Custom, Excise & Service Tax Tribunal
Hind Industries Limited vs Ce & Cgst Ghaziabad on 5 November, 2024
85/CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT No. I
Excise Appeal No.3830 of 2010
(Arising out of Order-in-Original No.19/Commr/CEX/GZB/2010 dated
09/09/2010 passed by Commissioner of Customs, Central Excise & Service
Tax, Ghaziabad)
M/s Hind Industries Ltd., .....Appellant-I
(B-42, Industrial Area,
Site-IV, Sahibabad, Ghaziabad)
VERSUS
Commissioner of Central Excise, Ghaziabad....Respondent
(C.G.O. Complex-II, Kamla Nehru Nagar, Ghaziabad) WITH Excise Appeal No.3831 of 2010 (Arising out of Order-in-Original No.19/Commr/CEX/GZB/2010 dated 09/09/2010 passed by Commissioner of Customs, Central Excise & Service Tax, Ghaziabad) Mr. Sirajuddin Qureshi, Chairman & Managing Director, .....Appellant-II (M/s Hind Industries Ltd., B-42, Industrial Area, Site-IV, Sahibabad, Ghaziabad) VERSUS Commissioner of Central Excise, Ghaziabad....Respondent (C.G.O. Complex-II, Kamla Nehru Nagar, Ghaziabad) APPEARANCE:
None, for the Appellants Shri Manish Raj, Authorised Representative for the Respondent CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) FINAL ORDER NOs.70760-70761/2024 DATE OF HEARING : 05 November, 2024 DATE OF DECISION : 05 November, 2024 Excise Appeal Nos.3830 & 3831 of 2010 2 SANJIV SRIVASTAVA:
These two appeals are directed against Order-in-Original No.19/Commr/CEX/GZB/2010 dated 09/09/2010 passed by Commissioner of Customs, Central Excise & Service Tax, Ghaziabad. By the impugned order, following has been held:-
"ORDER
1. I confirm the demand of Cenvat duty amounting to Rs.
53,05,543/- [ Rs. 51,51,013/- Basic + Rs.1,03,020/- Ed. Cess + Rs. 51,510/- S & H Ed Cess] not paid by HIL in respect of clearances of Bone Meal during the period Oct 08 to March 09 under section 11A of the Central Excise Act, 1944.
2. I confirm the demand of Cenvat duty amounting to Rs.5,11,726/- [ Rs.4.96,821/- Basic + Rs. 9,942/- Ed. Cess + Rs. 4,963/- S & H Ed Cess] short paid by HIL in respect of clearances of tallow during the period Oct'08 to March'09 under section 11A of the Central Excise Act, 1944.
3. I demand interest in respect of above confirmed demand of duty as per para 1 and 2 of the order under section 11AB of the Act ibid.
4. I impose a penalty of Rs. 58,17,269/- on M/s HIL under section 11AC of the said Act for short/non payment of duty adjudged above in contravention of provisions of rule 6 & 8 of the Central Excise Rules, 2002, section 3 of the Central Excise Act, 1944, notification 23/2003 dated 31.3.2003 read with para 6.8 of the Foreign Trade Policy.
5. I impose a penalty of Rs. 5,00,000/- on Shri Sirajuddin Quereshi, the Managing Director of HIL, under rule 26 Excise Appeal Nos.3830 & 3831 of 2010 3 of the Central Excise Rules, 2002 for his active participation in evasion of duty as above."
2.1 Appellant-I is a 100% EOU for export of fresh/frozen meat classifiable under sub heading no.02023000 of Central Excise Tariff Act, 1985.
