Customs Act. In the Samtel Color Ltd vs. Collector 2000(126)ELT 1256 it was held by the Tribunal that when imported goods are not used as per certificate of registration under Rule 3(2) of the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996, Assistant Commissioner having jurisdiction over his factory shall have jurisdiction to issue notice for recovery of differential duty under Rule 8 ibid, and not the Assistant Commissioner of Customs at the port of importation. Further in Ferro Alloys Corpo Ltd vs. Collector Customs (Appeals), Bhubneshwar, Tribunal Larger Bench held that the jurisdiction for raising demands for short levy of Customs duty under Section 28 of the Customs Act, 1962 lies with proper officer having jurisdiction over Export Oriented Unit and not Customs House where goods were assessed. We also find that the ratio of the Larger Bench decision is being consistently followed. We also note that Rule 8 of the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 also specifically provides so. Therefore following the Larger Bench, we hold that for recovery of the differential duty of Customs for the goods imported under the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996, it is the Deputy/ Assistant Commissioner having jurisdiction over the factory of production, with whom the importer assessee had filed bond for the purpose, is the proper officer for such recovery and that the recovery proceedings are to be in terms of Section 28 of the Customs Act, 1962.
13. However we find force in the contention of learned Counsel that the show-cause notices in Appeal No. E/3648/2006 and E/2758/2007 have been issued under Section 11A of the Central Excise Act, 1942 by the Deputy/Assistant Commissioner of Central Excise for recovery of differential duty of Customs in respect of the goods imported by them and cleared on payment of duty at concessional rate in terms of the relevant Customs Notifications are without justification as notices should have been issued under Section 28(1) of the Customs Act 1962. We note that the demands have been confirmed by the original Adjudication Authority under Section 11 A of the Central Excise Act. Hence we hold that the ratio of the Tribunal decision in the case of Molex India Ltd as referred by the Ld Counsel squarely applies. We hold that demand raised and confirmed under Section 11A of the Central Excise Act instead of Section 28 of the Customs Act 1962 are not valid being not issued under proper provisions of law.
14 On the issue of limitation, it is observed that exemption from Customs duty for import of inputs for their use in Ferrite under Notification No. 25/1999-Cus was availed only after due approval from the jurisdictional authorities. Importation at concessional rate was allowed under notification No. 25/1999-Cus only after jurisdictional authorities issued CT3 certificate. Such certificates were issued after checking availability of concession as specified in the notification along with other conditions. Invocation of extended period of limitation has been alleged in the Show Cause Notices on the grounds that assessee did not disclose full facts to CT3 issuing authority. It is observed that it was for concerned authorities to check the veracity of the declaration. Normally such permissions are granted only after due verifications by the jurisdictional authorities. Once importation was allowed with proper authorization by the competent authority, to invoke extended time of limitation is not permissible. Thus on this account, we find force in the contention of counsel that demands are time barred as invocation of extended period was not justified. Consequently assessees appeal No. E/3648/2006 succeeds and Revenues appeal No. E/2758/2007 fails both on limitation and as well as on jurisdiction. Accordingly there is no need to look into merits.
15. Now coming to third Appeal No. E/334/2008 we find that the demand has been raised and confirmed by the Assistant Commissioner of Central Excise, Shimla under Section 28 of the Customs Act, 1962. In para 12 above, we have already held that the same is correct and proper on jurisdiction. Therefore now sustainability is to be considered on merits.
16. On the 'merits' of the issue i.e. whether or not Ferrites would also cover Soft Ferrite Parts / powder, it is observed that till 1.3.2002, the impugned notification No.25/1999-Cus mentioned only Ferrites under S No 17 and 54. There was no separate reference to Soft Calcined Parts or Pre Calcined Powder. Therefore at that relevant time, there was bonafide belief with both sides that words Ferrites encompassed both Calcined Ferrites as also Pre Calcined Powder and Soft Ferrites. It is evident that when there was bonafide belief, there was no scope to raise demand by invoking extended period of limitation, by alleging suppression of facts under proviso to section 28 of Customs Act, 1962. Therefore demand for up to the period i.e 1.3.2002 is not sustainable. However situation is different from 1.3.2002 when notification No. 26/2002-CE dated 1.3.3002 amending the earlier notification was issued which was later followed by another notification No. 9/2004-CE dated 8.1.2004. The details are given in para 8 above.
