Custom, Excise & Service Tax Tribunal
Asahi Songwon Colors Ltd vs Vadodara-I on 13 September, 2024
1 CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST ZONAL BENCH : AHMEDABAD
REGIONAL BENCH - COURT NO. 3
EXCISE Appeal No. 10209 of 2018-DB
[Arising out of Order-in-Original/Appeal No VAD-EXCUS-001-APP-390-395-2017-18 dated
05.09.2017 passed by Commissioner ( Appeals ) Commissioner of Central Excise, Customs
and Service Tax-VADODARA-I]
Asahi Songwon Colors Limited .... Appellant
Block No. 429-432, ECP Channel Road Vill- Dudhwada,
Tal-Padra, VADODARA, GUJARAT
VERSUS
Commissioner of Central Excise & ST, Vadodara .... Respondent
1st floor, Ventral Excise building,
Race Course Circle, Vadodara, Gujarat-390007
WITH
EXCISE Appeal No. 10210 of 2018-DB
[Arising out of Order-in-Original/Appeal No VAD-EXCUS-001-APP-390-395-2017-18 dated
05.09.2017 passed by Commissioner ( Appeals ) Commissioner of Central Excise, Customs
and Service Tax-VADODARA-I]
A K Nayak, DGM .... Appellant
Block No. 429-432, ECP Channel Road Vill- Dudhwada,
Tal-Padra, VADODARA, GUJARAT
VERSUS
Commissioner of Central Excise & ST, Vadodara .... Respondent
1st floor, Central Excise Building,
Race Course Circle, Vadodara, Gujarat-390007
AND
EXCISE Appeal No. 12441 of 2019-DB
[Arising out of Order-in-Original/Appeal No VAD-EXCUS-001-APP-259-2019-2020 dated
27.08.2019 passed by Commissioner (Appeals) Commissioner of Central Excise, Customs and
Service Tax-VADODARA-I]
Asahi Songwon Colors Limited .... Appellant
Block No. 429-432, ECP Channel Road Vill- Dudhwada,
Tal-Padra, VADODARA, GUJARAT
VERSUS
Commissioner of Central Excise & ST, Vadodara .... Respondent
1st floor, Central Excise Building,
Race Course Circle, Vadodara, Gujarat-390007
2
Appeal No. E/12209-12210/2013, E/12441/2019-DB
APPEARANCE :
Shri Shri Sudhanshu Bissa, Advocate & Shri RR Dave, Consultant for the Appellant
Shri Anand Kumar & Shri AR Kanani, Superintendents (AR), for the Respondent
CORAM: HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL)
HON'BLE MR. C.L. MAHAR, MEMBER (TECHNICAL)
DATE OF HEARING : 05.07.2024 & 02.09.2024
DATE OF DECISION: 13.09.2024
FINAL ORDER NO. 12043-12045/2024
C.L. MAHAR :
The brief facts of the matter are that the appellant are engaged in the
manufacture of excisable goods namely Copper Phthalocyanine Blue Crude,
Activated Crude and Beta Blue, Ammonium Sulphate, Ammonium Carbonate
Liquor, Copper Sludge Waste & Chemical Gypsum falling under Chapter
heading 32, 31,28, 26 and 38 respectively of the first schedule of Central
Excise Tariff Act, 1985. The appellant are 100% EOU holding license for
private bonded warehouse and manufacture in bonded warehouse under
Section 58 and 62 of the Customs Act, 1962.
2. The department during the course of audit for the period 2009-2014 of
the appellants financial records noticed that the appellant has obtained Letter
of Permission (LoP) dated 20.04.2005 issued by Development Commissioner,
Kandla Special Economic Zone (KASEZ), Gandhidham, Kutch for manufacture
of finished goods as well as by-products. The by-product included Ammonium
Carbonate Liquor and Ammonium Sulphate with an obligation to export entire
production excluding rejects and sales in the Domestic Tariff Area as per the
provisions of EOU scheme for the period of five years from the date of
commencement of commercial production. The LoP as well as the green card
has been extended for the further period upto 12.03.2015. The LoP as well
the export period of the appellant unit has been extended by the Development
Commissioner from time to time and at the relevant time it stand extended
upto 12.03.2015. The department is of the view that by-product emerging
during the course of manufacture namely Ammonium Carbonate Liquor and
Ammonium Sulphate cleared in DTA were not similar to the goods which were
exported and therefore conditions of Para 2(ii) (a) of the Notification No.
