Customs, Excise and Gold Tribunal - Mumbai
Hanil Era Textile Ltd. And Ors. vs Commissioner Of Central Excise And ... on 2 January, 2004
Equivalent citations: 2004(171)ELT33(TRI-MUMBAI)
ORDER
1. The above appeals arise out of a common order of the Commissioner of Central Excise Mumbai, by which has ordered as under:-
"(SCN F.No. V/Adj/15(scn)327/2001/M-VII dt.06.07.01)
(i) I confirm Customs duty amounting to Rs. 14,38,50,280/- on the capital goods and inputs i.e. 3 D.G. sets an the spare parts of D G sets, and the entire qty. of furnace Oil/Lubricating Oil on which exemption under provisions of Notification No. 13/81-Cus dt 9.2.81 as amended by Notification No. 53/97 Cus dated 3.6.1997. as detailed in Annexure I, II & C of the SCDN, have been wrongly availed, under proviso to Section 28(1) of Customs Act, 1962, R/W/ Sections, 12, 17, 68 and 72 of the said Act.
(ii) I order that, interest should be charged at appropriate rate on the said amount of Customs duty as confirmed at Sr. No. (i) above under Section 28AB of the Customs Act, 1962.
(iii) I impose penalty of Rs. 14,38,50,280/- (Rupees Fourteen Crores Thirty Eight Lakhs fifty Thousand Two Hundred Eighty Only) on M/s Hanil Era Textiles ltd. Under section 114 of the Customs Act, 1962.
(iv) I confirm C. Ex. duty amounting to Rs. 41,21,171/- (Rupees Forty one lakhs twenty one thousand one hundred seventy one only) on the entire qty. of inputs viz. Furnace Oil HSD and lubricating Oil on which exemption under notification No. 1/95-C.Ex.dt. has been wrongly availed, under proviso to section 11A(I) of the Central Excise Act, 1944 r/w Section 3 of the Act and Rule225 of Central excise, rules, 1944.
(v) I order that interest should be charged at appropriate rate, on the C. Ex. Duty as confirmed at Sr. No. (iv) above, : under Section 11 AB of Central Excise Act, 1944.
(vi) I impose penalty of Rs. 41,21,171/- (rupees Forty One Lakhs Twenty One Thousand One Hundred Seventy One only) on M/s Hanil Era Textiles Ltd. Under Section 11AC of the Central Excise Act, 1944.
(vii) I order that said Customs duty of Rs. 14,38,50,280/- and C. Ex. Duty of Rs. 41,21,171/- as confirmed above and the interest amount thereon and the penalties imposed as above should be recovered from assessee in terms of condition No. 10 of the B-17 Bond, executed by them under Section 142(2) of Customs Act, 1962 and under section 11 of the Central Excise Act, 1944.
(viii) I order confiscation of the 3 D G Sets and the spare parts of D.G. Sets totally valued at Rs. 17,10,77,916/- & Rs. 1,10,67,774/- respectively as per the details given in Annexure I, II, and C to SCN under section !!! (J) and III (O) of the Customs Act, 1962. However I impose a redemption fine of Rs. 2,00,00,000/- (Rupees Two crores only)g on M/s Hanil Era Textiles Ltd. in lie of confiscation of aforementioned goods.)
(ix) I do not propose to confiscate land, building etc. as the penalty imposed on the assessee will meet the ends of justice.
(x) I impose penalty under Rule 209 A of CER, 1944 on the following notices as mentioned below against their names.
S. No. Names of the person Amount of Penalty
1. S/Shri R K Agarwal, Chairman - Rs. 5,00,000/- (Rupees Five Lakhs Only)
2. S/Shri VV C Gopalkrishnan, Dir. - Rs. 5,00,000/- (Rupees Five Lakhs Only)
3. S/Shri S C Kalra, Sr. President - Rs. 5,00,000/- (Rupees Five Lakhs Only)
4. Shri Vijay Kumar Aurangabad kar, chief engineers - Rs. 5,00,000/- (Rupees Five Lakhs Only)
5. S/Shri Ashok Saraf, - Rs. 5,00,000/- (Rupees Five Lakhs Only) Chartered engineer SCN F.NO. V/ADJ(scn)15-385/2001/M.VII
(i) I confirm Customs duty of Rs. 77,73, 403/- (Rupees seventy seven lakhs seventy three thousand four hundred three only) as recoverable from the E. O.U. M/s Hanil Era Textiles Ltd. on imported Furnace Oil/H S D under the provisions of Section 28(1) of the Customs Act, 1962 read with Section 12, 17, 68 or 72 of the said Act for the period August 2000 to December 2000.
ii) I confirm C.Ex. duty of Rs. 1,44,929/- (Rupees one lakhs forty four thousand nine hundred twenty nine only) as recoverable from the E.O.U. (M/s Hanil Era Textiles Ltd.) on the indigenous Furnace Oil/HSD under the provisions of Section 11A of the C.Ex. Act, 1944 for the period Aug 2000 to Dec. 2000.
iii) I confirm Customs duty of Rs. 8,29,943/- (Rupees eight lakhs twenty nine thousand nine hundred forty three only) as recoverable from the E.O.U. M/s Hanil Era Textiles Ltd., on spare parts of the D G sets imported, under Section 28( 1) of the Customs Act, 1962 read with section 12, 17, 68 or 72 of the said Act.
iv) I order that interest is chargeable under Section 28AB off the Customs Act, 1962 read with Section 11AB of the Central Excise Act, 1944 on the delayed payment of duty as confirmed above, for the relevant period.
v) I impose penalty of Rs. 87,48,275/- (Rupees eighty seven lakhs forty eight thousand two hundred seventy five only) on M/s Hanil Era Textiles Ltd., under Section 114 of the Customs Act, 1962 read with Section 11 AC of the C. Ex. Act, 1944.
SCN F.No. V/Adj.SCN/15-497/2001/M.VII
i) I confirm Customs duty of Rs. 49,92,069/- (Rupees forty nine lakhs ninety two thousand sixty nine only) as recoverable from the E O U M/s Hanil Era Textiles Ltd., on imported furnace Oil/H S D under the provisions of Section 28(1) of the Customs Act, 1962 read with Section 12, 17, 68 & 72 of the said Act for the period Aug. 2000 to Dec.2000.
ii) I confirm C.Ex. duty of Rs. 17,11,294/-(Rupees seventeen lakhs eleven thousand two hundred ninety four only) as recoverable from the E O U (M/s Hanil Era Textiles Ltd.,) on the indigenous Furnace Oil/H SD under the provisions of Section 11A of the C.Ex. Act, 1944 for the period Aug 2000 to Dec.2000.
iii) I confirm customs duty of Rs. 19,36,348/- (Rupees nineteen lakh thirty six thousand three hundred forty eight only) as recoverable from the E O U M/s Hanil Era Textiles Ltd., on spare parts of the D G sets imported under Section 28(1) of the Customs Act, 1962 read with section 12, 17, 68 or 72 of the said Act.
iv) I impose penalty of Rs. 86,39,711/- (Rupees eighty six lakhs thirty nine thousand seven hundred eleven only) on M/s Hanil Era Textile Ltd. under Section 114 of the Customs Act, 1962 red with Section 11Ac of the C. Ex. Act. 1944.
