Custom, Excise & Service Tax Tribunal
A P Fashions Pvt Ltd vs Bangalore- V on 25 April, 2024
E/20551/2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1
Central Excise Appeal No. 20551 of 2016
(Arising out of Order-in-Original No. BLR-EXCUS-005-COM-51/15-16
dated 11.02.2016 passed by the Commissioner of Central Excise,
Bangalore.)
M/s. A.P. Fashions Pvt. Ltd.
(100% EOU)
Plot No.19/A,
Appellant(s)
KIADB Industrial Area,
Hoskote - 562 114.
Bangalore District.
VERSUS
The Commissioner of Central Excise
Bangalore V Commissionerate,
4th Floor, BMTC TTMC Building,
Old Airport Road, Domlur,
Respondent(s)
Bangalore - 560 071.
APPEARANCE:
Shri B. N. Gururaj, Advocate for the Appellant Shri K. Vishwanatha, Superintendent (AR) for the Respondent CORAM: HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL) HON'BLE MRS. R. BHAGYA DEVI, MEMBER (TECHNICAL) FINAL ORDER NO. 20545 /2024 DATE OF HEARING: 25.04.2024 DATE OF DECISION: 25.04.2024 PER: R. BHAGYA DEVI The appellant M/s. A. P. Fashions Pvt. Ltd., an 100% Export Oriented Unit (EOU) is in appeal against the Order-in- Original No. 51/2015-16 dated 11.02.2016.Page 1 of 11
E/20551/2016
2. Briefly the facts of the case are that the appellants are manufacturers of 100% Natural Silk Fabrics (5007 2090), Polyester Fabrics and Silk Fabrics mixed with Viscose (5407 1029), 100% Polyester Embroidered Fabrics (5407 1039), 100% Polyester Fabric (5407 1099), made ups (Chapter 63 and 94) etc., of the Central Excise Tariff Act (CETA), 1985. On investigation, it was noticed that the appellant had exported made ups falling under Chapter 63 while polyester fabrics was being cleared under Domestic Tariff Area (DTA). Since, the items exported are different from items cleared under DTA, the appellant was not eligible for the benefit of concessional rate of duty vide Notification No.23/2003-C.E. dated 31.03.2003; hence show-cause notice No.63/2014 dated 27.03.2014 was issued denying the benefit of the above Notification and demanding differential duty of Rs.2,78,27,760/- for the period January 2011 to December 2013 under proviso to Section 11A(1) / 11A(4) of the Central Excise Act, 1944. The learned Commissioner based on the fact that the goods exported as against goods cleared under DTA are different, denied the benefit of the Notification No.23/2003-C.E. dated 31.03.2003 and confirmed the demands vide impugned order No.51/2015-16 dated 11.02.2016. Hence, this appeal.
3. The learned counsel on behalf of the appellant alleged that the respondent lacked jurisdiction in law to determine whether the supplies made to DTA are in conformity with Para 6.8(a) of the Foreign Trade Policy (FTP), 2009-14. He further submits that in respect of all promotional schemes of Foreign Trade under FTP, only the Directorate General of Foreign Trade (DGFT) are the authorities to decide the compliance of the conditions laid down therein. To buttress his submission, he relied on the following judgments:
• TTK Prestige Ltd vs. CC: 2005 (188) ELT 385 (Tri.-Bang.) • Blue Waters Foods & Exports Pvt. Ltd. vs. CC, Cochin: 2010 (251) ELT 305 (Tri.-Bang.) Page 2 of 11 E/20551/2016 3.1 It is further submitted that the Development Commissioner had issued a green card dated 19.09.2011 and license was granted on 29.04.2003 under Section 65 of the Customs Act, 1962 for manufacture by the Customs Authorities for manufacture of polyester fabrics and therefore, the finding of the Commissioner that they had no permission from the Development Commissioner to manufacture 100% polyester fabrics needs to be set aside.
3.2 With regard to limitation, it is submitted that ER-2 returns were filed regularly and the description of the products is subject to the limits of number of characters and this cannot be construed as suppression of facts. It is also stated that the CBEC Circular No.887/7/2009-Cx. dated 11.05.2009 requires Revenue officers to scrutinize every return within the time limit prescribed therein.
4. The learned Authorized Representative on behalf of the Revenue submitted that as per CBIC circular No.7/2006-Cus. dated 13.01.2005 similar goods with reference to DTA sale on payment of concessional duty are defined as "goods which is although not alike in all respects, have like characteristics and like component material which enable them to perform the same functions and to be commercially interchangeable with the goods which have been exported or expected to be exported having regard to the quality, reputation and the existence of trade mark and produced in the same unit by the same person who produced the export goods". In view of the above, it is stated that the made ups which are exported and yarn which is cleared to DTA do not have same functions nor are they are commercially interchangeable.