23/2003-CE dated 31.03.2003 was contravened by the appellant thereby the
appellant was not eligible to claim concessional rate of duty under the said
notification. The department has issued three show cause notices for the
period June 2009 to May 2014 and for the period June 2014 to April 2015 and
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third show cause notice for the period 2015 to December 2015. The first show
cause notice has been issued under Section 11A of Central Excise Act, 1944
by invoking extended time proviso and other two show cause notices have
been issued for the normal period of time. The Deputy General Manager, Shri
AK Nayak has also been made party to the show cause notice for the purpose
of levy of penalty under Rule 26 of Central Excise Rules, 2002. The matter
has been adjudicated by the impugned orders-in-original dated 22.02.2017
and 27.03.2019 whereunder all the charges as alleged in the show cause
notices have been confirmed by the impugned orders-in-original. The
appellants have approached learned Commissioner (Appeals). The
Commissioner (Appeals) vide impugned order-in-appeal dated 05.09.2017
and dated 27.08.2019 have not found it fit to grant any relief to the appellants
therefore the appeals were rejected. The appellants are before us.
3. Learned advocate appearing for the appellants submitted that
Commissioner (Appeals) has committed an error in law by confirming demand
for extended period of limitation in the first show cause notice even though
the decision in the case of Meghmani Industries Limited vs. CCE, Ahmedabad
- 2010 (288) ELT 411 (Tri. Ahmd.) was available on record and which covered
the facts and circumstances of the case. It has been the contention of the
learned advocate that the larger period of limitation is not invokable by the
Revenue against EOU in respect of Domestic Tariff Area clearances at
concessional rate of duty of excise which has further been affirmed by the
judgment of Hon'ble Gujarat High Court in the case of Commissioner vs.
Meghmani Dyes & Intermediates Limited - 2013 (288) ELT 514 (Guj.). The
learned advocate has argued that judgment of Hon'ble Gujarat High Court has
been referred in the absolutely similar situation as it existed in the case of
appellant. The appellant has filed ER-2 returns on monthly basis and has
declared all details and information required under ER returns including the
details of Domestic Tariff Area clearances and payment of duty thereon on
concessional rate of duty under Notification No. 23/2003-CE. It has been the
contention of the learned advocate that all the facts of availment of benefit of
notification 23/2003-CE dated 31.03.2003 were available before the
department and therefore, the period of limitation cannot be extended to five
years and no element of fraud, mis-representation, suppression of facts with
intention to evade duty are present in this case.
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3.1 The learned advocate vehemently argued that Commissioner (Appeals)
have erroneously denied them the benefit of concessional rate of duty under
Notification No. 23/2003-CE dated 31.03.2003 as the appellant has rightfully
been permitted by the competent authority by a letter of permission (LoP).
The appellant was also allowed permission for Domestic Tariff Area sales with
reference to the goods exported in accordance with the items permitted vide
LoP. It has further been submitted that the appellant sold goods on
concession rate of duty of excise in Domestic Tariff Area, after fulfilling their
export obligation accordance with the items permitted by broad banded LoP
within the specified value cap of 50% of the exports of the goods in accordance
with the items permitted vide broad banded LoP.
