Custom, Excise & Service Tax Tribunal
Yes vs Represented By : Shri J.C. Patel, Shri ... on 13 September, 2012
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad Appeal No. : C/485 & 486 of 2011 Arising out of : OIO No. 63-64/Commissioner/2011 dated 25.08.2011 Passed by : Commissioner of Central Excise Rajkot For approval and signature : Hon'ble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. B.S.V. Murthy, Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3 Whether their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes Appellant (s) : M/s. Reliance Industries Limited Represented by : Shri J.C. Patel, Shri Vipin Jain and Ms. Shilpa Balani, Advocates Respondent (s) : Commissioner of Customs, Rajkot
Represented by : Shri P.N. Sarvaiya, A.R. CORAM :
Hon'ble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. B.S.V. Murthy, Member (Technical) Date of Hearing/ Decision : 13.09.2012 ORDER No. _____________ /WZB/AHD/2012 Per : Mr. M.V. Ravindran;
These appeals are directed against the order in original No. 63-64/Commissioner/2011 dated 25.08.2011. Since both the appeals are directed against very same order in original, they are being disposed of by a common order.
2. The relevant facts that arise for consideration are that appellant herein being 100% EOU during the material period i.e. 01.10.2007 to 23.10.2007 had letter of permission from the Divisional Commissioner, Kandla Special Economic Zone, for manufacture and other operations in bonded warehouse, as per the provisions of Customs Act, 1962. The appellants were also registered with the jurisdictional Central Excise authorities. The appellant, as per letter of permission was licensed to manufacture Refined Petroleum Products, Liquids of Gaseous Fuels, Illuminating Oils or Grease or other products obtained from crude petroleum of their fractionation , production, liquefaction, petrochemical products and Polypropylene, Sulphur unrefined (by-product) and Petroleum Coke (residue). The appellant executed various bonds as required under the Customs Act for financing their unit as EOU and procured raw materials required for manufacturing of final products, as per the procurement certificates given to them by the lower authorities. Appellant procured various inputs without payment of Customs duty and Central Excise duty, as per the provisions of Notification No. 52/2003-Cus dated 31.03.2003 and Notification No. 22/2003-CE dated 01.3.2003 and availed the benefit of full exemption under the Notification No. 21/2002-Cus dated 01.3.2002 and Notification No. 4/2006-CE dated 01.3.2006 for want of their final product i.e. Liquefied Petroleum Gas (Domestic) (hereinafter referred to as LGP). The lower authorities were of the view that the appellant having cleared LPG in the Domestic Tariff Area (DTA) without payment of duty, after having availed the benefit of Notification No. 21/2002-Cus and Notification No. 4/2006-Central Excise were liable to pay duties forgone for the inputs which were used for manufacture of such LPG. The appellants were directed to show cause as to why the amounts paid by them as customs duty and Central Excise duty should not be appropriated and penalties not to be imposed under the provisions of Customs Act, 1962 as well as Central Excise Act, 1944. The appellant contested the show cause notice before the adjudicating authority on merits of the case as well as on limitation. They filed a detailed reply and also sought for personal hearing. The adjudicating authority, after following the due process of law, passed following order:-
A. Show cause notice No. V.JMR/AR-IV/Commr/13/2008 dt. 08.4.08
(i) I confirm the demand for Customs duty of Rs. 179,90,47,660/- (Rupees one hundred seventy nine crore ninety lakh forty seven thousand six hundred sixty only) against M/s. Reliance Industries Limited (100% EOU), Refinery Division, Meghpar/Padana, Dignvijaygram, District- Jamnagar, under Section 28 of Customs Act, 1962. Further I appropriate the amount of Custom duty of Rs. 179,90,47,660/- paid by the said M/s. Reliance Industries Limited vide TR-6 challan dated 15.10.2007.
(ii) I confirm the demand of interest as due and payable under Section 28AB of Customs Act, 1962 against the said M/s. Reliance Industries Limited, Jamnagar on the Custom duty confirmed at Sl. No. (i) above. Further I appropriate the interest amount of Rs. 5,84,69,049/- paid by the said M/s. Reliance Industries Limited vide TR.6 challan dated 15.10.2007.
