Custom, Excise & Service Tax Tribunal
Global Polybags Industries Pvt Ltd vs -Tiruchirapalli on 8 July, 2024
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT NO. III
Customs Appeal No. 40577 of 2020
(Arising out of Order-in-Original No. 01/2020 dated 28.02.2020 passed by Commissioner of Customs
(Preventive), No. 1, Williams Road, Cantonment, Tiruchirapalli - 620 001)
M/s. Global Polybags Industries Private Limited ...Appellant
No. 500A, Perali Road,
Virudhunagar - 626 001.
Versus
Commissioner of Customs (Preventive) ...Respondent
No. 1, Williams Road,
Cantonment,
Tiruchirapalli - 620 001.
APPEARANCE:
For the Appellant : Shri S. Muthuvenkataraman, Advocate
For the Respondent : Shri Anoop Singh, Authorised Representative
CORAM:
HON'BLE MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL)
HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL)
FINAL ORDER No. 40813 / 2024
DATE OF HEARING : 28.06.2024
DATE OF DECISION: 08.07.2024
Order :- Per Ms. SULEKHA BEEVI C.S.
Brief facts are that the appellant is a 100% export-oriented
undertaking issued with private bonded warehouse licence. They are
engaged in the manufacture of Plastic Moulded products, Polythene Rolls
(Lay Flat Tubings), Polythene Sheeted Rolls, Polythene/PP Sheets, Polythene
Bags with handles and without handles out of the HDPE/LDPE/LLDPE/PP
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granules imported as well as procured indigenously. They export the
finished products, and also clear goods to SEZ units. A small portion of
finished / semi-finished products was cleared to DTA.
1.2 The appellant imported raw-materials duty-free by availing the
benefit of Customs Notification No. 78/2017-Cus. Dated 13.10.2017 by
following the procedure prescribed under Rule 5 of the Customs (Import of
Goods at Concessional Rate of Duty) Rules, 2017. They have executed the
required bond as per these Rules.
1.3 On scrutiny of the records of the appellant by the officers of the
Customs Division, Madurai, it was noted that the appellant has cleared
certain goods into DTA during the period from 07/2017 to 12/2018 without
payment of Basic Customs Duty and Cess thereof.
1.4 The appellant vide Letter dated 08.02.2019 admitted about the
non-payment of Customs Duty in respect of the inputs used in the
manufacture of finished / semi-finished goods cleared into DTA and gave an
undertaking that they would pay the customs duty on a weekly basis and
complete their liability. The statement from Manager of the Company, Shri
T. Soundarapandian was also recorded. The appellant made payment of
Rs.2,51,00,000/- by instalments from 13.02.2019 to 17.06.2019
accordingly. However, the entire duty was not paid.
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1.5 As per the conditions of paragraph 6.08 of the Foreign Trade
Policy (2015-2020) read with Notification No. 52/2003-Cus dated
31.03.2003 as amended by Notification No. 59/2017-Cus dated 30.06.2017,
the appellant is liable to pay customs duty on the imported inputs used in
the manufacture of the finished / semi-finished products that were cleared
into DTA.