3.2 The learned advocate vehemently argued that it was not open for the
department to have held that by-product emerging during the process of
manufacture of finished goods could not have been cleared in DTA at
concessional rate of duty because the appellant had exported another
chemical product though all these products were chemicals of the same group
classified under the same Chapter of Central Excise Tariff as well as Customs
Tariff and covered under LOP. It has further been added that Domestic Tariff
Area sales made by the appellant of goods exported in accordance with the
items permitted vide broad banded LoP and DTA sales were not in excess of
50% of quantities of the exports of the similar goods. The learned advocate
has emphasized that goods exported in accordance with the items permitted
vide broad banded LoP and impugned order denying benefit of Notification No.
23/2003-CE dated 31.03.2003 is legally wrong and Central Excise duty of
differential amount cannot be demanded from the appellant.
3.3 It has further been continued that, it was wrong on the part of the
Commissioner (Appeals) to hold that the goods exported by the appellant in
accordance with the items permitted vide broad banded LoP were different
goods i.e. they were not the similar goods because according to the
department the raw materials, manufacturing process and end use of these
products were different and they were not in the nature of commercially
interchangeable goods. The main thrust of the appellant is that it was wrong
on the part of the Commissioner (Appeals) to hold that goods exported were
not similar to the goods sold in DTA as the goods were commercially
interchangeable or "similar goods" and since the goods cleared in DTA availing
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benefit of Notification No. 23/2003-CE dated 31.03.2003 were not similar to
the one which cleared in DTA and therefore concessional rate of duty benefit
was not available to the goods namely Ammonium Carbonate Liquor and
Ammonium Sulphate.
3.4 The learned advocate has relied upon various decisions especially in the
case of this Tribunal in Defiance Clothing Company -2008 (87) ELT 743 and
M/s. ABN Granites Limited vs. CC, Cochin - 2001 (133) ELT 483 (Tri. Bang.)
as well as the decision in the case of Ginni International Limited vs. CCE, Jaipur
- 2002 (139) ELT 172 (Tri. Del.) and all these decisions issue raised in the
show cause notice was that the appellant cleared by-product on concessional
rate of duty of excise of eligible limit, the Tribunal in the above mentioned
decisions has held that Domestic Tariff Area sales were actually were allowed
by the Development Commissioner as per Exim Policy. Once a LoP has allowed
manufacture and export of the same as well as sale in DTA, it is wrong on the
part of the department to demand full rate of excise duty denying the
concessional rate of duty benefit that there is no violation of either LoP or
Exim Policy.
3.5 The learned advocate also objected the imposition of penalty on Shri AK
Nayak, DGM, stating that there is no evidence of Shri Nayak's involvement in
willful avoidance of Central Excise duty. The appellant Shri AK Nayak was an
employee of the main appellant and there was no personal gain which he could
have gained by resorting to any infringement of any law with intention to
evade Central Excise duty. It is vehemently argued that Adjudicating
Authority as well as Commissioner (Appeals) has not applied their mind in
imposing penalty under Rule 26 of Central Excise Rules, 2002. The learned
advocate has relied upon the decisions of this Tribunal in the case of Shri
Vinod Kumar vs. CCE, Delhi - 2006 (199) ELT 705 (Tri. Del.) as well as in the
case of RK Ispat vs. CCE, Raipur - 2007 (211) ELT 460 (Tri. Del.)
4. We have heard learned AR appearing for the Revenue who reiterated
the findings as given in the impugned orders-in-appeal.
