Custom, Excise & Service Tax Tribunal
Chaudhry Hammer Works Ltd.(Now Known As ... vs C.C.E. Ghaziabad on 13 March, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Excise Appeal No.2004 of 2011
(Arising out of Order-in-Original No. 2/COMMR. /GZB/ 2011-12 dated
12.05.2011 of the Commissioner, Customs, Central Excise & Service Tax
Commissionerate, Ghaziabad)
M/s Chaudhry Hammer Works Ltd., .....Appellant
(10th KM Stone, Achheja, Dujana,
GT Road, Gautam Budh Nagar)
VERSUS
Commissioner of Central Excise, Ghaziabad ....Respondent
(CGO Complex-II, Kamla Nehru Nagar, Ghaziabad)
WITH
I. Excise Appeal No.2005 of 2011 (Mr. Mukul Chaudhary,
Managing Director of)
II. Excise Appeal No.2006 of 2011 (Mr. Gayatri Nath
Srivastava, Vice-President (F&A) of)
III. Excise Appeal No.2007 of 2011 (Mr. Manoj Singhal,
Commercial Manager of)
(Arising out of Order-in-Original No. 2/COMMR. /GZB/ 2011-12 dated
12.05.2011 of the Commissioner, Customs, Central Excise & Service Tax
Commissionerate, Ghaziabad)
APPEARANCE:
Shri Atul Gupta, Advocate for the Appellants
Shri A.K. Choudhary, Authorised Representative for the Respondent
CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL)
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NOs.70127-70130/2025
DATE OF HEARING : 15 October, 2024
DATE OF PRONOUNCEMENT : 13 March, 2025
SANJIV SRIVASTAVA:
These appeals are directed against Order-In-Original No.
2/COMMR. /GZB/ 2011-12 dated 12.05.2011 of the
Commissioner, Customs, Central Excise & Service Tax
Excise Appeal Nos.2004-2007 of 2011
2
Commissionerate, Ghaziabad. By the impugned order following
has been held:
ORDER
(i) I confirm the Demand of ₹3,05,25,795.00 (Rupees Three crore Five lakhs Twenty five thousand Seven hundred & Ninety five only) against short payment of duty under provisions of Section 11A(1) of the Central Excise Act, 1944 alongwith interest as per provisions of Section 11AB of Central Excise Act 1944.
(ii) I order appropriation of the amount of ₹3,05,25,795.00 (Rupees Three crore Five lakhs Twenty five thousand Seven hundred & Ninety five only) against short payment of duty and ₹14,38,279.00 (Rupees Fourteen lakhs Thirty eight thousand Two hundred & Seventy nine only) against payable interest already deposited towards the amount as demanded vide para above.
(iii) I Impose penalty of ₹ 3,05,25,795.00 (Rupees Three crore Five lakhs Twenty five thousand Seven hundred & Ninety five only) upon M/s Chaudhry Hammer Works Ltd. ( 100% EOU), Khasra No. 34,35,36,37 & 38, Village Acheja, Post Dujana, Gautam Budh Nagar under provisions of Section 11AC of Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002, and FTP.
(iv) I impose penalty amounting to ₹50,00,000/-( Rupees Fifty lacs only) on Shri Mukul Chaudhry, M.D.of M/s Chaudhry Hammer Works Ltd., ( 100% EOU), Khasra No. 34,35,36,37 & 38, Village Acheja, Post Dujana, Gautam Budh Nagar under Rule 26 of Central Excise Rules, 2002 read with FTP, and Central Excise Act;
1944(v) I impose penalty amounting to ₹ 10,00,000/- ( Rupees Ten lacs only) on Shri Gayatri Nath Srivastava, V.P. (F&A) of M/s Chaudhry Hammer Works Ltd., (100% EOU), Khasra No. 34,35,36,37 & 38, Village Acheja, Excise Appeal Nos.2004-2007 of 2011 3 Post Dujana, Gautam Budh Nagar under Rule 26 of Central Excise Rules, 2002 read with. FTP, and Central Excise Act; 1944.
(vi) I impose penalty amounting to ₹5,00,000/(Rupees Five lacs only) on Shri Manoj Singhal, Commercial Manager of M/s Chaudhry Hammer Works Ltd., ( 100% .EOU), Khasra Nc 34,35,36,37 & 38, Village Acheja, Post Dujana, Gautam Budh Nagar under Rule 26 of Central Excise Rules, 2002 read with FTP, and Central Excise Act; 1944.