(iii) I impose penalty of Rs. 179,90,47,660/- (Rupees one hundred seventy nine crore ninety lakh forty seven thousand six hundred sixty only) against the said M/s. reliance Industries Limited., Jamnagar, under Section 114A of Customs Act, 1962. However, in terms of the proviso to Section 114A of the Central Excise Act, 1944, if the duty as determined above and the interest payable thereon under Section 28AB is paid by the said M/s. Reliance Industries Limited within thirty days from the dated of communication of this order, the amount of penalty liable to be paid under this Section shall be twenty five percent of the penalty so determined. In terms of the second proviso to Section 114A of the Customs Act, 1962, the benefit of such reduced penalty under the first proviso shall be available only if the amount of penalty is also paid by the said M/s. Reliance Industries Limited within the period of thirty days referred to above.
(iv) I confirm the demand of Central Excise duty of Rs. 19,08,281/- (Rupees nineteen lakh eight thousand two hundred eighty one only) against the said M/s. Reliance Industries Limited, Jamnagar, under Section 11A of the Central Excise Act, 1944. Further, I appropriate the amount of Central Excise duty of Rs. 19,08,281/- paid by the said M/s. Reliance Industries Limited vide TR. 6 challan dated 15.10.2007.
(v) I confirm the demand for interest as due and payable under Section 11AB of Central Excise Act, 1944 against the said M/s. Reliance Industries Limited, Jamnagar on the Central Excise duty confirmed at Sl. No. (iv) above. Further, I appropriate the interest amount of Rs. 62,019/- paid by the said M/s. Reliance Industries Limited vide TR-6 challan dated 15.10.2007.
(vi) I impose penalty of Rs. 19,08,281/- (Rupees nineteen lakh eight thousand two hundred eighty one only) against the said M/s. Reliance Industries Limited, Jamnagar, under Section 11AC of the Central Excise Act, 1944. However, in terms of the proviso to Section 11AC of Central Excise Act, 1944, if the duty as determined above and the interest payable thereon under Section 11AB is paid by the said M/s. Reliance Industries Limited, within thirty days from the date of communication of this order, the amount of penalty liable to be paid under this Section shall be twenty five percent of the penalty so determined. In terms of the second proviso to Section 11AC of the Central Excise Act, 1944, the benefit of such reduced penalty under the first proviso shall be available only if the amount of penalty is also paid by the said M/s. Reliance Industries Limited, within the period of thirty days referred to above.
B. Show cause notice No. V.JMR/AR-IV/Commr/15/2008 dt. 15.4.08
(i) I confirm the demand for Custom duty of Rs. 21,69,67,274/- (Rupees twenty one crore sixty nine lakh sixty seven thousand two hundred seventy four only) against M/s. Reliance Industries Limited (100% EOU), Refinery Division, Meghpar/Padana, Dignvijaygram, District- Jamnagar, under Section 28 of Customs Act, 1962. Further I appropriate the amount of customs duty of Rs. 21,69,67,274/- paid by the said M/s. Reliance Industries Limited vide TR-6 challan dated 19.10.2007.
(ii) I confirm the demand for custom duty of Rs. 3,00,02,805/- (Rupees three crore two thousand eight hundred and five only) that was not paid/short paid on 19.10.2007/ 22.10.2007 and 23.10.2007 at the time of clearance, under Section 28 of Customs Act, 1962. I further appropriate of this amount that was paid by the said M/s. reliance Industries Limited subsequently, as noted in the show cause notice.
(iii) I confirm the demand for interest, as due and payable under Section 28AB of Customs Act, 1962 against the said M/s. reliance Industries Limited, Jamnagar on the Custom duty confirmed at Sl. No. B (i) & (ii) above. Further, I appropriate the interest amount of Rs. 7,70,648/- paid by the said M/s. Reliance Industries Limited vide TR-6 challan dated 19.10.2007.
(iv) I impose penalty of Rs. 24,69,70,079/- (Rupees twenty four crore sixty nine lakh seventy thousand seventy nine only) against the said M/s. Reliance Industries, Jamnagar under Section 114A of Customs Act, 1962. However, in terms of the proviso to Section 114A of the Central Excise Act, 1944, if the duty as determined above and the interest payable thereon under Section 28AB is paid by the said M/s. Reliance Industries Limited within thirty days from the date of communication of this order, the amount of penalty liable to be paid under this Section shall be twenty five percent of the penalty so determined. In terms of the second proviso to Section 114A of the Customs Act, 1962, the benefit of such reduced penalty under the first proviso shall be available only if the amount of penalty is also paid by the said M/s. Reliance Industries Limited, within the period of thirty days referred to above.