2.2 Appellants were purchasing animal carcass, involved in manufacturing and exporting fresh/frozen meat manufactured by them. During the course of production of meat, some waste/residue material in form of bones, Animal Fat and waste meat were obtained. These waste items and bone meal though exempt from Central Excise duty as per sub heading no. 05069019 and Tallow falling under sub heading no.15020030 of First Schedule to Central Excise Tariff Act. However, as per the proviso to Section 111 (1) of Central Excise Act, 1944, the goods cleared under GTA as 100% EOU, duty was required to be paid as leviable on the light of similar goods produced outside India, when imported into India appellants were discharging duty. 2.3 In respect of bone meal and Tallow obtained from the waste which reschedule of their manufactured product by availing the benefit of exemption notification no.23/2003-CE. 2.4 Appellants were issued with a show cause notice dated 13.10.2009 denying the benefit claimed by the appellants under Notification No.23/2003-CE dated 31.03.2003 has been issued to the appellants asking them to show cause as to why-
"(1) The Cenvat duty Rs.51,51,013.00. Education Cess Rs.1,03,020 00 and Secondary and Higher Education Cess Rs.51,510.00 (Total amount Rs 53,05,543.00) payable on Bone Meal should not be demanded from them under the provise in Section 11A of the Central Excise Act, 1944, for contravention of the terms and conditions of Notification No.23/2003-CE dated 31.03.2003 as amended, paragraph 6.8 of the Foreign Trade Policy. Rule 6 and 8 of the Central Excise Rules, 2002 and Section 3 of the Central Excise Act, 1944.
Excise Appeal Nos.3830 & 3831 of 2010 4 (2) The Cenvat duty Rs 4.96.821.00. Education Cess Rs. 9,942.00 and Secondary and Higher Education Cess Rs.4.963.00 (Total amount Rs.5,11,726.00) payable on Tallow should not be demanded from them under the proviso to Section 11A of The Central Excise Act. 1944, for the contravention of the terms and conditions of Notification No.23/2003-CE dated 31.03.2003 as amended, paragraph 6.8 of the Foreign Trade Policy. Rule 6 and 8 of the Central Excise Rules 2002 and Section 3 of the Central Excise Act, 1944.
(3) Penalty should not be imposed upon them under Section 11AC of the Central Excise Act 1944 read with the Rule 25 of the Central Excise Rules, 2002 for the contravention of the terms and conditions of Notification No. 23/2003-CE dated 31.03.2003 as amended paragraph 6.8 of the Foreign Trade Policy. Rule 6 and 8 of the Central Excise Rules 2002 and Section 3 of the Central Excise Act, 1944.
(4) The interest at the appropriate rates should not be demanded under section 11AC of the Central Excise Act, 1944."
2.5 This show cause notice has been adjudicated as per the impugned order referred in para-1 above. 2.6 Aggrieved appellants have filed these two appeals before the Tribunal.
3.1 When the matter was listed earlier, Learned Counsel on record had withdrawn their Vakalatnama. Thereafter, notices were sent to the appellants, however, appellants did not turn up for hearing on specified date. The notices sent to the appellants were returned undelivered with remark „left‟. In terms of Rule 20 of CESTAT Procedure Rule, 1982, these two appeals have been taken up for consideration after hearing the learned Authorised Representative Shri Manish Raj appearing for the revenue. 3.2 Learned Authorised Representative reiterates the findings recorded in the order of the lower authority and as the Excise Appeal Nos.3830 & 3831 of 2010 5 comments submitted by the revenue as per letter dated 04.04.2011.
4.1 We have considered the impugned orders along with the submissions made in appeal and during the course of argument.
4.2 The entire issue revolves around the applicability of Notification No.23/2003-CE dated 31.03.2003, the relevant entries of the said notification is reproduced bellow:-
"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 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 Export and Import 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 Description Amount of Duty Condi-
No. or of Goods tions
heading
No. or
sub-
heading
Excise Appeal Nos.3830 & 3831 of 2010 6 No. (1) (2) (3) (4) (5)
1.
2.
3. 4. Any All goods In excess of amount 4
Chapter produced or equal to 30% of the manufactured duty payable under wholly from section 3 of the Central the raw Excise Act, 1944.
materials produced or Illustration.- Assuming manufactured product X has the value in India, Rs. 100 under section other than 14 of the Customs those Act,1962 and is referred to in chargeable to basic Sr. Nos. 5, 6 custom duty of 25% ad and 7 of this valorem, special Table. additional duty of 4% ad valorem and not chargeable to additional duty. The computation of duty required to be paid would be as follows :
Basic Customs duty = Rs. 25/-
Value for the purpose of special additional duty if leviable = Rs.
100/- + Rs. 25/- = Rs.
125/-
special additional duty if leviable= 4% of Rs.
125/-= Rs. 5.0/-
Total duty payable but for this exemption= Rs.
25/-+ Rs. 5.00/-= Rs.
30.00/-
Thirty per cent. of the aggregates of the duties of customs= 30% of Rs. 30.00/-= 9.00/-
Duty required to be paid in accordance with this notification = Rs.