2.1 Appellant had Central Excise Registration No. AAACC6049CXM003 was engaged in manufacture of forged flanges of Carbon Steel/ Alloy Steel/Stainless Steel classifiable under Chapter 73 of Central Excise Tariff Act, 1985. Was granted permission for setting up of EOU by Assistant Development Commissioner, Noida Special Economical Zone (NSEZ), vide letter dated 11.09.2007, for Steel forgings 2.2 During scrutiny of records of the appellant, it was observed that they commenced production in March 2008 and also effected export clearances from the unit in March' 2008. Within few months, the party also started making Domestic Tariff Area (DTA) clearances with respect to finished goods and scrap i.e. in December'2008 and April' 2009, respectively. They claimed benefit of Notification No. 23/2003-CE dated 31.03.2003 for the DTA clearances done by them. It was observed that the appellant o cleared goods for DTA on concessional duty which were not similar to the goods exported as the unit's product descriptions for DTA clearances were not comparable with product description of export clearances and the goods sold in DTA had different characteristics and parameters. o The NFE is required to be calculated in a block of five years However, appellant had not completed one year of its operations when DTA clearances regarding finished Excise Appeal Nos.2004-2007 of 2011 4 goods were affected by them. Hence, NFE calculation as per para 6.5 of the policy was not done.
o without calculation of NFE, they proceeded to start DTA clearances.
o the required DTA sale permission was never available with the party and effecting DTA sales, without having permissions for the same, in contraventions of provisions of FTP;
o the DTA sales were made by them even beyond the limit of 50% of the FOR value of export which was not permissible at all.
2.3 Thus the appellant effected clearances of goods in DTA in contravention of the provisions of the Notification No. 23/2003- CE dated 31.3.2003 and of FTP and was not entitled for the benefit of Notification No. 23/2003-CE dated 31.3.2003 or they failed to fulfill the conditions of the Notification No. 23/2003-CE dated 31.3.2003 and thus they did not discharge duty against DTA clearances correctly.
2.4 Further investigations and enquiries were made in the matter. Statements of Appellant 2, 3 and 4 who were hold in senior management positions with the appellant were recorded. Thus it was observed that that appellant short paid the duty as detailed in table below:
S No Description Amount in Rs 1 Period 2008-09 & 2009-10 2 Amount Due as per proviso to Section 3 (1) 47746677 3 Amount Paid -17220882 4 Short Paid 30525795
2.6 On being pointed out the above, the appellant deposited duty and interest as detailed below and informed the department and informed the jurisdictional authorities:
Amounts in Rs S No Letter Dated Duties Interest Total 1 29.01.2010 86,09,335 118328 87,27,663 2 17/18.03.10 2,07,55,090 1065780 2,18,20,870 4 28/4/10 4,64,250 20997 4,85,247 Excise Appeal Nos.2004-2007 of 2011 5 5 29/4/10 6,97,120 233173 9,30,293 Total 3,05,25,795 14,38,278 3,19,64,073 2.6 A Show Cause Notice dated 10.05.2010 was issued to appellants asking them to show cause as to why-
(i) Demand and recovery of ₹3,05,25,795.00 (Rupees Three crore Five lakhs Twenty five thousand Seven hundred & Ninety five only) against short payment of duty and ₹14,38,279.00 (Rupees Fourteen lakhs Thirty eight thousand Two hundred & Seventy nine only) against payable interest from them by invoking extended period of limitation under proviso to Section 11A(1) read with Section 11AB of Central Excise Act 1944 for, the contravention of proviso to Section 3 of Central Excise Act, 1944;
(ii) Appropriation of the amount of ₹3,05,25,795.00 (Rupees Three crore Five lakhs Twenty five thousand Seven hundred & inety five only) against short payment of duty and ₹14,38,279.00 (Rupees Fourteen lakhs Thirty eight thousand Two hundred & Seventy nine only) against payable interest already deposited towards the amount as demanded vide para (i) herein above.
(iii) Imposition of penalty under provisions of Section 11AC of Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002, and FTP upon them.
(iv) Imposition of personal penalty upon (i) Shri Mukul Chaudhry, M.D., (i) Shri Gayatri Nath Srivastava, V.P. (F&A), and (ii) Shri Manoj Singhal, Commercial Manager of the noticee company under Rule 26 of Central Excise Rules, 2002 read with FTP, and Central Excise Act; 1944.
2.7 The show cause notice has been adjudicated as per the impugned order, referred in para 1 above 2.8 Aggrieved appellants have filed this appeal.
3.1 We have heard Shri Atul Gupta, Advocate for the appellants and Shri A K Choudhary Authorized Representative for the revenue.
Excise Appeal Nos.2004-2007 of 2011 6 3.2 Arguing for the appellant learned counsel submits that:
Commissioner could not have initiated these proceedings without concurrence from the development commissioner, reliance placed on-
o Hyderabad apparels [2008 (221) ELT 69 (T-Bang)] o Virgo Valves & Controls Pvt Ltd [2022 (5) TMI 1302
-Cestat Mumbai] Impugned order being non speaking is violative of principles of natural justice, reliance placed on- o A K Kraipak [AIR 1970 SC 150] o JAISWAL Iron Stores [2021 (9) TMI 830-Allahabad High Court] o Shree Shyam Granites and marbles [2023 (2) TMI 652 -Madras High Court] o Rasi Electrodes Ltd [2021 (5) TMI 671-Madras High Court] Finished goods cleared by the appellants in DTA are similar to the goods exported by them.