(v) I confirm the demand for Central Excise duty of Rs. 3,43,909/- (Rupees three lakh forty three thousand nine hundred and nine only) against the said M/s. Reliance Industries Limited, Jamnagar under Section 11A of the Central Excise Act, 1944. Further, I appropriate the amount of Central Excise duty of Rs. 3,43,909/- paid by the said M/s. Reliance Industries Limited vide TR-6 challan dated 19.10.2007.
(vi) I confirm the demand of interest, as due and payable under Section 11AB of Central Excise Act, 1944 against the said M/s. Reliance Industries Limited, Jamnagar on the Central Excise duty confirmed at Sl. No. B (v) above. Further, I appropriate the interest amount of Rs. 1,222/- paid by M/s. Reliance Industries Limited vide TR-6 challan dated 19.10.2007.
(vii) I impose penalty of Rs. 3,43,909/- (Rupees three lakh forty three thousand nine hundred and nine only) against the said M/s. Reliance Industries Limited, under Section 11AC of Central Excise Act, 1944. However, in terms of the proviso to Section 11AC of the Central Excise Act, 1944, if the duty as determined above and the interest payable thereon under section 11AB is paid by the M/s. Reliance Industries Limited within 30 days from the date of communication of this order, the amount of penalty liable to be paid under this Section shall be twenty five percent of the penalty so determined. In terms of the second proviso to Section 11AC of the Central Excise Act, 1944, the benefit of such reduced penalty under the first proviso shall be available only if the amount of penalty is also paid by the said M/s. Reliance Industries Limited, within the period of thirty days referred to above.
3. Aggrieved by the above said order, appellant is before us in these appeals. Learned counsel would contest the issue as under:-
(a) It is his submission that prior to 16.4.2007 their unit was a Domestic Tariff Unit and with effect from 16.4.2007 they converted into 100% EOU and on conversion into 100%EOU, they started procuring various imported inputs by availing the benefits that can be granted to an EOU under the Notification No. 52/2003-Cus and Notification No. 22/2003-CE and procured duty free inputs under the valid procurement certificate issued by the department, by Superintendent Central Excise having jurisdiction over the 100% EOU.
(b) It is his submission that one of the products manufactured by them indigenously as well as imported and duty forgone is Liquefied Petroleum Gas (LPG), and as per serial No. 89, export of LPG, required no objection certificate from the Ministry of Petroleum and Natural Gas and for want of which, they were unable to export LPG, although being 100% EOU, desirous of exporting, but appellant were not in a position to export the LPG and could not do so. It is his further submission that they had no option but to necessarily clear such LPG manufactured to various Public Sector Units or to supply to household domestic consumers and also for supplies under PDS scheme.
(c) It is his submission that under paragraph 6.9 (c) of the Foreign Trade Policy, the supplies of goods to such organisation who are entitled to import the same with duty exemption, were eligible for consideration of fulfilment positive net foreign exchange (NFE), as import of the LPG for supply under subsidy scheme is exempted from duty as per Notification No. 21/2002-Cus and general exemption Notification No. 4/2006-CE, supplies of LPG made by them to specified PSUs/ organised sectors, notified under the said subsidy scheme were eligible to be counted for NFE.
(d) It is his submission that although supplies of LPG to PSUs are otherwise were eligible for calculations of NFE, same did not have the status of deemed export under the Foreign Trade Policy and are considered as supplies under Domestic Tariff Area, they took up the matter with the Government, made representations for examining their proposal to grant status of deemed export to supplies of LPG made to PSUs under subsidy scheme, but the said proposal did not materialise despite there being express provisions in the Foreign Trade Policy for counting such clearances towards calculation of NFE.
(e) It is his submission, that as imports were eligible for customs duty under Notification No. 21/2002-Cus and LPG locally manufactured for supply under the said subsidy scheme was also exempt from Central Excise duty under Notification No. 4/2006, hence they cleared the said LPG into Domestic Tariff Area under nil rate of duty and duly filed with the department monthly returns in form ERE-2, showing all the clearances at Nil rate of duty. Learned counsel would take us through the copies of ERE-1 filed during the relevant period and entries therein to show that they had clearly indicated that LPG was cleared from the refinery to the Domestic Tariff Area under Nil rate of duty, the said entry s a random specimen, according to him is annexed at page No. 66 of the appeal memorandum in the monthly returns for the month of April 2007. He also submits that the same entry will be found in the other returns also.
