Customs, Excise and Gold Tribunal - Mumbai
Sunil Kumar Jain, Santhosh Kumar Jain, ... vs Commissioner Of Central Excise And ... on 8 November, 2007
Equivalent citations: 2008(124)ECC211, 2008(150)ECR211(TRI.-MUMBAI)
ORDER A.K. Srivastava, Member (T)
1. The appellants M/s. Indoworth India Limited (hereinafter referred to as 'IIL' for short) are a 100% export oriented undertaking engaged in the manufacture of polywool yarn, wool tops, and this would include blended yarns. They were permitted to set up a captive power plant / captive generating sets on 01/11/1994. Accordingly, they had set up a power plant by installing three generating sets each capable of generating 4 MW of electricity. One sot was standby while two were being used to generate electricity required.
2. As per the EOU scheme, for the raw material and the capital goods required by an EOU, Notification No. 1/95-CE was issued enabling an EOU to procure goods without payment of duty from the domestic tariff area, while notification 53/97-Cus entitled the EOU to import such goods without payment of duty. IIL had procured fuel (furnace oil mentioned in the Customs Notification table) for generation of Electricity.
3. Consequent to certain intelligence gathered by the officers as regards diversion of furnace oil, certain enquiries were launched and a show cause notice was issued, which was adjudicated by the Commissioner and following duties, penalties and fine were ordered.
a. Demand of duty as per Annexure 'A' to the show cause notice amounting to Rs. 49,51,577/- on furnace oil received under CT3 without payment of duty and clandestinely removed. The demands were made under the provisions of Section 11A of Central Excise Act, 1944. The demand as per Annexure 'AA' represents the demands on furnace oil allegedly diverted to another EOU at Raipur, comprising both Customs Duty and Excise Duty while demands at Annexure AI(i) is excise duty demand amounting to Rs. 1,32,219/- for the year 1998 by denying the benefit of Notification No. 1/95-CE. Demand at Annexure AI(ii), A2 and A3 amounting to Rs. 48,19,358/- are customs duty demands for the period 1998-1999 to 2001-02 (upto October, 2001) by denial of benefit of Notification 53/97-Cus b. A duty demand of Rs. 5,00,166 as per Annexure 'B' has been ordered on short receipt of furnace oil under CT3. This demand has been ordered under the provisions of Section 11A of the Central Excise Act, 1944 read with Section 28 of the Customs Act, 1962. Out of the total demand of Rs. 5,00,166/-, Rs. 1,41,703/- pertains to duties of Central Excise on goods short received and Rs. 3,58,463/- pertains to the customs duty on the imported furnace oil short received.
c. Demand as per Annexure 'C' to the show cause notice amounting to Rs. 1,16,08,359/- has been raised on all wool yarn and polywool yarn clandestinely removed in the garb of waste of yarn under provisions of Section 11A of Central Excise Act, 1944 read with Section 28 of the Customs Act, 1962 and pertains to the removals in terms of the proviso to Section 3(1) of the Central Excise Act, 1944 for the period August, 1998 to March, 1999.
d. Demand as per Annexure 'D' amounting to Rs. 48,44,539/- has been raised on the ground that the appellants had cleared polywool waste as wool waste by paying lower rate of duty from September, 1998 to August, 2002 and has been ordered under the provisions of Section 11A of Central Excise Act, 1944 read with Section 28 of the Customs Act, 1962.
e. 1622.2 KL of furnace oil which was allegedly clandestinely removed was held to be liable to confiscation under Rule 209 of erstwhile Central Excise Rules, 1944 and Rule 25 of the erstwhile Central, Excise (No. 2) Rules, 2001 read with Section 38A of the Central Excise, 1944 and Section 72 read with Section 28 of the Customs Act, 1962 and also under Section 111(o) of the Customs Act, 1962. However, since the goods in question were not available, a fine of Rs. 25 lakhs were imposed on M/s. IIL in lieu of confiscation.
f. The duty demand were to be recovered along with appropriate interest under Section 11AB from the EOU and under Section 28AA.
g. The Commissioner did not find any reason to order confiscation of 108327.6 Kgs of all wool yarn and polywool yarn cleared in the garb of waste of yarn and 224072.7 Kgs of polywool waste cleared in the garb of wool poly waste in DTA for the reason that the said goods were never seized / released provisionally in this case and hence were not liable to confiscation and he relied upon the decisions of CEGAT in the case of Ram Khajana Electronics v. CC , Shiwalya Spinning and Weaving Mills (P) Ltd. v. Cc , Universal Steel Agencies v. CC .
h. Penalties were imposed on M/s. IIL amounting to Rs. 2,19,04,641/- under erstwhile Rule 209 of the Central Excise Rules, 1944 read with Section 38A of the Central Excise Act, 1944 and erstwhile Rule 25 of the Central Excise (No. 2) Rules, 2001 and Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944 read with Section 114 of the Customs Act, 1962 respectively.
i. Personal penalties of Rs. 5 lakhs was imposed on Shri Sunil Kumar Jain, then General Manager, IIL, and Rs. 3 lakhs each on Shri Santosh Kumar Jain Director and Shri S.N. Maheswari Director under the provisions of Rule 209A of the Central Excise Rules, 1944 and erstwhile Rule 25 and 26 of the Central Excise (No. 2) Rules, 2001 read with Section 28A of the Central Excise Act, 1944 and Rule 25 and 26 of Central Excise Rules, 2002 and under Section 112(a) of the Customs Act, 1962.
4. Hence these appeals, which are being disposed off by this common order after hearing both sides and considering the materials on record.
5. The demands on imported furnace oil obtained by the EOU under the provisions of Notification 53/97-Cus are made on the ground that the said furnace oil has been cleared by the EOU without obtaining permission from the department. The unit, to which the said oil was cleared, is appellant's own unit at Raipur, which is also having an EOU status. It is not the contention of the Commissioner that the oil was not cleared and / or used in the other plant of IIL, which is also an EOU and situated at Raipur. The oil under dispute has been used in an EOU. The EXIM policy permits transfer of goods from one EOU to another EOU and Notification No. 53/97 permits removal of goods from one EOU to another EOU without payment of duty. The claim of the appellants that the transferee EOU at Raipur had used the said furnace oil for generation of electricity for use in production is not rebutted. This would call for arriving at the conclusion that there is no stipulation in the notification that goods covered by the said notifications and obtained duty free had to be used only in the Nagpur plant and they could not be used in the Raipur plant. The reliance on para 6 of Notification No. 1/95-CE by the Commissioner is not correct as that para would be applicable only on debonding of the Nagpur unit. There appears to be no intention to evade payment of duty as the notice has been issued only on the ground of not obtaining the prior permission to remove the furnace oil. There cannot be suppression against once own self, as both the Nagpur and Raipur units are of the same corporate entity. On prior permission, the furnace oil could be removed without payment of duty. Therefore, there is no malafide on the part of the appellants for not having approached the Department for permission. This may be procedural error but duty demands not upheld on merits would be found to be barred by limitation also. The Commissioner should have granted post facto approval when the request was made to him during the adjudication. The demand of Rs. 49,52,577/- in Annexure 'A' cannot, therefore, be sustained on merits and on limitation and is set aside.
6. As regards the demand in Annexure 'B' amounting to Rs. 5,00,166/- the demand is on short receipt of the furnace oil than what has been mentioned on the relevant Bills of Entry and is based on the payments made to the transporters. The Revenue's case is based on certain amounts deducted from the transport charges due to the transporters for transporting the furnace oil to the factory. These demands are based on presumption and assumption and are not corroborated by statement from the transporters to the effect of short deliveries of quantities of furnace oil. The Commissioner has relied upon the inter office memo and statement of Shri S.N. Maheswari, Vice President (Commercial). The memo is an advice to the finance department / stores department to deduct Rs. 14 per litre for short receipt. There is no actual co-relation arrived at by the Commissioner between the short receipt and the deductions made as per this memo. There is no doubt that furnace oil, being liquid cargo, there would be shortages especially when transported over long distances by lorry tankers. However, there is no records / reports of short receipts at the re-warehousing of the furnace oil, either by the departmental officers verifying the stocks at a given time or reports of the stores department of the assessee. The assessee had relied upon the decision of the Allahabad High Court in the case of AP State Cement Corporation 1996 (86) ELT 6 (Allahabad) maintained by the apex Court 1999 (112) ELT A44. This would help the appellants. The normal losses in transportation of liquid cargo have to be factored in and require condonation. The Commissioner has not arrived at any finding that the receipts are abnormally short and / or are not normal transit losses for such cargos and, therefore, cannot be condoned. In this view of the matter, the demand of Rs. 5,00,166/- as ordered cannot be upheld.
7. The Commissioner has ordered and arrived at the confiscation of 1622.2 KL of furnace oil found by him to be removed with an intent to evade duty and thus liable to confiscation under the provisions of Central Excise Law and Section 111(o) of the Customs Act, 1962. The said furnace oil, admittedly is not under seizure and thus not available for confiscation. However, he has proceeded to impose a redemption fine on M/s.IIL. In view of our findings that there is no evasion of duty on this quantity of furnace oil transferred to the other EOU plant at Raipur of the same assessee, we cannot uphold the liability to confiscation as arrived at by the Commissioner. Hence, the redemption fine is set aside.
8. As regards demands under Annexure 'C" relating to the removal of All wool yarn and Polywool yarn in the garb of "Polywool yarn waste" and "All wool yarn waste" during the period from 25/08/1998 to 19/03/1999, the appellants submitted that the basic customs duty is the duty of customs leviable under Section 12 of the Customs, 1962 and was payable in respect of the clearances of All wool yarn and Polywool yarn to the DTA for the period upto September, 1999. The larger bench of the Tribunal in appellant's own case 2002 (143) ELT 663 have held that prior to September, 1999, an EOU was liable to pay only basic customs duty under Notification 2/95-CE in respect of the clearances effected to DTA and CVD or Addl. Duty of Customs was not payable on such clearances. The demands under Annexure 'C' would require to be reworked out and for that purpose the matter is required to be remanded back to the Commissioner for re-determination of the duty applicable.
9. As regards the demand of differential duty on the removal of the "Polywool waste" in the garb of "Wool Polywaste" i.e., All wool waste during the period from 21/09/1998 to 31/08/2002 under Annexure 'D', the documents were not furnished to them and there was no material to arrive at the classification of the waste under heading 55.05. The mandate is to prove that the polyester fibre pre-dominates in the wastes so cleared. The Commissioner is, therefore, required to re-determine the duty demand under Annexure 'C' and 'D' after supplying the necessary documents and hearing the appellants on all issues, which they may opt to raise before him as regards the issues of duty demand under Annexure 'C' and 'D' to the notice are concerned.
10. Needless to add that the question of penalties would be determined only after the demands, if any, are quantified. The appeals of M/s. IIL are disposed off as partially allowed and partially remanded.
(Pronounced in Court on 08/11/2007)