Customs, Excise and Gold Tribunal - Tamil Nadu
Futura Polymers vs Commissioner Of Customs on 14 September, 2007
Equivalent citations: 2007(123)ECC232, 2007(149)ECR232(TRI.-CHENNAI), 2008(221)ELT272(TRI-CHENNAI)
ORDER P.G. Chacko, Member (J)
1. The appellants are a 100% Export-Oriented Unit (EOU, for short) and are engaged in the manufacture and export of Polyester chips. During July-August, 1996, they had cleared Polyester chips of Amorphous Grade to the Domestic Tariff Area (DTA, for short) by availing exemption under Notification No. 2/95-CE dated 04.01.1995 (as amended). In a show-cause notice dated 24.04.2001, me Commissioner of Central Excise demanded duty of Rs. 81,90,568/- from the appellants for the above period in respect of the chips of amorphous grade manufactured and cleared by them to DTA, by invoking the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act, and also proposed penalties on the notice under Section 11AC of the Act and under Rule 173Q of the Central Excise Rules, 1944. The proposals in the show-cause notice were contested on merits as well as on the ground of limitation. In adjudication of the dispute, learned Commissioner of Customs (Imports) confirmed the above demand of duty against the party under Section 11A(2) of the Act and imposed on them a penalty of Rs. 72,00,000/- under Rule 173Q ibid. The present appeal is directed against the decision of the Commissioner of Customs.
2. After examining the records and hearing both sides, we note that the appellants had the permission of the Development Commissioner for export of Polyester chips (High Pressure Moulding Grade) and that they were exporting such goods and also Polyester chips (Amorphous Grade) on the strength of the Development Commissioner's permission. That they were exporting the Amorphous Grade also is evidenced by the Shipping Bills produced today by the appellant's counsel. It is also noticed that the appellants were clearing Polyester chips of Amorphous Grade to DTA on payment of duty in terms of Notification No. 2/95-CE ibid.
3. The case of the Revenue is that the appellants were not entitled to the benefit of the Notification in respect of the chips of Amorphous Grade, which, according to the Revenue, were not identical to the chips of High Pressure Moulding Grade and hence not covered by the Development Commissioner's permission. This case of the Revenue as made out in the show-cause notice has been sustained by the Commissioner in the impugned order on the strength of, inter alia. Boards Circular No. 85/95-CE dated 26.07.1995, which clarified, in respect of 100% EOUs, that only goods which were similar to, or which belonged to the same class as, the goods of export were allowed to be sold in DTA and consequently the benefit of the above Notification was not admissible to it. Learned Counsel for the appellants has brought to our notice certain amendments to Notification No. 2/95-CE. He has particularly emphasised the amendment brought to that Notification by Notification No. 7/96-CE dated 01.07.1996, whereunder the text of the third proviso was amended. Prior to the amendment, the relevant part of the proviso was reading as under:
Provided also that-
(i) in the case of said goods, other than software, rejects, scrap, waste or remnant,-
(a) such goods, being cleared for home consumption are identical in all respects with the goods exported or expected to be exported from the unit during a specified period for such clearance in terms of the Export and Import Policy, 1st April, 1992 - 31st March, 1997;
The amending Notification substituted the following text for the words "identical in all respects",-
identical in all respects, including goods which although not alike in all respects, have like characteristics and like component materials which enable them to perform the same functions and to be commercially interchangeable.
The proviso so amended was in force during the period of dispute (July-August, 1996). It is the case of the appellants, reiterated by their counsel today, that, after the amendment of Notification No. 2/95-CE with effect from 01.07.1996, the goods cleared by a 100% EOU to DTA need not be identical in all respects to the goods exported by them under the Development Commissioner's permission and that it is enough if such goods have like characteristics and like component materials which enable them to perform the same functions and to be commercially interchangeable. Learned Counsel has sought to elaborate this point by submitting that Polyester chips of High Pressure Moulding Grade and those of Amorphous Grade are commercially interchangeable inasmuch as the Amorphouse Grade is also "high pressure mouldable" as certified by the Central Institute of Plastics, Engineering and Technology (Ministry of Chemicals and Fertilizers, Government of India). Learned Counsel has referred to this certificate available on Page No. 87 of the Paper Book. In this connection, he has also relied on a US patent relating to "Apparatus for injection moulding4s of Amorphous Polyethylene Terephthalate" (Polyester) which says that Amorphous Grade is also injection mouldable into articles. Learned Counsel has also relied on the Chemical Examiner's report (Page No. 85 of Paper Book), which says that "Amorphous and Crystalline Polyester chips are similar in characteristics, though the amorphous variety forms as an intermediate". The Chemical Examiner's report further says that the two grades are similar but not identical. Learned JDCR has heavily relied on this last part of the Chemical Examiner's report, which says that the Crystalline and Amorphous Grades of Polyester are not identical, though similar. It is his case that, for the 100% EOU to be able to clear the Amorphous Grade to DTA in terms of Notification No. 2/95-CE, it should be shown that the Commodity is identical to the Crystalline Grade, for which alone there was permission from the Development Commissioner for export. It is submitted that neither the Development Commissioner nor the Assistant Commissioner of Customs concerned had permitted the party to clear the Amorphous Grade to DTA. Their permission was for removal of only the Crystalline Grade. It is also pointed out by learned JDCR that the appellants had not claimed the benefit of the amendment to Notification No. 2/95-CE before the Commissioner, nor had they claimed anything under the Shipping Bills now produced by counsel. Learned JCDR has also relied on the Board's Circular.
