Customs, Excise and Gold Tribunal - Tamil Nadu
Vorin Laboratories Ltd. vs Cc on 19 December, 2003
Equivalent citations: 2004(92)ECC443, 2004(168)ELT107(TRI-CHENNAI)
JUDGMENT S.L. Peeran, Member (J)
1. All these appeals arise from common Order-in-Original No. 24/98 dated 22.3.98 by which the Commissioner of Customs (Adjn.) has denied the benefit of Notification No. 204/92 dated 19.5.92 and confirmed customs duty liability of Rs. 16,28,171 on the misutilized goods. He has also imposed interest at the rate of 24% per annum on the goods from the date of clearance of duty free materials given in respect of each clearance to the date of final payment under Para 128 of the Handbook of Procedures 1992-97 specified under Para 16 of Import and Export Policy 1992-97. There is an order of confiscation of the goods in terms of Section 111(o) of the Customs Act and since the goods were not available for confiscation, there is imposition of fine of Rs. 1 lac. A penalty of Rs. 3 lakhs under Section 112(a) of the Customs Act has also been imposed.
2. The appellants were issued quantity based advance licence No. 34875 dated 24.5.93 by the Director General of Foreign Trade (DGFT), Hyderabad for export of 10000 legs of Ibuprofen with a condition that the goods imported a gainst the aforesaid licence shall be utilized in accordance with the provisions of Customs Notification No. 204/92 dated 19.5.92. However, on investigation by Central Excise Officers, it was revealed that they had imported 7380 kgs of Acetyl Chloride, 20000 kgs of Iso propyl Alcohol, 10000 kgs of Iso bytyl Benzene and 3000 kgs of Sodium Metal and subsequently sold in the local market. However, it was noticed that they had exported their final product viz. Ibuprofen, by availing credit of Central Excise duty on imports procured locally and additional duty in respect of inputs permitted import under Rule 57A of C.E. Rules, 1944. They had completed the export obligation by exporting 11,500 kgs of Ibuprofen as against 10000 kgs to be fulfilled as per advance licence by utilising duty paid indigenous and imported raw materials. The appellant's plea was that there was fire accident in the factory and due to which the inputs were destroyed and they feared about contamination of imported raw materials and they immediately took decision to dispose them of. However, subsequently, by using the indigenous material they had fulfilled the export obligation. Their contention that since the fire accident took place in the factory, they sold part of the inputs to save it from the contamination and as they had already fulfilled their export obligation, the question of paying duty, redemption fine and penalty does not arise. They also submitted that the export bond which had been executed in the matter had been fulfilled and during the period when the department investigated, they were not under the DEEC scheme as the export obligation had been fulfilled. It is their contention that Commissioner's order directing them to pay duty on the imported raw material and also to pay penalty does not arise. They submitted that as the circumstances were beyond their control, they had to sell the imported raw material to save it from damage/destruction. Hence, their action was bonafide and no penalty was required to be imposed on them.
3. We have heard Ld. Counsel Shri R. Ganesan and Shri A. Jayachandran, Ld. DR.
4. Ld. Counsel pointed out that in a similar facts and circumstances, the Tribunal in the case of Dolphin Drugs Pvt. Ltd. v. Madras, vide Final Order No. 73/88 dated 15.1.98 set aside the order of the Commissioner imposing duty liability and penalty. He pointed out in the said case, the appellant had sold the final product in the domestic market by using imported raw material. However, as the DGFT had extended their licence, they had complied with the export obligation by manufacturing Ibuprofen and hence on this ground, the Tribunal set aside the confirmation of duty and also penalty in the matter. He pointed out that as they had not taken permission from the DGFT, proceedings were initiated by the DGFT. However, taking into consideration of their explanation, the Joint Director General Foreign Trade by his Order No. 2 (6)/95-96-ECA/HYD/65 dated 23.7.96 noted the appellants had a fairly good truck record and they were exporting under very cut throat competitiveness and also in view of larger interest of export promotion and developing exports, he did not wish to take a harsh view. However, as they had not taken permission from DGFT or from the Customs Department with regard to sale of the inputs, a nominal penalty of Rs. 10,000 was imposed. He pointed out from the said order that the only failure on the part of the appellant was with regard to their not informing the licensing authority about availing modvat credit and also about reversing the same. But at the same time, it was noticed that technically there was no pecuniar damage caused to the revenue and as they had not informed regarding sale of the inputs a nominal penalty was imposed. He submitted that this order of JDGFT should be taken into consideration and penalty should be waived in terms of the order of the Tribunal rendered in the case of Dolphin Drugs P. Ltd. v. CC (supra). He pointed out at the relevant time, 98% of the raw materials had been utilized for export purpose and the bond had been fulfilled by 13.9.94 but the show cause notice was issued on 9.5.95. Therefore, question of confiscating the goods and imposing fine & penalty does not arise even in the light of judgment of the Apex Court cited by Ld. DR in the case of Western Components Ltd. v. Commissioner, 2000 (67) ECC 201 (SC) : 2000 (115) ELT 278 (SC) as in that case the goods were released under bond and bond was still in existence.
