Karnataka High Court
The Commissioner Of Central Excise vs Jas Telecom Pvt. Ltd., on 29 August, 2018
Bench: Vineet Kothari, S.Sujatha
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IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 29TH DAY OF AUGUST 2018
PRESENT
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
AND
THE HON'BLE Mrs.JUSTICE S.SUJATHA
CSTA. No. 1/2015
BETWEEN:
THE COMMISSIONER OF CENTRAL EXCISE
BENGALURU-I, COMMISSIONERATE
C.R. BUILDING
QUEEN'S ROAD,
BANGALORE - 560 001.
...APPELLANT
(BY MR. JEEVAN J. NEERALGI, ADVOCATE)
AND:
JAS TELECOM PVT. LTD.
NO.26-H, VEERASANDRA INDUSTRIAL AREA
HOSUR ROAD
BANGALORE - 560 100.
...RESPONDENT
THIS CSTA/CUSTOMS AND SALES TAX PPEAL IS
FILED UNDER SECTION 130(A) OF THE CUSTOMS ACT,
1962, ARISING OUT OF FINAL ORDER DATED 23/06/2014
PASSED IN FINAL ORDER NO.21019/2014 PRAYING TO
ALLOW THE ABOVE APPEAL BY ANSWERING THE
Date of Judgment 29.08.2018, CSTA. No.1/2015
The Commissioner of Central Excise Vs.
JAS Telecom Pvt. Ltd.
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SUBSTANTIAL QUESTION OF LAWS FRAMED ABOVE IN
FAVOUR OF THE APPELLANT IN THE INTEREST OF
JUSTICE AND EQUITY AND SET ASIDE THE FINAL ORDER
NO. 21019/2014 DATED 23/06/2014 PASSED BY THE
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL, SOUTH ZONAL BENCH, BANGALORE IN THE
INTEREST OF JUSTICE AND EQUITY.
THIS CSTA/CUSTOMS AND SALES TAX APPEAL
COMING ON FOR FINAL HEARING THIS DAY, Dr. VINEET
KOTHARI J. PASSED THE FOLLOWING:-
JUDGMENT
Mr.Jeevan J. Neeralgi, Advocate for Appellant - Revenue Mr. Mahantesh Shettar, Advocate for respondent - Assessee
1. Heard the learned Counsel for the Revenue.
2. The Revenue has filed this appeal against the order dated 23.06.2014 passed by the CESTAT, South Zonal Branch, Bengaluru, in Appeal No.E/3245/2012- DB allowing the appeal of the assessee and setting aside the order passed by the Commissioner dated 22.08.2012.
Date of Judgment 29.08.2018, CSTA. No.1/2015 The Commissioner of Central Excise Vs. JAS Telecom Pvt. Ltd.
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3. The reasons assigned by the learned Tribunal in its impugned order are quoted here below for ready reference :
"2. The appellants imported batteries to be used for manufacture of mobile handsets and similar phones by availing concessional rate of duty under Notification No. 23/2010- Cus dated 01.03.2005 superseded by Notification No. 23/2010-Cus dated 27.02.2010. The notification extended benefit of concessional rate of duty subject to the condition that the same were used in the manufacture of mobile handsets and similar phones and the importer is registered under Customs (Import of Goods under Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 (here-in-after referred to as `Customs (IGCRDMEG) Rules, 1996).
3. It was submitted by learned counsel that confirmation of demand has been made on two grounds and both are not sustainable. The first ground taken is that Date of Judgment 29.08.2018, CSTA. No.1/2015 The Commissioner of Central Excise Vs. JAS Telecom Pvt. Ltd.4/15
the batteries cannot be considered to have been used in the manufacture of excisable goods mainly mobile handsets and phones required under the Customs (IGCRDMEG) Rules, 1996. We find that this stand has been taken by the Revenue on the ground that battery is not an essential part of the mobile phone. We take note of the fact that there is no allegation that batteries are not used in the mobile handsets and phones manufactured and sold by them; there is no allegation that batteries are diverted; there is no allegation that batteries were not accounted for properly. The only allegation is that the batteries cannot be considered as part of mobile handsets and phones. In this regard, we find ourselves in agreement with the first submission that whether batteries can be considered as part or not is a question that would be decided by the Customs assessing authority and jurisdictional Central Excise officers do not have jurisdiction on it, prima facie, is correct. Further, we also find ourselves in agreement that it cannot be said that the appellants Date of Judgment 29.08.2018, CSTA. No.1/2015 The Commissioner of Central Excise Vs. JAS Telecom Pvt. Ltd.5/15
have not used the batteries for the purpose on which they were imported.
