Custom, Excise & Service Tax Tribunal
Jindal Vijaynagar Steel Ltd vs Commissioner Of Customs (E.P.) Mumbai on 11 March, 2010
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI APPEAL NO. C/837,838,839/09 (Arising out of Order-in-Original No. CAO/No.226/2000/CAC/CCRS dated 22.6.2000 passed by the Commissioner of Customs (E.P.) Mumbai. For approval and signature: Honble Shri B.S.V Murthy, Member (Technical) Honble Shri Ashok Jindal, Member (Judicial) ============================================================
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Jindal Vijaynagar Steel Ltd.
:
Appellants
Saijan Jindal
R.P. Nangalia
VS
Commissioner of Customs (E.P.) Mumbai.
Respondents
Appearance
Shri J.J. Bhat, Sr.Advocate with
Shri Vipin Kumar Jain, Krishna Kumar and
Shri Vishal Agarwal, Advocate For Appellants
Shri K.M. Mondal, Consultant Authorized Representative
CORAM:
Shri B.S.V. Murthy, Member (Technical)
Shri Ashok Jindal, Member (Judicial)
Date of decision : 11/03/2010
ORDER NO.
Per : B.S.V. Murthy, Member (Technical)
M/s. Jindal Vijayanagar Steels Ltd., (JVSL) imported capital goods at a concessional rate of duty for an Integrated Steel Plant under EPCG Scheme during the period from 8.8.1996 to 26.2.1997. Capital goods were imported under 19 Bills of Entry. However, the Revenue took up investigation and found they were four contracts executed by M/s. JVSL with foreign counter parts namely Operation Licence Agreement, Engineering Contract, Service Contract and Supply Contract. After investigation, the issue of show cause notice and adjudication proceedings, in the impugned order the conclusion has been reached saying that the value declared by M/s. JVSL is required to be enhanced to the extent of payments made under various contracts to the foreign counter part in view of the fact that these payments was required to be made as precondition for sale of capital goods imported by the appellants. In addition to demanding duty on the enhanced value, goods have been held liable to confiscation under Section 111(m) of Customs Act, 1962 and penalty has been imposed on M/s. JVSL, Mr. Saijan Jindal, and Mr. R.P. Nangalia. On an appeal filed by M/s. JVSL and the other two appellants, this Tribunal vide Order No.185-87/01-A dated 11.5.2001 set aside the impugned order and allowed the appeals. Against this decision of the Tribunal, Revenue filed appeal before the Honble Supreme Court and Honble Supreme Court vide their order dated 21.11.2007 remanded the matter to the Tribunal on the ground that the reliance of the Tribunal on the decision in the case of Collector of Customs Vs. Reliance Industries Ltd. 2000 (2) SCC 114 was wrong since the judgment did not cover the points involved in the case.
2. The appellants filed an application for inclusion of additional grounds in respect of their appeals which was considered and allowed by the Tribunal. Briefly the additional grounds sought to be submitted were:-
(a) The assessments were provisional and therefore in view of the decision of the Honble Supreme Court in the case of Commissioner of C.Ex. & Customs, Mumbai Vs. I.T.C. Ltd. reported in 2006 (203) E.L.T. 532 (S.C.), the show cause notice and the adjudication proceedings were pre- mature. Therefore the order is not at all sustainable.
(b) Since the assessments were provisional, the order holding that goods are liable to confiscation also could not be sustained and they relied upon several decisions of Tribunal.
(c) Interest could not have been demanded in view of (a) and (b) above.
(d) Even if the assessable value was liable to be enhanced, the appellant could not be held liable to pay any differential duty in view of the Circular No. 46/04-Cus. dated 26.7.2004 issued by the Board, wherein it has been clarified that in case of doubts about valuation, jurisdictional Commissioner should bring the facts to the notice of the Board so that the feasibility of increasing value of EPCG Licence and also quantum of export obligation can be considered.
