Customs, Excise and Gold Tribunal - Bangalore
Hetero Drugs Ltd., Shri B. Nagi Reddy And ... vs Commissioner Of Central Excise And ... on 30 January, 2004
Equivalent citations: 2004(93)ECC669, 2004(171)ELT134(TRI-BANG)
JUDGMENT S.S. Sekhon, Member (T)
1. (a) These three appeals, filed by M/s. Hetero Drugs Ltd., (hereinafter referred to as Company), and two of their officials, against the Order-in-Original No. 9/2001 dt. 14.8.2001 passed by the Commissioner of Central Excise, Hyderabad-I Commissionerate, in terms of which the Commissioner has:
(i) Demanded a sum of Rs. 2,49,55,313 under Rule 57I of the Central Excise Rules, 1944 allegedly representing modvat credit irregularly taken;
(ii) Imposed a penalty of Rs. 1,79,41,162 under Rule 57I (4) of the Central Excise Rules, 1944;
(iii) Imposed a penalty of Rs. 80 lakhs on the Company under Rule 173Q of the Central Excise Rules, 1944;
(iv) Imposed a penalty of Rs. 5 lakhs each on Shri B. Nagi Reddy, Director-Operations and Shri K. Rami Reddy, General Manager, under Rule 209A of the Central Excise Rules, 1944.
(b) During the period April 1995 to August 1999, the Company imported consignments of chemicals for use as raw materials in the manufacture of the final product. Imports were made through Chennai Air and Sea Customs. To clear the same, after due payment of duties, M/s. Farport International, Madras was appointed as the Clearing agent. The appellant Company, after receipt of due intimation from the clearing agent, used to advise the said clearing agent either to clear the goods or to warehouse the same. They used to send the duty amounts for the goods to be cleared for home consumption, in the form of demand drafts drawn in favour of the Commissioner of Customs, Chennai and had been receiving the imported chemicals under the cover of Bills of Entry showing the amounts of duty as paid. They had taken credit of the C.V. duty as shown and paid on these Bills of Entry.
2. (a) Consequent to an investigation undertaken by the Department on the ground that the Clearing agent at Madras had misused the amounts sent by various importers as duty and had not utilized the said amounts for payment of customs duty, it was found that the clearing agent had fabricated several Bills of Entry and has cleared the goods under the cover of the said fake Bills of Entry and sent them to the appellants at Hyderabad, even by substituting the Warehoused goods.
(b) The appellants were issued with show notice dated 10.2.2000 and 31.5.2000 by the Commissioner of Customs, Air Cargo Complex, Chennai and Commissioner of Customs (Port), Chennai respectively, proposing to demand the amounts representing the Customs Duty from the appellants all over again, in spite of the fact that the appellants had sent all the amounts in question through demand drafts in favour of the Commissioner of Customs.
(c) As a sequel to the above proceedings, the present SCN dt. 28.3.2000 was issued to the appellants proposing to deny modvat credit of 74 Bills of Entry received by the appellants during the period 2.4.1995 and 30.8.1999.
(d) The Commissioner of Central Excise, after accepting that the proceedings under the Customs Excise Act for disallowing the credit and the recovery of duty under Customs Act initiated by Chennai Customs, are interrelated, has, however, passed the impugned order rejecting the contention of the appellants and holding that the proceedings are interdependent to arrive at a conclusion. Ordered the reversals of credit taken demands and penalties.
(e) Hence these appeals.
(3) After hearing both sides and considering the issues, it is found -
(a) The present proceedings initiated under the Central Excise Act, 1944 to deny the Modvat credit and impose penalties would depend solely on the outcome of the proceedings initiated by the Customs Authorities at Chennai. If, in the Customs case, it is held that the entire amount of duties in question in the form of demand draft addressed to the Commissioner of Customs (Chennai) have been paid, consequently the goods for which Modvat credit had been obtained would be duty paid goods, whose receipt and use is not questioned. Therefore, credit would as availed and would be in order. Since this Bench of the Tribunal, in the case of the same appellant and Shri Reddy in Appeals No. C/250 & 251/2002 vide Order No. 1594-1595 dt. 12.12.2003 have held that no demand under the Customs Act and/or penalty liability under that Act were called for, as arrived at vide Order-in-Original No. 9/2001 dt. 14.8.2001 and 28/2002 ACC dt. 29.3.2002 and had considered the goods covered by the said BES to be duty paid and the appellants not responsible for the alleged acts of the Customs House Clearing Agent at Chennai. Then the present proceedings under the Central Excise Act cannot be sustained.
(b) There can be no intention on the part of the appellants who have availed the credit of C. V. duty when the Company has sent the required amounts including the amounts of Basic Customs duties by demand draft addressed to Commissioner of Customs, Chennai. They (sic) which have been found to have been credited in the Government Treasury as Revenue. Rule 173Q1(bb) mandates that "only if credit is taken which a manufacturer knows or which he has reasons to believe was not permissible under the rates" then only penalty could be imposed. Since no material has been found, to implicate the Company and its Directors Shri Rami Reddy (General Manager) one of the appellants herein, to be part of the design of the Clearing House Agent in removing the goods in an unauthorised manner and supplying the same to the appellants. The penalty under Rule 173Ql(bb) cannot be imposed on the Company.
(c) The finding of the Commissioner that the assessee Company's endeavour is deliberate evasion of duty by taking Modvat credit in view of the findings arrived at by this Bench after considering the facts in certain cases cannot be upheld.
(d) The mandatory penalty as arrived at under Rule 57I(4) also cannot be upheld, in the facts of this case, when it is found that there was no knowledge on part of the appellants herein to have known that the Bills of Entries being sent to them were fabricated in any fashion. The fact that letterheads were given to the Clearing Agents, with instructions to deal with the situations at Chennai, should be a normal course of transactions, a commercial business, risk being taken by the Company at Hyderabad. Nothing else could be read in that act. The mandatory penalty, as arrived at, based on facts and on the reasons in the impugned order is therefore not upheld.
(e) As regards the penalty on the appellants under Rule 209 (A) of the Central Excise Rules, it is found that all the inputs in these proceedings are imported goods, therefore not being excisable goods, they are not liable for confiscation under the Central Excise Act, nor have they being found so. Therefore, no goods are found to be liable for confiscation. Hence, penalties under Rule 209(A) are not called for and cannot be upheld.
(f) The plea of limitation in this case is also upheld since in the terms of Trade Notice based on Board's letter F. No. 211/23/68-CX-6 dt. 28.5.1986 requires the officer to verify the genuineness of the documents before defacing the same. If these instructions were complied then this detection would have come to knowledge much earlier. In any case if the verification by the officers could not detect to be fraud it is too late for the day to held the appellants and its Directors to be in the knowledge of the same. The demands are also held to be complied by the same.
5. In view of the findings, demands of reversals and/or penalties as imposed could not sustain. Order is therefore required to be set aside.
6. Appeals allowed. Ordered accordingly.