The legislative intent behind the provision regarding DTA clearance by EOU vide Circular 85/95-Cus is to broadly maintain a 1:1 co-orelation between the export item and the DTA clearance item, without going into minute details. Reliance for interpreting the word "similar" is placed on the following decisions:
o Axiom Cordages Ltd. [2021 (%) TMI 665 Cestat Mumbai] o DCM Hyundai Ltd. [2023 (4) TMI 211-CESTAT Chennai)] NFE at the time of clearance of finished goods was positive.
Prior permission for DTA sale was not required by the Appellant.
Exemption from BCD & SAD has been rightly availed by the Appellants on sale of scrap.
Third time cess is not payable. Reliance is placed on the following decisions:
Excise Appeal Nos.2004-2007 of 2011 7 o Sarla Performance Fibers Ltd. [2010 (253) ELT 203 9T-Ahd)] o Meghmani Dyes & intermediates [2014 (11) TMI 615
-SC o Meneta Automotive Components Private Limited [2023 (8) TMI 789 Cestat Chandigarh] Extended period is not invokable, interst could not have been demanded and penalties could not have been imposed.
Penalty under Rule 26 could not have been imposed upon the employees and essential ingredients are not satisfied.
3.3 Authorized representative reiterated the findings recorded in the impugned order.
4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments
4.2 Impugned order records the findings as follows:
"6.6 Now coming to party's stand , they have submitted that their unit is having Plant & machinery which is capable of only manufacturing "Forgings" and hence the allegation that they have cleared goods in DTA which are not similar to goods exported is not correct. They have stated that they manufacture Flanges & Rings according to the drawing and specifications of the buyers. They may differ in size, specifications but are alike in all other respect and perform same functions and have identical characteristics, Manufacturing Process, Material a Technical Characteristics. They further submitted that in view of the report of M/s. Deba Engineers a Consultants, Delhi, the Chartered Engineers appointed by them who performed a very detailed study of the case and considered the functional properties of the products, goods cleared in DTA are similar in characteristic and having same function as was of exported goods.
6.7 Regarding achievement of positive NFE, they have submitted that up to 30.04.2009 they sold scrap only in Excise Appeal Nos.2004-2007 of 2011 8 DTA. Further in terms of sub-paragraph 6.8(e) of FTP, sales of scrap / waste / remnants shall not be subject to achievement of positive NFE". They added that scrap sale is also not subject to permission or intimation to Development Commissioner or excise authority as 'Scrap' generated and cleared by Noticee falls within SION norms. They also enclosed a certificate to this effect by Chartered Accountant.
6.8 With regard to sale of finished goods in DTA, they submitted that the sale of finished goods was in terms of sub-para 6.8(a) of chapter 6 of FTP. They submitted that according to said para of FTP, DTA sale of finished goods upto 50% of FOB value of Export could be done on concessional rate of duty and beyond 50% of FOB value of export, if any, on full rate of duty. They also submitted that they had achieved positive NFE which is confirmed by the Development commissioner, NSEZ vide their letter F.No.03- 368/2006-100%E0U/4467 dated 11.06.10. They also enclosed certificate issued by the Chartered Accountant certificate towards quarter-wise achievement of positive NFE (Cumulatively).
6.9 They Further submitted that since. the issue was not referred to the Development Commissioner, Excise Department cannot take decision in the matter in view of the decision of case titled as "Apex Recycling Pvt.Ltd. Vs. Commissioner of Central Excise, Delhi-1" in which it was held "when LOP cancelled by Development Commissioner unit can be debonded. Cancellation of private bonded warehousing license wrong when LOP not expired. Adjudication order holding failure to achieve NFE not sustainable when issue not referred to Development Commissioner.
6.10 With regards to the allegation regarding Permission for DTA sale before sale: (para2 (iv) (c) of SCN), they submitted that their unit being a 'Status Holder' EOU does Excise Appeal Nos.2004-2007 of 2011 9 not require permission for DTA Sale as per Hand Book of Procedure Volume 1 and only prior intimation needed to be given which they had done 6.11 They also added that no SAD was imposable as they under sub-section (5) of section 3 of The Customs Tariff Act, 1975 because they were availing benefit of Notification No. 23/2003 dated 31.03.03. As per Sr. No. 1 of aforesaid notification, if condition no. 1 is fulfilled then SAD is not required to be paid. Condition No. 1 is "if the goods being cleared into the Domestic Tariff Area not exempt by the state government from payment of Sales Tax or Value Added Tax". Thus, if the goods are vatable in respective state then no Special Additional Duty is required to be paid on the value of clearance. Flanges and waste cleared by them in DTA are vatable goods and VAT (Value Added Tax) had been-paid on all these sales.
