Customs, Excise and Gold Tribunal - Mumbai
I.G. Petrochemicals Ltd., Maysore ... vs Commissioner Of Customs on 23 November, 2006
Equivalent citations: 2007(116)ECC1, 2007ECR1(TRI.-MUMBAI)
ORDER Archana Wadhwa, Member (J)
1. All the three appeals are being disposed of by a common order as they arise out of the same impugned order passed by Commissioner of Central Excise vide which:
(i) He has confirmed demand of Rs. 1,93,15,875/- in respect of Steam Turbine Driver for generator imported by M/s. I.G. Petrochemicals Ltd. (appellant No. 1), by denying them the benefit of Notification No. 13/81-Cus. dt. 9.2.1981 and Notification No. 53/97-Cus. dt. 1.3.1997.
(ii) Interest on the above demand stands confirmed by him in terms of Section 28AB of Customs Act, 1962.
(iii) Central Excise duty of Rs. 2,82,924/- stands confirmed against the said appellant in respect of the indigenous capital goods accessories procured by them in terms of exemption Notification No. 1/95 along with confirmation of interest.
(iv) Penalty of Rs. 1,93,15,875/- and Rs. 2,82,924/- stands imposed upon the said appellant in terms of provisions of Section 28(2) of the Customs Act, and Section 11AC of the Central Excise Act, respectively.
(v) Penalty of Rs. 96,00,000/- stands imposed on the said appellant under Section 112 and Section 117 of the Customs Act and of Rs. 1.42 lakhs in terms of Rule 209, Rule 9 and Rule 226 of Central Excise Rules 1944.
(vi) Imported Steam Turbine Driver for generator and indigenously procured capital goods totally valued at Rs. 5,29,24,347/- are confiscated with an option to the said appellant to redeem the same on payment of redemption fine of Rs. 1.50 crores.
(vii) Penalty of Rs. 96 lakhs has been imposed upon M/s. Mysore Petrochemicals Ltd. (appellant No. 2) under Section 112 and Section 117 of the Customs Act, and penalty of Rs. 1.42 lakhs has been imposed in terms of provisions of Rule 209 and Rule 226 of Central Excise Rules, 1944.
(viii) Penalty of Rs. 10 lakhs Rupees ten lakhs only has been imposed upon Shri J.K. Saboo, Executive Director of M/s. I.G. Petrochemicals Ltd. (Appellant No. 3), under the provisions of Section 112 & 117 of the Customs Act, and of Rule 209A, Rule 225 and Rule 210 of Central Excise Rules 1944 read with Rule 26 of Central Excise Rules 2001.
2. We have heard Shri J.J. Bhat Ld. Sr. Advocate appearing for the appellants and Shri P.K. Katiyar Ld. SDR for the Revenue.
3. M/s. I.G. Petrochemicals Ltd. is a 100% EOU engaged in the manufacture of 'Pthalic Anhydride', for which they possess requisite permission and licences from the appropriate authorities. The appellants are having two plant PA-I and PA-II for the manufacture of the said product and had imported turbine generator sets and diesel generator sets for captive power generation. One generator is connected to PA-I and the other is connected to PA-II.
The dispute in the present appeal relates to duty free import of third generator in the year 1996 in terms of Notification No. 13/81-Cus. superceded by Notification No. 53/97-Cus. dt. 1.3.97. The said notifications permit duty free import of the capital goods for the purpose of manufacture of articles for export out of India, or for being used in connection with the production or packaging or job work for export of goods out of India by 100% EOU, subject to fulfillment of conditions enumerated therein. Inasmuch as, the appellant was having sufficient power generator plant, required for manufacture of final product, Revenue's view is that the third generator set imported by them, by availing the benefit of exemption notification in question, was not meant for use in the manufacture of articles for export out of India. As such, investigations were started against appellant No. 1 and statements of their authorized representatives were recorded. The result of such investigation revealed that the electricity generated out of the said generator set was being sold by the appellant in DTA to Maharashtra State Electricity Board, under an agreement. As such, Revenue entertained a view that inasmuch as the generator set in question was not being used in connection with the production of goods, to be exported, benefit of exemption from Customs Duty in terms of the notifications in question was not available. Similarly, the exemption in respect of indigenously procured goods, in terms of Notification No. 1/95-CEX was also wrongly availed. Accordingly, show cause notice dt. 22.3.2002 was issued to the appellants herein proposing confirmation of demand of duty and imposition of penalties. The said show cause notice stands adjudicated by the Commissioner vide his impugned order.
4. Shri J.J. Bhat Ld. Sr. Advocate appearing before us has accepted the finding of the adjudication authority that the said Turbine Generator set was used for production of electricity, which was exclusively being sold to MSEB. He conceded that during the relevant period more than 99% of electricity produced was sold to MSEB and only a fraction of such electricity was used in the operation of PA-I and PA-II plant during the crisis period or as a power back set up. It has also not been seriously disputed that Notification No. 13/81-Cus. or Notification No. 53/97-Cus. allowed duty free imports by 100% EOU for use in the manufacture of goods to be exported. However, he submits that the Tribunal in the case of Indian Charge Chrome Ltd. v. Commissioner 2001 (138) ELT 609 (Tribunal), confirmed by the Hon'ble Supreme Court reported as [2003(157) ELT A137 (S.C.)] has, while interpreting the same notification, has held that diversion of excess power to DTA from captive power plant imported under the notification is permissible.
The said decisions stands followed by the Tribunal in the case of Hanil Era Textiles Ltd. v. Commissioner of Central Excise & Customs , upheld by the Apex Court as reported [2005 (180) ELT A44 S.C.]. Our attention has also been drawn to the correspondence exchanged by appellant No. 1 with the Officials of Industrial Development. Accordingly, it is the contention of the Ld. Advocate that the generator set was imported with the consent and permission of the Development Commissioner and as such, it was not open to the Customs Department to deny the benefit of the notification in question.
5. Countering the above arguments Ld. DR submits that even in their letter to the Development Commissioner, appellants have stated that to utilize the additional surplus steam, they propose to import a generator set for power generation and it was never their case that such generator set was required by them for the purpose of manufacture of goods in their 100% EOU. As such, submits, the Ld. DR that the conditions of notifications were never satisfied and the sole purpose for importation of the said generator was generation of power for the purposes of sale in DTA and not for captive consumption. The Ld. DR also distinguished the earlier decisions in the case of Indian Charge Chrome Ltd. and Hanil Era Textile Ltd. by submitting that the dispute in those cases related to excess production of electricity than what was required by the unit for production of goods. It was in those circumstances, Tribunal held that such excess production was not intentional and sale of surplus power generator will not violate the conditions of the notification. In the instant case the appellants are not indulging in sale of surplus power but the entire electricity penerator is being sold. As such, he prays for rejection of the appeal.
6. After carefully considering the submissions made by both the sides we find that the findings by the adjudicating authority that more than 99% of the power generated is being sold to MSEB stands accepted by the appellants. In such a situation, can it be said that more than 99% of power generated by the said generator set was surplus. Admittedly, the appellant had imported two generator sets for the two plants in terns of the notifications in question. In their letter dt. 9.1.1996 addressed to the Development Commissioner, the appellant, while seeking permission to import the equipment, have submitted as under:
Turbine-Generator Set - Total Cost IM 22,00,000 Will get additional steam from our process after meeting our captive requirements. This additional steam will be utilized by us for generating electric power to the tune of about 1500 kw to 2000 kw and this surplus power will be sold to Maharashtra State Electricity Board. In case we do not generate power from the additional steam, the same will go waste. There is a shortage of power in the country and our generation of power from the waste heat is quite beneficial to the country besides improving the economy of the company. Hence, a Power Generating Turbine is needed for generation of power from the additional steam.
As is clear from above, the sole criteria and intention for import of the generator set was to utilize the additional steam for the purposes of generation of electricity and to sell the same to Maharashtra State Electricity Board. It was never the case of the appellant that such generator set was required by them for power generation meant for captive utilization. The appellants argument that the grant of permission by the Development Commissioner to import the capital goods should be considered as grant of exemption also des not appeal to us. The applicability of the notification is required to be decided by the Customs authorities about the purpose of import of the said generator set. Even the permission of the Development Commissioner for sale of the power in DTA was never taken by the appellant, though, the same was taken in respect of the other waste material. As such, we are of the view that the duty of customs has been rightly confirmed against the appellant by denying them the benefit of notifications in question. Similarly confirmation of demand duty of Central Excise by holding that the capital goods procured for use as a accessories with the said generator sets were not eligible to notification No. 1/95 is appropriated.
7. At this stage we may not also deal with the appellants reliance on the earlier decision in the case of Indian Charge Chrome Ltd. v. Commissioner of Customs, Bhubaneswar-I and Hanil Era Textile Ltd. Admittedly, in those cases the Revenue's case was that after utilizing the electricity produced out of the imported captive power plant, surplus was being diverted to Domestic Tariff Area. The imported power plant was admittedly being used for generation of power to be used in the manufacture of export goods. The benefit of the Notification was sought to be denied by the Revenue on the ground that a part of the power, which though generated, but not utilized was being sold to electricity board. It was in these circumstances that the Tribunal in the case of Indian Charge Chrome Ltd. held that there being no restrictive clause in notification for use of imported goods to be used 'solely' or 'exclusively' for the purpose of manufacture of goods, the benefit of notification cannot be denied if the excess electricity generated, as a result of technical compulsion, is sold out. The facts of the above decision does not apply to the facts of the instant case inasmuch as, it is not sale of surplus power left after captive use, which is being sold but almost the entire production of electricity is being sold to MSEB. Not only that the appellants correspondence with the Development Commissioner also reflects upon the fact that the plant was imported with the sole intention for using the excess steam for production of electricity and to sell the same to electricity board. As such, we find that the adjudicating authority has rightly not applied the ratio of the earlier decision to the facts of the instant case.
8. In view of our forgoing discussions, we confirm the demand of Customs duty of Rs. 1,93,15,875/- and of Central Excise duty to Rs. 2,82,924/-against M/s. I.G. Petrochemicals Ltd. with confirmation of interest. However, keeping in view the facts and circumstances, especially that plant was imported with the knowledge and consent of the Development Commissioner, we reduce the penalty under the Customs Act to Rs. 50 lakhs (Rupees fifty lakhs only) and under the Central Excise Act of Rs. 50.000/-. Penalty of Rs. 96 lakhs imposed upon the appellant No. 1 under Section 112 and Section 117 of the Customs Act and penalty of identical amount imposed upon the appellant No. 2 is set aside. Similarly, we set aside the penalty of Rs. 1.42 lakhs (Rupees one lakh forty two thousand only) imposed upon appellant No. 1 as also upon appellant No. 2. The liability of the imported capital goods to confiscation is upheld, having been imported in violation of the conditions of the Notification. However, redemption fine is reduced from Rs. 1.50 crores (Rupees one crore fifty lakhs only) to Rs. 25 lakhs (Rupees twenty five lakhs only). We do not find any justification for imposition of separate penalty upon Shri J.K. Saboo appellant No. 3 and accordingly set aside the same.
In a nutshell, appeal of appellant No. 1 is allowed partly, appeals of appellant No. 2 and appellant No. 3 allowed unconditionally. All the three appeals are disposed of in the above manner.
(Pronounced in Court on 23.1.06)