2. The issues involved are common to al appeals which are hence heard together and disposed of by this common order.
3. The facts of the case are that M/s Hanil Era Textiles Ltd (hereinafter referred to as HETL) are a 100% export Oriented Unit operating under the Letter of Permission (LOP) issued by the Government of India, Ministry of Industries, Department of Industrial Development, vide letter Dt.14.12.1991., for the manufacture of Acrylic Yarn and Cotton Acrylic Yarn and other specified types of Yarn. They had executed a legal Undertaking with the Development Commissioner, SEEPZ, Mumbai, and also obtained licence for private bonded warehouse under Section 58 of the Customs Act, 1962 and permission for carrying on manufacture under bond under Section 65 of the Customs Act 1962. They had also executed B-16 and B-17 bond with the jurisdictional Assistant Commissioner. the permitted spindle capacity in the factory was 85000 spindles. They proposed to expand their capacity by further 25000 spindles in 1993 and accordingly, obtained permission from Secretariat for industrial Approvals (SIA) on 31.12.93. They had an existing DG sets for generation of electricity. The need for a captive power plant was felt by the Textile mills and hence, they applied on 11.10.1993 for the import of two sets of 6 MW Captive Power Plant and necessary permission was accorded for their import, subject to the condition of maintaining value addition of 38.22% as per formula in force prior to .4.1993. Accordingly, they imported two DG sets of 6.5.MW each, for captive generation of electricity, for the purpose of manufacture of various types of yarns. The textile plant started production in 1994, and DG sets were commissioned and put to use in May -June 1997 and the Dg sets were used exclusively for captive requirement of power of the unit until July 1998. However, due to circumstances such as fire in the plant on 24.12.1994 and thereafter labour strike in 1995 and 1997-98, the textile mills could not fully untilse its installed capacity, and could not complete the proposed spindles capacity additions. Thus , the mills could not use the entire power generated by their power plant. Therefore, they obtained statutory permission vide letter Dt.22.5.1998, from the Government of Maharashtra under the provisions of Section 28 of the Indian Electricity Act, for sale of 40% of the installed capacity of their power plant to a third party i.e. M/s. The Bombay Dyeing & manufacturing Co. Ltd. They also obtained permission on 1.7.1998 from the Maharashtra state Electricity Board, for wheeling of the power, through their transmission lines from their plant, to the plant o M/s. Bombay Dyeing Vide letter dt. 6.1.1999 they intimated the Range Superintendent of Central Excise, about generation of excess electricity and sale of such surplus power. Similar intimation was given to the jurisdictional Assistant Commissioner of Central Excise under cover of letter dt. 10.2.1999. The mills also sought permission for sale of surplus power vide letter dt. 4.12.1999 to the Board of approvals, ministry of Industry, which vide letter dt 22.12.1999, forwarded copy of Ministry's Circular dt 12.10.1999 permitting sale of surplus power by EOUs and directed the mills to contact the Development Commissioner in the matter. Vide letters dt 1.12.1999 and 3.1.2000 the mills also applied to the Development Commissioner, for permission to sell the surplus power.
4.On 2.12.1999 the Central Excise officers visited the appellants' factory and carried out investigation which revealed that:-
(a) The appellants had been generating electricity, in excess of the required quantum for captive use, in the manufacture of yarn, by utilising duty free imported/indigenously procured DG Sets, spare Parts thereof, and furnace Oil, HSD and lubricating Oil, and were selling excess electricity to DTA unit to the extent of 685 of the total generated electricity;
(b) That they had contracted for the purchase of two DG Set of higher capacity of 15.68 MVA with M/s Wartsila Diesel, Finland for 1992, prior to obtaining permission from Ministry of Industry, Government of India.
(c) That they had sold electricity to M/s Bombay Dyeing in DTA, Unit through MSEB, without obtaining permission from the Development commissioner, SEEPZ/Board of Approval? SIA or from the Customs and Central Excise Authorities.
(d) That the appellants had not maintained proper account of consumption for Furnace Oil, HSD and Lubricating Oil.
(e) That they had suppressed the fact of sale of electricity in DTA in the Annual Rep[ort for 1998-99.
(f) That they had wrongly contended that the excess generation of electricity was due to higher connected load an would have been wasted, had it not been untilised through sale.
(g) That the appellants had forged documents, for the purpose of showing that the departmental officers had been informed about sale of electricity and hence, suppressed/mis-stated the fact of sale of surplus electricity.
(h) That they had arranged for a wrong and fabricated Chartered Engineer's Certificate, in respect of Furnace Oil Consumption on different loads of DG Sets/
5. On the basis of the above, a show cause notice Dt. 6.7.2001 was issued to M/s Hanil Era Textiles Ltd. proposing recovery of customs duty of Rs. 14,38,50,280/- together with interest, by denial of the benefit of exemption under Notification No. 13/81 Cus and 53/97 Cus to capital goods and inputs (DG Sets and spar parts thereof and furnace oil and lubricating Oil) proposing recovery of Central Excise Duty of Rs. 41,21,171/- on the entire quantity of inputs namely, furnace Oil/HSD/Lubricating Oil indigenously procured by denying benefit of exemption Notification No. 1/95, together with interest, proposing confiscation of capital goods and proposing imposition of penalty and cancellation of the warehousing licence. The notice also purposed penal action against officers of the company and chartered engineer. Similar notices of subsequent period raising demands of Rs. 87,48,275/- for the period August to December 2000 and for recovery of duty of Rs. 86,39,711/- covering the period January to September 2001 ware also issued and all three notices were adjudicated by the Commissioner vide the impugned order, confirming duties and penalties and ordering confiscation as set out in the opening paragraph of this order; hence these appeals.
6. We have heard both sides.
7. The issue in dispute relates to the admissibility of benefit of exemption in terms of Notification No. 13/81/Cus and 1/95-C on DG Sets and fuel imported by the company and fuel indigenously procured by the company.