(f) It is his submission that on considering that LPG under subsidy scheme was exempted from customs duty as well as Central Excise duty, no exemption in respect of inputs utilised for the purpose of manufacture of such finished goods shall be available to them, they on their own took up the matter for grant of status of deemed export with the authorities which was not forth coming despite six months have elapsed, they by the letter dated 15.10.2007 paid up the entire duty foregone by them either as input in form of customs duty or Central Excise duty, along with interest and informed the department. It is also his further submission that in the said letter it was specifically pointed out that the said duty and interest is being paid under the provisions of Section 28 (2B) of the Customs Act, 1962 before the service of notice by the department and hence they need not be visited with penalty. It is also his submission that this provision i.e. Section 28 (2B) of the Customs Act, 1962 is Para-materia with the provisions of Section 11A (2B) of the Central Excise Act, 1944 and hence penalties imposed by the lower authorities under these provisions are incorrect.
(g) It is his submission that department was fully aware of the situation as their letter dated 15.10.2007 was acknowledged and there was no change in duty figures worked out by the appellant and is same amount of duty, which was reversed by the appellant along with interest, was confirmed by the adjudicating authority and the amount paid by them was appropriated. The adjudicating authority was erred in not upholding their contention that the decision of the Larger Bench of the Tribunal in the case of Paras Fab International 2010 (256) ELT 556 (Tri. LB) would squarely apply to this case inasmuch as it is noted that appellant had utilised the warehoused goods for the manufacture in EOU. It is his submission that ratio laid down by the Larger Bench of Honble Tribunal in Paras Fab International case would clearly indicate that the appellant need not have paid any customs duty or CVD as the goods were not cleared by ex-bond bill of entry. He would take us through paragraph 8, 9, 10 and 11 of the said Larger Bench decision and refer to Para 12 wherein the reference has been answered. It is also his further submission that on merits of the case they are not required to discharge any duty liability on the goods which were imported and duty has been foregone in the light of the Larger Bench decision, though they are not seeking any refund of the amount already paid by them in these cases.
(h) It is his submission that the first proviso to clause-3 to Notification No. 52/2003-Cus and the second proviso to clause 6 of Notification No. 22/2003-CE provided that exemptions under the said notifications shall not be available in respect of inputs if the finished goods are either non excisable or if imported or leviable to nil rate of customs duty as specified under the first schedule of Customs Tariff Act, 1975 and additional duty leviable under Section 3 of Customs Tariff Act read with exemption notification in this regard, if any. It is his further submission that exemption under notification to the inputs would not be available in one of the situations:-
(A) if the finished goods are non excisable, or (B) if the finished goods, if imported are;
(i) leviable nil rate of customs duty as specified under first schedule of Customs Tariff Act, 1975,
(ii) leviable nil rate of additional duty of customs specified under section 3 of Customs Tariff Act read with exemption notification, in this regard.
It is his submission that the adjudicating authority has not appreciated the fact that special excisable goods as defined under Section 2D of Central Excise Act, 1944, would mean that the first schedule and the second schedule of the Central Excise Tariff Act, 1985 and being subjected to duty of excise. It is his submission that adjudicating authority has over looked the requirement for the purpose of attracting duty liability, both conditions/ requirements as hereinabove stated, needs to be fulfilled. The first requirement is that finished goods imported is leviable to Nil rate of duty as specified under the first schedule of Customs Tariff Act, which in this case, does not specify Nil rate of duty for LPG and consequently the second condition/ requirement also does not arise. It is his submission that duty on LPG is exempt from customs duty under notification is of no consequence, as the provisos requires that there should be Nil rate of duty for the finished goods specified under the first schedule of the Customs Tariff Act, itself, while in the case in hand it is not so and is an exemption under notification.
(i) It is his submission that appellant has filed bill of entry for warehousing the goods and imported inputs under such bills of entry as an EOU and hence the reference answered by the Larger Bench of the Tribunal in the case of Paras Fab International would be applicable in all squares, in appellants case. It is also his further submission that reference which has been answered in the case of Paras Fab was followed by the Tribunal in the appellants own case as reported at 2011 (268) ELT 380 (Tri. Ahmd.). In the present case also there has been no clearance of imported inputs for home consumption under the Customs Act, 1962 and consequently, the goods which were consumed for manufacturing of finished goods can not be considered as clearance of inputs. It is also his submission that the adjudicating authority has erred in not appreciating the ratio laid down by the Larger Bench i.e. when imported the goods pursuant to inbond warehousing bills are taken into 100% EOU and used within 100% EOU and are not cleared as such by 100% EOU for home consumption, stage for such payment of duty on such imported goods is not reached and therefore there cannot be any demand duty on such imported goods.