1.6 Paragraph 3 of the Notification No. 52/2003-Cus dated
31.03.2003 as amended by Notification No. 59/2017-Cus dated 30.06.2017
reads as under:-
"3. Notwithstanding anything contained in this notification, the exemption
from the whole of duty of Customs leviable thereon under First Schedule to
the Customs Tariff Act, 1975 (51 of 1975), shall not apply to inputs which
on importation into India or procurement, are used for the purpose of
manufacture of finished goods [ other than falling under Fourth Schedule of
Central Excise Act, 1944 (1 of 1944) ] or services and such finished goods
and services, (including by-products, rejects, waste and scrap arising in the
course of production, manufacture, processing or packaging of such goods )
are supplied in Domestic Tariff Area in accordance with the Foreign Trade
Policy, on payment of applicable Goods and Service Tax leviable thereon, or
are in stock at the time of exit from the scheme in accordance with the
Foreign Trade Policy and in case of waste and scrap within SION or within
norms fixed by the Norms Committee or norms as approved by the Board of
Approval the exemption in respect of goods imported or procured under this
notification would continue to be admissible :
Explanation. - For the purpose of this paragraph, on payment of whole of
duty of Customs leviable thereon under the First Schedule to the Customs
Tariff Act 1975 availed as exemption, under this notification, on the inputs
utilised for the purpose of manufacture of finished goods [ other than falling
under Fourth Schedule of Central Excise Act, 1944 (1 of 1944) ] before
clearance of such finished goods (including by-products, rejects, waste and
scrap arising in the course of production, manufacture, processing or
packaging of such goods) or services on payment of applicable, Goods and
Service Tax leviable thereon, in Domestic Tariff Area or as are in stock at
the time of exit, it shall be treated as if no exemption was availed under this
notification;"
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1.7 A Show Cause Notice dated 29.06.2018 was issued to the
appellant alleging violation of condition of paragraph 6.08 of the Foreign
Trade Policy read with Notification No. 52/2003-Cus dated 31.03.2003 and
proposing to demand the duty of the imported inputs used in the
manufacture of goods that were cleared into DTA for the period from
07/2017 to 12/2018 along with interest and also for imposing penalties.
Show Cause Notice proposed to appropriate the amount already paid by the
appellant. After due process of law, the Original Authority vide Order
impugned herein confirmed the demand as proposed in the Show Cause
Notice along with interest and imposed penalty of Rs.3 Lakhs under Section
117 of the Customs Act, 1962. The amount already paid by the appellant to
the tune of Rs.2,51,00,000/- was ordered to be appropriated. Aggrieved by
such order, the appellant is now before the Tribunal.
2.1 The Ld. Counsel Shri S. Muthuvenkataraman appeared and
argued for the appellant. It is submitted that the allegation raised by the
Department is that the appellant has violated the conditions in Notification
No. 52/2003-Cus dated 31.03.2003 in as much the appellant had cleared the
products into DTA without payment of customs duty. It is submitted that
the proceedings initiated for the recovery of the duty cannot legally sustain
for the reason that the Department has not challenged the assessments /
decisions passed by the officer while permitting the appellant to take re-
credit of the duty as noted in the running bond executed by the appellant.
To support this contention, the Ld. Counsel relied upon the judgment of
Hon'ble Apex Court in the case of ITC Ltd. Vs. Commissioner of Central
Excise, Kolkata [2019 (368) ELT 216 (SC)]. It is argued by the Ld. Counsel
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that the amended Section 2(2) of the Customs Act, 1962 which defines
'assessment' was considered in detail in this decision. As per the amended
definition, self-assessment, provisional assessment, re-assessment and any
assessment in which duty assessed is NIL, is an assessment.
2.2 The Ld. Counsel explained that the as per the above Notification,
a consolidated / continuity bond for Rs.15.26 Crores was executed by the
appellant. As and when Bill of Entry is filed for import of inputs claiming
duty free as per the Notification corresponding debit entry is made in the
bond for the duty amount involved. Similarly, as and when condition in the
Notification is fulfilled and redemption of the bond is claimed by the
appellant to the Department, corresponding credit entry is given. Such a
decision, allowing the appellant to take credit of the duty amount in the
running bond is an assessment passed by the officer. Without challenging
such assessment, the Department cannot issue a Show Cause Notice for
recovery of duty.
2.3 To explain the above argument and the sequence of how the
transaction take place, the Ld. Counsel adverted to Letter issued to the
appellant by the Department dated 14.07.2017 wherein it is stated that the
bond executed by them for Rs.15.26 Crores has been accepted by the
Assistant Commissioner of Central Tax, Central GST & Central Excise,
Virudhunagar on 14.07.2017. This would show that appellant has executed
bond as per the condition of the notification. The details of the bond are
then entered in the Bond Register maintained at Divisional Office.
