Custom, Excise & Service Tax Tribunal
M/S. Titan Industries Ltd vs Cce-Iii, Chennai on 12 March, 2008
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/292/2001
(Arising out of Order-in-AppealNo. 165/2000 (M-III) dated 18.12.2000passed by the Commissioner of Central Excise (Appeals), Chennai)
For approval and signature
Honble P. G.CHACKO, Member (Judicial)
Honble P.KARTHIKEYAN, Member (Technical).
_______________________________________________
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M/s. Titan Industries Ltd., : Appellant
Vs.
CCE-III, Chennai : Respondent
Appearance Shri R. Raghavan, Adv., Shri M. Kannan, Adv., for the appellant Shri M.K.A.K. Mohiddin, JDR for the respondent CORAM Shri P.G. CHACKO, Member (Judicial) Shri P. KARTHIKEYAN, Member (Technical) Date of hearing : 12.03.2008 Date of decision : 12.03.2008 Final ORDER No.________/2008 Per P. KARTHIKEYAN The appellant M/s. Titan Industries Ltd. (Titan) imported horological raw materials for the manufacture of components of wrist watches in terms of Notification No.36/96 dated 23.07.96 and from 01.03.97 under Notification No. 11/97 (Cus) dated 01.03.97. The imports took place during the period 01.09.96 to 30.03.97. The notifications extended the concessional rate of duty to raw materials and components imported for manufacture of watch parts subject to the condition that the importer followed Customs (Import of goods at concessional rate of duty of manufacture of excisable goods) Rules, 1996 (ICMEGR). As per the ICMEGR, the importer is required to register the manufacturing unit with the jurisdictional Assistant Commissioner/Dy. Commissioner, execute a bond with him to secure the differential duty in case of failure of utilization of imported goods for the intended purpose, periodically intimate the jurisdictional Assistant Commissioner/Dy. Commissioner, an undisputed quantity of goods that would be imported etc. Titan had registered its unit at Hosur under the above rules. However, while most of the goods were consumed in the manufacture of watches in the Hosur Unit, a portion of the imported goods were transferred to the adjacent jewellery division at Hosur and another sister unit at Dehradun. After due process of law, the Joint Commissioner of Central Excise, Chennai, passed an order demanding Rs. 6,11,912/- in terms of Rule 8 of ICMEGR from Titan and imposed a penalty of Rs. Eight lakhs in terms of Section 112 of the Customs Act, 1962. The Joint Commissioner held that the quantities diverted to its sister concerns were utilized contrary to the requirement prescribed in ICMEGR. The samples of the imported goods destroyed in tests also were held to have been not used for the intended purpose. In the impugned order the Commissioner (Appeals), Chennai upheld the order o the original authority as correct.
2. In the appeal before us, the appellant has submitted that the imported components/raw materials were utilizing in the manufacture of watches at the jewellery division at Hosur and also at Dehradun unit. They had certificates evidencing such usage from the jurisdictional Assistant Commissioner. It was submitted that the sample components are tested before the lot is used before the manufacture of watches to ascertain the suitability of the goods imported for assembling of watches. Therefore, the destructive test should be held that the goods destroyed in such tests were also used for the intended purpose as per the exemption notification.
3. Heard both sides.
4. We have carefully considered the facts of the case and submissions by both sides. We find that the Tribunal in its decision in Titan Industries Ltd. Vs. Commissioner of Customs, Bangalore reported in 2005 (191) ELT 748 (Tri.-Bang.), had held in a similar case involving the appellant held in the context of interpreting another notification that the imported goods continued to be eligible for the exemption benefit even if raw materials/components were used in another unit owned by the importer. We find that even though the ICMEGR, the notification considered in that case did not extend the benefit subject to this ICMEGR. The notification covering the grant of concession in that case also had contained similar conditions as in the rules. Therefore, we hold that if the imported components/raw materials were used in the manufacture of watches by the importers sister units, the said goods were eligible for exemption. Therefore, the impugned demand is not sustainable. In this decision the Tribunal held that materials destroyed in test for quality were used in the manufacture of watches. In the instant case similar use of samples for test of quality has to be considered as put to use for the intended purpose envisaged in Rule 8 of ICMEGR. In the judgment of the Apex Court also cited by the Ld. Counsel for the appellants in the case of Mangalore Chemicals and Fertilizers Ltd., Vs. Deputy Commissioner reported in 1991 (55) ELT 437 (S.C), the Apex Court had decided that the benefit of exemption notification should not be denied if the assessee fulfilled the substantive conditions and failed to follow the procedural conditions. It would be erroneous to attach equal importance to the non-observance of all conditions irrespective of the purposes they were intended to serve. In the judgment the Apex Court relied on the following observation of the Court in Union of India & Ors. Vs. M/s. Wood Papers Ltd & Ors. [1991 JT(1) 151 at 155]: on how to construed the provisions of the notifications When the question is whether a subject falls in the notification or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction. The ratio of the above judgment is in favour of granting the disputed benefit to Titan. In the circumstances, we allow the appeal filed by Titan and vacating the impugned demand and penalty.
(Operative part of the order pronounced in open Court 12.03.08)
(P.KARTHIKEYAN) (P.G. CHACKO)
MEMBER (T) MEMBER (J)
BB
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