17. The period involved in 3rd appeal No E/334/2008 is 01.07.2006 to 03.04.2007. SCN was issued on 26.6.2007. We find that the normal period for limitation for issue of SCN, under Section 28 of the Customs Act, 1962 was 6 months from the date of import at the relevant time. Therefore some portion of the demand would be within normal period of limitation. However remaining period, gets hit by limitation. Now on going through the impugned notification, we find that during this period, there are several entries in the notification regarding the finished goods Ferrites, Pre Calcined Ferrite Powder and Soft Ferrite Parts. For previous period, there were only two entries at Serial No. 17 and 54 when the basic notification was introduced on 28.2.1999 and later on S. No. 148 was added on 1.3.2002 vide notification no. 26/2002 and S. Nos. 189, 191, 192 and 193 were added on 8.1.2004 vide notification no. 9/2004 Cus. Of these S.Nos, S. No. 17, 54 and 193 are for Ferrites whereas S.Nos. 148 is for Pre Calcined Ferrite Powder and rests are for Soft Ferrite Parts/ Pre Calcined Ferrite Powder. Therefore for the interpretation of this notification, for the period 1.7.2006 to 3.4.2007 with the amendments as noted, it is clear that Ferrites are distinct and different form Soft Ferrites (Pre Calcined) Powder and Soft Ferrite Parts i.e. while the Pre Calcined Powder and Soft Ferrite Parts do not retain magnetization, however the Hard i.e. calcined Ferrites are permanently magnetized. The notification holds Soft Ferrite Parts and Ferrite Powder (Pre Calcined) on same footing. Therefore we hold that after the amendment, Ferrites are not to include Pre Calcined Ferrite Powder or Soft Ferrite Parts. Further it is observed that assessees own classification Lists declare the Soft Ferrite parts under sub heading 8529 and Pre Calcined Ferrite Powder under sub heading 3824.90. As already noted, the difference between the Pre Calcined Ferrite Powder /Soft Ferrite Parts and the Ferrites is that of reversibility of the magnetization. This obviously is an essential factor in the electronic industry where these goods are to be used.
18. In view of above amendments, we find that the Soft Pre Calcined Ferrite Powder / Parts and Ferrites (Calcined) are distinct and different and could not be held to be the same. Therefore for the period after amendment to the notification vide amending notifications no. 26/2002 w.e.f. 1.03.02 and specifically vide no. 9/2004 Cus dated 8.1.04 in the impugned notification, Ferrites are to be held as distinct and different from the Soft (Pre Calcined) Ferrite Powder and Parts. Further we note that the Commissioner (appeals) in paragraph 20 internal page 7, of his order dated 6.09.2006 (Appeal no. E/3648/2006) has noted that it has been established beyond doubt that the Appellants have manufactured Pre Calcined Ferrite Powder (spray dried)from the imported inputs which have been further used by their buyers in the manufacture of Ferrites as is evident from the end use certificate from the buyers produced by them.
19. As the assessee itself declared that ferrites were manufactured by their buyers, it was evident that their products were Pre Calcined Ferrites/ Powder only. The reasoning of the Commissioner (Appeals) in his Order dated 07.12.2007 ( in Appeal E/334/2008) that Ferrites include both Pre Calcined Powder/ Ferrites as well as above is, therefore, not justified as he has not appreciated the main notification No. 25/1999-Cus and its subsequent amendments as referred above. Thus reasoning adopted by Commissioner (Appeals) is not sustainable and Revenues Appeal is liable to be upheld.
20. On the basis of above findings, we hold that the demand for differential duty of customs for the normal period of limitation for appeal no. E/334/2008 is recoverable from the assessee. As no such computation is available in records, we propose to remit the matter back to the original adjudicating authority to re-quantify the demand. It is ordered accordingly. Assessee is also directed to submit necessary records before adjudication authority within three months of the order for such quantification. However, as we have already held that there is no suppression mis-statement or malafide on the part of the appellant, we set aside the penalty imposed in the present appeal.
21. Of the remaining two appeals as already noted, appeal E/3648/2006 is allowed and appeal no. E/2758/2007 is rejected.
22. The three appeals are disposed off on the above terms.
(Pronounced in the open court on __________)
(MANMOHAN SINGH) (ARCHANA WADHWA)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
K. Gupta
2