8. The relevant extract from Notifications 13/81/Cus & 53/97/Cus are reproduced below.
"Exemption to specified goods imported for production of goods for export or for use in 100% Export Oriented Undertaking - 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 goods specified in the Table below (hereinafter referred to as the Goods), when imported into India for he purpose of manufacture of articles for export out of India, or for being used in connection with the production or packaging or job work for export of goods or services out of India, or for being used in connection with the production packaging or job work for export of goods or services out of India by hundred percent Export Oriented units approved by the Board of Approvals for hundred per cent Export Oriented Units, appointed by the notification of Government of India in the Ministry of Industry, Department of Industrial Policy and Promotion or the Development Commissioner concerned as the case may be, for this purpose, (Hereinafter referred to as the said Board), from the whole of duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975) and the additional duty, if any, leviable thereon under section 3 of the said Customs Tariff Act subject to the following conditions, namely:-
(1) The imports, clearance, export, transfer and usage of the goods and goods manufactured there from and the net foreign exchange earning as a percentage of export shall be subject to the conditions of the Export and Import Policy - 1st April, 1997 to 31 March, 2002 notified by he Government of India under the Ministry of Commerce Notification No. 1/97, dated the 31st March, 1997 hereafter referred to as the said Export and Import Policy).
(2) The importer has been granted necessary licence for the import of the goods for the said purpose.
(3) The importer carries out the manufacture, production, packaging or job work or service in Customs bond and subject to such other conditions as may be specified by the Commissioner of Customs in this behalf.
(4)Importer exports out of India 100% or such other percentage, as may be fixed by the said Board, of articles manufactured wholly or partly from the goods during the period stipulated by the said Board or such extended period as may be specified by the Board.
(5) .....
(6) The importer executes a bond in such form and for such sum and with such security or surety as may be prescribed by the Assistant Commissioner of Customs, binding himself to fulfil the export obligations and conditions stipulated in this notification and in or under said Export and Import Policy and to pay on demand an amount equal to the duty leviable on the goods as are not proved to the satisfaction of the Assistant commissioner of Customs to have been used in he manufacture of articles or in connection with the production or packaging or job work for export of goods or services out of India.
(7) Notwithstanding anything contained in this notification the exemption herewith shall also apply to goods which on importation into India are used for the purpose of manufacture off articles (including rejects, waste and scrap material arising in the course of manufacture of such articles) even if not exported out of India, are allowed to be sold in India, in accordance with the Export and Import Policy, on payment of duty of excise leviable thereon under section 3 of the Central Excise act, 1944 ( 1 of 1944) or where such articles (including rejects, waste and scrap material) are not excisable, on payment of customs duty on imported goods used for the purpose of manufacture of such articles in an amount equal to the customs duty leviable on such articles, as if imported as such.
(8)........
(9).........
THE TABLE Serial No. Description of goods
1. Capital goods.
2 to 11 ................
12. Fuel, Lubricants and other consumables as approved by Commissioner of Customs on recommendation of the Development Commissioner.
13. .......................
14. ......................
9. With effect from 19.5.1999, para 7 of Notification No. 53/97 was amended so as to read as under:
"Notwithstanding anything contained in this notification the exemption herewith shall also apply to goods which on importation into India are used for the purpose of manufacture of articles within hundred percent Export Oriented Unit and such articles (including rejects, waste and scrap material arising in the course of manufacture of such articles) even if not exported out of India, are allowed to be sold in India, in accordance with the Export and Import Policy, on payment of duty of excise leviable thereon under section 3 of the Central Excise Act, 1944 (1 of 1944) or where such articles (including rejects, waste and scrap material) are not excisable, customs duty equal in amount to that leviable on the inputs obtained under this equal notification and used for the purpose of manufacture of such articles, which would have been paid, but for the exemption under this notification., shall be payable at the time of clearance of such articles;".
10. The relevant portion of Notification No. 1/95 is reproduced hereunder :
"Exemption to specified goods meant for manufacture and packaging of articles in 100% EOU or manufacture of development of electronic hardware and software in EHTP or STP. In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excises and Salt Act, 1944 (1 of 1944), read with sub-section (3) of Section 3 of the Additional duties of Exercise (Goods of Special Importance) Act, 1957 (58 of 1957), the Central Government being satisfied that it is necessary in the public interest so to do, hereby exempts excisable goods, specified in Annexure I to this notification (hereinafter referred to as the said goods), when brought in connection with -
(a) the manufacture and packaging of articles, or for production of packaging or job work for export of goods or services out of India into a hundred percent export oriented undertaking (hereinafter referred to as user industry); or
(b) .........
(c) ........
from the whole of,
(i) the duty of excise leviable thereon under section 3 of the (Central Excise Act, 1944) (1 of 1944), and
(ii) the additional duty of excise livable thereon under sub-section (1) of section 3 of the Additional duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), Subject to following conditions, namely : -
(a) the user industry;
(i) hundred percent export oriented undertaking has been approved by the Board of Approval for hundred percent export oriented undertaking (hereinafter referred to as the said Board) appointed by the Central Government in exercise of the powers conferred by section 14 of the Industries (Development and Regulation) Act, 1951 (65 of 1951) and the rules made under that Act;
(b) The user industry brings the excisable goods directly from the factory of manufacture of from the warehouse and uses them for purposes as specified in clauses (a) to (c) above solely for export;
(c) such user industry exports out of India hundred percent or such other percentage as may be fixed by the said Board or the said Committee, as the case may be, of articles manufactured wholly or partly from the said goods for the period stipulated by the said Board or the said Committee, as the case may be or such extended period as may be specified by the said Board or the said Committee, as the case may be;
(5) Notwithstanding any thing contained in this notification, the exemption contained herein shall also apply to the said goods used for the purposes of production, manufacture, processing or packaging of articles in a user industry and such articles (including rejects, waste scrap and remnants arising out of such production, manufacture, processing or packaging of such articles) even if not exported out of India, are allowed to be cleared outside the user industry under and in accordance with the Export-Import Policy and subject to such other limitations and conditions as may be specified in this behalf by the said Board or the said Committee, as the case may be on payment of appropriate duty of excise:
Provided that goods which have been repaired, reconditioned or re-engineered shall not be allowed to be cleared outside the user industry".
11. We find that the Commissioner's order is inter alia based upon the following findings:-
(a) that the appellants planned and purchased much higher capacity of DG sets as compared to their actual consumption requirements after obtaining permission of the Government for the sale.
(b) That 68% of the total generated electricity was sold during the period August, 1998 to November, 1999;
(c) that contract for purchase of DG sets was made in the year 1992 even before they obtained permission dated 31.12.93 from SIA ;
(d) That immediately after commissioning, of the captive Power Plant in May/June 1997, the Appellants started negotiating for the sale of surplus electricity to M/s. Bombay Dyeing to the extent of about 6 MW;
(e) That application was made for permission and recommendation for duty free import of Furnace oil, to the extent of 1500 MT per month, showing incorrect requirements of generation of electricity be used only for the purposes of captive consumption.
(f) That above 68% of the said 1500 MT Furnace Oil per month procured by way of wilful mis-statement/suppression of facts way for the purpose of generating excess electricity for DTA sale;
(g) That in spite of clear provisions of LOP, EXIM Policy, Licence under Section 5 and 65 of Customs Act, 1962, other provisions of Customs Act and Central Excise Act, conditions of the Customs and Central Excise exemption Notifications and specific wordings in the B-17 Bond executed, and Legal Agreement executed with Development Commissioner, SEEPZ to the extent that the EOU is to carry out export to 100% entire production except the sale allowed into DTA, the Appellants have intentionally mis-used the facility provided to the 100% EOU.
