Custom, Excise & Service Tax Tribunal
C.C.E.C. & S.Tax, Daman vs Al-Amin Exports on 3 July, 2017
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, O-20, NMH Compound Ahmedabad Central Excise Appeal No.1087 of 2011-SM Arising out of the Order-in-Original No.06/MP/DAMAN/2011 dated 30.3.2011 passed by the Commissioner, Central Excise , Customs & Service Tax, Daman. C.C.E.C. & S.Tax, Daman .. Appellant Vs. Al-amin Exports .. Respondent
Appearance:
Present Dr. J. Nagori, A.R. for the Appellant-Revenue None for the respondent Coram: Honble Dr. D.M. Misra, Member (Judicial) Date of hearing/decision:3.7.2017 Final Order No.A/11327/2017 Per Dr. D.M. Misra:
None present for the Respondents despite notice. Heard the Ld. AR for the Revenue.
2. This is an appeal filed by the Revenue against OIO 06/MP/DAMAN/2011 dated 30.3.2011 passed by the Commissioner, Central Excise , Customs & Service Tax, Daman.
3. Briefly stated the facts of the case are that the respondents, an 100% EOU, was alleged to have violated the conditions of B-17 Bond executed with the Department, inasmuch as, they had procured huge quantity of raw materials, namely, polyester fabrics from some of the 100% EOUs under CT-3 certificate, but instead of utilising the same in the manufacture of goods and exporting the same, they exported cheaper varieties of made-up garments i.e. scrarves and dupattas manufactured out of bought out items from local market, and the raw materials procured duty free were diverted into the Domestic Market. Consequenlty, show cause notice was issued to them proposing confiscation of the goods and penalty under the Customs Act,1962 to the Appellant and other noticees. On adjudication, the ld. Commissioner though imposed penalty under various provisions of the Customs Act,1962 on the Appellant but refrained from imposing fine observing that the goods exported are not available for confiscation. Aggrieved by the said order, the Revenue is in appeal.
4. Ld. A.R. Dr. J. Nagori for the Revenue submits that the respondents, a 100% EOU admittedly violated the conditions of B-17 Bond, therefore, the ld. Commissioner ought to have directed confiscation of the goods as proposed in the show cause notice in view of principle of law laid down by the Honble Gujarat High Court in the case of C.C.E.& C vs. Kaay Bee Tax Spin Ltd. 2017 TIOL 199 HC AHM CX and followed by the Division Bench of this Tribunal in the case of CCE, & ST,Surat-II Vs.Sanjari Twisters vide Order No.A/10732/2017 dt. 29.03.2017.
6. I find that the limited question of law involved in the Revenues appeal for determination is: whether goods exported in violation of the condition of B-17 Bond could be liable for confiscation and fine or otherwise. In my view the issue is no more res integra as has been considered by the Honble Gujarat High Court in the case of CCE&C Vs. Kaay Bee Tax Spin Ltd (Supra). Their Lordships observed as follows:
5. Heard learned advocates appearing on behalf of the respective parties at length. At the outset, it is required to be noted and it is not in dispute that as such, the Adjudicating Authority has confirmed the demand of Central Excise and Customs duty, etc. on the raw materials, interest thereon and imposed penalties under various sections of the Act, which has not been disputed by the respondent-Unit. It is an admitted position that the respondent being a 100% EOU, diverted the goods illicitly into the open market and the raw materials which were procured by forgoing the Customs duty were not used for the purpose for which they were imported. From the material on record, it appears that when the respondent-Unit imported the goods and was permitted to ware house the goods in the private bonded warehouse without payment of the duty, the respondent-Unit furnished the Bond in form B-17. In the said form, the respondent-Unit also agreed to abide by the conditions mentioned in the written Bond. The relevant conditions are reproduced as under :-
10. We, the obligor, shall fulfill the export obligations and conditions stipulated in Customs/Central Excise Notifications, as amended, under which the specified goods have been imported/sources, as well as the Import-Export Policy for April, 1997 to 2002, as amended from time to time and to pay on demand an amount equal to the Customs and Central Excise Duties leviable on the goods as are not proved to the satisfaction of Assistant/Deputy Commissioner of Customs/Central Excise to have been used in the manufacture of articles for export and any penalty imposed under the Customs Act, 1962 of the Central Excise Act, 1944 and rules or regulations made thereunder, as the case may be.
11. We, the obligors, shall discharge all dues whether Central Excise duty or the lawful charge which shall be demandable on the goods obtained by us without payment of duty from the domestic tariff area and transported from the place or procurement to our premises for use in special Industrial purpose and shall also pay after final assessment by the proper officer/Assistant Commissioner of Central Excise or such other delegated authority,as the case may be which were assessed on provisional basis under Rule 9B of the Central Excise Rules, 1944 all dues within 10 days of the date of demand thereof being made in writing by such officers.
