Custom, Excise & Service Tax Tribunal
Jeevan Diesels & Electricals Ltd.-Eou ... vs Commissioner Of Central Excise, ... on 6 July, 2017
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH CHENNAI Appeal No. E/40322/2015 Application No.E/COD/40241/2017 & Appeal No.E/40898/2017 [Arising out of Order-in-Original No.48/2014-(C) dt. 31.07.2014 passed by the Commissioner of Central Excise, Puducherry] Jeevan Diesels & Electricals Ltd.-EOU Puducherry Appellant Jeevan Diesels & Electricals Ltd.- DTA Puducherry Versus Commissioner of Central Excise, Puducherry Respondent
Appearance:
Shri K.S. Jain, Managing Director For the Appellant Shri B. Balamurugan, AC (AR) For the Respondent CORAM :
Honble Ms. Sulekha Beevi C.S. Member (Judicial) Honble Shri Madhu Mohan Damodhar, Member (Technical) Date of hearing / decision : 06.07.2017 FINAL ORDER No. 41176-41177 / 2017 Per Bench As both the appeals are interlinked and relate to the identical dispute, they are taken up for common disposal.
2. The facts of the case are that M/s.Jeevan Diesel and Electricals Ltd., a 100% Export Oriented Unit (hereinafter referred to as JDL-EOU) (appellant in Appeal No.E/40322/2015) are registered for manufacture of Diesel Generating sets and parts of DG sets. They procure inputs both by way of imports and domestically without payment of duty. Appellants have also a DTA unit adjacent to the EOU (hereinafter it is referred to as JDL-DTA). Pursuant to a visit by the officers of the department on 09.04.2013, the following facts emerged :
(i) JDL-EOU have no separate power connection. They draw power from JDL-DTA.
(ii) No capital goods were installed in JDL-EOU except one overhead crane. Only 81 nos. of 'Perkins' make Engines and storage racks were found available apart from which there was no stock in JDL-EOU.
3. On visit to the JDL-DTA unit, it emerged that raw material and finished goods pertaining to JDL-EOU were found in JDL-DTA unit. It therefore appeared to the department that entire manufacturing activity of both the units was carried out only at JDL-DTA. A show cause notice dt. 03.06.2013 was issued to JDL-EOU alleging that they had clandestinely removed the materials to JDL-DTA without any approval from concerned authorities and misused the EOU scheme by such removal of raw materials. Revenue loss to a exchequer to the tune of Rs.1,40,11,670/- was alleged and the same was proposed for recovery along with appropriate interest. Detained goods were proposed for confiscation under Rule 25 of the Central Excise Rules, 2002. Penalties were proposed under Rule 25 of CER 2002 and Section 11AC of Central Excise Act, 1944 on JDL-EOU. Further, penalty under Rule 26 and Section 9 (1) (bb) of the Central Excise Act was proposed on JDL-DTA for wrongful acquisition of possession of excisable goods in their premises. However, SCN was not issued to JDL-DTA. In adjudication, Commissioner vide impugned order dt. 31.07.2014 ordered release of three numbers of 400 KVA alternators valued at Rs.8,15,952/- to JDL-DTA, however, confirming other proposals of demand of differential duty etc. proposed in the SCN. Detained goods valued at Rs.3,01,98,135/- were confiscated and option to redeem the same was given on payment of fine of Rs.45 lakhs. Penalty of Rs.15 lakhs was imposed on JDL-EOU under Rule 25 and penalty of Rs.1 lakh imposed on JDL-DTA under Rule 26 ibid. Aggrieved, appellants have filed this appeal.
4. Today, when the matter came up for hearing, on behalf of the appellant, Shri K.S. Jain, their Managing Director, in the first place, draws our attention to MA No.E/COD/40241/2017 seeking condonation of delay in respect of Appeal E/40898/2017 filed by them. He submitted that there is a delay of 900 days in filing the appeal in respect of JDL-DTA. The reason for the delay was that they were under the impression that a common appeal would suffice for both JDL-DTA and JDL-EOU. Once they realized that there is a need for filing separate appeal for JDL-DTA, they have done so. However, in the process, this delay has occurred and sought condonation of the same.
