Customs, Excise and Gold Tribunal - Bangalore
L.T. Karle And Co. vs Commissioner Of Customs on 15 June, 2004
Equivalent citations: 2004(172)ELT80(TRI-BANG)
ORDER S.L. Peeran, Member (J)
1. This appeal arises from Order-in-Original No. 3/2002, dated 7-2-2002 passed by the Commissioner of Customs, Trichy, rejecting the claim of duty drawback in respect of 4 shipping bills filed by the appellant on the ground that the goods had been manufactured in 100% EOU viz. M/s. Karle International and there was a violation of proviso 2(c) of Notification No. 67/98-Cus. (N.T.), dated 1-9-1998 issued under the Customs & Central Excise Duties Drawback Rules, 1995. In the impugned order, he has also demanded the drawback, which had been granted to the appellants in terms of Section 75(2) of the Customs Act and directed the appellants to pay the same to the government forthwith. He has also confirmed interest besides imposing a penalty of Rs. 22,00,000/- on the appellants in terms of Section 114(iii) of the Customs Act.
2. The appellant's contention is that they are a partnership firm, which is a DTA unit. They had used the spare capacity available with M/s. Karle International, a 100% EOU and exported such garments and thereafter they submitted evidence for claim of drawback. The same was sanctioned and paid. They are still to get the balance of drawback, which they have not received. They filed their claim under Entry 62-01 relating to readymade garments under Chapter 62 of the table under Notification 67/98-NT Customs, dated 1-9-1998. Their case is that the raw materials in question were supplied by Karle International and such raw materials were utilised for manufacture by using the plant and machinery of their suppliers of raw materials and the goods so manufactured were got exported for and on behalf of the appellant through Karle International. They admit that in the shipping documents, they had not mentioned that the item had been manufactured by Karle International. They content that however, in all the other documents about such manufacture in Karle International was scrutinized by the Customs officers and there was no suppression of facts on this ground. The Commissioner has placed reliance on Clause 2(c) of the said Notification under the caption "General Notes" to hold that the claim is invalid as the manufacture had been done by using the spare capacity of 100% EOU factory. The second ground taken is that in the shipping bills, the appellants had not mentioned that the goods had been got manufactured and/or exported by a unit licenced as a 100% EOU and thus there was suppression of facts attracting penal action and for recovery of the drawback sanctioned and paid to them. They referred to the permission granted by Deputy Commissioner of Customs, Bangalore, vide his communication dated 28-7-1999 enabling them to get their goods manufactured through a 100% EOU factory and hence they say there was no suppression in the matter. They contend that merely because they have used the spare capacity of 100% EOU by itself will not preclude them from the claim of duty drawback. They contend that Clause 2(c) is required to be read down as to apply only to 100% EOUs in respect of goods owned by them and not in respect of goods manufactured/exported by them for and on behalf of the DTAs. They contend that Clause 2(c) of the Notification does not place any such embargo and the entire case of the department is based upon an erroneous interpretation. They contend that the bar in Clause 2(c) applies only to goods manufactured and/or exported by an EOU on its own account and not when its facilities were utilized by a DTA. They contend that even 100% EOUs themselves are entitled to a drawback under the provision to Clause 2 of the said Notification. They also contend that there was no bar against a DTA utilising the facility of 100% EOU in terms of the said Notification. They contend that the non-filling of Column No. 7 in the Shipping Bills pertaining to the place where it was manufactured, i.e. a 100% EOU, will not disentitle them from the claim as it is only a venial and technical mistake which will not take away the substantive benefit which is eligible for them. They also contend that subsequent circulars and public notices issued by the department itself go to show that there was some misunderstanding at the time the export was made about the shipping bills such as those submitted by them, about the eligibility or otherwise of certain DTAs to drawback and therefore, it cannot be said that there was any wilful failure on the part of the appellants. They contend that violation, if any, of the terms of a circular or a clarification issued by the Board/Government where there is no violation of any provisions of law or statutory notification cannot lead either to the denial of drawback or demand for repayment of drawback already granted or levy of penalty under Section 114 of the Customs Act. They contend that there was no violation of Section 113 or 114 for levy of penalty in the matter.