4. We have given careful consideration to all these submissions made by both sides on the merits of the case. Though, in the show-cause notice, the relevant amendment to Notification No. 2/95-CE (with effect from 01.07.1996) was expressly mentioned, the adjudicating authority appears to have overlooked it. We have examined the amendment and have found that, with effect from 01.07.1996 upto 23.04.1998 (on which date the above amendment was undone by Notification No. 4/98-CE), it was not necessary that the goods cleared by 100% EOU to DTA should be identical in all respects to the goods exported by them under the Development Commissioner's permission. It was enough if the two goods had like characteristics and like component materials which enabled them to perform the same functions and to be commercially interchangeable as reported by the Chemical Examiner. As denoted by the nomenclature, one had crystalline shape and the other had no definite shape in the language of Crystallography. Obviously, thus, the difference was physical. Again, it is not in dispute that both the grades can be used for making articles of the polymer. It would thus appear that the Crystalline Grade and the Amorphous Grade are commercially interchangeable and, if that be so, the two are squarely coming within the ambit of the amended proviso (amended with effect from 01.07.1996) in Notification No. 2/95-CE. This provision of the Notification obviously did not attract the attention of the learned Commissioner. We note that the Board's circular was issued prior to the relevant amendment to Notification No. 2/95-CE and, therefore, anything contained therein, in relation to 100% EOUs, may not hold good after 01.07.1996.
5. Hence the reliance placed on the Board's circular by learned Commissioner is misconceived. We have also noticed that the EOU had been exporting not only Crystalline Grade but also Amorphous Grade of Polyester chips, both, apparently, on the strength of the Development Commissioner's permission. Those exports were cleared by the Customs authorities concerned. No objection whatsoever was raised by those authorities with regard to the Amrphous Grade of Polyester chips. In other words, the Customs authorities, by their conduct, acquiesced in the party's view which was to the effect that both the grades were covered by the Development Commissioner's permission and could be cleared to DTA as well. On the whole, we observe, the appellants have succeeded in challenging the denial of the benefit of Notification No. 2/95-CE in respect of Polyester chips (Amorphous Grade) for the period July-August, 1996. The demand of duty, therefore, cannot be sustained.
6. We have also found a valid point in the challenge to the demand on the ground of time-bar. The larger period of limitation was invoked in the show-cause notice as well as in the impugned order on the ground of suppression of material facts. The shipping Bills reveal that the Customs authorities were aware of the fact that the EOU was exporting both the grades of Polyester chips under the Development Commissioner's permission. The exports were cleared by the authorities also. The Shipping Bills, being documents filed by the party, were tantamount to disclosure of the material fact to the department. There was no suppression. Hence the extended period of limitation was not invocable on the facts of this case.
7. Without prejudice to other contentions, the appellants have also raised a valid challenge against the penalty imposed on them under Rule 173Q. As rightly pointed out by learned Counsel, Rule 173Q contained in Chapter VII A of the erstwhile Central Excise Rules, 1944 was not applicable to EOUs whose removals of excisable goods for home consumption were covered by Chapter V A of the said Rule, a legal position since settled by a plethora of decisions, a few of them being cited below:
(i) Deccan Granites v. Commissioner of Central Excise, Hyderabad .
(ii) Rajwani Synthetics P. Ltd. v. Commissioner of Central Excise, Surat-I 2004 (176) E.L.T. 240 (Tri.-Mumbai).
(iii) Kalyani Sharp India v. Commissioner of Central Excise, Pune .
8. In the result, the appeal succeeds and the same is allowed.
(Dictated and pronounced in open court)