6.12 They have also raised the issue of time bar under section 11A pleading that in absence of any allegation of fraud, collusion or any willful Misstatement or suppression of facts in Show cause notice, invoking extended period of Limitation is contrary to law.
6.13 From the above I find that in-no case, party was entitled for the clearances beyond 50% of FOB value which they made indicating that they were effecting clearances in DTA without keeping in mind the provisions of the Act as well as FTP. Further admittedly, they started effecting the DTA clearances without receipt of permission from the Development Commissioner for which they had applied for. Further they cleared goods in terms of Para 6.10.4 of hand book of procedure (during the relevant period 31.03.08 to 26.08.09) for annual calculation of NFE, which lays down that, "value of imported Capital Goods & lump sum payment of foreign technical know-how fee shall be amortized as under-
Excise Appeal Nos.2004-2007 of 2011 10 "1 to 10th year -10%."
Provided that the above amortization rates would be applicable only if an undertaking is given by a unit that it would not exit to DTA in first 10 vears However, it is a fact on record that the party not only applied for debonding but has also got themselves debonded and on date they do not have a status of 100% EOU. Thus instead of continuing for 10 years, they have opted out before completion of 3 years. It shows their intentions that their main purpose was to clear the goods in local market and they did not have sufficient orders for export of goods. Therefore, the NFE which is required to be calculated in a block of five years cannot be said to have been achieved when they even did not continue for 5 years as 100% EOU. In view of above, it is seen that even if it is assumed that the unit tried to calculate the NFE, before DTA clearances, the calculation of NFE as per above method was totally wrong since the unit had applied for debonding and have now. no more a status of 100% EOU unit on date. Therefore, the annual calculation of NFE based on amortization rates as per 6.9.4 would not be applicable, meaning thereby that the positive NFE assertion made by the party was faulty and incorrect and contains no validation from the Development Commissioner. Hence it was in violation of the provision of the FTP 6.14.1 I further find that there is an allegation against them that the goods cleared by them in DTA were not similar to the goods cleared for export. In this regard, with their written submissions dated 18.4.2011, they have enclosed a certificate from DEBA Engineers & Consultants a duly certified chartered engineers, who have justified the similarity of goods on the ground that both type of goods namely sold in DTA and exported were manufactured by same process i.e. forging and hence were similar and that variation in description, dimension, chemical composition, Excise Appeal Nos.2004-2007 of 2011 11 mechanical properties etc do not change the similarity aspect of the goods. Regarding similarity of the goods I find that CBEC, vide Circular No. 7/2006-Cus dated 13.01.2006, as amended by Circular No. 12/2008 dated 24.07.2008, gave the guidelines that "Similar goods" means goods which are although not alike in all respects, have like characteristic and like component materials which enable them to perform same functions and to be commercially inter changeable 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". However, party itself has admitted that each item was manufactured by them as per drawing and specifications of the buyers Hence, the goods sold in DTA could in no way be treated as commercially interchangeable with regard to quality reputation and trade mark. I find that numerous machinery parts are made of steel by forging process. However, it will be wrong to say that all these parts are similar because they are made by forging process. The scope of the word similar in terms of FTP for the purpose of DTA sales is limited to the guidelines given in aforesaid Board's circular. Thus when admittedly, the goods were different in description, dimension, chemical composition, mechanical properties etc. as per party's own version, they cannot be treated as interchangeable. Party has stressed that they were manufacturing flanges and rings only which were cleared in DTA as well as for exports. I find that flanges are "Projecting flat rim etc. for strengthening or attachment". Thus flanges is not a specific product and flanges of different specifications have different uses. Flange of one specification is not usable at other purposes. Thus in no way flanges of different specifications can be treated as similar. Similar is the position of rings which are also made as per specification of the buyer for their specific use and rings of different specifications are not interchangeable. I Excise Appeal Nos.2004-2007 of 2011 12 also find that their version in this regard is also not true. As per annexures of the SCN, I find that in addition to flanges and rings, they have also cleared semi-finished products of on Alloy Steel, NPS/WNRF, Forgings as per design, shell cover of flanges, shell ring as per drawing, Lock ring as, Forged ring, Door ring as per drawing, test forging, semi finished for carbon steel, Stuffing box, packing/ gland, etc. Thus it is seen that when there is export of flanges and rings of specific design and drawing, these goods and the flanges & rings of other specifications cannot be treated as similar goods .In.this regard, the certificate of Chartered Engineer, submitted by the party is too general and is not relevant to the provisions of notfn. No. 23/2003 dated 31.03.03 5.14.2 find that for availment of benefit of the said notification relating to DTA sales, there were basic 3 conditions-
(a) The goods sold in DTA should be similar to the goods which are exported;
(b) The unit should have achieved positive NFE;
(c) DTA sale entitlement/ permission from Development Commissioner should be available to the unit beforehand for undertaking DTA clearances;
6.14.3 I further find that unless all these three conditions were satisfied, a 100% EOU unit was not entitled to sell their goods in DTA at concessional rate of duty in terms of Notfn. 23/2003 during the period under dispute. Hence when the first condition of similarity of goods was not satisfied, even if there could be positive NFE and even if the permission from the Development Commissioner might not be required for a status holder exporter, a 100% EOU was not entitled to avail the benefit of the said notification. I thus find that the clearances made by the party in DTA during the Fin. Years 2008-09 and 209-2010 were in contravention of the provisions of Foreign Trade Policy as Excise Appeal Nos.2004-2007 of 2011 13 well as Notfn. no. 23/2003 dated 1.3.2003 and as such they were not eligible to avail the benefit of concessional rate of duty for DTA sales during the said period.