4.1 He further submits that the ER-2 returns filed by the appellant do not reflect the correct nature and description of the goods exported as compared to the goods cleared in DTA. The Page 3 of 11 E/20551/2016 correct description and facts having come to light only during the investigation, the Commissioner was right in invoking suppression.
4.2 Further, he has also distinguished the various judgments relied upon by the appellant based on facts. Referring to Para 39 of the impugned order, it is stated that the appellants did not have the requisite Letter of Permission (LoP) for the products in dispute.
4.3 With regard to jurisdiction, it is submitted that when gold was seized in DTA, the Hon'ble High Court of Kerala at Ernakulam vide order dated 22.12.2022 held that the Customs officers have jurisdiction.
5. Heard both sides. The issue to be decided is whether the appellants are eligible to avail the benefit of Notification No.23/2003-CE dated 31.03.2003.
5.1 With regard to jurisdiction, we agree with the Revenue that since the implementing authorities of the policies are the customs authorities, they have the jurisdiction to issue notices and adjudicate the same.
5.2 The period of dispute is from January 2011 to December 2013 and the dispute is regarding denial of benefit of Notification No.23/2003-CE dated 31.03.2003. The relevant Paras of 6.8 of the Foreign Trade Policy 2012-13 has been reproduced below:
Entire production of EOU / EHTP / STP / BTP units shall be exported subject to following:
"(a) Units, other than gems and jewellery units, may sell goods upto 50% of FOB value of exports, subject to fulfilment of positive NFE, on payment of concessional duties. Within entitlement of DTA sale, unit may sell in DTA, its products similar to goods which are exported or expected to be Page 4 of 11 E/20551/2016 exported from units. However, units which are manufacturing and exporting more than one product can sell any of these products into DTA, upto 90% of FOB value of export of the specific products, subject to the condition that total DTA sale does not exceed the overall entitlement of 50% of FOB value of exports for the unit, as stipulated above.
(d) Unless specifically prohibited in LoP, rejects within an overall limit of 50% may be sold in DTA on payment of duties as applicable to sale under sub-para 6.8(a) on prior intimation to Customs authorities. Such sales shall be counted against DTA sale entitlement. Sale of rejects upto 5% of FOB value of exports shall not be subject to achievement of NFE."
EOU/EHTP/STP -- Exemption to specified goods produced therein -- Notification Nos. 103/93-C.E., 2/95-C.E., 6/97-C.E., 8/97-C.E., 20/97-C.E., 13/98-C.E., 28/2001-C.E. & 20/2002- C.E. rescinded In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) (hereinafter referred to as the Central Excise Act), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts excisable goods of the description specified in column (3) of the Table below, and falling within the Chapter, heading No. or sub-heading No. of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the Central Excise Tariff Act), specified in the corresponding entry in column (2) of the said Table, produced or manufactured in an export oriented undertaking or an Electronic Hardware Technology Park (EHTP) Unit or a Software Technology Park (STP) Unit and brought to any other place in India in accordance with the provisions of Export and Import Policy and subject to the relevant conditions specified in the Annexure to this notification, and referred to in the corresponding entry in column (5) of the said Table, from so much of the duty of excise leviable thereon under section 3 of the Central Excise Act as specified in the corresponding entry in column (4) of the said Table.
Page 5 of 11E/20551/2016 Sl.No.4 to Notification No.23/2003 C.E. dated 31.03.2003 as amended.
Tariff Heading Rate of duty Conditions Any Chapter In excess of amount equal If,-
All goods produced or to 30% of the duty payable manufactured wholly under section 3 of the from the raw Central Excise Act, 1944. (i) The goods are materials produced or produced or manufactured in India, Illustration. - Assuming the manufactured other than those product X has the value of wholly from the raw referred to in Sr. Nos. Rs.100 under section 14 of materials produced {5, 5A, 6, 7 and 7A of the Customs Act, 1962 and or manufacture in this table} is chargeable to basic India;
customs duty of 25% ad
valorem, special additional (ii) Such goods
duty. The computation of are cleared in the
duty required to be paid Domestic Tariff
would be as follows: Area in accordance
with sub-
Basic Customs duty - paragraphs (a), (d),
Rs.25/- (e) and (g) of
paragraph 6.8 of
Value for the purpose of the Foreign Trade
special additional duty if Policy.
leviable = Rs.100/- +
Rs.25/- = Rs.125/- (Condition 4 has
been substitute vide
Special additional duty if NTF No.46/2004-CE,
levialbe = 4% of Rs.125/- = dated 06/09/2004)
Rs.5.00
(iii) The goods, if
Total duty payable but for manufactured and
this exemption = Rs.25/- + cleared by the unit
Rs.5.00 = Rs.30.00 other than export
oriented
Thirty percent of the undertaking are
aggregates of the duties of wholly exempt from
customs =30% of Rs.30.00 duties of excise or
= Rs.9.00 are chargeable to
"NIL" rate of duty.
