Customs, Excise and Gold Tribunal - Delhi
Chemo Search Laboratories (P) Ltd. vs Collector Of Customs on 31 March, 1994
Equivalent citations: 1994(52)ECR538(TRI.-DELHI)
ORDER G.P. Agarwal, Member (J)
1. Being dissatisfied with the rejection of the refund claim filed by the appellants by the authorities below, the appellants have filed the present appeal.
2. Shortly put the facts of the case are that the appellants who are engaged in the manufacture of Drugs imported a consignment of Ethyl Thio Ethanol and filed the Bill of Entry for warehousing for the clearance of the imported goods. Thereafter, they filed exbond Bill of Entry for the clearance of a part of the consignment imported, that is to say, 3000 kg. for home consumption. The said exbond Bill of Entry was assessed to duty under Heading 2905.50. The appellants paid the duty accordingly. At the time of the clearance of the subject goods, the appellants did not claim the benefit of customs Notification No. 14/88, but subsequently claimed the refund of the duty and produced the certificate of consumption of the goods duly certified by their Chartered Accountant showing the details of the consumptions of the goods in their factory. However, the Assistant Collector rejected the said claim of the appellants stating that they were not entitled for the benefit under Notification No. 14/88-CE observing that "the notification stipulates certain conditions regarding receipt of goods in the premises of manufacturer within 3 months of the importation date and account of the goods to be maintained in the manner specified by the Assistant Collector of Customs and in fulfillment of these conditions importer has to furnish an undertaking to the Assistant Collector of Customs". After observing so, he further stated that from the perusal of the Notification it is amply clear that the undertaking is required to be given at the time of importation which has not been done in this case. This being a statutory requirement, the same cannot be condoned. As such the claim is rejected. On appeal by the appellants, the Collector (Appeals) also held that the appellants have not complied with the conditions mentioned in Notification No. 14/88 and, therefore, upheld the order of the Assistant Collector. Hence the present appeal.
3. The appellants instead of entering into appearance had submitted their written submissions with a request that the appeal be decided in their absence in the light of the written submissions. Accordingly, the Bench perused the written submissions and heard Shri Somesh Arora, learned JDR for the Revenue.
4. In the written submissions the appellants have raised the following issues:
(i) Whether the benefit of the said exemption Notification No. 14/88, should have been claimed only at the time of assessment before clearance of goods for home consumption (on payment of duty).
(ii) Whether benefit of Notification can be given subsequently when no end use bond was executed at the time of clearance and the goods were cleared on full payment of duty without claiming the benefit of the said Notification.
(iii) Whether end use evidence (as comtemplated in the Notification) produced after clearance of the goods can be accepted in the facts and circumstances of the case.
(iv) Whether on the basis of end use evidence produced subsequently benefit of exemption Notification can be accorded and consequential refund can be granted.
5. On the said Issues, the appellants have contended that Notification No. 14/88-CE does not lay down that the benefit of the Notification must be claimed at the time of assessment before clearance of the goods and further that the question of execution of end use bond etc. will arise only when the benefit of exemption Notification is claimed at the time of assessment before clearance of goods for home consumption and since the benefit of the said exemption Notification No. 14/88-CE was not claimed by the appellants at the time of clearance of the subject goods, the question of executing the end use bond did not arise. They have also stressed that the benefit of conditional exemption Notification can be claimed subsequently. They have cited the following cases:
(i) Auto Tractors Ltd. v. Collector of Customs (Appeals) , wherein it was held that the condition in the Notification No. 200/79-cus is not that the manufacturing programme should be produced but that the importer should produce evidence to the Assistant Collector of Customs at the time of clearance of the components or the goods that they have a programme duly approved by DGTD.
(ii) L.M. Ven Moppes Diamond Tools India Ltd. v. Government of India , wherein it was held that non-production of 'End Use Certificate' even at the time of filing refund application before the Assistant Collector of Customs does not disentitle the petitioners from claiming the benefit of exemption under Notification No. 2/69-Cus and also that non-execution of bond will not invalidate the claim for refund of duty under Notification No. 2/69-cus if the importer produces the evidence at the time of claiming the refund that the raw material has been used in the manufacture of products mentioned in the said Notification.
(iii) Hindustan Machine Tools Ltd. v. Collector of Customs , wherein relying upon the ratio of the case of L.M. Ven Moppes Diamond Tools India Ltd., supra, it was held the refund claim is admissible if evidence regarding specific use as mentioned in Notification No. 179/80-Cus is produced at the time of claiming the refund even though end use bond was not executed and further that the certificate from specified authorities mentioned in the said Notification could be produced later on.
(iv) Collector of Central Excise v. Suburban Engineering Works (Calcutta) Pvt. Ltd. , wherein it was held that failure to claim exemption at the time of clearance of goods does not invalidate refund claim at a later stage and further that the benefit of exemption Notification No. 211/85-CE dated 24.9.1985 could be allowed on the basis of substantial compliance with the requirements of the Notification notwithstanding certain procedural failure or omission.
5.1. They have also submitted that the subject consignment of Ethyl Thio Ethanol was consumed by the appellants in the manufacture of TTNIDAZOLE as could be seen from the certificate issued by their Chartered Accountant.
6. Countering the said submission, it was submitted by Shri Somesh Arora, learned JDR, that the conditions laid down in the subject exemption Notification are such that the benefit under the said Notification must be,claimed at the time of clearance and the importer should maintain a proper account as specified by the Assistant Collector of Customs in this behalf the other conditions laid down therein and cited the case of Navasari Oil Products Ltd. v. Assistant Collector of Central Excise , wherein it was held by the Hon'ble Gujarat High Court that whether the stipulated condition in Notification No. 208/69 dated 27th August, 1969 was fulfilled or not cannot be verified by referring to the record maintained by the assessee therein. Even before removal of the goods, the manufacturer must apply for exemption and claim exemption from payment of duty by satisfying the conditions of the Notification. Once the goods are removed it would be impossible for the department to verify as to whether the products in respect of which refund claim is made satisfied the conditions laid down in the Notification. He highlighted that this decision of the Gujarat High Court is based on the ratio of the decision rendered by the Apex Court in the case of Indian Aluminium Co. Ltd. v. Thane Municipal Corporation .
7. For appreciating the rival contentions raised by both the parties, it would be advantageous to reproduce the said Notification which runs thus:
Exemption to specified intermediates for manufacture of bulk drugs -- In exercise of the powers conferred by Sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962) the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified the column (3) of the Table annexed hereto and falling within Chapter 28, 29, 30 or 39 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), when imported into India for manufacture of bulk drugs specified in column (2) of the said table, from so much of that portion of the duty of customs leviable thereon which is specified in the said First Schedule as is in excess of 45% ad valorem :
Provided that the importer furnishes an undertaking to the effect that --
(a) said imported goods shall be used for the purpose specified above;
(b) an account of the said imported goods received and consumed in the place of manufacture for the aforesaid purpose shall be maintained by the manufacturer in the manner specified by the Assistant Collector of Customs;
(c) he shall produce the extract of such account duly certified by the said manufacturer evidencing receipt of the said imported goods in the premises of the place of manufacture within a period of 3 months from the date of importation or such extended period as the Assistant Collector of Customs may allow; and
(d) he shall pay on demand, in the event of his failure to comply with (a), (b) or (c) above, an amount equal to the difference between the duty leviable on such quantity of the said imported goods but for the exemption contained herein and that already paid at the time of importation:
Provided that nothing contained in this Notification shall effect the exemption granted under any other notification of the Govt. of India for the time being in force from the duty of customs specified in the said Schedule in respect of goods referred in this Notification.
8. The arguments which have been advanced before us were also appeared to have been advanced before the Collector (Appeals) who while disposing of the said contentions has observed as follows:
28. The condition (b), is a very important condition, i.e. a person wanting, to avail of the concession under the aforementioned notification must maintain an account in a manner specified by the Assistant Collector of Customs. Therefore, only an importer, who is an actual user, who want to avail of the concession under the aforementioned notification must move the Assistant Collector of Customs claiming the concession under the Notification. Once, he does so, the Assistant Collector of Customs has to design the methodology of accounting for purposes of this notification. This is a pre-condition of the Notification.
29. Just because the appellants have been able to procure a certificate of consumption from their Chartered Accountant that the goods in question were actually consumed in the manufacture of drugs specified in the aforementioned notification in this case TINIDAZOLE, at Sr. No. 106 to the table appended to the aforementioned notification does not mean that they have substantially complied with the requirements of the notification. For substantial compliance, they should have sought permission of the Assistant Collector to avail of the concession under the Notification and the Assistant Collector in turn should have given them the nature of accounts and the methodology for maintenance of the same. This is not a procedural requirement, as argued by the appellants advocate, but a substantive requirement in order to prevent mis-use of the concession. That being so, the appellants by not claiming the concession and by not complying with the condition (b) to the aforementioned Notification have failed to substantially comply with the same and are therefore debarred from availing of the concession under the aforementioned notification No. 14/88-Cus dated 1.3.1988 (as amended) I hold so.
30. I, therefore, reject the appellants/their advocate's plea that they have substantially complied the requirements of the aforementioned notification, and whatever they have not complied with were mere procedural lapses. I am afraid that they are not mere procedural lapses, but they are substantive lapses which negate the right of the appellants to avail of the concession under the aforementioned Notification. I hold so.
The said reasonings are in line with the ratio of the case of Navsari Oil Products Limited v. Collector of Central Excise , wherein the Division Bench of the Gujarat High Court has observed as follows:
25. In the instant case the petitioner claims that though it was entitled to the benefit of exemption Notification No. 208 of 1969 it has not been granted the same on account of mistake of law. The contention proceeds on the footing that the facts are established, and the relevant conditions required to be satisfied as per notification are also complied with. The notification inter alia provided that for claiming exemption from whole of the duty levaible on surface active agents falling under Tariff Item No. 15AA of the First Schedule to the Act, the assessee must fulfil the condition that:
The difference between the surface tension value as determined by Stalagmo meter of the liquid obtained by treating one gram of the organic surface active agents or the surface active preparation as the case may be with 100 millimetres of distilled water is not more than 20 dynes per centimetre at the same temperature.
Whether the aforesaid condition is fulfilled or not cannot be verified by referring to the record of the petitioner. Even before removal of the goods the manufacturer must apply for exemption and claim exemption from payment of duty by satisfying the conditions of the notification. Once the goods are removed it would be impossible for the department to verify as to whether the product in respect of which refund claim is made satisfied the condition laid down in the notification. From the accounts and other records of the petitioner Company there cannot be physical verification of the article and it cannot be verified as to what was the surface tension value as determined by Stalagmo meter obtained by particular method and as to whether it satisfied the condition of the notification or not.
26. In this connection reference may be made to a decision of the Supreme Court in the case of Indian Aluminium Company Limited v. Thane Municipal Corporation, . The case arose in respect of the claim of rebate/concession as regards payment of octroi. To claim rebate/concession an importer was required to file declaration in the form of undertaking that the goods imported shall not be used for any other purpose for sale or otherwise to be disposed of to any other party for any other purpose and that it was to be used as raw material to be used in the manufacture of aluminium products. Since such declaration was not filed while lodging the claim, the claim was rejected by the Municipal Corporation. Later on claim was made on the basis of the records and financial accounts of the Company. This claim was also rejected by the Corporation. The matter was carried up to the Supreme Court. While rejecting the special leave petition the Supreme Court observed that insistence on declaration was with a view to verify the correctness of the same. The Supreme Court observed that the octroi authority had not opportunity to verify the correctness or otherwise of the declaration. Therefore the Supreme Court rejected the claim of the company on the ground that it had failed to fulfil the important obligation under the law, though it was procedural. The Supreme Court observed that having failed to file necessary declaration the Company cannot turn around and ask the authorities to make verification of some records. The verification at the time when the raw material was still there is entirely different from verification at a belated stage after the article has ceased to be there.
27. In the instant case also, removal of the goods without satisfying the authorities as regards fulfilment of the condition would disentitle the petitioner to claim benefits of exemption notification. There is no substance in the contention that for the period of six months for which refund claim was granted there was no verification, The Assistant Collector had granted refund for a period of six months only after the analysis of the samples were drawn from the manufacturer during June-August, 1985. It is not even the case of the petitioner that samples of articles manufactured and removed from the factory premises were drawn for the period prior to June, 1985. Therefore, even on facts it cannot be said that the petitioner as proved that it satisfied the conditions of exemption notification and that it was entitled to claim benefits of exemption under Notification No. 208 of 1969.
9. The case law cited by the appellants is not appropriate to the facts and circumstances of the case.
10. In the result, we reject the appeal and uphold the impugned orders passed by the authorities below.
(Operative portion of the order rejecting the appeal was pronounced in the open court)