Customs, Excise and Gold Tribunal - Bangalore
Yenepoya Minerals & Granites Ltd. vs Commr. Of C. Ex., Bangalore on 8 March, 2002
Equivalent citations: 2002(142)ELT427(TRI-BANG)
ORDER S.S. Sekhon, Member (T)
1. The appellants (hereinafter referred as YMGL) are a Public Ltd. Company engaged in the manufacture of Indian unpolished/polished Granite Tiles/Slabs/Strips (hereinafter referred to as Granite) of specific dimensions and Export the same. They operate under 100% EOU scheme and clear the Waste/Rejects of their production to Domestic Market on payment of appropriate duty.
2. Officers of the Preventive Wing of Mangalore Division undertook an enquiry, pursuant to a seizure of Granite of certain dimensions, in the premises of a Private Limited Company viz. Banjor Minerals & Granite Private Ltd. (hereinafter referred to BMGPL). Enquiries made, revealed that both these units i.e. YMGL & BMGPL had common Directors. A show cause notice was issued demanding -
(i) Central Excise duty of Rs. 20,18,330/- calculated as equal to 50% of approximate duty levied under Section 12 of the Customs Act, 1962 on 62,051,890 Sq. feet of Goods cleared clandestinely to Domestic Tariff Area.
(ii) Duty on waste amounting to Rs. 9,428/-.
(iii) Confiscation of Plant & Machinery etc. under Rule 209{2) of the Central Excise Rules, 1944.
(iv) Confiscation of seized goods under Rule 209.
(v) Penalty under Rules 9(2) and 209 on YMGL.
(vi) Penalty under Rule 209A on BMGPL and Shri R. Sanaullah and Shri Ramachandra Shetty of YMGL/BMGPL.
as the enquiries and material relied upon indicated that -
(i) BMGPL had obtained all the Raw Material from YMGL under and as 50% waste cleared by YMGL on payment of duty.
(ii) Where slabs were received they were cut to size and sold and no accounts, were kept. The polishing machine was under repairs. Quantities in excess of invoiced quantities were received in BMGPL.
(iii) BMGPL was floated with common Directors, only to canalize the finished products of YMGL to Domestic Area by misdeclaration/clandestinely.
3. We have heard both sides and considered the material on record and find -
(a) The show cause notice in Paras 2.4 and 2.6 admits that the Polishing Machines at BMGPL which were under repair on 24-8-94, the date of enquiry. They were installed and working and in operation since 1992 along with Cutting Machines. Para 2.9 of the notice relies on the Director of BMGPL to have admitted to have received 'waste' which was further cut; polished, grooved. They were then sold by BMGPL a unit under SSI exemption or Excise Duty. That rough Granite was being received from YMGL. Therefore it is apparent that manufacturing and finishing activity as per requirements, were being conducted in the premises of BMGPL whose Polishing Machines was temporarily out of order. Therefore the conclusions arrived at by the adjudicator that BMGPL was floated only to canalize finished goods manufactured at YMGL and cleared from YMGL as 'waste' and then as Granite, into the Domestic Tariff Area, cannot be concurred with. The portions of facts, as relied upon in the notice itself militates against such an assumption or presumption. No such findings can therefore be arrived at.
(b) The learned Advocate for the appellants has taken us through the order or Adjudication of the jurisdiction Assistant Commissioner in charge of the 100% EOU Customs Bond being Order No 62/95, dt. 9-4-95. This order has been arrived at pursuant to receipt of information about the seizure at the premises of BMGPL alleged to have been removed in contravention of Section 71 of the Customs Act, 1962 from YMGL. The notice was issued proposing the cancellation of the Customs Warehousing Licence/permission granted to YMGL under Chapter IX of the Customs Act, 1962 being an E.O.U. The ld. Adjudicator in that case has come to the following findings -
"Further it is seen that the party is entitled to remove 5% of the waste material as per the proviso to Notfn. 13/81, dated 9-2-81. The penalty has obtained necessary permission from Customs and the removal of scrap and waste took place in the presence of Customs Officer and under supervision of Customs Officers. Since the clearance was effected under the supervision of Customs Officer and also there was no violation of the bond executed by them, clearance of scrap/waste was not illegal one. On the other hand they have followed the Customs procedure.
It is further revealed that the granite tiles seized by Central Excise officers at Banjara Minerals and Granites Pvt. Ltd. are of the dimension less than 12"X12" and less than 10 mm thickness. It was also revealed that this type of tiles cannot be produced in the machinery installed at the factory of M/s. Yenepoya Minerals and Granites. Further M/s. Yenepoya Minerals and Granites Ltd. vide their submission dated 18-5-95 admitted that the lesser dimension material manufactured by M/s. Banjara Minerals and Granites are out of the waste materials supplied by M/s. Yenepoya Minerals and Granites Ltd. Since M/s. Yenepoya Minerals and Granites Ltd. have cleared the goods after obtaining permission from competent authority contravention of Sections 71 and 72 of Customs Act and violation of Sections 59 and 65 also does not arise."
This finding and non-cancellation of the Licence/permission granted, has attained finality. This order has not been challenged in appeal. From these findings, it is apparent that the proper officer in charge of the E.O.U. has found and concluded -
(i) the goods under seizure at BMGPL could not be manufactured at YMGL due to the size 12" x 12" of the seized material and the absence of machinery at YMGL premises to work in these sizes.
