Customs, Excise and Gold Tribunal - Bangalore
Commissioner Of Customs vs Bharavi Laboratories (P) Ltd. on 23 January, 2006
Equivalent citations: 2006(106)ECC341, 2006ECR341(TRI.-BANGALORE), 2006(201)ELT41(TRI-BANG)
ORDER T.K. Jayaraman, Member (T)
1. Revenue has filed this appeal against the Order-in-Appeal No. 59/2004 Cus dated 31.3.2004 passed by the Commissioner of Customs (Appeals), Bangalore.
2. The brief facts of the case are as follows :
The appellants are a 100% E.O.U. licensed for manufacture of Biochemicals/Resins. They imported Capital goods/Raw Materials/Consumable goods without payment of duty by availing Customs exemption Notification No. 53/97 Cus dated 3.6.97 available for 100 % EOU. Similarly they procured indigenous goods without payment of Central Excise duty on the strength of Central Excise Notification No. 1/95. There was a fire accident on 11.4.2002. The appellants informed the Department regarding the fire accident on 15.04.2002. The Superintendent of Customs visited the premises on the same day and caused necessary verification. The list of items destroyed in the fire was drawn up. Since most of the items have not suffered duty, the Revenue proceeded against the appellants by issue of Show Cause Notice. The Show Cause Notice was followed by a Corrigendum dated 16.4.2003. Both the Customs & Excise duty were demanded on the goods destroyed in the fire. The adjudicating authority, after hearing the Respondents, dropped the proceedings. She has given a finding that in view of the fact that the conditions of Notification No. 1/95CE dated 4.1.95 and 2/95 CE dated 4.1.95 have not been infringed, the question of confirming the demand of Central Excise duty foregone under this Notification would not arise. She dropped the demand of Customs duty also in her order dated 6.10.2003. The Revenue appealed to the Commissioner (Appeals) against the Order of the Original authority on the ground that the dropping of demand of Central Excise duty is not correct in view of the provisions of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacturing of Exported Goods) Rules, 2001. The Commissioner (Appeals) agreed with the lower authority and dismissed the Department's appeal. Aggrieved over the order of the Commissioner (Appeals), Revenue has approached this Tribunal on the ground that Rule 6 of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacturing of Exported Goods) Rules, 2001 specifically bars duty concession in respect of goods lost or destroyed by natural cause or by unavoidable accidents during handling/storage in the manufacturer's premises. Reasoning of the Revenue given in the Grounds of the Appeal is as follows :
The impugned goods have been procured under Notification No. 1/95-CE dated 4.1.95 without payment of duty and as per Para (g) of the Notification, it is incumbent on the user industry to follow the procedure set out under Chapter X of Central Excise Rules, 1944. However, with effect from 1.7.2001, the entire Chapter X of Central Excise Rules was replaced by the aforesaid "Central Excise (Removal of Goods at Concessional Rate of Duty) Rules, 2001" vide Notification No. 34/01-CE (NT) dt 21.6.2001. Accordingly the goods procured under the said rules, should invariably be utilized for the intended purpose and the user industry shall pay the duty even if the goods are lost due to natural causes as specifically laid down under Rule 6 of the said Rules, as quoted earlier.
3. Shri Ganesh Havanur, learned SDR appeared for the Revenue and re-iterated the Grounds of Appeal. Shri Shekhar, learned Advocate appeared on behalf of the Respondents.
4. We have gone through the records of the case carefully. The short point is whether an amount of Rs. 10,080/- being duty foregone on indigenously procured materials under Notification No. 1/95 is liable to be paid by the Respondents in spite of the fact that the goods were destroyed in a fire accident. There is no problem with regard to the dropping of the demand of Customs duty of Rs. 7,06,877/-. Out of the total demand of Rs. 1,40,030/- being duty foregone on indigenous goods, an amount of Rs. 1,29,950/- pertains to goods procured under erstwhile Chapter X procedure for dropping of these demands. The Department has no objection as Rule 196(1) of the erstwhile Chapter X of the Central Excise clearly provides for remission of duty in respect of Goods (procured under Chapter X procedure) lost or destroyed or by unavoidable accident. The problem is only with regard to the balance of Rs. 10,080/- pertaining to indigenously procured goods under Notification No. 1/95-CE dated 4.1.95 read with Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacturing of Exported Goods) Rules, 2001. There is no doubt while going through the provisions of the Rule relied on by the Revenue that the Respondents are liable to pay the amount. However the amount should be recovered in accordance with the provisions of Rule 6 of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacturing of Excisable Goods) Rules, 2001. The Rule 6 is reproduced below :
RULE 6 - Recovery of duty in certain cases - Where the subject goods are not used by the manufacturer for the intended purpose, the manufacturer shall be liable to pay the amount equal to the difference between the duty leviable on such goods but for the exemption and that already paid, if any, at the time of removal from the factory of the manufacturer of the subject goods, along with interest and the provisions of Section 11A and Section 11AB of the Central Excise Act, 1944 (1 of 1944) shall apply mutates mutandis for effecting such recoveries.
[Provided that if the subject goods on receipt are found to be defective or damaged or unsuitable or surplus to the needs of the manufacturer, he may return the subject goods to the original manufacturer of the goods from whom he had obtained these and every such returned goods shall be added to the non-duty paid stock of the manufacturer of the subject goods and dealt with accordingly] Explanation - For the removal of doubts, it is hereby clarified that subject goods shall be deemed not to have been used for the intended purpose even if any of the quantity of the subject goods is lost or destroyed by natural causes or by unavoidable accidents [during transport from the place of procurement to the manufacturer's premises or from the manufacturers premises to the place of procurement] or during handling or storage in the manufacturer's premises.
A perusal of Rule 6 reveals that the provisions of Section 11A & Section 11B of the Central Excise Act, 1944 are applicable for effecting the recovery of duty on goods which are not used by the manufacturer for the intended purpose. That means, the show cause notice for recovery should be under Section 11A read with Rule 6 of the above mentioned Rules. On going through the show cause notice and the corrigendum, it is seen that the main show cause notice has no reference to the Central Excise duty which is the subject matter of dispute. Only the Corrigendum refers to the Central Excise duty. The duty is demanded in terms of Para 1(b) of Notification No. 1/95 read with Rule 20(3) of the Central Excise Rules. Thus we do not find any reference to Section 11A of the Central Excise Act at all in the show cause notice. There is no reference to Rule 6 of Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacturing of Exported Goods) Rules, 2001 either. On going through the Notification also, apparently no infringement appears to have been committed by the Respondents. Para (g) of the Notification prescribes Chapter X procedure which has later been replaced with effect from 1.7.2001 by the above mentioned Rules. Only when the Notification, para (g) is read with the above mentioned rules carefully, the infringement will be clear. The infringement arises on account of the Explanation given in Rule 6. These provisions have not been properly brought out in the show cause notice. Therefore we cannot fault with the findings of the lower authority given the way the show cause notice has been drafted. In other words, the show cause notice is defective as the same has neither invoked Section 11A nor Rule 6 of the above mentioned Rules. Under these circumstances, we have no other option but to reject the Revenue's appeal.
(Pronounced in the court on 23 Jan 2006)