6.15 Coming to the sale of scrap, party has submitted that no permission from the Development Commissioner was required for the its sale. However, I find that when the finished goods cleared in DTA were not eligible for clearances at concessional rate on the ground that these were not similar, the scrap generated during the production of such goods cannot be permitted to be sold at concessional rate. As such I do not find any force in party's submissions on this issue.
6.15.1 From the facts on record I find that on being pointed out the above mentioned short payment of duty, the party deposited ₹ 87,27,663/- (Duty- ₹ 86,09,335-+ interest- ₹ 1,18,328) and informed the office of the Deputy Commissioner, Central Excise Division-IV, Ghaziabad vide letter dated 29.01.2010 stating that they had deposited balance duty payable on DTA sale over 50% of the FOB value of export sales. Further, the party vide letter dated 17.03.10 & 18.03.2010 informed the department of payment of ₹ 9,11,988.00 and ₹ 2,09,08,882.00 which as informed to be duty of Customs, SAD, CESS portion of balance duty as remaining along with interest paid under protest. Furthermore, the party on 28/4/10 & 29/4/10 paid an amount of ₹ 4,85,247.00 (duty ₹ 4,64,250.00 and interest ₹ 20997.00) as remaining balance of duty whereas an amount of ₹ 9,30,293.00 (duty < 697120.00 + Interest ₹233173.00) was paid under protest as informed by the party vide their letter dated 29.04.10. And thus they have deposited an amount of ₹3,05,25,795.00 (Rupees Three crore Five lakhs Twenty five thousand seven hundred & Ninety five only) against short payment of duty and <14,38,279.00 (Rupees Fourteen lakhs Thirty eight thousand Two hundred & Seventy nine only) against Excise Appeal Nos.2004-2007 of 2011 14 interest. also find that vide their letter dated 3.5.2011, party further confirmed that they had accepted the duty liability alongwith interest amounting to ₹ 90,73,585/- + ₹ 1,39,325/- deposited by them in respect of the sales of goods in DTA over and above the eligible limit of 50% of FOB value under notfn. 23/2003 6.15.2 In this regard I find that though entire amount of duty involved in the case stands paid by the party, partly under protest and partly without protest. However, the said payment was made by the party only after the initiation of the enquiry by the Department in the matter and only when the wrong availment of the benefit of Notfn. 23/2003 was pointed out after the same came to the notice of the Department. Hence it cannot be said that the payment which has not been claimed under protest is voluntary. In fact, the stand of the party still remains that they were entitled for Notfn. 23/2003 and as the clearances in DTA exceeded over 50% of FOB value, the amount of duty attributable to said clearances was paid without protest. However, the fact cannot be negated by them that the clearances of goods , not being similar, were in contravention of the provisions of FTP as well as Notfn. 23/2003 and were made knowingly and willingly without keeping in mind the provisions of Foreign Trade Policy. Therefore, on this ground I find that they are not entitled for any relief against the charges made and established against them.
6.16 Regarding their stand that extended period was not invokable as there was no suppression of facts and mis- declaration, I find that not only the clearances were, made in contravention of the provisions of notfn. 23/2003 and FTP but also they deliberately misdeclared even at the stage of adjudication about the similarity of goods. Goods cleared in DTA were manufactured as per drawings and orders of the buyers and were specifically manufactured for Excise Appeal Nos.2004-2007 of 2011 15 sale in DTA only. These goods in no case could be exported and as such there was intention not to export the goods but to manufacture goods for DTA sale. In this regard, I further find that Hon'ble Supreme Court of India in case of Hindustan Granites [ 2007 (211) ELT 3] has given the verdict that " DTA sales by EOU is not an integral part of the EOU scheme." On the other hand, I find that party , instead of clearing goods as an exception or an incidental facility, manufactured goods specifically for DTA sales and made the sale of goods even in dishonour of the said law laid down by the Apex Court of India. I therefore, find that as the clearances in DTA. were in contravention of the provisions of C.E. Act, 1944 and the rules made thereunder as well as the provisions of FTP by way of willful mis- declaration and suppression of facts , the extended period is rightly invokable in their case."