Excise Appeal Nos.3830 & 3831 of 2010 7 (1) (2) (3) (4) (5) 9.00/-
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17. Any Bone meal. In excess of "Nil". 10 Chapter 10 10 10 10 11 11 ANNEXURE Sr. Conditions No. 1. 2. 3. 4. If,-
the (i) goods are produced or manufactured wholly from the raw materials produced or manufactured in India;
such (ii) finished goods are cleared into Domestic Tariff Area in accordance with sub-paragraphs
(a), (b), (d) and (h) of Paragraph 6.8 of the Export and Import Policy; and
(iii) the goods, if manufactured and cleared by the unit other than export oriented undertaking are wholly exempt from duties of Excise or are chargeable to "NIL" rate of duty.
5.
6.
7. Excise Appeal Nos.3830 & 3831 of 2010 8 Sr. Conditions No.
8.
9.
10. If the goods are manufactured wholly from indigenous raw materials.
4.3 After denying the benefit of said notification, impugned order records as follows:-
"18. From the above it is beyond doubt that bone meal and tallow are different manufactured products and cannot be regarded as waste and rejects. Now I come to the issue whether benefit of Notification 23/2003 could be extended to HIL. I find that there is clear mention in SCN DTA Clearances Implies" permissible DTA clearances" ... .... any clearances for home consumption does not become DTA sales to draw unconditional benefit under notification 23/2003...". It is on record and a matter of fact that HIL are registered with the Department as 100% EOU for the manufacture and export of fresh/ frozen meat only and not for the manufacture and export/sale of bone meal and tallow. They also do not have any permission for the same from the Ministry of Industry. As such I find that the benefit of exemption notification 23/2003 cannot be extended to them in respect of impugned goods namely bone meal and tallow."
4.4 Apart from observing as such, adjudicating authority has given number of findings with regards to manufacture and classification etc. of the said products namely Bone Meal and Tallow. Undisputedly, these are manufactured products arisen in the course of manufacture of fresh/frozen meat exported by the appellants starting from indigently procured carcass, the process of manufacture various products may arise, some may be in the nature of finished products or by-products or waste. However, the origin of either of three products arisen out from the raw material that entrance of product in the process of manufacture, there is no dispute that Bone Meal and Tallow on which this Excise Appeal Nos.3830 & 3831 of 2010 9 demand has been made has arisen out of the indigently procured carcass. The findings of the Adjudicating Authority that in process waste arisen and for pollution control restrictions it was converted into Bone Meal and Tallow, should be treated as manufactured of material other than indigenous raw material cannot be upheld.
4.5 That being so, in view of the findings that Bone Meal and Tallow have arisen out of the activities undertaken by the appellants on the indigenous carcass, the denial of benefit of exemption under notification no.23/2003-CE cannot be upheld. 4.6 We also find that on the same issue for the past period Commissioner has dropped the proceedings initiated against the appellant observing as follows:-
"Now, coming to the first and foremost issue I notice from the case papers that HIL are an 100% Export Oriented Unit engaged in the production and export of Fresh/ Frozen Meat, which is prepared/processed from animal carcass (of Buffalows and Sheep) purchased from the market. In the course of processing while good meat is used in preparation of export goods (fresh meat), some material in the form of Bones, Fat and waste meat is left out. HIL undertake further processing's of Bones/Fats in the rendering plant and convert it into Bone Meal and Tallow which are classifiable under Chapter 9 and 15 of Central Excise Tariff Act, 1985, attracting NIL rate of duty. HIL have been clearing to Domestic Tariff Area Bone meal without duty and have been paying concessional rate of duty on Tallow in terms of Notification No. 23/2003-CE dt. 31-03-03.
The department has objected to this practice of HIL on the ground that first of all the left out material ie. Bones, Fats and waste meat cannot be categorized as waste, scrap, remnant and reject. Secondly, such waste material cannot exceed the limit of 5% of exports in quantity terms and thirdly its value should be below 50% of FOB value of export goods.