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2.4 At the time of filing Bill of Entry for import of inputs availing the
duty-free benefit as per the notification, a corresponding debit entry is made
in the bond. After fulfilment of export in terms of notification, the appellant
requests the jurisdictional officer to allow credit of the duty involved in the
import of inputs (which was earlier debited). The Letter dated 12.10.2018
issued by the appellant to the Assistant Commissioner of Customs, Madurai
was relied by the Ld. Counsel to submit that the appellant had requested to
issue permission to take credit of the duty amount vide the above Letter.
After import of goods on fulfilment of condition, the appellant used to submit
the calculation of the duty amount which has been foregone and on
fulfilment of export appellant was allowed to take credit of the duty. This
means that the duty debited has been allowed to be forgone in favour of
assessee. Pursuant to Letter dated 12.10.2018, the Assistant Commissioner
had issued Letter dated 17.10.2018 granting permission to take credit of the
duty amount in the running bond. It is submitted that before permitting the
appellant to take credit of duty amount in the running bond, the Assistant
Commissioner has examined the records and documents. Such permission
granted is quasi-judicial decision and made after application of mind towards
fulfilment of statutory requirements / conditions for eligibility to the
exemption in the Notification. While such Letters of permission to take
recredit in bond were given in recent imports, earlier the practice followed
was to make debit in bond registered on importation and subsequent
recredit after re-warehousing and fulfilment of export obligation. The Ld.
Counsel asserted that all these decisions are quasi-judicial decisions and
they require review under law if such decisions are found to be erroneous.
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2.5 It is submitted that without challenging the assessment (review
of the decisions made while allowing credit of duty) the Department cannot
issue a Show Cause Notice demanding duty and for this reason, the notice
issued is ab-initio-void.
2.6 It is argued that by issuing the notice, the Department in fact
has sought to review the decision passed by the Assistant Commissioner
granting recredit of having fulfilling the condition of the Notification. Such a
proceeding is not sanctioned under Customs Ac, 1962 or under Sub-Section
2 of Section 129D of the Customs Act, 1962. If aggrieved by the quasi-
judicial decisions passed by the Assistant Commissioner granting recredit,
the Principal Commissioner can only direct the Assistant Commissioner to
apply to the Commissioner (Appeals) for determination of such points as
arising out of the decision of the Assistant Commissioner. Without such
review/challenge, the notice issued cannot sustain.
2.7 As per Sub-Section 3 of Section 129D, every order for such
direction must be made within a period of three months from the date of
communication of the decision or order of the Adjudicating Authority. Since
the present notice has been issued by the Principal Commissioner as an
Adjudicating Authority and the proceeding as contemplated under Sub-
Section 2 and 3 of Section 129D of Customs Act, 1962 has not been
initiated, the notice issued is vitiated and cannot sustain. The appellant
therefore is not liable to pay the duty or interest or penalties confirmed
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pursuant to such proceedings. It is submitted that though appellant has put
forward this argument before the Adjudicating Authority, it was not
considered at all and no finding has been rendered in this regard.
2.8 Without prejudice to the above argument, it is submitted that
the notice invokes paragraph 3 of the Notification No. 52/2003-Cus dated
31.03.2003 which was introduced w.e.f. 01.07.2017 by amending
Notification No. 59/2017-Cus dated 30.06.2017. The notice issued to the
appellant appears to cover even imports relating to Bills of Entry presented
before the introduction of the above amendment for which appropriate credit
has been given in the bond executed. The demand for such Bills of Entry
presented prior to amendment dated 01.07.2017 cannot be made in terms
of paragraph 3 of the Notification. Prior to the amendment, there was no
provision to demand customs duty on inputs used for manufacture of
finished product cleared into DTA. Only excise duty was required to be paid
on clearances as per the Notification No. 23/2003-CE. The appellant had
already discharged excise duty on clearance into DTA. Therefore, the
present proceeding initiated for demand of customs duty for the Bills of
Entry presented prior to 01.07.2017 is not tenable.