5. We have heard rival submissions and perused the record of the appeals.
We find that office of the Development Commissioner, KASEZ has approved
inclusion of by-products in the LoP vide its letter dated 29.04.2005 where in
Ammonium Sulphate Liquor, Ammonium Carbonate Liquor and hazardous
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waste have been included. It is matter of record that appellant have been
exporting their products Copper Phthalocyanine Blue Crude, Activated Crude
and Beta Blue, Ammonium Sulphate, Ammonium Carbonate Liquor, Copper
Sludge Waste & Chemical Gypsum etc. which they were permitted to
manufacture and export under 100% EOU manufacturing scheme. There is
no denying to the fact that required export obligation has been fulfilled by the
appellant with regard to their various products and they have been filing
regular returns with regard to exports as well as the clearances which have
been effected by them availing concessional rate of Central Excise duty as per
provisions of Notification No. 23/2003-CE dated 31.03.2003. We find from
the record that there is no allegation that the appellant have not fulfilled
export obligation as provided under LoP issued by Development
Commissioner, KASEZ, Gandhidham. The only dispute which needs to be
resolved by us is whether the appellant are entitled to the concessional rate
of Central Excise duty on the clearances effected by them on Ammonium
Carbonate Liquor and Ammonium Sulphate. It will be relevant to have a
perusal of Notification No. 23/2003-CE dated 31.03.2003, which reads as
follows:-
"(i) the goods are cleared into Domestic Tariff Area in accordance with sub-
paragraphs (a), (b), (d) and (h) of Paragraph 6.8 of the Export and Import Policy;
(ii) exemption shall not be availed until Deputy Commissioner of Customs or Assistant
Commissioner of Central Excise or until Deputy Commissioner of Customs or Assistant
Commissioner of Central Excise, as the case may be, is satisfied with the said goods
including Software, Rejects, Scrap, Waste or remnants;
(a) being cleared in Domestic Tariff Ares, other than scrap, waste or remnants are
similar to the goods which are exported or expected to be exported from the units
during specified period of such clearances in terms of Export and Import Policy;
(b) the total value of such goods being cleared under sub- paragraphs (a), (b), (d) and
(h) of Paragraph of the Export and Import policy, into Domestic Tariff Area from the unit
does not excess 50% of the Free on Board value of exports made during the year (starting
from 1st April of the year and ending with 31 March of next by the said unit;
(c) the balance of the production of the goods which are similar to such goods under
clearance into Domestic Tariff Area, is exported out of India or disposed of in Domestic
Tariff Area in terms of Paragraph 6.9 of the Export and Import Policy;"
It is apparent from the above mentioned provisions of exemption notification
that the domestic clearance of the product manufactured by 100% EOU can
be cleared at concessional rate of duty as per the provisions of Para 6.8 (a)
and (g) of the Foreign Trade Policy 2009-204 which reads as follows:-
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"Entire production of EOU / EHTP/STP/BTP units shall be exported subject to following:
(a) Entire production of EOU / EHTP / STP / BTP units shall be exported subject to
following: Units, other than gems and jewellery units, may sell goods upto 50% of FOB
value of exports, subject to fulfillment of positive NFE, on payment of concessional duties.
Within entitlement of DTA sale, unit may sell in DTA, its products similar to goods which
are exported or expected to be exported from units. However, units which are
manufacturing and exporting more than one product can sell any of these products into
DTA, upto 90% of FOB value of export of the specific products, subject to the condition
that total DTA sale does not exceed the overall entitlement of 50% of FOB value of exports
for the unit, as stipulated above. No DTA sale at concessional duty shall be permissible in
respect of motor cars, alcoholic liquors, books, tea (except instant tea), pepper & pepper
products, marble and such other items as may be notified from time to time. Such DTA
sale shall also not be permissible to units engaged in activities of packaging / labeling /
segregation / refrigeration / compacting / micronisation / pulverization / granulation /
conversion of monohydrate form of chemical to anhydrous form or vice-versa. Sales made
to a unit in SEZ shall also be taken into account for purpose of arriving at FOB value of
export by EOU provided payment for such sales are made from Foreign Exchange Account
of SEZ unit. Sale to DTA would also be subject 70 to mandatory requirement of
registration of pharmaceutical products (including bulk drugs). An amount equal to Anti
Dumping duty under section 9A of the Customs Tariff Act, 1975 leviable at the time of
import, shall be payable on the goods used for the purpose of manufacture or processing
of the goods cleared into DTA from the unit.
---
(g) By-products included in LoP may also be sold in DTA subject to achievement of positive NFE, on payment of applicable duties, within the overall entitlement of sub-para 6.8(a). Sale of by-products by units not entitled to DTA sales, or beyond entitlements of sub-para 6.8 (a), shall also be permissible on payment of full duties."