Excise Appeal Nos.3830 & 3831 of 2010 10 Countering the contention of the department HIL have pleaded that in the course of manufacture/processing of Fresh/Frozen Meat (export goods), residue bones are left out. Since as per pollution norms they cannot discharge the same in the open space, they have no option but to convert the same into non-pollution product i.e. Bone meal. Para 19 of the condition of LOP says that the adequate steps shall be taken to the satisfaction of the Govt. to prevent air, water and soil pollution. Hence, it was necessary for them to convert polluting waste product into non-pollutant product. HIL have further submitted that under para 8 of Annexure to LOP it is clearly mentioned that the undertaking may be permitted to sell in Domestic Tariff Area a percentage of 'rejects' which may not exceed 5%. It is also stipulated in para 6.8(e) of the policy that the scrap/waste/remnants may be sold in DTA on payment of concessional duties as applicable within over all ceiling of 50% FOB value of exports. Since HIL's clearances of waste material were well within the permissible norm, no demand was sustainable.
Regarding admissibility of benefit of Notfn. No. 23/2003 dt. 31-03-03 HIL submitted that they are licensed 100% EOU by the Development Commissioner for manufacture/export of fresh/frozen meat. In the course of processing of export goods, waste/remnant material such as bone, waste meat etc. arises and the same is not disposable as such due to pollution reason. So it is converted into bone meal which is exempted under S. No. 17 of Notfn. No. 23/2003 dt. 31- 03-03, if manufactured from indigenous raw materials. Since the condition is fulfilled, they are entitled to the benefit of the said notification.
As regards Tallow, HIL have pleaded that since demand is not sustainable, interest is also not chargeable and penalty is not imposable under Sec. 11 AC of Central Excise Act, 1944.
Excise Appeal Nos.3830 & 3831 of 2010 11 Further, HIL have pleaded that since demand is not sustainable, interest is also not chargeable and penalty is not imposable under Section 11 AC of Central Excise Act, 1944.
For proper appreciation of the issues involved and the rival contentions raised, it is necessary to cast a glance at the notification no. 23/2003-CE dated 31-3-01 round which the case revolves. On perusal of the said notification I find that it has been issued prescribing concessional rates of excise duties to the specified excisable goods produced or manufactured in an EOU, STP unit or EHTP unit and cleared for DTA. I find that under this notification against Sl.No. 17 Bone meal is chargeable to NIL rate of duty. Even under Central Excise Tariff Bone meal falling under sub heading 05069019 attracts NIL rate of duty. Since HIL's unit is an EOU, this notification is squarely applicable to their case. This notification imposes a condition that the Bone meal should be manufactured wholly from indigenous raw materials. In this case it is not under dispute that HIL used indigenous raw materials only for manufacturing the same. Hence this case is well covered within the four walks of the notification no. 23/2003-CE dated 31-3-03 and the benefit is not deniable to HIL.
As regards the contention of the deptt. that Bones, fats and waste meat which remains after processing of meat from carcasses of animal, is not waste/scrap /remnant, I find that the material is left out material after processing of Fresh/ Frozen meat. Had it been good meat, HIL would export it also. Left out material is nothing but remnant and residue waste as it is not worth attaining the quality of export goods. When it is neither carcass nor fresh/frozen meat, how can it be described? it is certainly waste material which is a residue after processing_of export goods. I therefore see no substance in the contention of the Deptt. that it is not waste/remnant/residue.
Excise Appeal Nos.3830 & 3831 of 2010 12 As regards tallow I find that against Sl.No. 4 of the notification no. 23/03 tallow is chargeable to 30% duty of Customs, as payable under section 3 of Central Excise Act, 1944. From, the facts I observe that HIL have been aiready paying Central Excise duty equivalent to 30% of total Customs duty payable on Tallow if imported into India. There is one condition that the Tallow should be manufactured from Indigenous raw materials. HIL have claimed to have manufactured it from waste/residue/remnant material (i.e. Bone, fat and waste meat) which is not controverted by the Deptt. Under these circumstances I am constrained to accept the HIL's contention that they have discharged duty liability correctly as per the above notification."
Nothing is available on record to suggest that this order has been appealed by the Revenue authorities before any forum.