(h) That the appellants took permissions for sale of electricity from Maharashtra Govt. and MSEB, but did not apply for obtain permission from Development Commissioner, SEEPZ or Customs and C. X. Authorities.
(i) that in spite of Development Commissioner SEEPZ, making very clear in the permission letters for imports of spares for the D G Sets, by making the permission conditional, that the surplus electricity is not to b used for DTA sale, the appellants never approached the Development Commissioner or the Customs & C. Ex. Authorities, and continued to intentionally suppress the facts and misused the exemption.
(j) That the appellants failed to maintain the proper accounts of Furnace Oil, HSD, Lubricating Oil consumption, in statutory records under Annexure 118 and maintained only the accounts of 'Receipts' wrongly, under Annexure 12 with Account of Capital Goods& Spares and intentionally did to maintain the "Issue" accounts of Furnace Oil, HSD, Lubricating Oil.
(k) That, the Appellants continued their wilful misstatement and suppression of facts, by way of wrong information even in their fabricated letter dated 6.1.1999 and 10.2.99 to Range Supdt. & Assistant Commissioner and letter dated 1.12.1999 to Development Commissioner, that they are selling surplus electricity which would otherwise be wasted;
(l) that they arranged for obtaining a wrong, fabricated and manipulated Chartered Engineer's Certificate, in respect of Furnace Oil consumption on different loads of the D G Sets and submitted the same to give wrong consumption figures and to match their claim regarding Daily Statement (Power Plant). They intentionally and wrongly submitted about use of "duty paid" Furnace Oil without actually clarifying, that they meant" duty free indigenous" Furnace Oil.
(iii)That the ratio of CEGA judgment in the case of INDIAN CHROME CHRGE LTD. ( 2002-Taxindiaonline-41-Cestat-Kol ), is not strictly applicable t the present case, as in that case surplus power generated was transmitted to the grid for pooling, while in the present case generation of excess power was pre-planned, for selling into DTA;
(n) That clearance of electricity into DTA was without obtaining permission from Asstt. Commissioner of Customs and C. Ex:
(m) That the investigations have brought on record, that the generation of electricity, will always be equal to the load put on the DG Sets in the captive Power Plant;
(p) That it is clear, that the DGG Sets and the spare parts and specified imported quantity of Furnace Oil/Lubricating Oil were mis-utilised intentionally, in violation of the conditions of the said Notifications. Similarly in respect of Furnace Oil/HSD, indigenously procured duty free, in terms of Notn.No. 1/95-CE, dated 4.1.1995, part of the quantity was mis-utilised intentionally involution of the various conditions as above, along with the similar conditions of Notn. No. 1/95-CE dtd 4.1.1995.
(q) That the appellant failed to follow the provisions of the EXIM Policy 1997-2002, the provisions of LOP, along with its conditions, the provisions of the Licence issued under Section 58 & 65 of Customs Act, 1962 along with is conditions, provisions of B-17 executed by them provisions & conditions of exemption Notn. No. 13/81 Cus, dated 9.2.1981 as amended, Notn.No. 53/97-Cus, dated 3.6.1997 as amended, notn. No. 1/95-CE, dated 4.1.1995 as amended, provisions of Chapter IX of Customs Act, 1962, Chapter VA of the C.Ex. Rules, 1944 and Rule 173N of Chapter VIIA of the C.Ex. rules, 1944.
12. We find that all the above aspects have been considered by the tribunal in its judgment in the case of Indian Charges Chrome Ltd. Vs. Commr. Of Customs, Bhubaneswar - I ( 2002-Taxindiaonline-41-Cestat-Kol ) which has been upheld by the Supreme Court vide its order dt.28.3.2003. The issue involved in the above is identical to the present case. M/s Indian Charge Chrome Ltd. had set up captive power plant for power requirements of their two 100% EOUs one at Choudwary and other at Therubali (IMFA). IMFA was subsequently de-bonded and it become a DTA unit. the total requirement of power of both the units was about 80 MW and ICCL and ICCl had imported power plant of 108 MW capacity and claimed that the captive power plant never generated electricity exceeding 65 MW and that the sale of power arose due to unforeseen contingencies after import of the captive power, ICCl did not obtain prior permission room the Development commissioner and/or Central Excise Authorities prior to sale of electricity. Show Cause Notice dt.1.2.1995 was issued proposing denial of the benefit of Notification No. 13/81-Cus., in view of the sale of electricity to DTA units and proposing recovery of duty, which was confirmed by the Commissioner. The assessee's appeal to the Tribunal was allowed, holding interalia that there was no restrictive clause in Notification No. 13/81-Cus. hat imported goods should be used solely or exclusively for the purpose of manufacture of goods for export and therefore there is no violation of the conditions of the Notification and hence sale of surplus power into DTA does not disentitle the appellants from the benefit of exemption under the notification. the Tribunal relied upon various judgments and notifications interpreting the expression "only", "exclusively", "entirely" etc. as also the clarification in the Commerce Ministry, letter dt. 12.10.1999 and 16.11.1999. the relevant portion of the Tribunal's order is reproduced below:-
"2.1 M/s Indian Charge Chrome Ltd. (hereinafter refereed to as ICCL) and M/s Indian Metals & Ferror Alloys Ltd. (hereinafter referred to as IMFA) are two associated companies engaged in the manufacture of Ferro alloys in two of their Units operating as DPA Units. As per the facts on record, the appellants set up 100% Export Oriented Unit (E.O.U.) in short) for the manufacture of Charge Chrome and other ferro alloys. For the said purpose, a power generation pant of 108 M.W. capacity was imported and was cleared without payment of duty availing exemption under Notification No. 13/81-Cus., dated 9.2.1981 in terms of Hon'ble Supreme Court Court's Order dtd 5.6.1985. Import of Captive Power Generation Plant was approved by Government of India, Department of Industrial Development to meet the power requirements of two 100% E.O.s.-one to be set up by M/s Charge Chrome Ltd. and the other already set up by M/s IMFA. it seems that initially, a dispute as regards the importation of Captive Power Plant under the said Notification arose, which dispute traveled up to the Hon'ble Supreme Court and vide its Order dated 5.6.1985, the Hon'ble Supreme Court held that notification No. 13/81-Cus., dated 9.2.1981 is applicable to the importation of the Power Plant the appellants. Thereafter, a Miscellaneous Application field by the Revenue was dismissed by the Hon'ble Supreme court by observing that the same seeks review of the earlier Order of the Court. We find that although all these backgrounds have been discussed in the impugned Order by the Commissioner, but the same is not very relevant to the dispute involved in the present appeals and as such, the factual position relating to importation of Captive Power Plant by the appellants can be avoided.