2.9 The Ld. Counsel submitted that the impugned order notes that
the appellant has paid an amount of Rs.2,51,00,000/- during the
investigation and the same has been appropriated towards the duty
demanded as per the Show Cause Notice. The amount appropriated as per
the impugned order is not legally correct. The amount actually paid by the
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appellant is Rs.2,66,00,000/- out of which an amount of Rs.2,17,00,000/- is
related to the present Show Cause Notice for the period from 07/2017 to
12/2018 and the balance amount of Rs.49,000/- is related to the period
from January, 2019. It is submitted that the same requires to be verified
and rectified.
2.10 The appellant had put forward the argument that the
quantification of duty on the inputs is erroneous for the reason that there
was opening stock of 1956 Tons of inputs as on 01.07.2017. Though this
argument was put forward and sufficient proof was submitted, the Original
Authority did not consider the same. The duty demand, in any case requires
to be reworked after considering the opening stock of inputs.
2.11 In regard to penalty imposed, the Ld. Counsel submitted
Notification No. 52/2003-Cus does not treat the goods cleared into DTA by
using imported raw-materials as a contravention of the Notification. The
Notification itself provides for remedial measure by the execution of the
bond. As per the Notification, if the conditions of the Notification are not
fulfilled, the duty is to be paid and there is no provision for imposing
penalty. The Notification does not impose any punitive measure of imposing
penalty. The order passed by the Adjudicating Authority imposing penalty of
Rs.3 Lakhs requires to be set aside. It is also submitted that Section 117 of
the Customs Act, 1962 is not invokable in the facts of the case, and hence
no penalty is imposable under the said Section. The Ld. Counsel prayed that
the appeal may be allowed.
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3.1 The Ld. Authorized Representative Shri Anoop Singh appeared
and argued for the Department. It is emphasized by the Ld. Authorized
Representative that the appellant has admitted the non-payment of Customs
duty in respect of inputs used in the manufacture of finished / semi-finished
goods cleared into DTA. During the investigation, the person authorized by
the Managing Director of the Company had appeared before the Customs
Officer and given statement that they would be paying the Customs duty
and complete their liability.
3.2 In regard to the allegation that the Department cannot issue the
Show Cause Notice without challenging the assessment (in the nature of
granting permission to take credit), the Ld. Authorized Representative
submitted that as the violation of conditions of the Notification are
established, the appellant cannot then argue that the Show Cause Notice is
invalid. As per the Foreign Trade Policy, the entire production of EOU units
is to be exported except for conditional exceptions as stipulated in FTP. It is
submitted that the DTA sale by EOU is subject to payment of excise duty
wherever applicable along with reversal of duties of Customs under First
Schedule to the Customs Tariff Act, 1975 which has been availed as
exemption. This reversal of Customs duty would be as per prevailing SION
norms or norms fixed by the Norms Committee. It is submitted that the
Letter allowing for credit in the Bond does not amount to assessment / self-
assessment / assessment of duty by the proper officer in terms of statutory
provisions. The contention of the appellant that the Letter giving permission
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to credit in the bond is to be considered as a quasi-judicial decision cannot
be accepted. The recredit is allowed as per the worksheet furnished by the
appellant and there is no application of mind. In case of non-fulfilment of
conditions of the Notification, the appellant has to pay the applicable duty in
terms of the Notification. Merely because the bond has been recredited, it
cannot be said that the officer has examined whether the inputs have been
used for exports / DTA sales fully. Such interpretation put forward by the
appellant on the basis of the ITC judgment of Hon'ble Apex Court would
make the situation chaotic and the provisions of the Customs Act redundant.
If all such decision are accepted as assessment proceedings, then it will
open a Pandoras Box.