4.7 Similar view has been taken in the following cases:
SKM Egg Products Export (India) Ltd [2015 (327) E.L.T. 521 (Tri. - Chennai)]
11. Further, the appellant has a strong case in view of the exemption at S. No. 21 of Notification No. 23/2003-C.E., dated 31-3-2003, which exempts waste from food industries manufactured in 100% EOUs. 100% EOU is normally expected to export all its products. However, for some of the products of residual nature, like egg shell, there may not be an export market and EOUs will be forced to clear such waste into domestic tariff area. The exemption enables 100% EOU producing food products to dispose of waste products, if arising out of indigenous raw materials, without payment of any excise duty to Domestic Tariff Area. If the waste product is not excisable there is no need for the exemption. The notification goes one step further to make the liability clearer by providing that even if any waste product may be considered as manufactured product, duty need not be paid on such product. Egg Shell Powder is Excise Appeal Nos.3830 & 3831 of 2010 13 almost similar to oil cake left behind when vegetable oil is extracted from oil seeds. Oil cakes also are used in making animal feed. For oil cake exemption is provided at S. No. 20 of the notification. Similar exemption can be seen for tea waste and coffee waste at S. No. 19 of the same notification. So, we see no reason to deny the benefit of this notification to Egg Shell Powder.
Lubrizol Advanced Materials India Pvt. Ltd. [2013 (290) E.L.T. 453 (Tri. - Ahmd.)]:
14.The next issue to be considered is whether the product can be considered to have been manufactured wholly of indigenous raw materials or not. This is also of academic interest only in view of the conclusion reached by us above but still we propose to deal with it. The Commissioner has taken the view that appellants are using imported raw materials for the manufacture of cassia gum powder and modified cassia gum powder. The view taken is that indigenous raw materials should have been used in the manufacture of final products to render the waste eligible for exemption. However, the appellant's claim is that exemption has to be considered by looking at the fact as to whether imported raw material was used up to the stage when the waste arose. The waste can arise at any stage of manufacture.
14.1 In this case exemption is provided to waste from food industries. Condition No. 10 provides "if the goods are manufactured wholly from indigenous raw materials". In this case the word "goods" is to be considered as waste from food industry which is what is exempted from payment of duty if the condition is fulfilled. Therefore it appears that what is intended is that for manufacture of waste, indigenous raw materials only should have been used. In this case from the manufacturing process explained and from the records what emerges is that the cassia meal gets segregated and separated and taken out of the product Excise Appeal Nos.3830 & 3831 of 2010 14 before further processing starts by using imported raw materials. Under these circumstances it cannot be said that importer raw materials have been used in the manufacture of waste. Therefore the ld. Commissioner's conclusion that imported raw materials have been used for waste also and therefore exemption under Notification No. 23/2003 is not available is not correct and cannot be sustained.
Hind Agro Industries Ltd [2004 (174) E.L.T. 117 (Tri.
- Del.)] "4.The learned Counsel has mainly contested the denial of benefit of Notification No. 8/97, dated 1-3-1997 under which the finished products, rejects and waste or scrap produced in 100% export oriented units and allowed to be sold in India are exempt from the duty of excise, as in excess of amount of excise duty leviable on like goods produced by a unit other than 100% EOU out of indigenous raw materials, by contending that the proviso added to this notification vide Notification No. 7/98, dated 2-6-1998 at Sl. No. 13 took away from the purview of the principal Notification No. 8/97 only the finished goods and not other goods such as rejects or scrap. This contention of the Counsel in our view deserves to be accepted. The proviso appended to the principal Notification No. 8/97 through the above referred Notification No. 7/98, only enacts that nothing contained in this notification shall apply where such finished products, if manufactured and cleared by a unit other than a 100% export oriented undertaking or a unit in a Free Trade Zone, are wholly exempt from the duty of excise or chargeable to nil rate of duty. This proviso apparently applies to finished products only and not to the rejects, waste or scrap which too along with the finished products find place/reference in the principal Notification. Therefore, benefit of the principal Notification could be denied to the appellants only in respect of finished products and not other by-products namely Tallow Waste and Bone Excise Appeal Nos.3830 & 3831 of 2010 15 Waste. The duty in respect of other products is payable by the appellants under subsequent Notification No. 13/98, dated 2-6-1998. Therefore, the impugned order in respect of the confirmation of duty deserves to be modified accordingly."
4.8 As we hold that benefit of Notification No.23/2003-CE is admissible to the appellants, we do not find any merits in the demand made or the demand for interest and the same are set aside. As the demands are set aside, penalties imposed under Section 11AC on Appellant-I and under Rule 26 of Central Excise Rules on appellant-II is also set aside. 5.1 Appeals are allowed.
(Dictated and pronounced in open court) (P.K. CHOUDHARY) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp