Custom, Excise & Service Tax Tribunal
M/S Equinox Semiconduction Ltd vs C.S.T. & S.T., Ahmedabad-Iii on 15 February, 2018
In The Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad Appeal No.C/91/2009-DB [Arising out of OIO No. 75-COMMR-2008 dated 29.12.2009 passed by Commissioner of Central Excise, Ahmedabad-III] M/s Equinox Semiconduction Ltd. Appellant Vs C.S.T. & S.T., Ahmedabad-iii Respondent
Represented by:
For Appellant: Mr. P.P. Jadeja (Consultant) For Respondent: Mr. L. Patra (A.R.) CORAM:
HONBLE DR. D.M. MISRA, MEMBER (JUDICIAL) HONBLE Mr. Raju, MEMBER (TECHNICAL) Date of Hearing/decision:15.02.2018 Final Order No. A/ 10957 /2018 Per: Dr. D.M. Misra This appeal is filed against order-in-original No. 75/Commr./2008 passed by the Commissioner of Central Excise Ahmedabad-III.
2. Briefly stated the facts of the case are that the appellant an 100% EOU imported capital goods valued @ Rs. 21,91,466/- and installed the same in their factory premises. However, the capital goods could not be put use for commercial production and the warehouse license No. 1/87 issued to them had been renewed upto 16.02.1991 got expired. Consequently, proceedings were initiated against the appellant for recovery of the duty of Rs. 21,85,474/- foregone on the imported goods which was not put to use as per the condition of import. On several rounds of litigation before various forums, finally in the de novo proceeding the Ld. Commissioner by the impugned order confirmed the demand of Customs duty amounting to Rs. 21,85,474/- under Section 72 read with Section 15 of the Customs Act, 1962 with interest and also directed confiscation of the goods under Section 111(o) of the Customs Act with an option to redeem the same on payment of fine of Rs. 1,00,000/- also imposed penalty of Rs. 5,00,000/- under Section 112(a) of the Customs Act, 1962. Aggrieved by the said order, the present appeal has been filed.
3. Ld. Consultant, at the outset raised a preliminary objection that the Show Cause Notice is not valid being issued by the Assistant Commissioner whereas adjudicated by the Commissioner of Customs. Further, he has submitted that the demand is barred by limitation of time as it should have been issued within 6 months from the date of expiry of the warehouse period i.e. from 16.02.1991, since warehouse period was renewed upto 16.02.1991 and the SCN was issued on 29.06.1995 i.e. after approximately 41/2 years hence barred by limitation. In support he has referred to the judgment of the Honble Gujarat High Court in Raj Exports vs Central Warehousing Corporation 2013 (287) ELT 166 (Guj.).
4. Per contra, Ld. AR for the Revenue has submitted that limitation prescribed under Section 28 of Customs Act, 1962 is not applicable to the appellants case since they have executed a bond to make good of the duty foregone under Section 72 of the Customs Act, 1962, and therefore, the period of limitation prescribed is not applicable to them. On the issue of jurisdiction, the Ld. AR for the Revenue submitted that the Commissioner is empowered to exercise jurisdiction in the matter, even if, SCN is issued by the Assistant Commissioner of Customs.
5. Heard both the sides and perused the records.
6. We find that the facts are not in dispute inasmuch as even though the appellant had imported duty free capital goods and installed in their factory premises but failed to commence commercial production making use of those capital goods and thereby violated the condition of import. Attributing the reasons for non-commencement of production, it has been submitted on behalf of the appellant that due to Iraq-Iran war they could not get inputs necessary to make finished products, therefore, commercial production could not be undertaken even though capital goods installed were tested and trial runs were carried out. The Ld. Advocate vehemently argued that the warehousing period expired on 16.02.1991 and the demand was issued on 29.06.1995 after 41/2 years, therefore, the demand is barred by limitation. The objection of the Revenue is that no period of limitation could be made applicable to warehoused goods. We find that the issue is no more res-integra and covered by the judgment of the Honble Gujarat High Court in Raj Exports case (supra). After analyzing the relevant provisions and the judgments on the issue, their Lordships observed as follows:
14.?Such provision, however, cannot be seen in isolation and must be read subject to other provisions contained in the Act. In this respect, we may examine other relevant provisions. As noted earlier, Section 61 pertains to period for which goods may remain warehoused. Sub-section (1) of Section 61 provides for different time frame up to which the goods may remain warehoused. The present case falls under clause (b) thereof namely, in case of other goods wherein the time-limit provided is one year. Section 72, as noted, pertains to goods improperly removed from warehouse etc. Sub-section (1) thereof provides for instances where the proper officer may demand the full amount of duty chargeable on account of such goods together with penalties, rent, interest and other charges payable in respect of such goods. Such instances are -
(a) where any warehoused goods are removed in contravention of section 71;
(b) where such goods have not been removed from a warehouse at the expiration of period provided in section 61;
(c) where any warehoused goods have been taken under section 64 as samples without payment of duty, and
(d) where any goods in respect of which a bond has been executed and such goods are not duly accounted for to the satisfaction of the proper officer.