3.3 It is submitted that the importer who has availed the benefit of
an exemption Notification shall use the goods imported in accordance with
the conditions specified in the exemption Notification within six months from
the date of import. In regard to unutilized or defective goods so imported,
the importer has an option to either re-export such goods or clear the same
for home consumption within the said period. The importer who opts to
clear the unutilised or defective goods for home consumption (DTA), shall
pay the duty along with interest on the common portal and the particulars of
such clearance and the payment of duty shall be recorded by the importer in
the monthly statement. Such clearances are governed by Customs (Import
of Goods at Concessional Rate of Duty) Rules, 2017. All decisions by a
Customs Officer cannot be termed as assessment proceedings merely
because it has some repercussion in terms of tax / duty liability. In the
present case, neither is there any Bill of Entry or order of assessment.
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3.4 The Customs Act, 1962 provides for definition of the words 'Bill
of Entry' and 'Assessment'. So also, there are specific provisions to deal
with 'assessment' and 'self-assessment / reassessment' in terms of Section
17 and Section 128 of the Customs Act, 1962. Similarly, there are separate
provisions available for amendment of documents like IGM, import report,
export report, conversion of bills for warehousing / home consumption,
bonds, identity cards, passenger manifest, etc. There are different time
limits prescribed for review and appeal against assessment / reassessment
proceedings. Every decision cannot be considered as an assessment
proceeding. The contention of the appellant that the Letter permitting the
appellant to take recredit is to be considered as an assessment cannot be
accepted.
3.5 In regard to the contention of having opening stock of inputs as
on 01.07.2017, the Ld. Authorised Representative submitted that the
appellant has to furnish documents in this regard. With regard to the
payment of duty, during the investigation, it is submitted that the appellant
has paid Rs.2,51,00,000/- towards the demand in the Show Cause Notice
and the same has been appropriated.
3.6 It is submitted that the impugned order does not require any
interference. The Ld. Authorized Representative prayed that the appeal may
be dismissed.
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4. Heard both sides.
5.1 The foremost contention put forward by the appellant is that the
Show Cause Notice issued is ab-initio-void for the reason that the permission
granted by the Assistant Commissioner allowing to take recredit of the duty
foregone at the time of import of inputs being an order of assessment ought
to have been challenged by the Department. The Ld. Counsel has relied
upon the decision of the Hon'ble Apex Court in the case of ITC Ltd. Vs.
Commissioner of Central Excise, Kolkata-IV [2019 (368) ELT 216 (SC)]. For
better appreciation of this issue, the relevant part of the decision of the
Hon'ble Apex Court reads as under:-
"20. Right to appeal is available to any person i.e. to the department as
well as to importer/exporter against an order of self-assessment. Until and
unless assessment order is modified and a fresh order of assessment is
passed and duty redetermined, the refund cannot be granted by way of
refund application. The refund authorities cannot take over the role of
Assessing Officer. The officer considering refund claim cannot reassess an
assessment order. An assessment order has to be questioned within the
stipulated period of limitation. The refund application cannot be entertained
directly under Section 27 unless the order of assessment is appealed against
and is modified.
....
....
23. It is apparent from the amended definition that self-assessment, provisional assessment, re-assessment and any assessment in which the duty assessed is nil, is an assessment. Assessment includes self-assessment, when the provision of self-assessment has been incorporated in Section 17(1), and corresponding change has been made in the definition of assessment in Section 2(2). Earlier the word self-assessment was not included in the definition of assessment.
....
....
29. The first question for consideration is whether in the case of self- assessment without passing a speaking order, it can be termed to be an 14 C/40577/2020 order of self-assessment. It was urged on behalf of the assesses that there is no application of mind and merely an endorsement is made by the authorities concerned on the bill of entry which cannot be said to be an order much less a speaking order.
....
....
31. It is apparent from the aforesaid discussion that the endorsement made on the bill of entry is an order of assessment. It cannot be said that there is no order of assessment passed in such a case. When there is no lis, speaking order is not required to be passed in "across the counter affair".