3. We have heard learned Advocate Shri Naresh Thacker and learned JCDR, Smt. Shobha L. Chary.
4. The learned Advocate pointed to several Circulars issued by the Ministry of Finance like Circular No. 66/98-Cus., dated 15-9-1998 in respect of executing the bond; and Circular 67/98-Cus., dated 14-9-1998 in respect of subcontracting; Circular No. 74/99-Cus., dated 5-11-1999 issued by Ministry of Finance and Circular issued by Central Board of Excise and Customs dated 5-11-1999 in Circular No. 74/99-Cus. wherein they have clarified that the shipping bills can be filed by DTA unit when goods are manufactured in the 100% EOU unit. He submits that although the Circular refers to the shipping bill to contain the details as to where it was manufactured, he submits that mere lapse of non-mention will not preclude them from the benefit of the drawback when the substantive compliance has been done and the goods have been exported under bond. He referred to the circulars including the Circular No. 67/98-Cus., dated 14-9-1998 issued by the Board wherein it clarified the utilization of ideal capacity of EOU/EPZ units by a DTA unit. He also referred to Board's Circular No. 31/2000-Cus., dated 20-4-2000 wherein also it was clarified that DTA units shall be eligible for grant of drawback against duties suffered on inputs. He submits that this very issue was gone into by the Tribunal in the case of Leela Scottish Lace Ltd. v. CC, Bangalore - 2003 (156) E.L.T. 548 (Tri. - Bang.) and has held that considering special milieu of readymade garments industry, the raw material supplied i.e. DTA company, was the manufacturer and entitled to drawback of duty, especially, as it was allowed by department to file drawback claim and such goods could not be counted towards export performance of EOUs. It was also noted that non-mentioning of EOU/EPZ unit as manufacturer/exporter in shipping bill did not amount to misdeclaration in terms of Paras 2(a) and (c) of General Notes to Notification No. 67/98-Cus. (N.T.). The Tribunal has also set aside the penalty imposed in the matter. It is the contention of learned advocate that this judgment squarely covers the facts of the case and hence the same is required to be applied in all fours to the facts of the case.
5. Learned JCDR contended that the appellants had suppressed the fact of manufacturing of the goods in the 100% EOU unit by not filling the Column 7 of the shipping bill. She submitted that the findings recorded by the Commissioner is just and proper and required to be upheld.
6. On a careful consideration of the matter, there is no dispute with regard to the fact that the goods were manufactured in the spare capacity of the EOU unit by DTA unit i.e. the appellant. The circulars issued by the Board in this regard clearly permit such an activity and, therefore, there is no specific clause in the Notification in question prohibiting the manufacture of goods by a DTA unit in the 100% EOU unit. The Board, in the Circular No. 67/98-Cus., dated 14-9-1998 has, in Para 4, clarified as follows :-
"4. Further to utilise the idle capacity of the EOU/EPZ units, it has also been decided that the EOU/EPZ units in textile, readymade garments, agro-processing and granite sectors may be permitted to undertake job work from the DTA units provided the finished products produced by such EOU/EPZ units will be exported directly from EOU/EPZ unit itself and these goods will not be sent back to the DTA."
The Circular No. 31/2000-Cus., dated 20-4-2000 also clarified that such DTA exporters will be eligible for payment of Brand Rate of Drawback against duties suffered on inputs, on submission of proof of payment of duty. Para 4 of the circular is extracted below :
"4. Such DTA Exporters will be eligible for payment of Brand Rate of Drawback against duties suffered on inputs, on submission of proof of payment of duty. Accordingly, drawback will be payable to such exporters under Rule 6(1) of the Customs and Central Excise Duties Drawback Rules, 1995, at the rate fixed on specific application. The procedure laid down under the said Drawback Rules will have to be followed for fixation of Brand Rates of Drawback. Such exporters will have to apply to the Directorate of Drawback for fixation of Brand rates on exports under DEP. However, under no circumstances, such exporters will be allowed to claim All-Industry Rate of drawback."
We also notice that the appellant had given bond and had also produced proof of export, which is not disputed. The only question raised is that they have not filled the Column 7 of shipping bill to indicate that the goods were manufactured in 100% EOU. This point has already been answered by the Tribunal in the case of Leela Scottish Lace Ltd. and held that demand amounts to misdelcaration. Further, we notice by Circular 74/99-Cus., dated 5-11-1999 issued by the Board clarifying the benefit in Para 4 of the Circular 67/98-Cus., dated 14-9-98 to EOU/EPZ units. We, further find that this very question was examined by the Tribunal in the case of Leela Scottish Lace Ltd. v. CC (supra) and upheld the manufacture of goods by a DTA unit in the EOU/EPZ unit on job work basis and exporting the same claiming drawback. In view of these material facts on record and the judgment of the Tribunal, we are of the considered opinion that appellants have made out a case on merits in their favour. There is no suppression in the facts nor the claim was availed illegitimately. The claim was in terms of the Board's circular and was available to them in terms of the Notification in question. It does not specifically bar the DTA unit to manufacture in the idle capacity of 100% EOU and hence they have rightly filed the claim in terms of the Board's Circular and their claim was rightly adjudicated in their favour. In that view of the matter, the impugned order is set aside and the appeal allowed.