12. We, the obligor, shall if the articles so manufactured are and are allowed to be sold in India in such quality and subject to such other limitation and conditions as may be specified in this behalf by the Director General of Foreign Trade, pay duty of Excise leviable on such articles under Section 3 of the Central Excise Act, 1944 and duty of Customs & Central Excise leviable on the raw materials/ components parts used in the manufacture of such articles as are not allowed to be sold in India in accordance with the provision of Exim policy.
13. We, the obligors, shall comply with the conditions and limitations stipulated in the said Import and Export Policy as amended from time to time or the Assistant/Deputy Commissioner of Customs/Central Excise permitting the goods imported into India or sourced indigenously for the purpose of aforesaid or the articles manufactured or package therefrom to be taken outside the undertaking temporarily, without payment of duty, for testing repairs, reconditioning, processing or display, etc."
5.1 In the said form, the respondent-Unit had also declared that the said written bond shall continue to be in force, notwithstanding the transfer of goods to any other person or removal of goods from one warehouse to another. The said bond was also backed by an undertaking. On execution of such bond and the conditions mentioned in the bond, the respondent-Unit was permitted to warehouse the goods without payment of any duty.
5.2 It is an admitted position that thereafter, the respondent-Unit clandestinely removed the goods and thereby committed breach of condition by diverting the goods illicitly into the open market and the raw materials which were procured by forgoing Customs duty have not been used for the purpose for which they were imported, and therefore, the goods were liable to be confiscated.
5.3 Section 125 of the Customs Act, 1962 provides that whenever confiscation of any goods is authorized by the Act, the Officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under the Customs Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods, an option to pay in lieu of confiscation such fine, as the said Officer thinks fit.
5.4 As observed hereinabove, on the respondent-Unit diverting the goods illicitly into the open market and the raw materials which were procured by forgoing the Customs duty were not used for the purpose for which they were imported, the Customs authorities were authorized to confiscate such goods which are illicitly diverted. It is required to be noted that the respondent- Unit was permitted to deposit the goods in a bonded warehouse without making payment of the Customs duty, on certain terms and conditions and one of the condition was that the finished product was required to be exported, meaning thereby the goods which were permitted to be imported and thereafter deposited in a warehouse without payment of customs duty, were not required to be sold in the open market in India. Thus, once the confiscation of such goods was authorized, Section 125 of the Customs Act shall be applicable. However, as the goods were not available for confiscation at the time of adjudication, as the same were already released on bond and/or permitted to be warehoused without payment of duty on furnishing the bond and undertaking, redemption of fine in lieu of confiscation was imposable.
5.5 Under the circumstances, considering the decision of Apex Court rendered in case of Weston Components Limited [Supra] and the decision of Karnataka High Court in the case of Shilpa Trading Company [Supra], the Tribunal ought to have held that the Adjudicating Authority ought to have imposed redemption fine in lieu of confiscation of the goods which were illicitly diverted in the open market, which were permitted to be warehoused on certain terms and conditions; including without making payment of Customs duty.
5.6 Now, so far as reliance placed upon a decision of Bombay High Court rendered in case of Finesse Creation Inc. [Supra] and the subsequent decision of the said High Court in the case of National Leather Cloth Mfg. Company [Supra] are concerned, on facts, the same shall not be applicable to the facts of the case on hand, since in the matters before the Bombay High Court, there was no bond/legal undertaking executed. The submission made on behalf of the respondent-Unit that unless and until the goods are first seized, there is no question of confiscation and consequently, there is no question of imposing the redemption fine in lieu of confiscation is concerned, considering the language used in Section 125 of the Customs Act, we do not agree with the same. As observed hereinabove, Section 125 of the Act shall be applicable in a case where confiscation of any goods is authorized by the Customs Act. If it is found that there is breach of any of the provisions of the Customs Act and/or even the Export/Import Policy, and/or there is a breach of any of the terms and conditions on which goods were permitted to be imported without payment of duty and permitted to be deposited in the Warehouse, confiscation of such goods can be said to be authorized thereafter, when it is found that the goods are not available for confiscation as the same were illicitly diverted to the open market, and the purpose for which the goods were permitted to be imported without payment of duty is frustrated, in lieu of such goods, redemption fine is imposable.
5. In view of the above judgment, which has been followed by this Tribunal in CCE, & ST,Surat-II Vs. Sanjari Twisters case(supra), the matter needs to be remanded to the Adjudicating Authority to ascertain the quantum of fine. Consequently, the impugned order to the extent of not directing confiscation and imposing of fine is set aside and the matter is remanded to the Adjudicating Authority for determination of quantum of fine imposable under the circumstances of the case. Revenues appeal is allowed by way of remand, accordingly.
(Dictated and pronounced in the open Court) (Dr. D.M. Misra) Member (Judicial scd/ C/499/2011-SM 6