3. On behalf of the appellants Sr. Counsel Shri J.J. Bhatt submitted that the Circular issued by the Board even though issued in 2004, could be applied in the presence case in view of the fact that assessment was provisional and the impugned order and the proceedings were pre-mature. It was his submission that on this ground alone the matter is required to be remanded after setting aside the impugned order so that feasibility of enhancement of value of EPCG licence could be considered. We have gone through the Boards Circular and para 3 of the Circular which is relevant is reproduced below:
In respect of import of capital goods under EPCG Scheme, there is linkage between the CIF value of imported capital goods and the quantum of export obligation fixed against the EPCG Licence by DGFT authorities. Hence, if Customs have any doubts about valuation of imported capital goods in relation to addition of the element of any other charges in value, then before initiating any percipitative action, the jurisdictional Commissioner of Customs should bring this to the notice of Board which will take up the matter with concerned DGFT authorities so that necessary corrective action, if any, is taken simultaneously by Customs and DGFT. There is already a Committee set up for this purpose in which CBEC is also represented. This is also because DGFT will have to simultaneously increase the CIF value of the EPCG Licence and also the quantum of export obligation specified therein. Unilateral action by Customs in such cases may ultimately help the EPCG licence holder to escape the clutches of law because under EPCG Scheme both Customs and DGFT authorities have important roles to play.
4. The perusal of the above paragraph shows that the consideration of enhancement value of licence instead of initiating adjudication proceedings is required to be done before precipitative action. In this case we are in second round of litigation. Therefore, we feel that in view of the considerable delay which has already occurred in view of the fact that adjudication proceedings have already been concluded rightly or wrongly, it would not be appropriate to hold that the benefit of this Circular should be extended to the appellant.
5. The second submission made by the Ld. Counsel was the additional ground which was placed before the Tribunal and allowed. He submitted that out of 19 Bills of Entry under which capital goods were imported 10 Bills of Entries have been provisionally assessed as reported by the Commissioner of Customs (E.P.) vide his letter F.No.S/40-EPCG-123/95. He cited several decisions in support of his contention that once assessment is provisional, show cause notice can be issued for any action only after finalization of the assessment. For this purpose he drew our attention to Section 28 of Customs Act, 1962 which provides for issue of notice within 6 months/1 year/5 years from the relevant date for the purpose of recovery of duty short paid, not paid, not levied etc. He also submitted that the relevant date in respect of provisional assessment has been defined as the date of adjustment of duty after the final assessment. Besides the fact that the law is very clear, he also submitted that there are several decisions and he cited the following decisions in support of this contention in Serai Kella Glass Works Pvt. Ltd. Vs. Collector of C. Excise, Patna [1997 991) E.L.T. 497 (S.C), Commissioner of C.Ex. & Customs, Mumbai Vs. I.T.C. Ltd. 2006 (203) E.L.T. 532 (S.C.).
6. On the other hand, the learned special Counsel for the Revenue submitted that no doubt Honble Supreme Court has held in the case cited by the learned Advocate that when there is provisional assessment, the show cause notice and adjudication proceedings can be started only after the finalization of assessment. But in this case appellants have fraudulently entered into separate agreements which has resulted in gross under valuation of goods and such were not the circumstances in the cases considered by the Supreme Court. Therefore, the decision cited by the learned Advocate cannot be applied to the present case. He took us through several decisions and submitted detailed arguments. The decision cited by him are L. D. Textile Industries Vs. CC, Ahmedabad 2005 (190) ELT 174 (T-LB), Duncans Agro Industries ltd. Vs. U.O.I. & Ors. 1989 939) ELT 511 (Del.), Paharpur Cooling Towers Pvt. Ltd. Vs. CCE, Calcutta-I 1999(107) ELT518 (T), Godrej Foods Limited Vs. Commissioner of Cus. & C. Ex., Indore-II 2004 (172) E.L.T. 178 (Tri.-Mumbai) and Collector of Central Excise, Patna Vs. I.T.C. Limited 1994 (71) E.L.T. 324 (S.C.). The decisions cited by the learned special Counsel for the Revenue no doubt support the case of the Revenue. Even though there are differences as regards facts, we consider it not necessary to go into each and every case in detail and discuss the same for the simple reason that all these decisions are rendered prior to the decision of the Honble Supreme Court in the case of ITC Ltd. cited above by the Counsel for the appellants. In this case also the Revenue had contended that action to recover short levy can be initiated before the final assessment. The logic submitted was that the provisional assessment is also an order of assessment and, therefore, such action can be taken. No doubt this decision was with regard to the provisions of Section 11A of Central Excise Act, 1944, yet, is applicable to the facts of this case in view of the fact that Section 28 of the Customs Act, 1962 is similarly worded. The observations of Honble Supreme Court in para 17 are very relevant and hence the same are reproduced below :
Section 11A of the Act provides for a penal provision. Before a penalty can be levied, the procedures laid down therein must be complied with. For construction of a penal provision, it is trite, the golden rule of literal interpretation should be applied. The difficulty which may be faced by the Revenue is of no consequence. The power under Section 11A of the Act can be invoked only when a duty has not been levied or paid or has been short-levied or short-paid. Such a proceeding can be initiated within six months from the relevant date which in terms of sub-section (3) (iii) (b) of Section 11A of the Act (which is applicable in the instant case) in a case where duty of excise is provisionally assessed under the Act or the Rules made thereunder, the date of adjustment of duty after the final assessment thereof. A proceedings under Section 11A of the Act cannot , therefore, be initiated without completing the assessment proceedings.
