Custom, Excise & Service Tax Tribunal
M/S. Aarti Industries Ltd vs Commissioner Of Customs, Export, Nch, ... on 26 August, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. C/1092/04 [Arising out of Orders-in- Appeal No. 386/2004/MCH dated 23/7/2004 passed by the Commissioner of Customs (Appeals), Mumbai-I] For approval and signature: Honble Mr Ramesh Nair, Member(Judicial) Honble Mr. Raju, Member (Technical) =======================================================
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M/s. Aarti Industries Ltd
:
Appellant
VS
Commissioner of Customs, Export, NCH, Mumbai-I
:
Respondent
Appearance
Shri. Mehul Jivani, C.A. for the Appellants
Shri. S.J. Sahu, Asstt. Commissioner(A.R.) for the Respondent
CORAM:
Honble Mr. Ramesh Nair, Member (Judicial)
Honble Mr. Raju, Member (Technical)
Date of hearing: 26/8/2016
Date of decision /2016
ORDER NO.
Per : Ramesh Nair
The issue involved in the present case is that the show cause notice was issued making allegation that the appellant has violated the condition V(A) of the Notification No. 203/92-Cus. In the show cause notice it was mentioned that input stage credit under Rule 57 A was availed, demand was confirmed by the adjudicating authority which was upheld by the Commissioner(Appeals).
2. Shri. Mehul Jivani, Ld. C.A. appearing on behalf of the appellant submits that firstly the show cause notice was issued without any basis to establish that input stage credit was availed in respect of exports goods. In absence of any evidence, allegation will not be sustained and the demand is also not sustainable on this ground itself. He further submits that appellant is merchant exporter whether the credit was availed or otherwise is the matter of fact which can be known from the investigation at supporter manufactures end. However, department has not even tried to verify whether supporting manufacturer has availed the credit or otherwise. He also submits that notification only prescribed the condition under clause V(A) that no modvat credit should be availed, however no documentary evidences is require to be submitted, only the condition is that on the export documents it has to be declared that modvat credit is not availed. In the present case that declaration is not under dispute. He further submits that import was made after export of the goods therefore it was open for the customs authority to question about the fulfillment of the condition of the notification which department failed to do therefore extended period of the demand cannot be invoked. On this ground demand is time bar. He further submits that duty was also wrongly quantified as the correct quantification comes to Rs. 93,435/- and not to Rs. 2,54,828/-. He further submits that appellant have received the modvat certificate from two supporting manufacturer however unable to obtained from one supporting manufacturer for the export of 4986 kgs against the total exports of 20,000 kgs, for this reason also on pro rata basis demand stand reduced to Rs. 23,209/- attributed to quantity of 4986 kgs for which certificate should not be obtained. He further submits that demand of interest is not sustainable under Section 28AB of the Customs Act as the said Section came into force on 28/9/1996, whereas import was made in the year 1994 itself. As regard the penalty he submits that in December 1994 the penalty provision under Section 114A was not existing. In support of above submission, he placed reliance on various judgments which are cited below:
(a) Consumers Plastics Pvt Ltd Vs. Commr. Of Cus.(export), Mumbai[2001(134) ELT 521(Tri. Mumbai)]
(b) Oriental Industries Vs. Commissioner of Customs, Kandla[2004(166) ELT 331(Tri. Mumbai)]
(c) Commr. Of Cus. (export Promotions), MumbaiVs. Diamond Polyprints[2016(332) ELT 883(Tri. Mumbai)]
(d) Industrial Chem. Manufacturing Co. Ltd. Vs. C.C.(Import), Nhava Sheva[2015(317) ELT 262(Tri. Mum)]
(e) Goel Airshrink (India) Limited Vs. Commissioner of Cus. (Export), Mumbai[2002(148) ELT 562(Tri. Mum)]
(f) Futura Fashions Pvt Ltd. Vs. Commissioner of Customs, Sheva[2003(161) ELT 1059(Tri. Mum)]
3. On the other hand, Shri. S.J. Sahu, Ld. Asstt. Commissioner(A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order.
4. We have carefully considered the submissions made by both sides and perused the record.
5. We find that the show cause notice though alleged that the appellant has violated the condition V(A) of the Notification No. 203/92-Cus but allegation is not based on any factual matrix. The department has not investigated anything to know whether the input stage credit under Rule 57 in respect of export goods was availed or otherwise. The show cause notice without any relied upon documents or without any factual information cannot sustain. In this regard this Tribunal has taken consistent view that show cause notice without having any evidence is not sustainable. The relevant judgments are reproduced below:
Consumers Plastics Pvt Ltd ?2.The common issue in both these appeals is whether duty could be demanded from an importer by seeking to revoke the benefit of exemption contained in Notification 203/92 which was extended to the goods on their importation. The show cause notice issued to each of the appellants alleges that Modvat credit had been taken of the duty paid on the inputs used in the manufacture of exported goods, thus contravening the condition contained in clause v(a) to Notification 203/92. The notices invoked the extended period contained in the proviso to sub-section (1) of Section 27 of the Act on the ground that the exporter had made a wrong declaration on the shipping bill that Modvat credit has been availed of. The counsel for Gaurisons says that no show cause notice was received by it and it is only on passing of the order that it came to know of the existence of the proceedings. Counsel for the Consumers Plastics Pvt. Ltd. submits that the reply that it filed to the notice was not considered. Each of them requests remand of the matter to the Commissioner for decision on merits afresh, contending that their case is covered by the ratio of the Tribunal in Plastchem Industries v CCE, 2000 (120) E.L.T. 775.