32. Coming to the procedure of assessment of duty as prevailed before the amendment of the Act prior to the amendment made in Section 17(1) by the Finance Act of 2011, the imported goods or exported goods were required to be examined and tested by the proper officer. After such examination, he had to make an assessment of the duty, if any, leviable on these goods. Under sub-section (3) of Section 17, the proper officer was authorized to require the importer, exporter or any other person to produce any contract, broker's note or any other document as specified in the proviso and to furnish any required information. Notwithstanding that the statements made in the bill of entry relating thereto and the documents produced and the information furnished under sub-section (3); but if it was found subsequently on examination or testing of the goods or otherwise that any statement in such bill of entry or document or any information so furnished was not true, he could have proceeded to reassess the duty. Where the assessment done under sub-section (2) is contrary to the claim of the importer or exporter regarding valuation of the goods, classification, exemption or concession, speaking order shall be passed within 15 days from the date of assessment of the bill of entry or the shipping bill as the case may be as provided in Section 17(5).
....
....
43. As the order of self-assessment is nonetheless an assessment order passed under the Act, obviously it would be appealable by any person aggrieved thereby. The expression 'Any person' is of wider amplitude. The revenue, as well as assessee, can also prefer an appeal aggrieved by an order of assessment. It is not only the order of re-assessment which is appealable but the provisions of Section 128 make appealable any decision or order under the Act including that of self-assessment. The order of self- assessment is an order of assessment as per Section 2(2), as such, it is appealable in case any person is aggrieved by it. There is a specific provision made in Section 17 to pass a reasoned/speaking order in the situation in case on verification, self-assessment is not found to be satisfactory, an order of re-assessment has to be passed under Section 17(4). Section 128 has not provided for an appeal against a speaking order but against "any order"
which is of wide amplitude. The reasoning employed by the High Court is that since there is no lis, no speaking order is passed, as such an appeal would not lie, is not sustainable in law, is contrary to what has been held by this Court in Escorts (supra).15
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....
47. When we consider the overall effect of the provisions prior to amendment and post-amendment under Finance Act, 2011, we are of the opinion that the claim for refund cannot be entertained unless the order of assessment or self-assessment is modified in accordance with law by taking recourse to the appropriate proceedings and it would not be within the ken of Section 27 to set aside the order of self-assessment and reassess the duty for making refund; and in case any person is aggrieved by any order which would include self-assessment, he has to get the order modified under Section 128 or under other relevant provisions of the Act."
5.2 It is seen that this contention of the appellant that the order passed by the Assistant Commissioner permitting to take credit as per various Letters amounts to quasi-judicial decisions was raised by the appellant in their reply. However, the Adjudicating Authority has not considered this contention nor rendered any finding in this regard.
5.3 Further, it is submitted that they had opening stock of 19.56 Tons as on 01.07.2017 and had also given proof for this along with their reply. This aspect also has not been taken into consideration while quantifying the duty. Thirdly, the appellant contends that towards the liability in regard to the present dispute, they have paid only Rs.2,17,00,000/- and the balance of Rs.49,00,000/- was paid for the period from January 2019 onwards. However, the impugned order has appropriated an amount of Rs.2,51,00,000/-. All these facts require to be reconsidered.
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6. In view of the above, we are of the opinion that the matter requires to be remanded to the Adjudicating Authority for fresh consideration. In such denovo proceedings, the Adjudicating Authority shall give opportunity for personal hearing and to adduce evidence. All the contentions put forward by the appellant may be considered and also render findings in this regard. All issues are left open.
7. In the result, the impugned order is set aside. The appeal is allowed by way remand.
(Order pronounced in open court on 08.07.2024) Sd/- Sd/-
(VASA SESHAGIRI RAO) (SULEKHA BEEVI C.S.) MEMBER (TECHNICAL) MEMBER (JUDICIAL) MK