Custom, Excise & Service Tax Tribunal
M/S.Ericsson India Pvt. Ltd vs Cce, Jaipur on 8 April, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
BENCH-DB
COURT-III
Excise Misc. Application No.E/Misc/50774/2015 in
Excise Appeal No.E/2740/2011-EX[DB]
[Arising out of Order-in-Original No.42-44/2011 (CE)-Commissioner dated 08.08.2011 passed by the Commissioner of Central Excise, Jaipur-I]
For approval and signature:
HONBLE MR. RAKESH KUMAR, MEMBER (TECHNICAL)
HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)
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.Ericsson India Pvt. Ltd. Appellant
Vs.
CCE, Jaipur Respondent
Present for the Appellant : Shri.Amit Jain, Advocate
Present for the Respondent: Shri.Ranjan Khanna, DR
Coram:HONBLE MR. RAKESH KUMAR, MEMBER (TECHNICAL)
HONBLE MR.S.K. MOHANTY, MEMBER (JUDICIAL)
Date of Hearing/Decision: 08/04/2015
FINAL ORDER NO. 51192/2015
PER: RAKESH KUMAR
The facts leading to filing of this appeal are in brief as under:-
1.1 The appellant are manufacturers of telecommunication equipment. For manufacture of telecommunication equipment they had imported various components from their principal M/s. Ericsson, Sweden and M/s. Ericsson, China. The components were imported free of basic custom duty under Notification No.24/2005-Cus which is available subject to condition that the procedure as prescribed under Customs (Import of goods at concessional rate of duty for manufacture of excisable goods) Rules, 1996 [hereinafter referred to as 1996 Rules is followed. There is no dispute that the appellant were maintaining the records as prescribed under the 1996 Rules. The duty demand of Rs.2,88,52,271/- has been confirmed against the appellant on the following three grounds:-
1) Certain imported components were written-off without use and hence the Department was of the view that the same were not used for the intended purpose and invoking Rule 8 of the 1996 Rules, the duty has been demanded. The duty demand of Rs. 23,15,901/- is on this basis.
2) The second category of components are those which were surplus inventory and were not required and hence were re-exported. The duty demand raised in respect of these components by invoking Rule 8 of the 1996 Rules is Rs.94,29,117/-.
3) The third category of components are those which were issued for manufacture, thereafter was used in the assembly of finished products and subsequently when the components were found to be defective, the same were re-exported. The duty demand of Rs.1,71,07,253 is in respect of such components.
1.2 The Commissioner by the impugned order confirmed the demand of the duty of Rs.2,88,52,271/- from the appellant alongwith interest in it u/s 28 AB and has also imposed penalty of Rs.20,23,000/- on them under section 112(a) of the Customs Act, 1962. Against this order of the Commissioner, this appeal has been filed.
2. Heard both the sides.
3. Shri Amit Jain, Advocate, the ld. Counsel for the appellant, pleaded that so far as the duty demand of Rs.1,71,07,253/- in respect of the components which were used for assembly of finished products but were later on found to be defective and hence were re-exported is concerned, this demand is not sustainable, as these components have to be treated as having been used for the specified purpose, that just because the components were subsequently found to be defective and re-exported, the same cannot be treated as not having been used for the manufacture of the finished products, that in this regard he relies upon the Tribunals final order No.53407-53408/ 2008 dated 21.08.2014 in the appellants own case, wherein on the question as to whether in respect of such components, the appellant would be required to reverse the cenvat credit of additional customs duty, the Tribunal held that the reversal of the additional customs duty is not required as such components have to be treated as having been used for the manufacture, that as regards the duty demand of Rs.94,29,117/- in respect of surplus inventory of component which have been re-exported, he relies upon the Tribunals judgment in the case of Kerala Hi-Tech Industries Ltd. vs. CCE, Cochin reported in 2001 (132) ELT 593 wherein in similar circumstances, where the goods had been imported free of basic customs duty under notification No. 32/1997 subject to following the procedure prescribed under 1996 Rules and the importer had re-exported the components without manufacture of the finished goods, the Tribunal held that no duty would be payable, that as regards the duty demand of Rs.23,15,901/- in respect of the components written-off, this demand is also not sustainable in view of the above mentioned judgment of Tribunal in the case of Kerala Hi-Tech Industries Ltd. vs. CCE, Cochin (supra), that in any case the imposition of penalty of Rs.20,23,000/- is contrary to the provisions of law in view of the judgment of this Tribunal in the case of Titan Industries Ltd. vs. CCE, Chennai reported in 2008 (232) ELT 281 (Tri. Chennai), wherein the Tribunal held that Rule 8 of the 1996 Rules does not authorize any central excise officer to impose penalty under Rule 112 (a) of the Customs Act, 1962 and that in view of this, the impugned order is not sustainable. He also pleaded that in respect of the components which have been re-exported, the appellant would be eligible for duty drawback and for the directions on this point the appellant have filed a Miscellaneous Application No.E/Misc./50774/2015-EX with regard to the draw-back claim Shri Jain cited the judgment of the Apex Court in the case of Share Medical Care vs. Union of India reported in 2007 (209) ELT 321 (SC); CCE, Jaipur vs. Mahavir Aluminium Ltd. reported in 2007 (212) ELT 3 (SC) and Siddharth a Tubes Pvt. Ltd. vs. CCE, Indore (M.P.) reported in 2006 (193) ELT 3 (SC), wherein it was held that a benefit which is legally admissible can be claimed at any stage.