?3.In that decision, the Tribunal had concluded that while it was open to the department, when the import took place to ask the importer to satisfy that Modvat credit has not been availed of and it could deny exemption in the event compliance of this condition was not demonstrated. It however, state that once the import has taken place and the extended period is invoked the requirement of material sufficient to conclude that credit had indeed been taken, and to justify invoking the extended period specified in the proviso to sub-section (1) of Section 27 would have to be shown by the department. In the absence of such material, it held the demand to be impermissible. The same consideration would apply to the facts before us.
4It is in fact clear that the failure to verify?. compliance with the condition contained in the paragraph (v) of the notification was due to the omissions of the assessing officer and not due to any suppression or misstatement or such act on the part of the importer. In each of the orders, the Commissioner says, Examination of the question whether they (i.e. the importer) had availed Modvat credit on the inputs while exporting the goods towards discharge of export obligation in the advance licensing scheme was missed or overlooked. Further, there is also not slightest evidence that Modvat credit has in fact been availed of. What the department has done, in order to make up for the acts or omissions of its officers, is to transfer to the importer the burden which now lies upon it of showing that credit has been availed of. We are hence unable to confirm the orders impugned before us.
5The appeals are allowed, and the impugned orders set?. aside.
Oriental Industries ?2.We have heard Shri L.P. Asthana, and Shri George, learned DR. We find that there is no material on record to establish that input stage credit had been availed either by the merchant manufacturer or the transferees of the licences, therefore non-compliance with the requirement in the notification regarding filing of declaration of non-availment of Modvat credit on inputs used in the manufacture of exported goods cannot result in denial of the benefit of the notification. Further the stand of the appellants that the export goods, namely, HDPE woven fabrics were exempt from Central Excise duty and therefore the question of availing of Modvat on inputs used in their manufacture did not arise, has not been controverted. In the absence of any evidence to show that input stage credit had been availed either by the appellants or by the transferees of the VBAL licences we hold that contravention of the relevant condition in Notification 203/92 has not been made out by the Revenue. We therefore set aside the impugned order in so far as it relates to the appellant, namely, by setting aside the penalty imposed upon them, and allow the appeal.
. Diamond Polyprints
6.?We find that in the show cause notice there is allegation that manufacturer/exporter i.e. original licence holder has availed Modvat credit and made wrong declaration in the export documents to the effect that no Modvat credit was availed and as such violated the condition V(a) of Notification No. 203/92-Cus. However, it is undisputed facts that show cause notice has no base or in fact no single document has been relied upon in the show cause notice that the manufacturer-exporter made a wrong declaration on the export documents that no Modvat credit was availed on the input used in the export goods, the entire proceedings are vitiated by the Revenue as it failed to prove that the declaration is incorrect. Allegation of charge is possible only by adducing tangible documentary evidences such as Modvat invoices, Modvat account in respect of input of manufacturer-exporter. No such exercise was carried out in order to issue effective show cause notice. In view of this fact the show cause notice and the allegation made thereunder without support of any evidence cannot stand. Though the ld. Commissioner has dropped the proceedings relying on the Honble Supreme Court judgment in case of Goodluck Industries (supra) but even after considering the grounds of appeal made by Revenue this fact is not under dispute that the show cause notice is a skeleton, as allegation made in the show cause notice has no basis of any evidence. Moreover, it is also a settled legal position that the transferees import under legitimate transferred licence cannot be disputed on the ground that obligation casted on exporter-manufacturer regarding non-availment of Modvat credit was not satisfied. This gets support from the judgment of Larger Bench of this Tribunal in the case of Collector of Customs, Bombay v. Hico Products Ltd., Bombay [1988 (34) E.L.T. 643 (Tribunal)] which was upheld by the Apex Court as reported in 1997 (95) E.L.T. 12 (S.C.). In view of our above discussion, appeal of the Revenue is not maintainable and the same is dismissed. CO also stands disposed of accordingly.
Industrial Chem. Manufacturing Co. Ltd.
5.?We have carefully considered the submissions made by both the sides and perused the records. In the show cause notice, the allegations made and the Commissioner confirmed in adjudication holding that the transferor-exporter has availed MODVAT credit and therefore, the appellant is not entitled for the exemption Notification No. 203/92-Cus. It is observed that neither in the show cause notice nor in the impugned order, the allegation of availment of MODVAT credit by the transferee of the licence was supported by any evidence from which any inference can be drawn that the exporter has availed MODVAT credit. Though the adjudicating authority has recorded that there is a declaration of non-availment of MODVAT credit by the exporter on the shipping bill/AR4s. However, it could, not be established by the adjudicating authority by adducing any evidence that the declaration is incorrect or false. In such a situation, it cannot be concluded that the exporter has availed input stage MODVAT credit in terms of Rule 57A of the Central Excise Rules, 1944 and there is any violation of condition (V)(A) of Notification No. 203/92-Cus.
