Custom, Excise & Service Tax Tribunal
C.C.E., Jaipur I Vs. M/S Paras Fab ... vs Appeal No.C/169 Of 2006 Is By The ... on 27 November, 2008
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R.K.Puram, New Delhi COURT-III Date of hearing: 27.11.2008 Date of pronouncement: .12.2008 Customs Appeal Nos.169 of 2007 and 30 of 2007 Arising out of the order in appeal No.446(MPM)/CE/JPR-I/2005 dated 6.12.2005 passed by the Commissioner(Appeals I), Central Excise, Jaipur and No.248/2006-KDL/Cus/Commr(A)/AHD dated 28.9.06 passed by Commissioner (Appeals), Customs , Kandla. For Approval and Signature: Honble Mr. M. Veeraiyan, Member (Technical) Honble Mr. P.K. Das, Member (judicial) 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? 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 Respondent
C.C.E., Jaipur I vs. M/s Paras Fab International Appellant Respondent M/s Paras Fab International vs. C.C., Kandla Appearance:
Shri M.P. Singh, Advocate for the assessee Shri L,B. Yavad, Authorized Departmental Representative (DR) for the Revenue Coram : Honble Mr. M. Veeraiyan, Member (Technical) Honble Mr. P.K. Das, Member (Judicial) Order No.____________________ Per M. Veeraiyan:
1.1 Appeal No.C/169 of 2006 is by the Department against the order in appeal No.446(MPM)/CE/JP-I/2005 dated 6.12.2005.
1.2 Appeal No.C/30 of 2007 is by the party against the order of the Commissioner (Appeal) No.248/2006/KDL/Cus/Commissioner (A)/Ahd. dated 28.9.06. This appeal has been ordered to be listed along with appeal No.C/169/06 by Tribunals Stay Order No.S-97/07-Cus dated 14.2.07 in Appeal No.C/30 of 2007.
1.3 Both the cases are interconnected and involve the same party and invove common issues and accordingly, are being dealt with by a common order.
2. Heard both sides.
3.1. The relevant facts, in brief, in Appeal No.C/169 of 2006 are as follows:
a) M/s Paper Fab International ( respondent in appeal No.C/169/06, and appellant in appeal No.C/30/07) is a 100% EOU having their unit at 10-A,RIICO Industrial Area, Khushkhern, Alwar and are engaged in the manufacture of Terry towels falling under heading No.6302 of the Schedule to the Central Excise Tariff Act, 1985.
b) They imported HSD of 1011478 litres through Kandla Port during the period December 2003 to October 2004 and filed into bond Bill of Entry for warehousing the imported goods and got it assessed and removed the goods to their unit in Alwar and warehoused the same. Since the clearance was for warehousing under into Bill of Entry, no duty was paid.
c) The appellant has been granted warehousing licence under Section 58 of the Customs Act and has executed stipulated under Section 59. They also have, as 100% EOU, permission to manufacture the goods under bond.
d) The original authority, on the basis of show cause notice dated 16.12.2004 confirmed demand of additional duty of customs amounting to Rs.15,17,217/- on the ground that the Notification No.52/2003, exempted only basic customs duty and additional customs duty imposed under Section 3 of the Customs Tariff Act and not the additional customs duty imposed under Section 128 of the Finance Act, 2003. He also ordered recovery of interest; he imposed a penalty of Rs.2 lakhs.
e) On appeal by the party, the Commissioner (Appeals) held that the Notification 53/2003 customs dated 31.3.2003 is applicable to HSD imported and consumed by the appellant and accordingly, set aside the order of the original authority.
3.2. The relevant facts, in brief, in Appeal No.C/30 of 2007 are as follows:
As the goods were imported through Kandla Customs, A.C, Kandla Customs issued show cause notices dated 1.9.2004 and 20.12.2004 in respect of HSD proposing demand of additional customs duty imposed under Section 128 of the Finance Act, 2003. The original authority confirmed demand of Rs.10,43,520/- along with interest. The jurisdictional Commissioner (Appeals) by Stay Order dated 31.8.06 directed the importer to deposit a sum of Rs.5,32,125/- and by the order dated 29.9.06 dismissed the appeal for non-compliance of the order dated 31.8.06.
4. Learned Advocate for the party made the following submissions:
a) The goods imported through Kandla port have been duly received in the warehouse. Once the goods are received in the Customs bonded warehouse the jurisdiction of the Customs officer of the port ceases. In support of the contention, he relies on the decision of the five Member Bench in the case of Ferro Alloys Corpn. Ltd. vs. C.C (Appeals), Bhubanesware 1995 (77) ELT 310 (Tri).
b) For removal of the goods from the Port of import to warehouse no exemption Notification need to be claimed. The entire premise of the 100% EOU is a warehouse under the Customs Act. The HSD has been used within the factory in the manufacture under bond and no quantity of HSD has been issued out of said warehouse. The goods were not removed from the warehouse, no ex-bond bill of entry for removal of goods from the warehouse has been filed or assessed. Under these circumstances, the question of any short levy or non-levy does not arise.
c) The duty liability arises only when the goods are removed from the warehouse. The rate of duty applicable to such removal shall be as on the date of removal which could be more than or less than those at the time of import. Since there is no physical removal from the warehouse, the question of demand of duty does not arise.
d) If the goods are removed from the warehouse then only duty requires to be paid and at that time, Notification 52/03 requires to be applied. If the finished goods is manufactured in 100% EOU is cleared for other than export then the applicable duty shall be payable.
e) He relies on the decision of the Tribunal in the case of STI India Ltd. reported in 2008 (222) ELT 112 (Tri-Delhi) wherein it has been held that as the impugned goods were not cleared from the warehouse, there was no question of collection of duty on the goods entailing any short levy. Therefore, there cannot be any demand under Section 28 of the Customs Act. The demand is therefore, not sustainable.
f) As there is no finding that the appellant committed any act of omission or commission rendering the goods liable for confiscation under Section 111 of the Customs Act, we find that no penalty is imposable on the appellants under Section 112 of the Act.
5.1 We have carefully considered the submissions from both sides. One of the issues relates to the jurisdiction of the officer to issue show cause notice in respect of goods imported by 100% EOU through a Customs Port. That is whether the Officers of Customs in charge of the port of importation will issue the issue or whether the officers in whose jurisdiction the 100% EOU is situated will issue the notice.
5.2 We find that the goods have been imported through Kandla Port. The goods have been assessed under bill of entry meant for warehousing the goods. When the goods are to be warehoused, warehousing is permissible irrespective of availability of any exemption. In fact, if the goods are otherwise exempted the question of moving them under a warehousing bond does not arise. In this case, the import was by a 100% EOU and the goods have been cleared under a warehousing bill of entry. At the time of assessment at the Port, the duty is not required to be paid whether the good are eligible for exemption under Notification No.52/03 or not. Since the goods have already been admittedly, received in the warehouse of the 100% EOU , the jurisdiction for raising demand for short-levy, if any, is with the proper officer having jurisdiction over export oriented unit and not Customs House where goods are assessed by into bond bill of entry for the purpose of being warehoused. This is supported by the decision of the five Member Bench in the case of Ferro Alloys Corporation Ltd. vs. C.C. (Appeals), Bhubaneswar -1995 (77) ELT 310. The relevant portion of the order are reproduced below:
The Tribunal has held in these two decisions that in a situation of clearance of warehoused goods, the jurisdiction for raising demand for short levy or refund on reassessment will be with the proper officer granting ex-bond clearance. This view of the Tribunal finds support in the Madras High Court decision in the case of Collector of Customs, Madras v. Tungabhadra Fibres Ltd., reported in 1994 (71) E.L.T. 655 (Mad.). The High Court had held that the assessment of goods into bond on a warehousing Bill of Entry is only tentative and such assessment being made only for the purpose of execution of warehousing bond, is not conclusive. Para-6 of the Madras High Court decision reads as follows : -
* * * * * * * * * Therefore, the reservations expressed by the referring Bench in the present case, about the aptness of the Ferro Alloys Corporation Ltd. decision as regards the jurisdiction in a situation under the warehousing provisions of the Customs Act, 1962, are well-founded. For the reasons discussed above, it has to be held that in the circumstances of this case the jurisdiction for raising demand for short levy will be with the proper officer having jurisdiction over the E.O.U. and not the Custom House where the goods were assessed on an into bond Bill of Entry for the purpose of being warehoused. 5.3. The second issue is whether the entire premises of 100% EOU is to be treated as warehouse and issue of duty free materials for use in the manufacture of final products should be treated as having been cleared for home consumption. The connected issue is that whether duty can be demanded when ex-bond bill of entry is not filed for clearance before use in further manufacture.