4.3 Undisputedly appellant had set up 100% Export Oriented Unit for which necessary permission was obtained by them form the development Commissioner The demand has been made against the appellant on two accounts i.e. On sale of scrap;
On sale of finished goods which they had cleared by claiming the benefit of exemption under Notification No 23/2003.
4.4 Notification No. 23/2003-CE dated 31.03.2003 is reproduced below:
"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 Appeal Nos.2004-2007 of 2011 16 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 Foreign Trade 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.
TABLE Sr. Chapter or Description of Amount of duty Conditions No heading No. Goods or sub-
heading No. 1 2 3 4 5 3 Any Chapter All goods other In excess of amount equal to aggregate of 3 than those duties of excise leviable under Section 3 of referred to in 5, the Central Excise Act or under any other law 5A, 6, 7 and 7A of for the time being in force on like goods this Table produced or manufactured in India other than in an export oriented undertaking, if sold in India.
Condition no. 3 of the Notification states that:-
"If-
(i) the goods are produced or manufactured wholly from the raw materials produced or manufactured in India,.
(ii) the goods are cleared into Domestic Tariff Area in accordance with sub-paragraphs (a), (d), (e) and (g) of Paragraph 6.8 of the Foreign Trade Policy ; and
(iii) such goods, if manufactured and cleared by the unit other than export oriented undertaking are not wholly exempt from duties of Excise or are not chargeable to NIL rate of duty.'
4.5 The exemption under Notification No. 23/2003-CE dated 31.3.2003 was subject to conditions laid down above. Excerpts of Para 6.8 of the Foreign Trade Policy are reproduced below:
Excise Appeal Nos.2004-2007 of 2011 17 "Entire production of EOU/EHTP/STP/BTP unit shall be exported subject to the following
(a) Units, other than gems and jewellery units, may sell goods upto 50% of FOB value of exports, subject to fulfillment 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 exported from units.
(b) ...
(c) ...
(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.
(e) Scrap /Waste / remnants arising out of production process or in connection therewith may be sold in DTA, as per SION notified under Duty Exemption Scheme, on payment of concessional duties as applicable, within overall ceiling of 50% of FOB value of exports.
(f) .......
(g) By-products included in LOP may also be sold in DTA
subject to achievement of positive NFE, on payment of applicable duties, within the overall entitlement of sub-para 6.8(a). Sale of by-products by units not entitled to DTA sales, or beyond entitlements of sub- para 6.8(a), shall also be permissible on payment of full duties."
4.6 It is settled preposition in law that the exemption Notification need to be interpreted strictly according to wordings of the notification. Hon'ble supreme Court has in case of Dilip Excise Appeal Nos.2004-2007 of 2011 18 Kumar & Company [2018 (361) ELT 577 (SC)] observed as follows:
52. To sum up, we answer the reference holding as under
-
(1) Exemption notification should be interpreted strictly;
the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification.
(2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue.
(3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export case (supra) stands overruled.
4.7 The basic of the EOU scheme is for promotion of the exports. From para 6.8 of the Foreign Trade Policy reproduced above it is quite evident that the entire production of the EOU is to be exported and the DTA sales are permitted in certain specific conditions subject to the restrictions and conditions imposed. The Exemption Notification 23/2003-CE which is in respect of the DTA sales made by an EOU needs to be considered in an strict manner in accordance with the scheme. The appellant soon after starting their EOU started clearance of the scrap/ goods in DTA. The intentions of the appellant by making such huge clearances of scrap and goods within a period of less than a year from the date of setting of EOU and starting export production and clearances is itself indicative of the ill intentions of the appellant. In the case of Hindustan Granites [2007 (211) E.L.T. 3 (S.C.)] hon'ble Supreme Court has observed as follows:
"20. We find no merit in the challenge to the impugned circular/notification for the following reasons. Firstly, it is important to note that under para 6.1 of the unamended Excise Appeal Nos.2004-2007 of 2011 19 FTP 2004-2009, 100% EOUs undertook to export their entire production except permissible sales in DTA. Therefore, DTA sales constituted an exception or an incidental facility. DTA sales were not an integral part of the EOU Scheme. Under para 6.1, EOUs were allowed to be set up on the condition that they would export their entire production. It is on this condition that 100% EOUs could avail of various benefits under Customs and Excise Act. The said DTA sales or sales of rejects were exceptions. DTA sales were not an integral part of the EOU Scheme in the sense that if for reasonable reasons if these exceptions are eliminated, as in this case, the Scheme would become unworkable. In fact, M/s. Hindustan Granites even today after the impugned amendment works without use of domestic raw material. Hence, DTA sales is not an integral part of the EOU Scheme....."