(j) It is his submission that though the appellant would have argued the issue on merits itself and sought the benefit of the Larger Bench decision as well as various decisions, they are not pressing that point. It is his submission that the said point is raised for the purpose of non imposition of penalties by the adjudicating authority. Learned counsel would also take us through the letter dated 15.10.2007, where in they had calculated the amount have been paid under the provisions of Section 28 (2B) of Customs Act, 1962 has been sought by them in the said letter. Learned counsel would take us to the representation made by them to the Ministry of Petroleum and Natural Gas and also through the minutes of the meeting which was held on 30.4.2007 in the Ministry of Petroleum and Natural Gas. It is his submission that penalties imposed by the adjudicating authority be set-aside.
4. Learned departmental representative would reiterate the findings of the adjudicating authority for imposition of penalties.
5. Heard both sides and perused the record.
6. It is undisputed that appellant, during the relevant period, was registered as EOU with the authorities. It is also undisputed that appellant had imported various inputs/ raw materials for consumption in their EOU, foregone the duty liability either of customs or excise by procuring CT-3 certificates from the authorities. It is also undisputed that the said goods which were imported/ procured duty free were consumed in the EOU and duly recorded in statutory records and filed returns regularly. It is also undisputed that appellant had produced LPG and had intention to export the same, which could not materialise due to absence of clearance from the Ministry of Petroleum and Natural Gas. It is also undisputed that per-force the appellant had to clear LPG in the Domestic Tariff Area for public distribution to various Public Sector Undertakings. It is also undisputed that appellant had not discharged the duty liability on the said LPG cleared to Domestic Tariff Area by availing benefit of notifications which exempted payment of duty on LPG. In the above factual matrix, we have to decide whether the appellant had made themselves liable for penalty under the provisions of Section 114A of Customs Act, 1962 and Section 11AC of Central Excise Act, 1944 for non discharging the duty liability on the inputs which were consumed for manufacturing of LPG and cleared by availing the benefit of exemption notification.
7. Though we find that the merits of the case need not be gone into as it will be a mere academic exercise on the face of the submissions made by appellants counsel that they are not claiming any refund of duty already paid by them, we have considered the merits only for the purpose of arriving at conclusion as to whether appellant needs to be visited with penalties under the provisions of Section 114A of the Customs Act, 1962 or under Section 11AC of the Central Excise Act, 1944.
8. On perusal of record, it is noted that the inputs which were procured by the appellant, were consumed in an EOU, after filing in-bond bills of entry or documents like re-warehousing certificate. These documents are not disputed by the Revenue. This would mean that the goods imported or procured locally, were warehoused in the appellants licensed warehouse and it is admitted that inputs were not cleared as such but were consumed. At this juncture we have to note and record that, in a similar issue, the Larger Bench of Tribunal in the case of Paras Fab International (supra) has ruled that no duty requires to be paid if inputs are consumed that in an EOU, as it is treated as warehouse. We find that the ratio of the Larger Benchs decision in Paras Fab International was followed by this Bench in the appellants yet another case, wherein Revenue was demanding NCCD, SHE Cess and Education Cess on imported crude petroleum oil, proposition negatived by recording following findings:-
14. We also find? favour with the submissions raised by the respondents that in any case, in any way of the matter, no duty was required to be paid by them in view of the law declared by the Larger Bench in the case of Paras Fab International. It stands held in the Larger Bench decision that inasmuch as the entire premises of 100% EOU have to be treated as a warehouse, the imported goods warehoused in the said premises and used for the purpose of manufacturing in-bond as authorized under Section 65 of the Customs Act 1962, cannot be treated to have been removed for home consumption. If that be so, the goods are not cleared from 100% EOU and hence there cannot be any demand of duty on the same. The Tribunal accordingly, affirmed the earlier judgment of the Tribunal in the case of STI India Limited reported as 2008 (222) E.L.T. 112 (Tri.). While rendering the said Larger Bench decision, the Tribunal took into consideration the fact that the entire premises of an 100% EOU is licensed as private bonded warehouse under Section 58 of the Customs Act, 1962. The imported goods are required to be imported directly to such premises and a manufacturing is required to be done within the bonded premises. By taking note of the provisions of Customs Act as also the Customs Manual, it was observed that neither speaks of any requirement to pay any duty on the warehoused goods which are used for manufacture in bond nor it require filing of any ex-bond bill of entry at that stage. Sections 68 of the Customs Act, dealing with clearance of the warehoused goods for home consumption require filing of ex-bond bill of entry for payment of import duty and other charges. Section 65, which deals with manufacturing in bond does not required any filing of ex-bond bill of entry or payment of duty before taking warehoused goods for manufacture inside the bonded premises. There is also no provision treating the said goods as deemed to have been removed for the purpose of Customs Act. As such, the Larger Bench observed that if such use has to be treated as removal for home consumption and duty is required to be paid on such use, there will not be any incentive for an assessee to undertake manufacturing in-bond and the provisions made the provisions made in this regard would not be of any use. The policy objective behind enactment of such statutory provisions and designing of EOU scheme to make available duty free material for manufacturing export goods would be entirely defeated.