The submission of the learned Advocate for the importer that the Notification 52/03 requires to be applied at the time of clearance from the 100% EOU is not acceptable. When the imported goods are removed as such from 100% EOU the question of applying the said Notification does not arise as Notification of 52/03 applies to goods imported for use by 100% EOU. Under these circumstances, the question of applying the said Notification when the goods are cleared as such from 100% EOU without being used in the manufacture does not arise at all.
5.4 The premises of 100% EOU definitely has a licensed warehouse for depositing goods imported duty free and procured duty free. The 100% EOU also has permission to manufacture the goods under bond in terms of Section 65 of the Customs Act. However, to say that the entire premises of 100% EOU is a warehouse and that the goods are not removed for use in the manufacture in bond appears incorrect. The 100% EOU notwithstanding the various benefits availed by them are units in India and the manufacture of excisable goods are governed by the Excise Law. Under Excise Law , removal of goods for captive consumption would also be treated as removal of the goods and requires to pay duty as applicable.
5.5 The Notification 52/03 exempts only basic customs duty and additional customs duty imposed under Section 3 of the Customs Tariff Act. The Special Additional Customs have been imposed under Section 128 of the Finance Act, 2003. The exemption Notification requires to be strictly interpreted. Extending exemption to additional customs duty imposed under Section 128 of the Finance Act, 2003 has to the effect of enlarging the Notification No.52/03 by expanding the list of duties that are exempted under the said Notification. Such an interpretation is not warranted.
5.6 However, the appellant relies on the decision of the Tribunal in the case of STI India Ltd. cited supra. The relevant portions of the said decision are as follows:
4. We find that the impugned goods were assessed on into bond Bills of Entry. The department has no case that the impugned goods were removed from the warehouse or were not used in the production of articles exported. As the impugned goods were not cleared from the warehouse, there was no collection of duty on the goods entailing short levy. Therefore, there cannot be any demand under Section 28 of the Customs Act. The demand is therefore not sustainable. As there is no finding that the appellant committed any act of omission or commission rendering the goods liable for confiscation under Section 111 of the Customs Act, we find that no penalty is imposable on the appellants under Section 112 of the Act.
5. In Priya Blue Industries Ltd. v. CC (Preventive) [2004 (172) E.L.T. 145 (S.C.)], the Apex Court held that once an order of assessment was passed the duty would be payable as per that order. Unless that order of assessment has been reviewed under Section 28 and/or modified in an appeal that order stands. In the instant case, there was no such review/appeal of the assessment by the competent authority, if such a review was required to determine any liability of STI as per the EOU scheme.
6. The EOU had executed bond for discharging any liability relating to goods warehoused by it before the Commissioner, Indore. The EOU is situated in the jurisdiction of Commissioner, Indore. Therefore we do not accept the argument that the Commissioner, Indore is not competent to adjudicate notices issued to recover any short levy in relation to the warehoused goods from the appellant. We also hold that in the absence of a Notification issued under Section 25 of the Customs Act, the impugned goods had to discharge additional customs duty when cleared for home consumption, though the exim policy had mentioned that EOU could import goods without payment of any duty. 5.7 As our prima facie view is in conflict with the decision of the Tribunal in the case of STI India Ltd. cited supra, we deem it proper to refer to Larger Bench for resolving the conflict.
6. We therefore, direct the registry to place the file before the President for constituting a Larger Bench.
(Pronounced in open Court on .12.2008)
(M. Veeraiyan)
Member (Technical)
(P.K. Das)
Member (Judicial)
scd/