4. The second ground taken by the Commissioner (Appeals) is that batteries were received in an address different from the one indicated in the Bill of Entry. Learned counsel pointed out that this has been rectified and the amended Bill of Entry has been produced as evidence.
5. The above observations would show that there is no case against the assessee at all. Accordingly, the appeal is allowed with consequential relief, if any, to the appellants. Stay application also stands disposed of."
4. The learned assessing authority in the first instance, not only held that it had jurisdiction to pass appropriate orders in view of the powers conferred under the provisions of Customs (Import of Goods under Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996, applicable for Date of Judgment 29.08.2018, CSTA. No.1/2015 The Commissioner of Central Excise Vs. JAS Telecom Pvt. Ltd.
6/15 manufacture of excisable goods, but also found that the assessee was not entitled to the concessional rate of customs duty under the Customs Act, as the batteries imported by it were not used for `manufacture' of the mobile handsets and therefore the difference of the full duty and the concessional rate of duty, was liable to be demanded from the importer - respondent assessee.
5. The learned Commissioner of Central Excise (Appeals-I) had also upheld the said order passed by the Assessing Authority. The relevant extract from both the orders passed by the Assessing Authority and also Commissioner of Central Excise (Appeals-I) are also quoted below for ready reference :
Order dated 31.01.2011 of Assessing Authority :
"11. As regards the issue of batteries required for manufacture of Mobile Handsets or not, I find that the assessee has argued that the adjudication of the issue is not within the jurisdiction of the Assistant Commissioner Date of Judgment 29.08.2018, CSTA. No.1/2015 The Commissioner of Central Excise Vs. JAS Telecom Pvt. Ltd.7/15
of Central Excise. To obtain benefit under Notification No. 21/05 Cus. dt. 01.03.2005 superseded by Notification No. 23/2010-Cus dt. 27.02.2010, the procedure as prescribed under Customs (IGCRDMEG) Rules, 1996 is to be followed. On plain reading of the Customs (IGCRDMEG) Rules, 1996, it is evident that Rule 8 of the said rules relating to recovery of duty rest only with the jurisdictional Deputy/Assistant Commissioner of Central Excise and also the fact that the Bond/Bank Guarantee under the said Rules is executed before the same authority. No other authority other than the jurisdictional Deputy/Assistant Commissioner of Central Excise has been specifically vested with the power to recover the Government dues. I find that being the only authority named in the Rules, the adjudication of the issue is well within my jurisdiction.
ORDER
i) I order cancellation of the addendum
dated 08.07.2009 issued to
Registration Certificate Sl.No. 04/08-
Date of Judgment 29.08.2018, CSTA. No.1/2015 The Commissioner of Central Excise Vs. JAS Telecom Pvt. Ltd.
8/15 09 and the relevant Annexure-III issued for importation of the batteries and the availment of concession/exemption for import of said goods is treated as invalid in context of latest findings.
ii) I demand duties of customs of Rs.15,73,662/- (Rupees fifteen lakhs seventy three thousand six hundred and sixty two only) (as per annexure to the notice) from M/s. JAS Telecom Pvt. Ltd., Bangalore, under Rule 8 of the Customs (IGCRDMEG) Rules 1996 on violation of the conditions of the Notification Sl. No. 21/2005 Cus. dated 01.03.2005 (as it stood at the time of import) superseded by Notification No. 23/2010 dated 27.02.2010 read with Customs (IGCRDMEG) Rules, 1996.
iii) I demand interest under Section 28AB of Customs Act, 1962, on the duty demanded above at (ii) at such rate as in force at the time of being Date of Judgment 29.08.2018, CSTA. No.1/2015 The Commissioner of Central Excise Vs. JAS Telecom Pvt. Ltd.
9/15 levied by the Central Government from the day of import of the said goods till the date of payment of duty demanded above.
iv) I order for recovery of the above demanded duties of Customs and interest against import of Batteries under the Customs (IGCRDMEG) Rules, 1996, by enforcing the Bond bearing Sl.No.06/2009-10 dated 30.06.2009 executed for an amount of Rs.20,00,000/- if the same is not paid."
From the order of Commissioner (Appeals) dated 22.08.2012 :
"8. From a close reading of both the above rules, it is quite clear that the emphasis is on the actual usage of the imported items in the manufacture of excisable goods which has to be ensured by the jurisdictional Assistant Commissioner, who is the proper officer in the given context. Further by virtue of rule 8 above, the proper officer is also empowered to recover the customs duty along Date of Judgment 29.08.2018, CSTA. No.1/2015 The Commissioner of Central Excise Vs. JAS Telecom Pvt. Ltd.10/15
with interest, if the said condition is not fulfilled. As such, I find the appellants' argument to the effect that there is no actual user condition in the said notification to be far from truth. Consequently, I also find the appellants' arguments on the lines that when the import has been allowed by the Customs authorities, the exemption on the same cannot be denied by the original authority to be lacking in strength.