15. Learned? consultant for the Revenue Shri K.M. Mondal had admitted that there is no dispute that the respondent EOU is licensed as a private bonded warehouse in terms of Section 58 of the Customs Act. However, he submits that even than it cannot be said to be at par with any private bonded warehouse, inasmuch as EOU scheme is a special scheme with the main objective to promote exports and the EOU is required to execute a single all purpose B-17 bond in prescribed form undertaking to fulfill the condition stipulated in the exemption notification for EOU. He also submits that there are special procedures enacted for EOUs like procurement of business goods without payment of duty against CT-3 certificate. The detailed procedures are laid down in CBEC manual, required to be followed by the EOU. As such, he submits that though EOU is a private bonded warehouse but is governed by the warehousing provisions contained in Chapter-IX of the Customs Act. They cannot be equated with an ordinary private bonded warehouse where the imported goods are kept temporarily and are cleared as such for home consumption on payment of requisite customs duty by filing ex-bond bill of entry.
As against the above submission, the respondents have submitted that a bare reading of Section 59 of the Customs Act, 1962 which appears under Chapter -IX of the Customs Act, would show that it applies to the goods specified in Section 61(1). Section 61(1) clearly talks of goods intended for use in 100% EOU. As such Section 59 applies to goods imported by a 100% EOU, who have to only execute a bond for twice the duty assessed at the time of filing bills of entry for warehousing and there is no requirement of making any payment at that point of time. As such, there is no difference between a 100% EOU and any other bonded warehouse. Further, the submissions of the Revenue that goods imported by 100% EOU are meant for use in the warehouse whereas goods imported by other bonded warehouse are meant only for temporary storage and their ultimate home consumption, proceeds on an erroneous presumption that no manufacturing involved can be undertaken by an importer other than 100% EOU. Respondents have drawn our attention to the provisions of Section 65(1) of the Customs Act which clearly providing that owner of any warehoused goods may carryon manufacturing operations in the warehouse in relation of such goods. As such, they have submitted that there is no difference between the 100% EOU warehouse and the other private bonded warehouse. The respondents have further 1 argued that the Revenues contention that inasmuch as they have paid duty in 257 bills of entry at the time of assessment, the Larger Bench decision will not apply to such bills of entries, is totally perverse. Inasmuch as the duty was paid under protest, it will not alter the legal position that a 100% EOU being Customs Bonded Warehouse, there was no requirement to pay duty in respect of the warehoused goods except where the same are cleared from the warehouse for home consumption.
16. However, we? find that all arguments raised by Shri Mondal stands considered by the Larger Bench decision of the Tribunal in the case of Paras Fab International. Fine distinction drawn by Shri Mondal between private bonded house and 100% EOU are of no help to the Revenue, inasmuch as the issue on the said dispute stands answered by the Larger Bench in the case of Paras Fab International which even Shri Mondal has also not denied. Further, the fact of payment of duty at the time of filing bill of entry for warehouse Under Protest will also not change the legal position that 100% EOU is required to pay duty only at the time of clearances of warehoused goods for home consumption. To arrive at the decision other than the one declared by the Larger Bench, would amount to sitting in the appeal over the Larger Bench judgment, which is not permissible under the law. As a division bench we feel bound by the law declared by the Larger Bench. By following the law declared by the Larger Bench decision in the case of Paras Fab International that 100% EOU is not required to discharge any duty liability in respect of the imported goods warehoused in their premises and used for the purpose of manufacturing in-bond, we hold that respondents were not required to pay any NCCD, Education Cess and SHE Cess. As such, on this point also the appeals filed by the Revenue are to be rejected. We order accordingly. Cross objections filed by the respondents also get disposed off. In our considered view the above ratio would apply in full force to the case in hand, as it is undisputed that the inputs procured by appellant, on which department has foregone duty, was consumed in the EOU for manufacturing of LPG and said LPG was sold to Public Sector Units. We find that there is no allegation of removal of inputs as such in the entire case records. In our view, if the appellant have pressed into service the ratio of the larger Bench decision, there would be no duty liability on inputs.