(ii) material at BMGPL was out of material of different larger sizes supplied by YMGL.
(iii) necessary permissions were given for removal of 'Scrap and Waste' which was done in the presence of Customs Officers, since the removal was in presence of officers and no Bond condition was violated clearance of 'scrap and waste' is not illegal.
(iv) therefore removal of waste/strap material from YMGL with the permission cannot be faulted with and the notice was not upheld.
(c) Once the proper officer has not upheld or found the goods, as seized at BMGPL to be removed from the premises of YMGL to be correct. Then allegation of clandestine removal, its seizure at BMGPL as alleged in the proceedings before us cannot be upheld. In fact the finding that the Granite material in size 12" x 12", could not be manufactured at YMGL leads us to conclude that no duty could be demanded on YMGL for the goods under seizure.
(d) There is no definition of 'Waste/Rejects' in Chapter 25 or and 68 of the CETA, 1985 or HSN applicable to Granite. There is no other material, on record, to conclude that what was removed was other than 'waste/rejects'. There is therefore no ground to conclude that polished/excess goods were removed as 'waste', as is arrived at in the impugned order. 'Waste/Rejects' have to be understood by the concept of persons in that trade, in absence of any parameters fixed by a definition in the Tariff. Therefore what the E.O.U. could not export, due to reasons of Trade/ Export requirements would therefore constitute 'Waste/Rejects'. For such an E.O.U. The plea of the appellants, on 'Rejects arising in the Granite Industry' as recorded in the impugned order Paras 56 and 57, cannot be brushed aside, as has been done by the adjudicator, merely on the grounds of non mention of sizes on the invoice and reliance on the decision of TELCO, regarding waste of Iron and Steel. In that case the goods were different and a definition of 'waste' existed in the Tariff applicable for Iron and Steel at all times. The rejection of the plea as arrived at, in the order, is therefore is not upheld. The very fact that goods are not standard packing, sizes or polish being unpolished also or one sided polished, etc. induces us to consider them not to be standard Granite Goods meeting a specification. Being mixed left over unusable lots they can constitute to be 'Rejects/Waste' of Granite. The plea of the appellant that only 'waste' was removed after due permission and under supervision and the statements of Shri Ganesh Mayya, having been recorded in English a language not very conversant to him, cannot be relied, has to be upheld.
(e) The learned Advocate has relied upon the case law of 'Kuntal Granites' [2001 (132) E.L.T. 214 (Tribunal) = 2001 (43) RLT 829] of this Bench, wherein under Section 3(1) levy of Central Excise duty was examined. As evidence of sale on permission of Development Commissioner was not available nor brought on record, in the case before us, if the goods are considered not as waste, but clandestinely removed prime Granites from E.O.U. then duty on such goods would obviously being considered to be removed without permission of the Development Commissioner not called for under the proviso to Section 3(1) of Central Excise Act, 1944, as it then existed. Since it has been held in Kuntal Granite case that the levy on duty on the goods manufactured and removed from an E.O.U. is since genesis and is restricted only to such goods as are 'allowed to be sold' by the Development Commissioner. Relying on this decision, we also find, nothing amiss in YMGL not maintaining RG 1 etc. which being an E.O.U. they were not required to removal of goods excess or otherwise misdeclared, as alleged therefore cannot be also accepted. As removals were under physical supervision, we do not find any reason to indicate YMGL for removal of any goods from their premises in contravention of any law or procedure. There are no grounds available to arrive at or confirm the charges in the show cause notice issued to them. We cannot uphold the same.
(f) When we as well as Jurisdictional Assistant Commissioner is coming to a finding that the goods under seizure at BMGPL were not goods in the same form as were removed from YMGL and in fact the processing is admittedly undertaken at premises of BMGPL on the goods received from YMGL, which were found to be waste/rejects only. Then Central Excise duty, on such processing at BMGPL, if any, cannot be cast as liability of excise duty, if any would be on BMGPL, the processor. These Companies are separate legal entities having their own machines and premises situated far apart. Therefore merely on the grounds of supply of raw material, no relationship cannot be established YMGL is only the raw material supplier. They cannot be burdened with the Central Excise Duty. The entire demand of duty on YMGL, which is misdirected, is required to be set aside.
(g) We find no reasons arrived at in the impugned order, that the production of BMGPL, is not within the SSI exemption limit entitled to them under the Central Excise Law. Therefore duty liability on BMGPL is not established. Confiscation of finished goods, as found in the premises of BMGPL, even if not accounted is not called for. The goods found in BMGPL if finished goods are not established to be dutiable, as no such separate duty liability under SSI Excise Exemption limit is arrived to be violated. No material is brought to show that SSI Exempted units are to burdened with accounting records. If they are still the goods of YMGL that would be Raw Material and accounting the same in RG 1 is not required since they are not yet finished exigible goods of BMGPL. In either case for non-accounted by BMGPL, confiscation is not called for Indian Central Excise Law.
(h) When we find no reason to determine levy and demand of Central Excise duty on the Appellant, an E.O.U. and no reason to confiscate the goods under seizure are not the production of YMGL or demand duty thereon. Then no penalty as determined in the impugned order can be upheld.
4. In view of our findings, the order is set aside and the appeals are allowed.