15.?Section 72 thus provides for the power to collect duty under circumstances other than regular clearance of goods for home consumption. Under clause (b) of sub-section (1), the authorities have power to collect duty when it is found that the goods warehoused have not been removed even after the period permitted under Section 61 has expired. In the present case, admittedly, this clause would apply. By virtue of the Supreme Court order dated 21-1-1997, the petitioners had the permission to clear the goods for home consumption. Therefore, even if we accept this date as the starting point for the purpose of Section 61(1), for a full period of one year thereafter, the petitioners did not lift the goods. Under Section 61(1) of the Act, therefore, the maximum period for which such goods could have been warehoused expired. Upon completion of such period, therefore, the liability of the petitioners to pay the duty in terms of clause (b) of sub-section (1) of Section 72 thus arose. We may recall that the cyclone destroyed such goods on 9-6-1998. Therefore, in our opinion, it would emerge that the goods were destroyed after the petitioners liability to pay duty thereon in terms of section 72(1) crystallized. Once the duty liability was crystallized, the destruction of the goods thereafter would make no difference. Sub-section (1) of Section 23 pertains to duty remission when the goods have been lost or destroyed before clearance for home consumption. As noted, Section 72 of the Act governs cases of collection of duty upon the events other than clearance of goods for home consumption. Once, therefore, we find that upon happening of the events envisaged under clause (b) of sub-section (1) of Section 72 of the Act, the liability of the petitioners to pay duty on the goods arose, any subsequent event such as loss or destruction of the goods thereafter would not alter the situation.
20.?This brings us to the sole surviving question namely, the demand of the customs authorities for payment of duty after a long period of time. To reiterate the relevant facts, the maximum period for which the petitioners could have warehoused the goods got over by 21-1-1998 even if we take the date of the order of Supreme Court as the starting point. The present petition was filed on or around 29-11-2001. The first notice on the petition was issued by the High Court on 14-12-2001. On 28-12-2001, the court issued fresh notice. The same would have been served on the respondents particularly the Customs Department sometime thereafter. Thus, nearly four years passed after the period envisaged in Section 61(1) of the Act was over before the respondents were served with a copy of the present petition. Admittedly, during this entire period of four years, the Customs authorities raised no demand for payment of duty. It is true that in the meantime, the petitioners request for remission of the customs duty was rejected. The Customs Department also conveyed to the CWC that its unpaid customs duty is recoverable. However, no notice or any other formal demand for payment of customs duty was raised by the respondent No. 3 against the petitioners.
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22.?We are of the opinion that the notice for recovery of the customs duty is hopelessly belated. Nothing has been brought on record to suggest that due to pendency of the petition and out of due deference to the court in view of pending disputes, the Department did not issue the show-cause notice. In any case, there was no stay against issuance of show-cause notice or even against recovery of the duty. Quite apart from total inaction on part of the respondents to issue such a notice during the pendency of the petition, four years had passed before the petition was filed. During such period no steps were taken at all.
23.?Section 28 of the Customs Act provides for the limitation of one year for collection of unpaid duty unless it is occasioned due to reasons of collusion or wilful mis-statement or suppression of facts in which case extended period of limitation of five years would be available. In this case, even if we may not pin down the customs authorities with such statutory time-limit, as held by series of decisions cited by the counsel for the petitioners and noted by us, such action cannot be initiated after an indefinite period of time. In absence of any statutory time-limit for recovery of duty, action should be initiated within reasonable time. What is reasonable time must depend on facts and circumstances of each case. In the present case, initial inaction on part of the customs authorities for four years before the petition was filed by itself must be seen as unreasonable delay on their part. Even after filing of the petition, total inaction on part of the customs authorities would preclude them from raising the demand for duty now. The impugned show-cause notice, therefore, must fail on this ground for being belated.
24.?Quite apart from this, we also find that the notice is rather vague and general. No specific details have been given as to why such duty is payable in terms of Section 72(1)(b) and (d) of the Act. We may recall that clause (d) of sub-section (1) of Section 72 pertains to a case where bond has been executed and the goods are not accounted for to the satisfaction of the proper officer. We fail to see how such clause can be invoked in view of the admitted fact that the goods were destroyed. Further, the notice also does not compute the amount of unpaid duty that the Department wishes to recover.
7. We find that the principle laid down in the aforesaid case is squarely applicable to the facts of the present case, therefore, in our opinion, the demand is barred by limitation. Accordingly, the impugned order is set aside and the appeal is allowed.
(Operative portion of the order pronounced in the open court)
(Mr. Raju) (Dr. D.M. Misra)
Member (Technical) Member (Judicial)
Neha
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C/91/2009-DB