9. It can be seen from the undisputed facts that appellant had, in fact, sent representation to the authorities i.e. Ministry of Petroleum and Natural Gas on 30.3.2007 as regards anomaly in supply of LPG made by them to Domestic Tariff Area by consuming imported/ locally procured materials on which duty has been foregone. We also note that on 30.4.2007 a meeting took place in the Ministry of Petroleum and Natural Gas wherein this issue was discussed but no conclusion was reached. We also note that appellant vide letter dated 15.10.2007, while debiting the amount had clearly indicated as under:-
It can be seen from the above reproduced letter that appellant had in fact, clearly indicated that they are paying this duty and interest as per the provisions of Section 28 (2B) of the Customs Act, 1962.
9.1 It would be relevant to reproduce the provisions of Section 28(2B) of the Customs Act, 1962:-
Section 28 (2B) : - Where any duty has not been levied or has been short-levied or erroneously refunded, or any interest payable has not been paid, part paid or erroneously refunded, the person, chargeable with the duty or the interest, may pay the amount of duty or interest before service of notice on him under sub-Section (1) in respect of the duty or the interest, as the case may be, and inform the proper officer of such payment in writing, who on receipt of the such information, shall not serve any notice under sub-Section (1) in respect of the duty or the interest so paid: It can be seen from the above reproduced Section that the said Section provides of discharge of duty and interest by assessees on his own calculation and intimate authorities, who on being informed will not issue show cause notice. We find that only exception for the above referred provisions of Section 28(2B) would be in a case where the duty liability arises due to misrepresentation or suppression of facts with intent to evade duty. In the case in hand, it is undisputed that appellant themselves has discharged the duty foregone along with interest, on their own. There was no intimation or letter from departmental authorities directing them to do so. In our considered view, the action of the appellant in keeping informed the departmental authorities about the availment of exemption notification for LPG, filing returns by the appellant who is an EOU, would mean that they had no intention to suppress material facts. This fact of filing returns indicating entire transactions of EOU is not disputed by Revenue authorities. In the case in hand, we find that there was no need to issue any show cause notice to appellant as the duty liability either Customs or Central Excise is the same as has been calculated by the appellant. We find that in a similar situation Honble High Court of Karnataka, in the case of Adecco Flexione Workforce Solutions Limited 2012 (26) STR 3 (Kar.) has held as under :-
Both these appeals are preferred by the assessee challenging the order passed by the Tribunal as well as the Appellate Commissioner who have held that the assessee is not liable to pay any penalty under Section 76 of the Finance Act, 1994 and therefore, set aside the order passed by the lower authorities imposing penalty.
2.?Facts are not in dispute. The assessee has paid both the service tax and interest for delayed payments before issue of show cause notice under the Act. Sub-sec. (3) of Section 73 of the Finance Act, 1994 categorically states, after the payment of service tax and interest is made and the said information is furnished to the authorities, then the authorities shall not serve any notice under sub-sec. (1) in respect of the amount so paid. Therefore, authorities have no authority to initiate proceedings for recovery of penalty under Sec. 76 of the Act.
3.?Unfortunately the assessing authority as well as the appellate authority seem to think. If an assessee does not pay the tax within the stipulated time and regularly pays tax after the due date with interest. It is something which is not pardonable in law. Though the law does not say so, authorities working under the law seem to think otherwise and thus they are wasting that valuable time in proceeding against persons who are paying service tax with interest promptly. They are paid salary to act in accordance with law and to initiate proceedings against defaulters who have not paid service tax and interest in spite of service of notice calling upon them to make payment and certainly not to harass and initiate proceedings against persons who are paying tax with interest for delayed payment. It is high time, the authorities will change their attitude towards these tax payers, understanding the object with which this enactment is passed and also keep in mind the express provision as contained in sub-sec. (3) of Sec. 73. The Parliament has expressly stated that against persons who have paid tax with interest, no notice shall be served. If notices are issued contrary to the said Section, the person to be punished is the person who has issued notice and not the person to whom it is issued. We take that, in ignorance of law, the authorities are indulging in the extravaganza and wasting their precious time and also the time of the Tribunal and this Court. It is high time that the authorities shall issue appropriate directions to see that such tax payers are not harassed. If such instances are noticed by this Court hereafter, certainly it will be a case for taking proper action against those law breakers.