4.8 The goods which appellant claim to be similar goods cannot be claimed to be the similar goods in absence of the positive evidence to this effect. The decisions referred to by the counsel for the appellant in this respect do not help the cause of the appellant as the question whether the goods cleared in DTA were similar to the goods cleared for export is a question of fact and needs to be established by the appellant on the basis of the tangible evidences. In the present case we find that undisputedly Appellant 2, who is Managing Director of the Appellant has categorically in his statement, has admitted that the goods cleared for export and those cleared in DTA were not the "similar goods", as the goods cleared by them were tailor made goods conforming to the specific requirements of the customer. The duties due in respect of the entire clearances made in DTA was also admitted and paid by the appellant.
4.9 For the reason that the appellant has deposited the entire amount of duty along with the interest during the investigation and prior to issuance of Show Cause notice the proceedings in respect of the amounts so deposited could not have been Excise Appeal Nos.2004-2007 of 2011 20 initiated against the appellant and the same should have been closed as per law.
4.10 Appellant has raised certain issues in respect of denial of natural justice by stating that the order is non speaking order. However we do not find any merits in the said submission as the impugned order records the reason for arriving at the findings. Hon'ble Supreme Court has in case of Saheli Leasing & Industries Ltd [2010 (253) E.L.T. 705 (S.C.)] observed as follows:
"6. We, therefore, before proceeding to decide the matter on merits, once again would like to reiterate few guidelines for the Courts, while writing orders and judgments to follow the same.
7. These guidelines are only illustrative in nature, not exhaustive and can further be elaborated looking to the need and requirement of a given case :-
(a) It should always be kept in mind that nothing should be written in the judgment/order, which may not be germane to the facts of the case; It should have a co-
relation with the applicable law and facts. The ratio decidendi should be clearly spelt out from the judgment/order.
(b) After preparing the draft, it is necessary to go through the same to find out, if anything, essential to be mentioned, has escaped discussion.
(c) The ultimate finished judgment/order should have sustained chronology, regard being had to the concept that it has readable, continued interest and one does not feel like parting or leaving it in the midway. To elaborate, it should have flow and perfect sequence of events, which would continue to generate interest in the reader.
(d) Appropriate care should be taken not to load it with all legal knowledge on the subject as citation of too many Excise Appeal Nos.2004-2007 of 2011 21 judgments creates more confusion rather than clarity. The foremost requirement is that leading judgments should be mentioned and the evolution that has taken place ever since the same were pronounced and thereafter, latest judgment, in which all previous judgments have been considered, should be mentioned. While writing judgment, psychology of the reader has also to be borne in mind, for the perception on that score is imperative.
(e) Language should not be rhetoric and should not reflect a contrived effort on the part of the author.
(f) After arguments are concluded, an endeavour should be made to pronounce the judgment at the earliest and in any case not beyond a period of three months. Keeping it pending for long time, sends a wrong signal to the litigants and the society.
(g) It should be avoided to give instances, which are likely to cause public agitation or to a particular society. Nothing should be reflected in the same which may hurt the feelings or emotions of any individual or society.
8. Aforesaid are some of the guidelines which are required to be kept in mind while writing judgments. In fact, we are only reiterating what has already been said in several judgments of this Court."
As we find that the impugned order has recorded the reasons for arriving at the findings, we do not find any merits in the submissions made to the effect that the order is a non speaking one. Thus we do not find any merits in the submissions made by the appellant.
4.11 Appellant has relied upon certain decisions to submit that third time cess is not payable. The ratio of the said decisions is not disputable. However in the present case we find that appellant have themselves deposited the amount of duty and Excise Appeal Nos.2004-2007 of 2011 22 cess as calculated by them. We do not any basis for the claim so made from the impugned order. As the no separate demand has been made in respect of these demand we do not find any merits in the said submission.
4.12 Appellant would be correct in their submissions to the effect that these proceedings could have been adjudicated only after the concurrence from the Development Commissioner. However in the interest of justice and for the reason that the appellant would suffer unnecessary hardship if we remand the matter back to original authority after nearly 15 years for re- adjudication after obtaining necessary concurrence from the Development Commissioner we are not inclined to take that course of action. All litigations must end and not be kept alive for some procedural inadequacies. Even the Board Circular relied upon do not bar initiation of proceedings but only restricts the adjudication of the same without concurrence from the concerned Development Commissioner. While making this observation we also note that the appellant have themselves opted out of the EOU scheme within three years (instead of 10 years) from the date of commencement of their operations as EOU as per the permission granted by the Development Commissioner and have got their unit de-bonded as per the provisions of policy. Further the NOC for de-bonding has been issued only after taking into account these amounts deposited by the appellant, and the unit would have been de-bonded only after taking the note of the NOC issued. As the appellant had already opted out of the scheme of EOU we reject the submissions made by the appellant to this effect.