5.1?In the present case, the demand of Customs Duty was confirmed on the appellant, who is the transferee of the advance licence. However, as regard the condition of non-availment of MODVAT credit provided under Condition No. V(A) of Notification No. 203/92-Cus., the obligation is on the exporter and not on the transferee of the licence. Therefore, the entire basis of the show cause notice and the consequent confirmation of demand is incorrect.
5.2?On the identical issue, the Larger Bench of this Tribunal, in the case of Hico Enterprises v. Commissioner of Customs - 2005 (189) E.L.T. 135 held that the transferee of the licence cannot be held responsible for compliance of the Condition V(a) of the Notification No. 203/92-Cus. This Larger Bench decision has been upheld by the Honble Supreme Court [2008 (228) E.L.T. 161 (S.C.)] in Civil Appeal No. 2418 of 2006.
6.?In view of the above settled legal position and considering the facts and circumstances of the case, we are of the considered view that the learned Commissioner has wrongly denied the exemption Notification No. 203/92-Cus. to the appellant and confirmed the Customs Duty demand by denying the benefit of exemption Notification No. 203/92.
7.?In view of our above discussion and settled legal position on the issue involved, we allow the appeals of, the appellant with consequential relief, if any, in accordance with law.
In view of the above judgments it has been consistently held that before issuance of show cause notice to substantial the allegation the burden lies on the department to bring the fact on record which can support the allegation which revenue failed to do in the present case therefore merely on the assumption basis benefit of notification cannot be denied. In the present case since the import were made after fulfillment of export obligation therefore nothing prevented the department to verify whether the cenvat credit was availed in respect of exports goods which revenue failed at the time of allowing import clearances under Notification 203-92-Cus for this reason demand is also time bar as has been held in various judgments as cited below:
Goel Airshrink (India) Mumbai[2002(148) ELT 562(Tri. Mum)] upheld by Apex court reported in [2003(151) ELT A83]
5.The department would have been perfectly in order to? deny the benefit of the notification on this ground when it was claimed. One of the conditions of the notification is that Modvat credit should not have been availed of and the burden of proving that the conditions, subject to which the notification would be available, falls on the person who claims the benefit of the exemption. In the present case, the benefit of the notification had been granted. If, thereafter, if the department was of the view that the exemption was not available and that the extended period of limitation could be invoked, it was up to it to show why it was not available, and by what act or omission of the importer, any of the factors in the proviso under Section 28(1) would apply. It was not open to it at this stage to withdraw the exemption which had been granted only on the ground that the eligibility to exemption was not proved. There is, therefore, no basis in the notice for invoking the extended period. The notice issued is therefore barred by limitation.
Above judgment upheld by the Apex Court Exemption notification Burden on department to show that exemption not available The Supreme Court Bench comprising Honble Mr. Justice B.N. Kirpal and Honble Mr. Justice Ashok Bhan on 14-9-2001 dismissed the Civil Appeal No. D13254 of 2001 filed by Commissioner of Customs (Exports), Mumbai, against CEGAT Order Nos. 1036-1037/2001-WZB/C-I, dated 24-3-2001 and reported in 2002 (148) E.L.T. 562 (Tri. - Mumbai) [Goel Airshrink (India) Ltd. v. Commissioner].
The Appellate Tribunal in its impugned order had held that exemption granted Notification No. 203/92-Cus. in 1994 cannot be withdrawn in 1999 on the ground that eligibility to exemption was not proved. Burden to show that the exemption granted was not available lies on Department.
Futura Fashions Pvt Ltd.
This is an appeal against yet another order of the Commissioner of Customs, Nhava Sheva demanding duty from the appellant and imposing penalty on him on his finding that Modvat credit was availed of goods exported by it, thus contravening the condition contained in Notification 203/92. We have in a number of earlier occasions set aside such orders on the ground that they did not indicate either the material on the basis on which it was alleged that it has been taken or did not indicate any material to justify invoking the extended period contained in the proviso under sub-section (1) of Section 28 of the Act. We had noted that the export had already been allowed by giving the benefit of the notification without any objection on the part of the Department and in these circumstances, there have to be clearly specific reasons for invoking the extended period and also material to show on the basis on which credit was taken.
It is also observed that against the duty of total export of 20,000 kgs, for the quantity of approx. 16,000 kgs certificate of non availement of credit/reversal of credit was submitted by the appellant which also indicates that allegation of the show cause notice is contrary to the facts available on record. As per the above settled legal position demand confirmed against appellant denying exemption notification No. 203/92-Cus is clearly not sustainable. The impugned order is set aside and appeal is allowed.
(Order pronounced in court on ________________ ) Raju Member (Technical) Ramesh Nair Member (Judicial) sk 13 C/1092/04