2.2 The dispute the present appeal relates to the fulfillment of post-importation condition of notification No. 13/81-Cus. which, according to the Revenue, have been violated by the appellants. Admittedly, the Captive Power Plant was allowed import in terms of letter of intent dated 26.11.1984 of Government of India i.e. to meet the power requirement of the 100% E.O.Us and the exemption from payment of Customs Duty was allowed by the Revenue under Notification No. 13/81-Cus. in terms of Hon'ble Supreme Court's Order dated 5.6.85 the Power Plant was to be installed in the Bonded premises of M/s. ICCL and the power so generated was to be partly used there and the rest was to be supplied to M/s IMFA situated Therubali through Orissa State electricity Board Grid.
2.3 it is not the Revenue's case that the power so generated in the Captive Power Plant has not been used by M/s ICCL and M/s IMFA in the production of the goods which has been ultimately exported. But their objection seems to be that the surplus power so generated in the Captive Power Plant besides catering to the needs of the afore-mentioned EOUs has also been used by Orissa State Electricity Board for consumption/distribution in domestic tariff area, thus violating the condition of the Notification in question. One the above basis, show cause notices were issued to the various appellants which culminated in to the impugned Order passed by the Commissioner.
3.1 We find from the impugned order that no specific condition of Notification No. 13/81-Cus. has been referred to by the adjudicating authority, which according to him, has been violated. the entire case of the Revenue is based upon only one premise that the duty-free importation was allowed only for use in the exported products and any use towards the domestic tariff area have violated that condition thus making the appellants ineligible for the benefit of the Notification. for better appreciation of the Revenue's case, we reproduce below the relevant paragraph of the Commissioner's Order:-
3.2 Now, the question required to be decided is as to whether by selling the surplus power generated by the appellant, the Power Plant has resulted in violation of condition of Notification No. 13/81-Cus. it is seen that Notification in question grants exemption to specified goods when the same are imported for the purpose of manufacture of articles for export out of Indian by 100% E.O.U. it is not the Revenue's case that the Captive Power Plant imported by the appellants has not been used for generation of power by ICCL, which in turn was utilised for manufacture of Charge Chrome for export purposes. Evidently, electricity by its very nature has be consumed instantaneously and cannot be stored and as such, whatever power is generated, the same is consumed by the appellants for manufacture Charge Chrome and the rest is fed into the Grid for supply of electricity to IMFA. The electricity supplied by ICCL is appropriated by Orissa State Electricity Board and is pooled in the Grid System and the same cannot be segregated for the purpose of distribution to any particular consumer. As such, it is not possible to match the electricity produced at a given point of time with that of the electricity consumed t the same point of time. there will always be either surplus or deficit. the appellant's contention that in the absence of a restrictive clause in the notification that the imported goods will be solely or exclusively used for the purposes of manufacture of goods for export, no violation of any conditions of the Notification can be said to have been committed.
3.3 It is seen that the Tribunal in the case of C C , Mumbai Vs. Shefali Arts reported in 1999(35) RLT-644(CEGAT) has held that where the Notification made the exemption from duty conditionally upon the imported machine being "used for the purpose of export", where a part of the production was sold locally, the benefit of the exemption was available, since the words - "only", "exclusively" or "entirely" - were not used in the Notification. We find that Notification No. 13/81-Cus. nowhere uses the expression that the Power Plant in question should be exclusively used for the production of power to be used in the export of products. The appellants are right that when there is a surplus power and when the same was unable tube stored, the use of the same in the domestic tariff area should not disentitle them from the benefit of the Notification in Question.
3.5 The appellants have refereed to a number of other similar notifications, being Notification No. 173/79-Cus. dated 7.8.79, Notification No. 51/96-Cus. dated 23.7.96 and Notification No. 39/96-Cus. dated 23.7.96- wherein the word, 'exclusively', has been used in contradistinction to the Notification involved the present case. We also find the the Hon'ble Calcutta high Court in the case of Nayak Associates Vs UOI reported in 1991(55) ELT-189, after taking into account the various precedent decisions, has held that the benefit of exemption Notification No. 70/76 granting exemption to Mill Board could not be denied on the ground that the same has been manufactured out of mixed waste paper and jute stalk and paddy straw along with caustic soda on the ground that the Notification No. 70/76 did not use the expression - "only" or "exclusively" or "entirely".
By applying the ratio of the above decisions to the facts of the instant case and in view of the admitted use of power in the manufacture of the exported product, we are of the view that the use of surplus power in the domestic tariff area will not amount to contravention of the provisions of Notification No. 1/81-Cus. for arriving at the above conclusion. We also take account issued by the Ministry of Commerce as contained in their letter No. 1/1/98-EP dated 12.12.99 and as contained in their letter No. 2(1)/1-1/92/9088 dated 16.11.99 In para 3 of the said letter, it reads as follows:-
"3. Deptt. of Commerce has since finalised the procedure for sale/supply of surplus power in the DTA by 100% EOU/EPZ units and has advised this Office that pending requests of the unit are to be considered in the light of the guidelines and the proposal to be submitted for further consideration of the BOA."
Para 4 of the said letter permits 100% EOU to sale/supply surplus power in the DTA in keeping with the guidelines issued by the concerned power utility agency. In view of the foregoing, we hold that the sale of surplus power has not resulted any contravention of the conditions of the notification justifying denial of the benefit of the same and confiscation of the Power Plant in question. there is also no justification for imposition of personal penalties upon the appellants. The impugned Order is accordingly set aside and all the appeals are allowed with consequential relief to the appellants.
13. The Revenue challenged the said order before the Hon'ble Supreme Court in Civil Appeal D No. 1317/2002 contending interalia that power plant of higher capacity was deliberately set up, that 59% of the power generated was sold to DTA units, that at the time of duty free import of the captive power plant, ICCl did not disclose that they would be selling power to units of DTA, the it was conscious and pre-planned idea to sell excess electricity on the Commerce ministry's letters and no "permission" for sale of electricity was taken either from the Central Excise Authorities or from the development Commissioner. The Supreme Court vide is order Dt.28.3.2003 dismissed the Civil Appeal on merits as under:-
"We do no find any justifiable reason to condone the delay of 503 days, out of which 400 days' delay occurs in refilling the appeal. Notwithstanding the delay, we looked into the order under challenge. We find no reason to interfere with the order. The appeal is dismissed both on the ground of delay as well as on merits".
14. The dismissal of the Civil Appeal by the Supreme Court is deemed to be a dismissal on merits as held by the Apex Court in the case of V M Salgaocar & Bros. P. Ltd. Vs Commissioner of Income Tax [2000 (38) RLT 619(SC), Kunhay Ammed Vs State of Kerala, 2002-Taxindiaonline-50-SC-SLP, and the tribunal decision in the case of Franco Italian Co. Pvt. ltd. Vs commissioner of C. Ex. Mumbai-II [2000(120)ELT 792(Tribunal) LB] and S. Kumar's Ltd. Vs Commissioner of Central Excise, Indore [2003(153)ELT 217(Tri.-LB)].