Duty required to be paid in
accordance with this
notification. = Rs.9.00
As seen from the above Notification, it can be seen that condition (ii) states that the DTA clearances are to be in accordance with sub paragraphs (a), (d), (e) and (g) of Paragraph 6.8 of the Foreign Trade Policy. What is relevant for us to examine is clause 6.8 (a) of FTP which states 'Within entitlement of DTA sale, unit may sell in DTA, its products Page 6 of 11 E/20551/2016 similar to goods which are exported or expected to be exported from units.' 5.3 The question here is whether the items exported by the appellant are similar to the goods cleared under DTA. The appellants were exporting made-ups and all kinds of fabrics to European countries but what is cleared under DTA is 100% polyester fabric. The only reason for denying the benefit of the Notification No.23/2003-C.E dated 01.03.2003 is that the goods exported are not similar to the goods cleared under DTA. Holding that the goods exported are different from the goods cleared under DTA, the Commissioner in the impugned order finds that there is clear violation of the provisions of Para 6.8 of the Foreign Trade Policy read with Notification No.23/2003-C.E dated 01.03.2003. Since the allegation/dispute is only with regard to violation of the provisions of Foreign Trade policy, we find that the authorities concerned should have consulted the DGFT authorities as rightly claimed by the appellant.
5.4 The Commissioner in the impugned order has basically relied upon definition of similar goods as defined under Rule 2(f)(i) of Customs Valuation Rules, 2007 where similar goods is defined as 'although not alike in all respects, have like characteristics and like component materials.........' to say that the goods are different and hence not eligible for the benefit of the Notification No.23/2003-C.E dated 01.03.2003.
5.5 In the case of Meghmani Industries Ltd. vs. Commissioner of C. EX., Ahmedabad-I: 2010 (261) E.L.T. 411 (Tri. - Ahmd.) dated 5-1-2010 the Tribunal held as follows:
"In this case what was required to be considered was whether the definition of "similar goods" available in Customs Valuation Rules can be applied to the facts of the case. Basically the issue involved appears to be Page 7 of 11 E/20551/2016 covered by the decisions cited by the learned advocate. The facts were not relevant but ratio of the decision as regards words 'similar' was to be considered. Therefore these decisions are applicable. Ratio of these decisions is that definition available in the Customs Act cannot be used in respect of Notification issued under another enactment. In such cases common parlance or dictionary meaning has to be applied. Therefore, we find this issue has not been dealt with properly by the Commissioner. We could have considered this issue here in the Tribunal but for the fact that there is no examination of the goods in question which have been cleared in the DTA in terms of definition of similarity. In our opinion, in such cases, there has to be examination in respect of each product to show that this product is not similar to the one exported and why benefit of notification is not available to this particular product. In the absence of clear finding in respect of each product, we consider the order would be incomplete. As already observed by us in respect of dyes, there seems to be clarity in view of the fact that demand shown under the heading VAT dyes would give an impression that department has accepted that VAT dyes, OBA and solvent dyes form distinct categories. There is no finding as regards agro-chemicals which are similar and if they are not similar why they are not similar. Commissioner has to consider all these facts and give finding on the issues. Therefore, we remand the matter to the Original Adjudicating Authority, who shall consider in respect of each item the eligibility in DTA and also which meaning of "similar goods" to be adopted."
5.6 The Hon'ble High Court of Delhi in the case of Greatship (India) Ltd. Versus Union Of India 2016 (338) E.L.T. 545 (Del.) dated 23-5-2016 while analysing the provisions of the FTP vis-à-vis the Customs Provisions observed as follows:
"Analysis of the relevant paras of FTP 2004-09 and 2009-14
20. The above submissions have been considered. The SFIS forms part of the FTP 2004-2009 and has been continued under FTP 2009-2014 as well. The provisions concerning SFIS in both the FTPs are more or less similar. Clause 2.3 of Chapter 2 of FTP 2004-2009 states as follows :
"2.3 Interpretation of Policy. - If any question or doubt arises in respect of the interpretation of any provision contained in FTP, or Page 8 of 11 E/20551/2016 classification of any item in the ITC (HS) or HBP-v1 or HBP-v2, or Schedule of DEPB Rates (including content, scope or issue of an authorisation thereunder), the said question or doubt shall be referred to the DGFT whose decision thereon shall be final and binding."