9. In this regard I also find that the appellants have raised one more issue by averring that once the bill of entry has been finally assessed by Inland Container Depot, Bangalore, any action to reopen the assessment and that too by the Central Excise Department is not sustainable in law. This is a misdirected argument for the reason that there is absolutely no question of reopening the assessment made by the Customs authorities. As rightly held by the original authority, the demand in no way questions the assessment done by the Customs authorities. The issue relates only Date of Judgment 29.08.2018, CSTA. No.1/2015 The Commissioner of Central Excise Vs. JAS Telecom Pvt. Ltd.11/15
to wrong/misdeclaration of an item as input to obtain benefit under a notification.
10. .Next I take up the more serious allegation of the Department as mentioned at para 5 (ii) above viz., the imported batteries were not consigned to the address of the appellants as given in the certificate issued under rule 3 of Customs IGCRDMEG Rules, 1996. While contesting this point, the appellants have stated that due to clerical error, address was wrongly mentioned in the impugned bill of entry, which was got corrected from the Customs authorities subsequently. In this regard I find that the original authority has dealt at length at para 17 of his findings and has concluded that the appellants failed to establish that the impugned batteries were actually received at the registered premises of the appellants. In this regard there are no two opinions on the fact that Rule 4(3) ibid (reproduced below) specifies and allows import for use in the factory of the importer i.e., the registered premises."
Date of Judgment 29.08.2018, CSTA. No.1/2015 The Commissioner of Central Excise Vs. JAS Telecom Pvt. Ltd.
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6. We have heard the learned counsel for the Revenue. The respondent - assessee is unrepresented though the name of Sri. Mahantesh Shettar is shown in the cause list.
7. Rule 8 of Customs (IGCRDMEG) Rules, 1996 is quoted below for ready reference :
"RULE 8. Recovery of duty in certain case. - The Assistant Commissioner of Central Excise of Deputy Commissioner of Central Excise shall ensure that the goods imported are used by the manufacturer for the intended purpose or are re-exported in terms of Rule 7A and in case they are not so used take action to recover 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 importation, along with interest, at the rate fixed by notification issued under Section 28AB Date of Judgment 29.08.2018, CSTA. No.1/2015 The Commissioner of Central Excise Vs. JAS Telecom Pvt. Ltd.13/15
of the Customs Act, 1962, for the period starting from the date of importation of the goods on which the exemption was availed and ending with the date of actual payment of the entire amount of the difference of duty that he is liable to pay."
8. The said Rule 8 was not only referred and discussed by both the parties below in detail, but the learned Tribunal without going into the said Rule 8 and effect thereof, just allowed the appeal of the Assessee by the aforesaid order quoted above, finding that there was no allegation against the assessee that the import of the batteries was diverted and that they were not properly accounted for. The learned Tribunal obviously misconstrued the purport and effect of the Rules, 1996, while holding that the batteries cannot be considered as part of mobile handsets and phones, whereas the effect of Rule 8 and other relevant rules of the aforesaid 1996 Rules was very clear that, unless the imported goods are Date of Judgment 29.08.2018, CSTA. No.1/2015 The Commissioner of Central Excise Vs. JAS Telecom Pvt. Ltd.
14/15 used in the `manufacture' of the excisable goods, the importer is not entitled for the concessional rate of customs duty.
9. There is neither any finding of the Tribunal in this regard as to how the batteries in question were used in the manufacture of handsets or not, nor any discussion on the applicability of Rule 8 quoted above is made, which goes to the root of the matter.
10. Therefore, in our opinion, the impugned order of the learned Tribunal cannot be sustained and the matter deserves to be remanded back to the learned Tribunal for deciding the appeal again on merits, in accordance with law.
11. Therefore, the present appeal filed by the Revenue is allowed and the impugned order of the CESTAT dated 23.06.2014 is set aside, and the matter is restored and remanded back to the learned Tribunal Date of Judgment 29.08.2018, CSTA. No.1/2015 The Commissioner of Central Excise Vs. JAS Telecom Pvt. Ltd.
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12. The parties may appear before the learned Tribunal, in the first instance on 24th September, 2018.
13. A copy of this order may be sent to the respondent - assessee forthwith.
Sd/-
JUDGE Sd/-
JUDGE Mgn/-