4. Shri R.K. Grover, ld. Departmental Representative defended the impugned order by reiterating the findings of the Commissioner.
5. We have considered the submissions from both the sides and perused the records.
6. The appellant had imported various components for use in the manufacture of telecommunication equipment by availing basic customs duty exemption under Notification No.24/2005-Cus. which is available subject to following the procedure prescribed under 1996 Rules. There is no dispute that the appellant have maintained the prescribed records and have followed the procedure prescribed in this Rule. However, Additional Customs Duty equal to Central Excise Duty leviable has been paid on the imported components and the Appellant have taken cenvat credit of the Additional Customs Duty paid.
7. The duty demand of Rs.1,71,07,253/- is in respect of the components which had initially been issued for use in the manufacture and were used for assembly of the finished product but on testing the same were found to be defective and hence were taken out and subsequently re-exported. According to the Department, these components have not been used for manufacture of the finished goods and hence invoking Rule 8 of the 1996 Rules, this duty has been demanded. In terms of Rule 8 of 1996 Rules the Assistant Commissioner/ Dy. Commissioner 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 duty leviable on the goods alongwith interest on that duty under section 28AB. The point of dispute in this case in respect of this demand is as to whether these goods can be treated as having been used for the intended purpose. We find that in the appellants own case decided by the Tribunals final order No.53407-53408/ 2008 dated 21.08.2014 this very question had come up for consideration. The point of dispute in that case was as to whether in respect of the components which had been issued for manufacture and were used for assembly but later-on being found to be defective was re-exported, cenvat credit of the additional customs duty earlier taken would be reversible and the Tribunal in para 8 of the judgment after considering the Delhi High Court judgment in the case of Asahi India Safety Glass Limited vs. Union of India reported in 2005 (180) ELT 5 (Del.) held that such components have to be treated as having been used and hence the assessee cannot be asked to reverse the cenvat credit. Following the judgments of the Tribunal, we hold that these components have to be treated as having been used for the intended purpose and hence the duty demand of Rs. 1,71,07,253/- would not be sustainable and has to be set aside.
8. As regards the duty demand of Rs.94,29,117/- in respect of the surplus inventory which was re-exported and the duty demand of Rs. 23,15,901/- in respect of the components written-off admittedly these components have not been used for the manufacture of the finished products and, therefore, in our view the Department is justified in invoking Rule 8 of the 1996 Rules for recovery of duty. Therefore, the duty demand of Rs.23,15,901 & Rs.94,29,117/- have to be upheld.
8.1 However, since the components in respect of which the duty demand of Rs.94,29,117/- has been confirmed have been re-exported, in our view, the customs authorities have to consider the appellants claim for duty drawback. The appellant also plead that the components which had been issued for manufacture and on being found defective were subsequently re-exported and in respect of which duty demand of Rs.1,71,07,253/- has been confirmed, they had paid additional customs duty whose credit, though initially taken, was reversed and that they would be eligible for additional customs duty draw-back under section 75 of the Customs Act. The concerned customs authority may consider this claim for drawback also.
9. As regards the question of penalty of Rs.20,23,000/-, the view of the judgment of the Tribunal in the case of Titan Industries Ltd. vs. CCE, Chennai (supra) the same is not sustainable. Hence the same is set aside.
10. In view of the above discussion, while customs duty demand of Rs.1,71,07,253/- and also the order of penalty of Rs.20,23,000/- is set aside, the customs duty demands of Rs.23,15,901/- and Rs.94,29,117/- are upheld. As regards the appellants claim for draw-back in respect of the components re-exported, the same may be considered by the concerned customs authority. The appeal is partly allowed.
[Dictated & Pronounced in the open Court].
(S.K.MOHANTY) (RAKESH KUMAR) MEMBER (JUDICIAL) MEMBER (TECHNICAL) Anita ?? ?? ?? ?? 0 9