21. The DGFT is a statutory authority exercising powers in terms of Section 6 of the FTDR Act. Under Section 6(2) of the FTDR Act, the DGFT "shall advise the Central Government in the formulation of the FTP and shall be responsible for carrying out that policy." In exercise of his powers under Section 6(2) of the FTDR Act, the DGFT has issued the HBP which is a part of the FTP manual. Since the DGFT is entrusted by the statute to implement the FTP, Para 2.3 of the FTP 2004-2009 as well as Para 2.3 of the FTP 2009-2014 have recognised the DGFT as being the final authority on all matters relating to the interpretation of the FTP. The slight change in FTP 2009-2014 is that under Para 2.3(b) a Policy Interpretation Committee could be constituted to and and advise the DGFT. Under Section 5 of the FTDR Act read with Para 2.1 of the FTP 2009-2014 the DGFT has the power to make amendments to the FTP 2009-2014.
22-29. ...............
30. The SFIS scheme is implemented by the DGFT working under the Ministry of Commerce. In terms of the FTDR Act, it is the DGFT who has the final word on interpretation of the FTP. Whether it is Para 3.6.4.6 of FTP 2004-09 or Para 3.12.7 of FTP 2009-14, both of which stipulate 'non- transferability' of goods imported under SFIS, the interpretation of the DGFT is final. The FTDR Act, FTR Rules, the FTP and the HBP are a complete code governing the SFIS. Para 3.12.7 of the FTP 2009-14 has been amended by the DGFT in exercise of his statutory powers under Section 5 of the FTDR Act with effect from 1st August, 2013 to permit alienation of goods that have been imported on completion of three years from the date of import. The said notification being statutory in character should equally bind the DoR.
31-32. ...................
33. There is merit in the contention of the petitioner that in the event of conflict of views between two ministries of the Central Government, the view taken by the ministry that is primarily responsible for the policy in Page 9 of 11 E/20551/2016 question, which in this case is the FTP, should prevail. The SFIS was introduced by the Ministry of Commerce and its instrumentality, i.e., the DGFT has been statutorily entrusted with the final word on the interpretation of the FTP. The letter dated 6th September, 2013 from the Commerce Secretary to the Revenue Secretary is instructive. It refers to Circular No. 837/14/2006, dated 3rd November, 2006 issued by the C.B.E. & C. under the Ministry of Finance which acknowledged that payment of customs duty could be made by using the duty credit scrips. In particular it was pointed out that the expression "duty free credit scrip"
had been used incorrectly and that the correct phrase should have been "duty credit scrips". It was suggested that the "insistence by C.B.E. & C. that goods imported by use of SFIS scrip may not be alienated unconditionally, even after three years of import, can be attributable to this inadvertent choice of words." Importantly it was pointed out that "the scrip itself is a benefit that has been 'earned"'. This also answers the misconception of the DoR that customs duty can only be paid in cash, and that use of duty credit scrips is only 'revenue foregone'. The position has been explained by the Madras High Court in Tanfac Industries Ltd. (supra), where it was held that the goods cleared by using DEPB scrips for payment of duty should be treated as duty payable goods and not as duty exempted goods.
On questions of interpretation of the FTP, it is the DGFT whose views will prevail. For the same reason, the stand of the DoR conveyed to the Court through the letter dated 29th April, 2016 to Mr. Nijhawan, learned counsel for the DoR, and recorded in the Court's order dated 5th May, 2016 cannot prevail".
In view of the above decisions, we find that in the instant case there has been no examination of the goods to state what was exported is different from what was cleared under DTA and also based on the Hon'ble High Court's decision discussed above, we are of the opinion that DGFT is the authority to decide whether the conditions of 6.8(a) of FTP have been satisfied or not.
Page 10 of 11E/20551/2016 5.7 The Commissioner has confirmed the demand invoking extended period only on the ground that under the present self- assessment scheme, it was the duty of the appellant to be more tax compliant and not to claim any undue benefit. Countering this findings, the learned counsel for the appellant submits that the ER-2 Returns filed with the department reflect therein the clearances of both physical exports and DTA clearances of 100% Polyester Fabric and therefore, the Commissioner's finding that the facts were suppressed cannot be sustained. We find that in the case of TTK Prestige Ltd. vs. CC, Bangalore (supra), the Tribunal has held that 'The records do not show any suppression of facts. The goods have been examined by the customs officers and allowed to be exported, hence, there is no justification to invoke longer period to demand duty'. In the present case also, the goods exported and cleared under DTA are clearly mentioned in the ER-2 returns of the appellant, therefore, the question of suppression and invoking extended period does not arise.
6. In view of the above discussion, the matter is being remanded and the department is directed to get a clarification from the DGFT before finalising the above proceedings and the demand be confirmed to normal period. Needless to say that appellant needs to be given an opportunity of being heard.
7. In view of the above discussions, the impugned order is set aside and the appeal is allowed by way of remand.
(Operative portion of the order was pronounced in Open Court on conclusion of hearing.) (D.M. MISRA) MEMBER (JUDICIAL) (R. BHAGYA DEVI) MEMBER (TECHNICAL) rv Page 11 of 11