Customs, Excise and Gold Tribunal - Ahmedabad
Commissioner Of Central Excise And ... vs Al-Amin Exports And Ors. on 24 January, 2007
Equivalent citations: 2007(116)ECC300, 2007ECR300(TRI.-AHMEDABAD)
ORDER K.K. Agarwal, Member (T)
1. These are four appeals against the order of the Commissioner upholding the confiscation of the goods and penalties imposed on the appellants.
2. The brief facts of the case are that the appellants are 100% EOUs who are engaged in the manufacture of readymade garments and for the said purpose were entitled to procure duty free materials indigenously by import on the strength of CT-3 certificate. They were availing the benefit of Notification No. 53/97-Cus for the purpose of procuring indigenously manufactured goods under CT-3 certificate issued by the Jurisdictional Officer. However, on investigation, it was found that the goods procured under CT-3 certificate were never received in factory premises and were disposed of in the market or only paper transaction was done without movement of the goods. In order to fulfill the export obligation some substandard material was obtained from the open market which was subsequently exported in the place of superior quality goods. The present case involves 65,000 pcs of polyester dyed and printed scarves of irregular size valued at Rs. 7,80,000/- procured from the open market and lying in the factory premises of 100% EOU which according to the Revenue were meant for subsequent export in order to fulfill export obligation. These goods have been confiscated under the provisions of Rule 25 of Central Excise Rules, 2002 and penalty of Rs. 1 lakh has been imposed on M/s. A1-Amin Exports (100% EOU), Rs. 1 lakh on Shri Sayed Mohd. Irfan Gulam Rasool, the man and active partner of M/s. A1-Amin Exports (100% EOU), Rs. 50,000/- on Shri Haron Razaq Chhaya, Partner of M/s. Lazio Exports and Rs. 1 lakh on Shri Bilal Latif Memon, proprietor of M/s. Lazio Exports for his involvement and abetement in commission of offence. This order of the Additional Commissioner on appeal was set aside by the Commissioner (Appeals). Against the order of the Commissioner (Appeals), the Revenue has come up in appeal before the Tribunal.
3. The learned SDR submits that the Commissioner (Appeals) has dropped the proceedings holding that Rule 25 of the Central Excise Rules, 2002 are not applicable as in the present case, dyed and printed scarves procured from the open market were not liable to be accounted for by the 100% EOU as they were not goods on which the exemption has been availed and further on the ground that there has been no contravention of any Rules with intent to evade payment of duty. It was submitted that even though 100% EOU is not the manufacturer and producer of the seized goods, he is definitely a person having license and registration issued under Rule 58 and Rule 65 of the Customs Act and therefore, he is deemed to be registered warehouse hold any by not accounting for the duty paid goods bought from the market in the statutory records which has been admitted by the partners, they have definitely violated the provisions of Sub-rule (b) (i) of Rule 25. All EOUs are issued LOP by the Development Commissioner in which the description of raw materials to be used for the manufacture of final products are specified and under the LOP, the 100% EOUs are not authorized to bring outside duty paid goods nor the same is permitted under the warehousing and a manufacturer license issued under the provisions of Sections 58 and 65 of the Customs Act. Further before bringing the goods into the factory a 100% EOU has to make an application to the Assistant Commissioner in proper format which was not submitted in the present case nor any permission was taken, nor D-3 intimation for bringing the duty paid goods within the factory premises was given. Thus, the appellants have violated the provisions of Central Excise/Customs Rules with intent to evade payment of duty and therefore the Commissioner (Appeals)'s order holding otherwise should be set aside.