4.?In that view of the matter, we do not see any merit in these appeals. The appeals are dismissed.
5.?Mark a copy of this order to the Commissioner of Large Tax Payers Unit who is in charge of collection of service tax to issue proper circular to all the concerned authorities, not to contravene this provision, namely sub-section (3) of Section 73 of the Act.
It can be seen from the above reproduced judgment that their Lordships have clearly held that, in similar situations as is in the case in hand, show cause notice should not have been issued.
9.2 We find that provisions of Section 11(2B) are pari-materia to the provisions of Section 28(2B) of the Customs Act, 1962, and have, in our view, the ratio of Honble High Court judgment in Adecco Flexione Workforce Solutions Limited case will cover the issue of imposition of penalty under Section 11AC of the Central Excise Act, 1944.
9.3 In our considered view the action of Revenue authorities in issuing of show cause notice on the appellant demanding duty is like looking into the mouth of gifted horse, as we have hereinabove held that the appellant need not have paid any duty on duty free inputs procured by them, as there is no dispute that inputs were consumed in EOU and issuance of show cause notice demanding duty interest and imposition of penalties, in our opinion, is a self-destructive action in the light of decision of Larger Bench of Tribunal in the case of Paras Fab International (supra.)
10. We also find strong force in the contention raised by the learned counsel that they had filed monthly returns with the authorities for the month April to Sept. 2007 and they had clearly indicated the clearance of LPG in the returns as being cleared to Domestic Tariff Area by claiming exemption under specific notification.
11. Before parting with the case we would like to record that an interesting point was raised by the counsel for appellant as regards non applicability of clauses to Notification Nos. 52/2003-Cus and 22/2003-CE. In our considered view, this issue can be looked into by the Bench in an appropriate case, as we have held that in this case, having voluntarily discharged duty liability and interest thereof, issuance of show cause notice by the Revenue authorities was itself incorrect as provided in relevant sections.
12. All the above discussion will lead to the conclusion that appellant had definitely not suppressed any material information from the department as regards the consumption of inputs procured, on which the duty labiality was forgone by the Revenue and as also clearance of final products to DTA. This also is fortified from the fact that appellant without being informed, on their own paid the entire amount of duty forgone on the inputs along with interest and informed the department on 15.10.2007. In our view, the show cause notice dated 15.4.2008 invoking extended period of limitation for demand of Customs duty under Section 28 of the Customs Act, 1962 , Central Excise duty under Section 11A of Central Excise Act, 1944, has not brought forth any situation, wherein it could be concluded that there was a suppression of facts with intention to evade duty on the part of appellant herein. On perusal of the order of the adjudicating authority, we find that the adjudicating authority has confirmed the demands of duty liability of Customs or Central Excise as per the calculation given by the appellant and there was no addition to such duty liability, which would indicate that the calculation of duty as has been done by the appellant is correct and they had indeed invoked their right of paying duty as per the Section 28 (2B) of Section 11A(2B), as the case may be, and they had correctly sought for non issuance of show cause notice to them.
13. Accordingly, in our considered view, the adjudicating authority has committed an error, in invoking the provisions of Section 114A of the Customs Act, 1962 and Section 11AC of the Central Excise Act, 1944 for imposition equivalent amount of penalties as indicated in his order. We do not find any reason to sustain the same, as extended period cannot be invoked in this case and accordingly set-aside the penalties imposed by the adjudicating authority.
14. In view of the foregoing discussions, we find that appellants have made out a case for setting aside the penalties imposed on them. Appeals are allowed to the extent they challenge the imposition of various penalties under the Customs Act, 1962 and the Central Excise Act, 1944 on the appellants by the adjudicating authority, and impugned to that extend is set-aside.
Appeals disposed of as indicated hereinabove.
(Operative part of the order pronounced in the Court)
(B.S.V. Murthy) (M.V. Ravindran)
Member (Technical) Member (Judicial)
..KL
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