From the perusal of the above provisions, it is clear that appellant are entitled for sale of their by-products into Domestic Tariff Area availing benefit of Notification No. 23/2003-CE dated 31.03.2003. We find that the provisions of Foreign Trade Policy under Para 6.8 (a) and (g) of Foreign Trade Policy 2009-2014 as mentioned in preceding paras, provides for sale of goods of 50% of FOB value of exports subject to fulfillment of positive net foreign exchange earnings, on payment of concessional rate of duty. It further stipulates that within entitlement of DTA sale, unit may sell in DTA, its products similar to goods which are exported or expected to be exported from units. It is a matter of record that the appellants have fulfilled the export obligation and only the by-products as mentioned above have been cleared at the concessional rate of duty availing benefit of Notification No. 23/2003-CE dated 31.03.2003.
8Appeal No. E/12209-12210/2013, E/12441/2019-DB 5.1 We find that provisions of Para 6.8 (g) of the Foreign Trade Policy 2009- 2014 specifically covers by-products which can be cleared for the Domestic Tariff Area and reads as follows:-
"(g) By-products included in LoP may also be sold in DTA subject to achievement of positive NFE, on payment of applicable duties, within the overall entitlement of sub-para
6.8(a). Sale of by-products by units not entitled to DTA sales, or beyond entitlements of sub-para 6.8 (a), shall also be permissible on payment of full duties."
It can be seen from the above provisions of Para 6.8 (g) of the Foreign Trade Policy that by-products can be cleared at the concessional rate of duty if 100% EOU has already achieved positive NFE.
5.2 We find that appellant have fulfilled their export obligation and there is no allegation that NFE has not been achieved by the appellant of permissible export products and therefore, we are of the view that the provisions relating to clearance of its by-products in Domestic Tariff Area at the concessional rate of duty are undoubtedly available to the appellant, more so when NFE has been positive in case of the appellant. While taking the above view, we rely on this Tribunal's decision in the case of DCM Hyundai Limited vs. CCE, Chennai - 2023 (4) TMI 982- CESTAT Chennai, which reads as follows:-
"12. The very same issue was analyzed by the Tribunal in the case of Abi Turnamatics vs. Commissioner of GST & CE (supra) as under:
"5.4 The third ground for denial of notification benefit is that the goods cleared in DTA are not "similar" to the goods exported by the appellant. The adjudicating authority in para 11 of the impugned order has relied upon para 3 of Board Circular 7/2006-Cus., dated 13-1-2006 which has observed that there is no definition of "similar goods". Hence to bring clarification and uniformity that the definition of "similar goods" would be based on the definition of similar goods as provided in the Customs Valuation (Determination of Pride of Imported Goods) Rules, 1988. The relevant portion of the Board's clarification is under :-
"The term 'similar goods" means "goods which is although not alike in all respects, have like characteristics and like component materials which enable them to perform the same functions and to be commercially interchangeable with the goods which have been exported or expected to be exported having regard to the quality, reputation and the existence of trade mark and produced in the same unit by the same person who produced the export goods."
5.5 In the first place, we find that the Tribunal in the case of Meghmani Industries Ltd. (supra) has addressed the very controversy in respect of the definition of 'similar goods' for exemption under Notification 23/2003-C.E. The Tribunal in the decision after referring to the judgment of the Hon'ble Supreme Court in Wood Craft Products Ltd. - 1995 (77) E.L.T. 23 (S.C.) and of the Tribunal in TELCO - 2000 (126) E.L.T. 1102 (Tribunal) noted that the definitional available in the Customs Act cannot be used in respect of notifications issued under another enactment; that in such cases common parlance or dictionary meaning is to be 9 Appeal No. E/12209-12210/2013, E/12441/2019-DB applied. Secondly, we find from the green card dated 31-3-2006 issued by the Development Commissioner, MEPZ and subsequently also further revised by MEPZ/SEZ that the main products that was manufactured/exported to be turbo charger components. There is no doubt that the appellant had exported bearing housing whereas the goods to be cleared into DTA seeking benefit of Notification 23/2003 was turbo wheel assembly. While, the adjudicating authority has been at pains to cite the difference in characteristics and function of these two items, the fact remains that both of them are components of turbo charger and hence will surely fall under the broad banded term 'turbo charger components' which is the export product as per the EOU/green card issued to the appellant by the Development Commissioner. Hence when the permission granted to appellant has not listed any specific components of a turbo charger but instead has only indicated export product as 12,50,000 nos. of turbo charger component which was even subsequently enhanced to 32,00,000 nos. of turbo charger components, the appellant cannot then be said to have caused a breach of the conditions. Both bearing housing and turbine wheel are surely component parts of turbo charger, a fact which has been admitted by the adjudicating authority in para 12 of the impugned order. If on the other hand, the permission granted by the Development Commissioner to the EOU was only for bearing housing, in that event, the clearance of turbine wheel which is a part distinct from bearing housing would have come under the scanner. But when the permission is generic and only states "turbo charger components", the condition of the impugned notification gets satisfied so long as the parts that the exported and the parts cleared into DTA are both the components of turbine charger."
13. It can be seen that the open top containers exported by the appellant is similar to the tipper body used for transportation. It is not necessary that the goods cleared into DTA have to be identical to the goods exported by the EOU. Further, permission has been granted by the MEPZ to clear containers which are similar. We therefore find that the denial of the benefit of the notification is not justified. The impugned order demanding differential duty requires to be set aside which we hereby do."
5.3 In view of above we hold that the appellant have rightfully availed the benefit of concessional rate of duty under Notification No. 23.2003-CE dated 31.03.2003 an clearances of its by products..
6. The learned advocate has also contended that the first show cause notice which covers the extended time proviso from June 2009 to May 2014 dated 07.07.2014 is also hit by period of limitation. He submits that all the details have been disclosed by the appellant before the concerned authorities of the department. We take note of the fact that all the details of the goods being manufactured and cleared for export and for the Domestic Tariff Area clearance have been disclosed by the appellant to the authorities from time to time. We reproduce a letter dated 26.09.2013 addressed to Development Commissioner and copy endorsed to Assistant Commissioner as well as Superintendent of Central Excise, Division-II, Vadodara Commissionerate, the same is reproduced below:-
10Appeal No. E/12209-12210/2013, E/12441/2019-DB 11 Appeal No. E/12209-12210/2013, E/12441/2019-DB 12 Appeal No. E/12209-12210/2013, E/12441/2019-DB 13 Appeal No. E/12209-12210/2013, E/12441/2019-DB 14 Appeal No. E/12209-12210/2013, E/12441/2019-DB 15 Appeal No. E/12209-12210/2013, E/12441/2019-DB 16 Appeal No. E/12209-12210/2013, E/12441/2019-DB 17 Appeal No. E/12209-12210/2013, E/12441/2019-DB From perusal of above letter and its contents, it is clearly established that the appellant have been informing the department about the by-products which have been cleared by them availing concessional rate of duty under Notification No. 23/2003-CE dated 31.03.2003. We find that element of fraud, mis-representation, suppression of facts with intention to evade duty are not present in this case and therefore, we do not find it legally sustainable to invoke extended time proviso under Section 11A of Central Excise Act, 1944 for demanding Central Excise duty. We therefore, hold that first show cause notice is barred by period of limitation also.
7. Since, we are allowing the appeals of the main appellant on merit, we find no reason for imposition of penalty on Shri A.K.Nayak and accordingly, we set aside the penalty imposed an appellant Shri A.K.Nayak.
8. In view of above discussion, we hold that impugned orders-in-appeal are without any merits. We set-aside the same. Appeals are accordingly allowed.
(Pronounced in the open court on 13.09.2024) (Ramesh Nair) Member (Judicial) (C L Mahar) Member (Technical) KL 18 Appeal No. E/12209-12210/2013, E/12441/2019-DB