Further the Honble Supreme Court in paragraphs 22 & 23 of the same order also upheld the view taken by the Tribunal and held that the Show Cause Notices issued before finalization of provisional assessment were illegal the relevant paragraphs 22 & 23 are reproduced below:
Whereas provisional duty is levied in terms of Sub-Rule (1) of Rule 9B, final assessment is contemplated under Sub-Rule (5) thereof by reason of which the duty provisionally assessed shall be adjusted against the duty finally assessed and in the event, the duty provisionally assessed falls short of or is in excess of the duty finally assessed, the assessee will pay the deficiency or will be entitled to a refund, as the case may be. Ultimately, thus, the liability of the assessee would depend upon the undertaking of exercises by the assessing officer to complete the assessment proceeding as contemplated under the Rules.
On a plain reading of the provisions of the Act and the Rules framed thereunder, we have no doubt in our mind that the Tribunal was correct in its finding that the impugned show cause notices were illegal.
7. Learned special Counsel submitted that the decision of the Honble Supreme Court cannot be relied on in view of the special circumstances. It was his submission that appellants have committed fraud and in such a situation there will be no need to wait till the provisional assessment is finalized. We would not like to discuss whether the appellants are committed fraud or not in view of the fact that this Tribunal had already allowed the appeal filed by the appellants earlier and we have not considered the merits of the Revenues case.
8. Nevertheless, it is significant to note that the Honble Supreme Court took note of the fact that Section 11A of the Act provides for a penal provision. Where short levy arises because of suppression etc., in addition to issue of show cause notice within an extended period, there is a corresponding provision under Section 11AC proposing penalty. In fact, the observation of the Honble Supreme Court that the difficulty which may be faced by the Revenue is of no consequences is significant this shows that Honble Court was aware that this could lead to delays in recovery of short-levy and also delay in initiating of action. Inspite of that it was held that only after completion of provisional assessment the notice can be issued. Further, it is also settled illegal provision that provisional assessment for whatever purpose resorted to, would be provisional assessment for all purposes. Therefore, even if action is to be initiated on a totally different ground vis-`-vis the purpose for which provisional assessment was resorted to, yet the provisional assessment has to be finalized before action is taken. It will be open to the Revenue to propose finalization of provisional assessment simultaneously while proposing to recover short-levied, in view of the fact that under Customs Act a superior authority can exercise the power of sub-ordinates and therefore legally there appears to be no bar for finalization of provisional assessment as well as penal action in one proceeding. Another submission made by the learned Sr. special Counsel was that show cause notice has been issued for recovery of short-levy on a totally different ground and appellants have been given opportunity to present their case. In the case of provisional assessment, it would have so happened that appellants would not have got an opportunity to present their case. He submits that this is in view of the fact that these are several decisions which hold that for finalization of provisional assessment there is no need to issue show cause notice. Therefore by issue of show cause notice and adjudication proceedings appellants have actually been benefited. But this is not a case of finalization of provisional assessment simplicitor and Revenue has proposed enhancement of value on the basis of detailed investigation and naturally the importer has to be given an opportunity to advance their defence and we do not think that Revenue would have succeeded in convincing any judicial forum that no show cause notice was required.
9. The learned Advocate for the appellants also submitted that this Tribunal cannot decide the issue at this stage by splitting up the finalized Bills of Entry and the provisionally assessed Bills of Entry. He submitted that since the notification provides exemption subject to the condition of fulfillment of export obligation over a period of eight years, it cannot be said that the nine Bills of Entry which have been reported as finally assessed in reality can be considered as finally assessed. On the other hand, learned special Counsel submitted if the Tribunal feels on the basis of the submissions made regarding provisional assessment, the matter is required to be remanded, the remand may be limited to 10 Bills of Entry which are provisionally assessed only and the Tribunal be proceed to decide the issue on merits with regard to the remaining nine Bills of Entry which have been finally assessed.