15. Ld. Counsel for the Revenue urged us to hold that the ICCl decision does not cover the issue in dispute, in the light of the judgment of the Supreme Court in National Thermal Power Corporation Ltd. v State of MP [2002 (5) Supreme Court Cases 203]. However we note that the NTPC case arose under the Sales Tax Act, and the issue in dispute was whether electricity has immovable property or goods, and whether Sales Tax is payable on inter State Sale of Electricity generated by NTPC in Hyderabad and supplied to State electricity Board of Karnataka and Kerala, while the later ICL order of the Supreme Court, although of a Division Bench is directly on the issue in dispute in the present case namely interpretation of Notification No. 13/81 (predecessor of Notification No. 53/97-Cus) and therefore prevails over an earlier Constitution Bench Judgment a different issue further there is no conflict between the relevant finding in the NTPC case on the characteristics of electric energy and the Tribunal's order in the case of ICL, inasmuch as both have held that electricity generation or production coincides almost instantaneously with its consumption and it cannot be stored.
16. The contention that since electricity by its very nature cannot be stored the appellants deliberately imported higher capacity DG sets in order to generate more electricity and sell the sane in DTA quantum of electricity and sale in DTA is not only factually incorrect as the use of electricity in the manufacture of the export products namely various types of yarn and fulfillment of export obligation is not disputed, but also not relevant in the face of the finding of the commissioner that capital goods and inputs were not used "only for the manufacture of yarn". In other worlds it is no disputed that the imported capital goods and imported and indigenously procured inputs were used for the purpose of manufacture of the export product. It is not the finding of the Commissioner that the goods in question were not used for such purpose. Therefore Ld. Counsel attempt t argue that the goods in disputes were not used for the purpose of manufacture of export goods is contrary to record and cannot be accepted. If both the phases of the project envisaged by the appellants were completed, there would not have been any excess electricity and entire electricity generated would have been consumed in their 100% EOU itself, hence there was no deliberate attempt to import DG Sets of higher capacity than required in their unit. Further, we, notice that for 14 months the entire quantum of electricity generated was used only within the factory of the appellants. however due to exigencies beyond the control of the appellants such as fire, accident, continued labour unrest etc. (which is not disputed by the Revenue,) production of yarn had reduced considerably and consequently requirement of electricity also reduced, but the captive power plant had to be run at the optimum level, failing which wear and tear and excess fuel consumption would result. further the connected load requirement of he first phase itself was 13.55 MW as seen from the Chartered Engineer's Certificate (this certificate has been discountenanced by the Commissioner who has held it to be a procured document) which has not been established to be false or incorrect. We also note that at the time of negotiating purchase of DG Sets with the overseas supplier in 1992, making application to the Board of Approval/Secretariat of Industrial Approval and grant of permission by SIA in 1993 and import of DG sets in February 1995, there was no provision in law for sale of electricity, and it was for the first time in December 1995 that the Government of Maharashtra introduced a Policy permitting sale of electricity, and hence the appellants could not have pre-planned to import higher capacity DG Sets for generation of Excess electricity and sale thereof in DTA.
17. Further, Para 7 of Notification No. 53/97 provides that where the articles manufactured within a 100% EOU are not excisable, then customs duty is payable on imported goods used for the manufacture of such articles in an amount equal to customs duty livable on such articles as if imported a such. w.e.f. 18.5.2001 condition 7 provided for payment of customs duty equal in amount to that leviable on the inputs obtained under the notification and used for the purpose of manufacture of such articles, which would have been paid, but for the exemption under the notification, and the duty was payable at the time of clearance of such articles. It is significant to note that the 'articles' refereed to in paragraph 7 are the articles for the manufacture of which the 100% EOU has been set up, which in this case is yarn; therefore he question of payment of Customs duty does not arise when the non excisable item is electricity which is not the article referred to and covered by condition 7 of the notification.
18. Fuels/Consumables used for generation of electricity are also not chargeable o duty under Notification No. 13/81-Cus./53/97-Cus. & 1/95-CE a of each of the Notifications provides for payment of duty livable on the goods as are not proved to the satisfaction of the Assistant Commissioner of Customs/Central Excise to have been used in connection with the production of goods for export out of India and there is no dispute that Fuel/Consumable imported or indigenously procured by the appellants herein were so used. It is also pertinent to note that paragraph 6 of Notification No. 53/97-Cus was amended by Notification No. 65/99 dt.19.5.1999 so as to provide interalia for payment of duty and interest at the rate of 20% per annum. on the duty from the date of duty, free importation or procurement, till date of payment of duty, on raw materials, components spares and consumables (other than capital goods) imported or procured duty free, if the unit fails to achieve NFEP and Export Performance as specified in Appendix -I of he Exim policy within one year of importation or procurement of such goods ... and there is no dispute regarding achievement of NFEP and Export Performance by the appellants, and such achievement is admitted by the Commissioner in the impugned order.
19. We accordingly hold that the duty demands and penalties on the company are unsustainable in law and set aside the same. Penalties imposed upon the officers of the Company and the Chartered Engineer are also set aside for the same reasons and also for the reason that the adjudicating authority has not bought out the role played by any of them in the alleged evasion of duty.
20. In the light of the discussion, we hold that the duty demands and penalties are not sustainable in law and therefore set aside the impugned order and allow the appeals.
Sd/-
(C. Satapathy) Member (Technical) Sd/-
(Jyoti Balasundaram) Member (Judicial)
1. I have carefully gone through the order recorded above by my learned Sister. The dispute relates to duty demand on D.G. Sets, Spare parts of DG Sets and consumables, such a Furnace Oil/Lubricating Oil/HSD obtained duty free by the appellant EOU. in view of the earlier decision of the Tribunal in the case of ICCI (Supra) against which the civil appeal has been dismissed by the Apex Court on merits, I am of the opinion that no duty is demandable in respect of DG Sets and the Spare parts used in the DG Sets. Which have been used for generation of power for export production, though only patly, this is, however, subject, to the required fulfilment of usual conditions relating to the achievement of MFEP and export performance through value addition.
2. As regards the impugned consumables obtained duty free and used in generation of power which has not been used in export production but sold outside, I find hat the learned Counsel for Revenue has made out a clear case on the basis of the judgment of the Constitution Bench of the Apex Court in the case of the A P V/s NTPC - 2002(5) S C 2003 that generation of electricity is dependent upon the connected load. Applying the ratio of the said design the Construction bench, it becomes clear that only because the appellants sold electricity outside, they produced more electricity and consequently used more consumable for such production which was not otherwise required for the export production. hence, I am of the opinion that they are liable to pay duty on the quantity of such consumables which has been used in the production and sale of electricity outside. The quantity of consumables which have been used for production of power used in the export production has to be allowed duty free subject to fulfillment of usual conditions relating to the achievement of NFEP and export performance through value addition.