4.13 In case of Jain Grani Marmo Pvt. Ltd [2015 (330) E.L.T. 97 (Raj.)] Hon'ble Rajasthan High Court has observed as follows:
41. Irrefutably, having regard to the role, commitment and obligation of an EOU under the Policy to export its entire production of goods, the permissible DTA sales of finished products etc. and other supplies in the DTA, as contemplated in Paragraphs 6.8 and 6.9, are exceptions in Excise Appeal Nos.2004-2007 of 2011 23 the contingencies carved out therefor. Logically therefore, and as ratified by Paragraphs 1.3 and 2.1 of the FTP, exports and imports envisaged thereunder, can assuredly be regulated by the provisions thereof or any other law in force, and the Central Government is authorized, in public interest, to make any amendment to the Policy in the exercise of its power under Section 5 of the Act. Thus, if the supplies in DTA, as conceived of in Paragraph 6.9 with all its attendant concomitants, including NFE earning potential thus, can indubitably be regulated/restricted by the Central Government on relevant considerations and in public interest, and in such an eventuality, the plea of violation of the fundamental right to carry on any trade, occupation or business under Article 19 of the Constitution of India, would not be tenable. Having regard to the avowed objectives sought to be achieved by the impugned decision, reliance on the decision in Secretary to Govt., Tamil Nadu & Anr.
(supra) is also of no avail.
42. The considerations prompting the impugned decision, in our view, outweighs the aspects highlighted on behalf of the petitioner to repudiate the same and cannot be dubbed to be antagonistic to the Act and the Policy framed thereunder.
4.14 For imposition of the penalties on the employees of the appellant 1, i.e. Appellant 2, Appellant 3 and Appellant 4, we find that impugned order records the findings as follows:
6.18 Now coming to the penalties proposed on Shri Mukul Chaudhry, Managing Director; Shri Gayatri Nath Srivastava, Vice President and Shri Manoj Singhal, Excise/Commercial Manager. I find that they were summoned for tendering of their statements. From their statements I find that they were in complete knowledge of the clearances of goods in DTA which were not similar to the exported goods. Shri Mukul Chaudhry, Managing Director of M/s Chaudhry Hammer Works Ltd., stated that Excise Appeal Nos.2004-2007 of 2011 24 the goods manufactured by the EOU are tailor made to Customer's specific requirement conforming to the drawing and design having different mechanical properties and they are not similar. He admitted that he was responsible for the overall functioning of the unit and as an MD all the responsibilities and final decisions were taken by him. He also admitted that with respect to EOU clearances, Shri Manoj Singhal and Shri Gayatri Nath Srivastava, Vice President was responsible for duty payments and other procedures pertaining to EOU. I, therefore, find that Shri Mukul Chaudhry, Shri Gayatri Nath Srivastava and Shri Manoj Singhal were fully aware of the violations committed by the party & were actively involved in transporting, depositing, keeping, concealing, selling & purchase of excisable goods which they knew or had reason to believe were liable to confiscation under the Central Excise Act;
1944. As such I find that they have rendered themselves liable for penalty under rule 26 of the Central Excise Rules, 2002.
From the above it is evident that penalty has been imposed upon these appellants only on the basis of the statement of Appellant 2 without recording any act of omission or commission committed by the appellant 2, 3 and 4 leading to the holding that the goods were liable for confiscation. The penalty has been imposed only for their knowledge about the activities of Appellant 1, which evidently they would have acquired in normal course of business. Penalty under Rule 26 could not have been imposed for the reason of knowledge but could have been imposed only for positive acts of omission or commission, for which the goods were held liable for confiscation. In absence of any positive findings recorded in the impugned order to this effect we do not find any merits in the penalties imposed under rule 26 on the employees of the Appellant.
4.15 Summarizing our findings-
Excise Appeal Nos.2004-2007 of 2011 25 Demand of duty and interest is upheld and also the appropriation of the same against the amounts already deposited prior to the issuance of show cause notice; Penalties imposed under Section 11AC of The Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002 and FTP is set aside.
Penalties imposed upon Appellant 2, Appellant 3 and appellant are set aside.
5.1 Appeal filed by the appellant 1 is partly allowed to the extents of setting aside the penalties imposed.
5.2 Appeals of Appellant 2, Appellant 3 and Appellant 4 are allowed.
(Order pronounced in open court on-13 March, 2025) Sd/-
(P.K. CHOUDHARY) MEMBER (JUDICIAL) Sd/-
(SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp