Customs, Excise and Gold Tribunal - Mumbai
Dempo Engineering Works Limited vs Commissioner Of Customs And Central ... on 11 September, 2001
Equivalent citations: 2002(139)ELT316(TRI-MUMBAI)
JUDGMENT Jyoti Balasundaram, Member (J)
1. The appellants herein are registered with the Central Excise Authorities to manufacture goods falling under Chapter 89 of the Schedule to the Central Excise Tariff Act, 1985. In February 1996 they entered into a contract between M/s. V.S. Dempo & Co. Ltd. for the purpose of construction and delivery of one No. 2000 DWT Iron Ore Barge to the buyer. The barge was constructed and delivered to M/s. V.S. Dempo & Co. Ltd. under a Bill of Entry declaring Rs. 2,67,36,861/- as the assessable value under Section 14 of the Customs Act, 1962 and cleared without payment of duty claiming exemption under Customs Notification No. 11/97 dt. 1.3.97. The barge was manufactured in the Customs bonded warehouse in accordance with the procedures laid down under chapter IX of the Customs Act, 1962 read with the Manufacture Of Other Operations In Warehouse Regulations, 1966. The Department was of the view that the provisions of the Central Excise Act, had been evaded with an intention to evade payment of duty of Rs. 21,38,949/- on the barge and hence show cause notice proposing recovery of the above amount as well as proposing levy of interest under Section 11AB and penalty under Section 11AC of the Central Excise Act, 1944 and Rule 173Q of the Rules was issued to the appellants. The Commissioner of Central Excise confirmed the duty demand as raised in the notice and also imposed penalty of an amount equal to duty and also direct payment of interest. Hence this appeal.
2. We have heard Shri JJ Bhatt Sr. Counsel appearing along with Shri MP Baxi Ld. Counsel and Shri Karnail Singh Ld. SDR.
3. We find that the adjudicating authority has not accepted the contention of the appellants that the barge is to be treated as "Imported goods". He has held that the final product manufactured in Customs Bond cannot be deemed to be imported goods, and since the final product is manufactured indigenously in bond where in the imported warehoused raw material/components etc. are used along with indigenous raw material are used for the manufacture of the final product Central Excise duty is required to be paid on the manufactured goods even if the goods are manufactured in a Customs bonded warehouse when the goods are cleared for home consumption unless specifically exempted. There is no dispute that the appellants applied for permission from the Commissioner of Customs Mumbai for declaring Village Bainguinim, Old Goa, Goa as a Warehousing Station under Section 9 of the Customs Act. by letter dt. 21.9.1995. The Chief Commissioner of Customs, Mumbai had issued Notification No. 3/95-Cus(NT) declaring Village Bainguinim, Goa as a Warehousing Station under Section 9 of the Customs Act. Warehousing Licence under Section 58 of the Customs Act, for storage of imported raw material/components was issued on 27.5.1996 and permission to carry out manufacturing operations in bond under Section 65 of the Customs Act read with Clause 5 of Warehouse Regulations was also granted. The appellants presented Bill of Entry on 1.3.97 seeking clearance of the barge for home consumption. The barge was thus de-bonded for home consumption after being charged with duty of Customs and additional duty (CVD) at Nil rate. On 13.3.1997 the Superintendent of Central Excise, Panaji informed the appellants that by virtue of Clause 82 of the Finance Act, 1997 vessels falling under Chapter 89 of the Schedule to the Central Excise Tariff Act, 1985 were made dutiable at 8% Advalorem and required the appellants to pay appropriate duty on such products if cleared on or after 1.3.1997. On 15.3.1997 show cause notice was issued to the appellants demanding duty in respect of the barge. The appellants replied to the show cause notice and the notice was adjudicated by the Dy. Commissioner of Customs vide order dt. 20.9.99 holding that the barge was not liable to payment of additional duty, in view of exemption granted under Notification No. 11/97-Cus dt. 1.3.97. Prior to the order of the Dy. Commissioner, show cause notice dt. 19.9.87 which is the show cause notice in the present case was issued on the ground that the Central Excise duty of the amount mentioned earlier was required to be paid under Sections 11A and 11B read with Rule 9 of the Central Excise Rules. The notice also the proposed imposition of penalty. The notice was adjudicated by the impugned order. The question that arises for consideration before the Tribunal is whether Central Excise duty is leviable on the barge admittedly manufactured in Customs bonded warehouse. It is the contention of the appellants that the issue in dispute stands settled by the Tribunal decision in the case of Mustan Taherbhai v. Collector of Customs, Ahmedabad [2000 (125) ELT 1001 (Tribunal)] in which it has been held that manufacture of goods under Customs Warehousing bond would amount to treating the goods as having been manufactured in a foreign country. The Bench has considered the relevant provisions of the Customs Act including under Section 68 & 69 of the Act. It is the contention of the DR on the other hand that since the barge was manufactured in Central Excise Premises and since the appellants are registered with the Central Excise Department, the Central Excise duty is required to be levied. We however are not able to bring ourselves to agree with this contention of the Revenue. There is no dispute that the goods were manufactured in Customs Bonded warehouse therefore the decision of the Tribunal cited by the ld. Counsel is squarely applicable in the present case. In other words the barge manufactured under Customs warehousing bond is to be treated as having been manufactured in a foreign country, the therefore duty of Customs and not duty of Central Excise will be leviable thereon. Following the ratio of the order of the Tribunal cited supra which is applicable on all fours to the present case we hold that the demand of duty and penalty are not sustainable, set aside the same and allow the appeal.
(Pronounced in Court) JH Joglekar, Member (Technical)
1. The Commissioner's believed that in the circumstances narrated above the goods manufactured in a Customs bonded warehouse out of imported component parts would attract of excise is summarised in paragraph 50 of his order which is represents below:
"The party's contention that the said barge "Jay Ashwini" has been manufactured under the provision of Chapter IX of Customs Act, 1962 read with Manufacture And Other Operations In Warehouse Regulations 1966 and as such the said barge is to be treated as "Imported goods" and not excisable goods, is not accepted by me. It can be seen that the above mentioned Customs provisions are applicable only for the imported warehoused goods. The said provisions regulate control over the manufacture of the final product. Nowhere it is said that the final product manufactured in Customs Bond are deemed to be imported goods. The final product, the said barge, "Jay Ashwini" is manufactured indigenously in bond where in the imported warehoused raw material/ components etc. along with the indigenous raw material are used for the manufacture of final product. Hence Central Excise duty is required to be paid on manufactured goods even if the goods are manufactured in a Customs bonded warehouse when the goods are cleared for home consumption unless specifically exempted".
2. The provisions of Section 65 of the Act permit manufacture of goods out of the components earlier warehoused. Any difficulty arising out of the various levels of duty attracted by imported components and by the final goods manufactured is also settled by virtue of the provisions of Section 66. Section 68 and 69 which provide for clearance of warehouse goods would apply equally to the component parts imported and cleared as such as well as to the goods manufactured out of such parts. Both these goods would continue to attract the term "Warehouse goods" as given in Section 2(44) of the Act. The Commissioner's belief that the final product manufactured would cease to be warehoused goods on which the logic in paragraph 50 cited above is based, is clearly wrong.
3. His observation in paragraph 45 of the order about licence is on wrong premises it is not known while Notification No. 15/92-CE(NT) was referred to Counsel on instruction declared that the premises are licence under Rule 174 of the Central Excise Rules, 1944.
4. Even if it were not so there is no force in the Commissioner's statement that where an exemption is claimed in terms of Rule 174 of the Central Excise Rules, the applicant automatically accepts the liability of payment of duty under the Central Excise duty.
5. Shri Karnail Singh Ld. DR would submit that the judgments cited are not applicable in the present case, inasmuch as they do not consider the applicability of the Central Excise Regulations to the goods manufactured in the Customs bonded area. We do not see any force in this ground. The judgment itself shows that the manufacturers of the vessel in that case were placed in identical situation as the appellants before us in that vessel was manufactured by Hindustan Shipyard Ltd. Ltd. inside the Customs bonded area and had been cleared without payment of duty under an appropriate notification. The ratio of the judgment would therefore apply to the case before us.
6. With this observation I hold that the appeal succeed and is allowed.