3 In view of the foregoing, I am of the opinion that the impugned order needs to be set aside and remanded back to the adjudicating Commissioner for fresh adjudication as it is necessary to verify as to whether the required NFEP and export performance through value addition has been achieved by the appellant unit and to separately quantify the duty liability in respect of the quantity of consumables used in the production and sale of electricity outside. I order accordingly.
Sd/-
(C. Satapathy) Member (Technical) The following difference of opinion is placed before the Hon'ble President for reference to Third Member:
Whether the appeals are required to be allowed, by setting aside the impugned order confirming duty on g sets and consumables and imposing penalties, as proposed by member (judicial) OR Whether the order is required to be remanded for verification of fulfillment of conditions relation to achievement of NFEP and export performance through value addition, subject to which demand on DG Sets and consumables used for production of power used in the export production, is tobe set aside and quantification of duty liability in respect of quantity consumables used in production and sale of electricity outside, as proposed by member (Technical).
ORDER NO. C-I/108 TO 113/WZB/04 in Continuation to order No. C-I/2518-2523/WZB/03 S.S. Sekhon, Member (Technical)
1. This matter was heard on 19.12.2003. the facts of the case have been brought out in the order of a Ld. Member (Judicial) and are not being repeated.
2. After considering the entailed order prepared by Ld. Member (Judicial) and Ld. Member (Technical) and considering the submissions made by the Ld. Senior counsel for the Revenue and the Ld. Counsel for the appellants, it is found:
a) It is an admitted and accepted fact, as it also appears from the following para of the impugned order where the Commissioner has come to a conclusion:
"I find that the captive power plant imported by the EOU is still lying in bond and being used for generation of power which is used for the manufacture of exportable articles. Moreover, there is not dispute that EOU has failed to discharge the export obligations assigned to them by the Development commissioner under these circumstances, I find that proposal in the impugned SCN to cancel the licence is not justified. Therefore, I am not inclined to accept the said proposal."
and the perusal of the SCN, leads to a conclusion that Exports required by an 100% EOU, as the appellants are, and the same not being met, was never an issue. Therefore an order proposing a remand for verification of fulfilment of conditions relating to achievement of NFEP and export performance would be traveling beyond the issues to be determined in this case.
b) From the records, as available in the file it appears that on 27.08.2003 a letter was addressed by Additional Commissioner of Central Excise to Registrar(CESTAT with copies to the two Ld. members enclosing the order of the Development Commissioner SEEPZ (Special Economic Zone) wherein that authority had questioned the NFEPs and the export Performance of the assessee EOU. Since NFEPs or the Export Performance of the Assessee EOU. Since NEFPs or the Export Performance was never an issue, in these proceedings the production of this document and reliance thereto by the Addl. commissioner of Central Excise, who had addressed this letter, for the information of the Registrar with copies to the two Ld. Member for information, has to be ignored. Once the exports are admitted to have been met, verification of the fulfilment of conditions relating to achievements of NFEP through value addition which was never the case of Revenue even at the SCN stage is not called for.
c) From the two orders, of the Ld. members, it is found that Ld. member (judicial) has concluded that the exemption was available and no duty could be demanded therefore the order should be set aside and appeals allowed while Ld. member (Technical) as regards DG Sets and spare parts used in there DG Sets found as follows.
"...I am of the opinion that no duty is demandable in respect of DG Sets and spare parts used in the DG Sets which have been used for generation of power for export production, through only partly. This is, however, subject to the required fulfillment of usual conditions relating to the achievement of NFEP and export performance through value addition."
When Export Performance and NFEP are not the issues involved this case, as found herein, and also held by Ld. Member (Judicial) that there is no dispute on this issue, as achievement was admitted by the Commissioner for the impugned order, there can be no question of the re-determination of the duty demands on DG Set and Spare Parts as arrived a by Ld. Member (Technical). No difference of opinion, in the findings of the two Ld. members are regards DG Set and Spare Parts exist except for found the NFEPs and Export Performance checks, which was never an issue. On that ground, new case cannot be built at this stage. the question of partial use, if any, of the DG Set and spares would be reading into the Notification words and stipulations like 'use exclusively for Export production'. that cannot be done. This aspect has been deal with by Ld. Member (Judicial) in the order relying upon binding decisions mentioned therein and has to be approved . The eligibility of notification to DG Sets and Spares thereof if to be upheld in the facts of the case.
d) The order of Ld. Member (Technical) appears not to have considered the application of the decision and its acceptance on merits by the Supreme Court , is the Tribunal decision of Indian Charge Chrome Ltd. ( 2002-Taxindiaonline-41-Cestat-Kol ). The reliance on the Constitution Bench in the case of the A.P. Vs NTPC {2002(5) SCC 2003} by Ld. member (Technical) as follows:
"2.. As regards the impugned consumables obtained duty free and used in generation of power which has not been used in export production but sold outside, I find that the learned Counsel for Revenue has made out a clear case on the basis of the judgment of the constitution Bench of the Apex Court in the case of the A.P. v/s N.T.P.C. - 2002 (5) S.C.C. 2003 that generation of electricity is dependent upon the connected load. Applying the ratio of the said decision of the Constitution Bench, it becomes clear that only because the appellants sold electricity outside, they produced more electricity and consequently used more consumables for such production which was not otherwise required for the export production. Hence, I am of the opinion that they are liable to pay duty on the quantity of such consumables which has been used in the production has to be allowed duty free subject to fulfilment of usual conditions relating to the achievement of N.F.E.P and export performance through value addition."
does not bring out how it can be arrived at that "only because appellants sold electricity etc, they produced more electricity and consequently use more consumables."
e) It is also found that the Commissioner has also came to a conclusion, that generation of electricity will always be equal to the load put on the DG sets in the Captive Power Plants and this has resulted in part of the quantity of consumables to have been utilized in the electricity which was sold. However, these findings and the charges relating thereto in the SCN on this aspect do not take into consideration the following submission as made by the appellant, which are relevant.
"(i) The appellants further say that the connected load of the Machinery in the mills has been verified by the Bond Officer. The connected load is very near to the capacity of DG sets. Due to bad market conditions and change in demand pattern in international market, the appellants were unable to utilise its entire plant, therefore, the power consumption came down and there was surplus power available which was sold. It is not the case, as alleged by the Department, that the requirement of power was not thereof and highly over capacity power plant was imported. The L. Commissioner did not even verify the above facts. These facts can also be verified even now, as the Machines are imported and installed in the plant which is bonded premises and still available for inspection. An Electrical Engineers can know from the electric motors, the connected load, instead of recording the plain findings that the connected load statement given by the appellants was false.
(ii) The appellants further say that the Ld. Commissioner has failed to appreciated the fact that the DG sets have given best efficiency of about 90 to 95% load factor. Hence, if the surplus power was not sold can the DG sets were run at load of 55% to 60% the fuel consumption per unit would have been higher. Moreover, the utilities i.e. water pump lube oil. circulation pump, centrifuge, cooling tower, etc. would in any case had to run whether the DG sets run at 60% or 95%. Further, if the excess power had not been wheeled to MSEB grid, the yarn plant load would have fluctuated very frequently, which again would have increased the power variation, fuel consumption at one hand and would have affected the life of the power plant. Hence, due to above factors, the appellants had used only marginal fuel extra for generating this surplus power which was sold to M/s. Bombay Dyeing. The lube oil and spare consumption depends on number of hours the DG sets run and not on how much load. Hence, in any event whether the plant runs at lower or higher capacity, the lube oil and spares consumption would be the same. The Id. Commissioner failed to appreciated the above fats and has passed the impugned order confirming duty on the lube oil and spare parts also. The above facts can be noticed from the fact that during the period June 1997 to July 1998, when these was no sale of power in DTA and power plant was entirely used for yarn production, the lube oil and spare parts consumption were not less. The Ld. Commissioner would have taken into account the above facts while passing the impugned order.
(iii) The appellant further say that how much would be the consumption of furnace oil for DG sets of specified quantity would be covered by technical parameters. The appellants had installed total 3 DG sets (i.e. 2 DG sets of Wartsila diesel make and one SKODA), with the capacity of 15.68 MW. with the said capacity, based on the technical parameters, specified quantum of inputs consumption would be there and hence, Dept's allegation that they have mis-led the consumption of furnace oil by obtaining fabricated documents to show excess consumption is incorrect.
(v) Without prejudice to the above, the appellants further say that the consumption for furnace oil, a main input i.e. fuel, required for generating electricity is well within the permissible limit as per Standard Input-Output Norms (SION) fixed by DGFT through Public Notice No. 24 (RE-2001)/1997-2002 dated 2-7-2001 i.e. 1.2 liter of furnace oil per each kg of year produced. To evidence the above, illustratively, the appellants enclose, marked as EXHIBIT - "Y", statements showing production of yarn and purchase/consumption of furnace oil during the period June 1997 to July 1998 and August 2000 to Sept. 2001, showing average consumption of 1.04 liter and 0.90 liter, respectively per each kg. of yarn produced."
In this connection the Commissioner has only found to following :
".. I find that the investigation brought on record that the generation of electricity will always be equal to the load put on the DG sets in the Captive Power Plant. In other words M/s. Hanil Era Textiles Ltd. imported duty free and utilised the excess quantity of Furnace oil (which was not required for the production of electricity necessary for the purpose of captive use, in production of yarn) for the generation of excess electricity by putting the MSEB load on the DG sets in order to generate excess electricity and to sell the same through MSEB, to M/s Bombay Dyeing in terms of the said tripartite agreement. By this they also mis-used the 3 DG sets (2WArtsila make and 1 SKODA make), which are imported duty free in terms of the conditions of the LOP, the Licence, the LUT, the B-17 Bond, the conditions of the Notification No. 13/81 CUS dated 09.02.1981 amended and 53-97 Cus dated 03.06.1997 only for the purposes of production of Yarn (i.e. for production of electricity to the extent of required and utilised for the production of Yarn). The EOU had also imported duty free spare parts and misused the same in the 3 DG sets (2 Wartsila make and 1 SKODA make). By this it is clear that the DG sets and the spare parts and specific imported quantity of Furnace oil/Lubricating oil all were mis-utilised intentionally in violations of the conditions of the said Notification. Similarly in respect of Furnace oil/HSD indigenously produced duty free, in terms of Notification No. 1/95-C. Ex dated 04.01.1995 part of the quantity were mis-utilised intentionally in violations of the various conditions as above, along with the similar conditions of Notification No. 1/95 C. Ex. dated 04.01.1995."
This finding of Commissioner, therefore, in light of the submissions of the appellants could be upheld, only it it was based on technical data and material. The findings as extracted herein, exhibit that the same is not based on any such material .
f) The allegations that the excess fuel, lubricating oil etc. were used in the generation of excess electricity, which was to be and eventually sold cannot be established, when the appellants have very strenuously pleaded and produced material, to the effect that their consumption of 'fuel' is within the expected input-output norms as fixed for manufacture of 'yarn', during the period, which the assessee EOU was required to comply with in relation to the product for Export. They have also produced technical literature to exhibit the need to work the DG sets in question, at an optimum level of performance to save those Capital goods DG sets from being spoiled and damaged. The appellants have also brought on record certain abnormal situations in the form of strickes, etc., which resulted in the disruption of their manufacturing programme. The Ld. Senior Counsel for Revenue has pointed out in the decision of NTPC case in [2002 (5) SCC 2003 para 20 and 21, to submit that consumption and sale of Electricity takes place almost simultaneously to its production and that property to Electricity as goods were of immense relevance and cannot be ignored and have to be considered. These submissions and reliance on this decision cannot be found fault with. However, it is found that the very fact the electricity cannot be stored and it has to be consumed, as soon as it is produced, and that the appellants in this case have demonstrated that there was a need to produce the quantum of Electricity in question to maintain the DG sets functioning at effective levels, supported by technical Literature, as also the alleged excess was attributable to abnormal factors of stricke, etc. effecting consumption; yet the fuel consumptions for the DG sets were still within the stipulated and presented input-output norms, for manufacture of yarn, the Export product in question that would go establish that the alleged surplus Electricity, in any, generated was not to any evil design, but was the result of technological requirements consequences of goods machine maintenance management practice. There was no other alternative but of disposal of the load by wheeling it through MSEB since the same could not be stored; There is no reason to come to a finding that excess consumption of consumables ever took place by the working of the DG sets or/and that DG sets and Spares thereof were only partially used. These findings, confirm the reliance to be placed on the case of M/s. Indian Charge Chrome Ltd. ( 2002-Taxindiaonline-41-Cestat-Kol ) in the facts of this case.
f) The findings as arrived at by the Ld. Member (Judicial) as regard the interpretation of the Notification in this case and reliance placed on the Tribunal's decision in the case of Indian Charge Chrome Ltd. ( 2002-Taxindiaonline-41-Cestat-Kol ) which has been upheld on merits by the Hon'ble Supreme Court and following the same it has to beheld that the eligibility of the exemption Notification is covered in favour of the assessee even in this case.
g) The plea of the appellants that electricity manufactured in the EOU is not covered under the Central Excise Tariff is well founded. When the goods are not covered under the Central Excise Tariff there can be no levy on the removal of such goods from the EOU. Especially when it is found that there is no contravention of the Notification under which the consumables were received. No excess consumables are found to have been utilised in this case to call for denial of the said Notification and consequent duty demand.
3. In view of the findings arrived herein above, I would concur with the findings of Ld. ember (judicial) and answer this reference accordingly. The matter any now be placed before the original Bench for orders.
Majority Order The impugned order is set aside and the appeals are allowed.