10. In view of the above submission of the learned special Counsel, we proceeded to consider the next point raised by the appellants relating to the value of the EPCG Licence.
11. The learned Sr. Counsel on behalf of the appellants submitted that EPCG Licence was issued in terms of CIF value, Notification No. 111/95-Cus in clause 4 speaks of CIF value of the goods imported. Therefore the Commissioner has no jurisdiction to go into the valuation at all and has to accept CIF value as per the documents and extend benefit of notification extended and allow the licence to be debited. In this connection, he drew our attention to the definition of value in Section 2 of Customs Act 1962. Section 2 of Customs Act starts with the words in the act, unless the context otherwise requires. Use of this clause shows that when the context requires otherwise, the definition of value given in Section 2(41) cannot be applied. He submits that in this case the notification and the licence both speak of CIF value and CIF value cannot be considered as value under Section 2(41) of Customs Act, 1962. Further, he submitted that the Commissioner has also relied upon the definition of value in Foreign Trade (Regulation) Rules, 1993 which according to the Commissioner defines value as the value which has the meaning assigned to in clause (41) of Section 2 of the Customs Act, 1962. He again drew our attention to the fact that in this case also the definition starts to the words unless the context otherwise requires. Therefore, it is his submission that since the notification and EPCG licence speak of CIF value, the Commissioners observation that value should be the one determined under Section 14 of the Customs Act, 1962 is not correct. For this purpose he relied upon the decision of the Honble Mumbai High Court in the case of Union of India and Others Vs. Glaxo Laboratories (India) Ltd. reported in 1984 (17) ELT 284 (Bom.). The Honble Mumbai High Court had discussed this aspect in detail in paragraph 13 of their order and he submitted that the discussion shows that CIF value is entirely different from value as defined under Customs Act. On the other hand, the learned special Counsel relied upon the decision of the Honble Calcutta High Court in the case of Manjushree Minerals Ltd. Vs. Collector of Customs reported in 1993 (68) ELT 273 (Cal.). Incidentally this decision was relied upon by the appellants also. While the appellants relied upon decision to support their contention that CIF value and the value are different. The learned special Counsel relied upon this decision to submit that debiting the licence and determination of value for assessment of duty are totally different and therefore while the licence could be debited to the extent of CIF value declared in the Bill of Entry by the appellant, when it comes to assessment for levy of Customs duty, the value has to be determined as per the provisions of Section 14. However, we find that in both the cases the issue before the courts was entirely different. In both the cases there was no dispute as regards the determination of value for assessment by the Customs officers before the courts. The only issue that was before the court was whether Customs can debit the value determined under Section 14 of Customs Act, 1962 to the Import Licence. In both these cases, the import licence basically permitted importation of the goods and the question was to the extent in terms of value of goods could be imported and levy of duty was not at all in dispute. Whereas in this case, the exemption Notification is directly linked to implementation of EPCG Scheme and the value debited in the licence determines the export obligation of the importer and subject to fulfillment of the export obligation which is based on CIF value, the exemption is permitted. Therefore, debited in the licence and the value of debit is very crucial and both are linked and cannot be segregated as in the cases which came up before both the Honble High Court. Therefore, we find that both these decisions are not relevant and cannot be applied to the facts of this case. While, we consider that CIF value and value under Section 14 of the Customs Act, 1962 are different, whether the department would be right in denying exemption, go to the value of goods over and above the CIF value as submitted by the special Counsel is to be considered in depth and in detail. The learned special Counsel made detail arguments with regard to this. But in view of the Honble Supreme Court decision holding that when assessment is provisional, show cause notice is issued for recovery of short-levied is illegal, we feel that it would be appropriate to remand the matter to the original adjudicating authority so that the matter can be dealt with in accordance with law as laid down by the Honble Supreme Court. We do not think that it would be appropriate to split the provisionally assessed bills and finally assessed bills and give our final decision with regard to finally assessed bills since it would create two sets of litigation. We do not consider it necessary to reproduce the detail arguments advanced by the learned special Counsel or consider the same. This is in view of the fact that we have not heard the learned Counsel for the appellants for the purpose of rebuttal, hence we consider it appropriate to keep this issue open.
12. In view of the above discussion, we come to the conclusion that the matter is required to be remanded keeping all issues open so that the matter can be dealt afresh in accordance with law. We make it clear that matter may be decided afresh uninfluenced by the observations made in this order.
(Dictated in court) (Ashok Jindal) Member (Judicial) (B.S.V. Murthy) Member (Technical) Sm 2