5. Ld. DR relied on the judgment of Western Components Ltd v. Commissioner (supra) and pointed out that confiscation was sustainable and penalty & fine was imposable. He also relied on the judgment of R. Janardhanan v. CC Chennai, 2002 (84) ECC 661 (Tri) : 2002 (149) ELT 1029 (Tri-Chennai) wherein also the goods had been released under bond and as they were not produced when required, the goods were held to be confiscable and penalty was imposable.
6. We have carefully considered the submissions and notice that appellants had already exported all the goods in terms of the licence under the EXIM policy and the conditions of the licence had been fulfilled. As they had exported the goods, the appellants had sold a part of the raw material in the market due to fire in the factory for fear of contamination. This plea has been accepted by the JDGFT in the order passed by him as noted above. However, as they had not informed the DGFT authorities, they have been penalised to the extent of Rs. 10,000. It is very clear from the said order, which is perused by us, that the appellants were exporting under stiff competitiveness and have completed the export obligation and earned foreign exchange for the country. It has also been noted that they have a fairly good track record. In the case of Dolphin Drugs P. Ltd. (supra) the Tribunal has also noted that when the export obligation had been fulfilled, then in such an event, question of imposing fine & penalty does not arise. The findings recorded in the above judgment in para-5 are noted herein below:
"5. We have carefully considered the pleas advanced by both the sides. While it is true that in the beginning only 8200 kgs of IBUPROFEN was manufactured and exported and the remaining quantity out of the said raw material was manufactured and sold in the domestic but we observe that they have got relevant permission from the DGFT authorities to fulfil their export obligation by the extended time limit of 31.5.95. The said export obligation has been duly fulfilled. It was duly recorded in para 6.1 of the impugned order which has not been dealt with by the adjudicating authority at all. This was duly pointed out by the applicants/appellants herein in para 3 of their reply to SCN. In view of extension period for fulfilment of export obligation and the fact that export obligation has since been fulfilled the charge of violation of Notification No. 203/92 is not sustainable. Hence, we are of the view that the imposition of duty liability and imposition of penalty on the applicants cannot be sustained. Hence, we set aside the impugned order so far as the applicant/appellant is concerned. Hence, we allow the appeal itself. In view of above, the stay petition also gets disposed of".
7. In view of above findings of the Tribunal, we set aside the confirmation of duty on the inputs sold in the domestic market as they have fulfilled the export obligation. In the case of Western Components Ltd. (supra), the Apex Court had held that if goods were not produced in terms of the bond in execution, then they are liable for confiscation and fine & penalty is imposable. Same view was expressed in the case of R. Janardhanan v. CC, Chennai (supra). It the present case, the export obligation had been completed and the terms of the licence had been fulfilled and the bond had been cancelled. The show cause noticed was issued on 9.5.95 whereas the bond was cancelled on 13.9.94. Therefore, the Commissioner's finding that the bond was well in existence is not in terms of facts on record. In a circumstance when the bond is not in existence and the export obligation had been fulfilled, the question of confiscation in the matter does not arise and hence the order of confiscation and imposition of fine is set aside.
8. As regards imposition of penalty for having contravened terms of the notification, in disposing of the raw material, we notice that this is an admitted fact. The JDGFT has already imposed a penalty of Rs. 10,000 after taking into consideration all the extenuating circumstances. The appellants have shown that they were compelled to sell the inputs in the domestic market to avoid contamination and total loss due to fire in the factory. We notice that appellants was required to have taken permission from the department before disposing of the raw material. To that extent there is laches on the part of the appellant. However, it does not call for imposition of penalty of Rs. 3 lakhs. In the overall facts and circumstances of the case and also in view of imposition of penalty Rs. 10,000 by JDGFT, it will be in the interest of justice to reduce the penalty to Rs. 10,000 (Rupees Ten thousand only) in this case also under Section 112(a) of the Customs Act. The appeals are partly allowed in the above lines.