Customs, Excise and Gold Tribunal - Mumbai
Tata Iron And Steel Co. Ltd., Dr. J.J. ... vs Commissioner Of Central Excise And ... on 30 August, 2005
Equivalent citations: 2006(104)ECC255, 2006ECR255(TRI.-MUMBAI), 2006(198)ELT290(TRI-MUMBAI)
JUDGMENT
S.S. Sekhon, Member (Technical) Page 256
1. The present appeals are against the order in original dtd 19th December, 2002 passed by Commissioner of Central Excise, Bhubaneshwar by the said order. It was held that the market value of 42 million deutche marks failed on merits being not supported by any legal provisions and thereafter it is submitted that the completely new ground which was not even alleged in the show cause notice was made out against the appellant assessee/importer purporting to hold that the value of the contract No. MD/601 dtd 22nd August, 1990 of 1 MDM under which technical documents imported from Portuguese Government Company, from Siderurgia Nacional (hereinafter referred to as SN for short) by the assessee/importer were to be part of value of 2120 tonnes Page 257 LD converters & other machinery imported. The goods imported by the assessee/imported in agreement being contract No. MD/601 dtd 22nd August, 1990 from SN. The Commissioner has held that the part of the value of the imported equipment was transferred to as engineering, drawings & documents i.e. to technical documents thereby resulting in under-valuation of the goods imported to the extent 1 MDM and therefore the total duty payable of goods were Rs. 17,70,80,340 as against Rs. 16,62,72,947 declared and claimed by the appellants and therefore there was a duty evasion of Rs. 1,08,07,393. The said demands were therefore continued under Section 28 of the Customs Act 1962 and since the assessee importers had already paid the duty amount of Rs. 17,70,80,340 determined at the time of clearance of the goods of provisional assessment basis, therefore no further duty was to be determined as recoverable. The penalty of Rs. 1.96 crores upon the importers under Section 112 of the Customs Act 1962 was imposed along with the liability to confiscation under Sections 111(d) and (m) of the Act. On the grounds that the ITC licence did 6th December, 1991 fell short of the CIF value of the said goods as determined now by the order. Therefore the goods were held liable to confiscation under Section 111(d). The Commissioner allowed the redemption of this confiscation liability on a fine of Rs. 1.5 crores. No grounds are separately arrived to hold the liability to confiscation under Section 111(m) of the Customs Act 1962. The Managing Director, Dr. J.J. Irani and the then Dy. General Manager Mr. C.S. Ekambaram was also visited with penalty of Rs. 1 crore and Rs. 2 lakhs respectively under provisions of Section 112 of the Act. Hence these appeals.
2. After hearing both sides & considering the material it is found:
a) from the show cause notice it is seen that the allegations therein were that market value of the said goods (as new) and referred to in the chartered engineers certificate were to be basis for assessment of the customs duty and thereby the value of the goods was to be basis of 42MDM instead of 12.6MDM as declared. The consequent under valuation and evasion of duty would work out to extent of Rs. 30,69,29,961. The show cause notice is silent about the modus oprandi of transferring part of the value of the equipment to the value of engineering and technical drawing documents or that the value for such drawings and documents was required to be included in the value for determining for assessable value of the goods under import. Commissioner therefore, has proceeded beyond the issues raised and an order therefore is vitiated. It is to be stuck down of this ground alone. Reliance by the appellants on the case of GTC Industries Ltd v. CCE 1997(94) ELT 9(SC) and catena of decisions of this Tribunal by the appellants is well founded.