5. We find that the reasons for delay are genuine and are acceptable and it has resulted only due to misconceived procedural lapse on the part of appellant. Hence, the delay is condoned. MA (COD) is allowed. Both the appeals are taken up for disposal.
6. Shri K.S. Jain submits that consequent to Tsunami which struck Pondicherry, some portion of their EOU unit had blown up and badly damaged. Therefore, to safeguard the materials from damage, they had shifted some of the materials from EOU to their adjacent DTA unit for safe custody. Their shed was not repaired immediately since insurance claim was in dispute. In the circumstances, the allegation of clandestine removal is not correct since all the materials that were removed, have been found and accounted for in the DTA unit. No Revenue loss has been caused to Government. For these reasons, he prayed that the impugned order may be set aside.
7. On the other hand, Shri B. Balamurugan, Ld. A.R argued that JDL-EOU unit did not have any capital goods to facilitate manufacture. No permission has been taken for removal of the goods from EOU unit to DTA unit. Hence demand of duty liability thereon is fully justified.
8. In response, Shri K.S. Jain submits that they had procured bought out items domestically or by way of import in their EOU unit which was only subjected to minor assembly job subsequently. Hence, the need for requirement for capital goods did not arise.
9. Heard both sides and have gone through the facts.
10. Discernably, SCN is issued only on the allegation of clandestine removal of raw materials from JDL-EOU to JDL-DTA, without any approval from concerned authorities. There is no allegation that the goods so removed have been found thereafter diverted for sale or were otherwise used by the DTA unit to manufacture their own goods. In fact, from the SCN itself, it clearly emerges that the goods so found removed from JDL-EOU were very much located and detained in JDL-DTA unit. In the circumstances, taking note of the fact that both the units are adjacent to each other under a common management, the averment that removal of goods had only been necessitated due to destruction caused in one unit due to Tsunami, should not be summarily rejected.
11. Viewed in this light, the only infraction that comes up is that appellants have removed the goods without any prior permission or for that matter, any post-facto permission. But given the facts that the goods removed to the adjacent unit have been found available, even such infraction would only have to be considered as a procedural lapse which should not be given the colour of clandestine removal with intent of evading duty. When the impugned goods not found at the EOU unit have, however, been subsequently found in their adjacent DTA unit, in our opinion, there cannot be any demand of customs duty on such goods. Accordingly, the demand of Rs.1,40,11,670/- along with interest liability thereon will not sustain and will have to be set aside, which we hereby do.
12. Imposition of equal penalty under Section 11AC ibid on JDL-EOU and confiscation of the detained goods valued at Rs.3,01,98,135/- will also, in consequence, not sustain. Penalty of Rs.15 lakhs imposed under Rule 25 of CER on JDL-EOU is therefore, in our view, unnecessary and excessive. As discussed herein above, what that has happened is a procedural violation for which, in our considered opinion, imposition of such huge penalty is an overkill. We therefore hold that interest of justice for such a procedural lapse would be best served by limiting the penalty to Rs.25,000/- (Rupees twenty five thousand only) and we order accordingly.
13. For the reasons already discussed above, we also hold that there is no justification for imposition of penalty of Rs.1 lakh on JDL-DTA under Rule 26 ibid since the adjacent unit was only used to store the goods temporarily. It is also pertinent to note that JDL-DTA has not been issued a SCN. This penalty against JDL-DTA is therefore set aside.
In the result we order as follows :
(1) Appeal E/40898/2016 is allowed.
(2) Appeal E/40322/2015 is substantially allowed except for reduction of penalty under Rule 25 ibid, however limiting it only to Rs.25,000/- (Rupees twenty five thousand only).
(Operative part of the order was pronounced in court) (Madhu Mohan Damodhar) (Sulekha Beevi C.S) Member (Technical) Member (Judicial) gs 6 Appeal No.E/COD/40214/2017, E/40898/2017 & E/40322/2015