4. The Advocate for the respondent submits that in this case, the entire charge against the appellants is that the goods which were procured under CT-3 certificate were not received in the factory and therefore proceedings if any, can be initiated in respect of non accountal of said goods procured under CT-3 certificate. In the present case the goods which were procured from the open market were not required to be accounted for in the statutory books and therefore there could not have been confiscated under Rule 25 of the Central Excise Rules, 2002. Since the goods themselves were not liable for confiscation, the question of imposition of any penalty does not arise. The Advocate also submitted that neither show cause notice nor the order of the lower adjudicating authority spells out the particular clause of Rule 25 which it is alleged to have been contravened and under which the goods are sought to be confiscated and therefore the goods cannot be confiscated as held by the Supreme Court in the case of Amrit Foods 2006 (72) RLT 9 (SC) which was followed by the Tribunal in the case of Parag Fan and Cooling Systems Ltd. v. CCE, Indore 2006 (76) RLT 319 (CESTAT-Del.)
5. I have considered the submissions. For better appreciation of the facts and law the provisions of Rule 25 are reproduced below:
Rule 25. Confiscation and penalty - (1) subject to the provisions of Section 11AC of the Act if any producer, manufacturer, registered person of a warehouse or a registered dealer,-
(a) removes any excisable goods in contravention of any of the provisions of these rules or the notification issued under these rules or
(b) does not account for any excisable goods produced or manufactured or stored by him; or
(c) engaged in the manufacture of, production or storage of any excisable goods without having applied for the registration certificate required under Section 6 of the Act; or
(d) contravenes any of the provisions of these rules or the notifications issued under these rules with intent to evade payment of duty, then, all such goods shall be liable to confiscation and the producer or manufacturer or registered person of the warehouse or a registered dealer, as the case may be, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention of the nature referred to in Clause (a) or Clause (b) or Clause (c) or Clause (d) has been committed, or rupees ten thousand, whichever is greater.
(2) An order under Sub-rule (1) shall be issued by the Central Excise Officer, following the principles of natural justice.
6. From the above it will be clear that the provisions apply in relation to the goods which are manufactured, produced or stored by a manufacturer or registered person of a warehouse. In the present case, a 100% ECU can at best be termed as registered person of a warehouse. However, show cause notice alleges the contravention in respect of goods which are procured under CT-3 certificate and it is these goods only which the assessee is under obligation to account for in his statutory records. The goods on which no exemption from duty has been availed is not required to be accounted for under any of the Rules of Central Excise or the Notification issued under Rule 9 for the purpose of warehousing. Further, since these goods were still lying in the factory premises for which no shipping bill was filed it cannot be confiscated under the provisions of the Customs Act for mis-declaration of value and description even if the provisions of Customs Act have not been invoked in the show cause notice. Both the show cause notices and the order of the original authority suffers from infirmity inasmuch as the particular clause of Rule 25 under which the goods are proposed to be confiscated has not been indicated. On the other hand, both the Additional Commissioner as well as Revenue has contended that the goods were not accounted for and are therefore liable for confiscation under Rule 25 ((b) (1) and at the same time under Rule 25(d) stating that the contravention of the rules and the notifications issued under the rules has been done with intent to evade payment of duty. The show cause notice is therefore vague and as held by the Supreme Court in the case of Amrit Foods v. CCE, UP 2005 (190) ELT 433 (SC), the assessee has to be put on notice as to the exact nature of the contravention for which he was liable under the provisions of Rule 173Q - Rule 25 of the Central Excise Rules and in the absence of the same, confiscation cannot be upheld.
In view of the above, I hold that the goods are not liable for confiscation as goods purchased from the open market were not required to be accounted for in the statutory records and action if any lies in respect of the goods obtained under CT-3 certificate which was never used for the purpose of export. The confiscation cannot also be upheld on the ground that specific clause of Rule 25 of Central Excise Rules, 2002 has not been cited in the show cause notice or in the order of the adjudicating authority. Since the goods themselves held are not liable for confiscation, penalty cannot be imposed on the appellants under Rule 25 of Central Excise Rules. In view of the above, the Revenue appeals have no merit and the same are dismissed.
(Pronounced in the open Court on 24.01.2007)