b) Once the order pursuant to the show cause notice is not being upheld, the question of imposition of penalty or confiscation of the goods under Section 111d&m and penalty under Section 112 of the Customs Act 1962 is not called for. The goods have been cleared on provisional assessment. Therefore the notice purporting to demand duties under the provision of Page 258 Section 28(1) of the Customs Act 1962 and confiscation liabilities under Section 111(b) and (h) along with penalty liabilities cannot be upheld since the condition precedent for determining duties under Section 28 has not been arrived at. The order of the Asst. Commissioner dtd 30th July, 1992 and 14th August, 1992 in very clear terms indicates that the subject goods were allowed clearance in terms of provisional assessment order of the Asst. Collr of Customs Paradeep. It is a fact on record that the appellants had executed the provisional duty bond backed by a bank guarantee and a final assessment as contemplated under Section 28(3)(b) of the Customs Act 1962 and consequent "adjustment of duty" as required thereunder has not taken place. This finding arrived is settled by the decision of the Supreme Court, High Court and CESTAT and the Reliance on the following decisions by the appellants is well founded
i) ITC Ltd v. Commissioner of Central Excise1 wherein the Larger Bench of this Tribunal referred to and relied upon various decisions of the Supreme Court & High Court and arrived at the decisions of demands under Section 11A in case of provisional assessment under the Central Excise Act 1944. The provisions of law being pari materia this decision would be applicable.
ii) Sterlite Optical Technologies Ltd v. CC, Mumbai 2003 (55) RLT 721 (T-Mum)
iii) Finolex Industries Ltd v. CC, Mumbai 2003 (58) RLT 807 (T-Mum)
iv) Radiant Acrylic v. CCE, Jaipur 2005 (66) RLT 778 (Tri.Del)
c) The offer letter dtd 13th August, 1986 of M/s EHI referred to by the Commissioner in the said order relates to the entire steel plant equipments available with SN, Portugal which comprised of blast furnace, LD converter, rolling mill and torpedo ladle cars "along with all drawings and engineering, related to the project". This would clearly show that the offer as contained therein related to not only the equipments but also all drawings and engineerings related to the entire project i.e., the steel plant, contrary to what has been alleged in the said order, the expression "drawings and engineerings" contained in the said letter dtd 13th August, 1986 was altered to "technical documents" (which meant the same) in the offer submitted by M/s EHI to the appellant by its letter dtd 2nd March, 1990. By the said letter dtd 2nd March, 1990, EHI resubmitted its offer on behalf of SN for the said goods only, along with the relevant technical documents in respect of the project. Hence the 15 MDM price quoted therein related to the said goods "and associated documentation" as specified in the said letter dtd 2nd March, 1990 itself. The offer dtd 13th August, 1986 and the contract MD-601 being a followup of this fresh offer dtd 2nd March, 1990 of EHI made on behalf of SN, the terminologies used in ail the said three documents had to be and were the same. Contrary to the fertile imagination of the Commissioner there was no motive or oblique purpose in making such change in the Page 259 nomenclature. The fact that the technical documents had separate existence from the said goods and there was a price therefore (which were reflected in the agreement being MD-601) would also be evident from the letters dtd 31st August, 1987 of Kawasaki Heavy industries Ltd., Japan 21st July, 1987 of Voest Alpine AG, Austria and 24th July, 1987 of Mecan Arbed, Luxembourg to SN conveying their respective "No objections" to SN handling over the subject equipments and materials of which they were the manufacturers and delivering to the buyer thereof the related technical documentation. The nature of these technical documentations were also clearly specified in the said letters of 1987 (written three years prior to the agreements which SN and the appellant entered into the said imports). Thus it is clearly specified therein that the technical documentations were drawings, records, technical information, etc. to be used for the erection, operation and maintenance of the units in which the said goods would be used. As a matter of fact, the letter of Kawasaki Heavy Industries Ltd, Japan clearly specified that "manufacturing drawings and technical information" were to be excluded and should not be handed over and transferred to the buyer of the said goods. These documents formed a part of the Contracts MD601 and 602 "wherever applicable" as recorded in the Minutes of the Meeting dtd 21st August, 1990 between the appellant and SN and were all duly submitted to the customs authorities at Paradeep, as would be evident from the relevant records. The cost of these technical documents was agreed to by the parties, that is, SN and the appellant to be 1MDM. No material to the contrary is available on record and none has been disclosed in the said order. Though initially the appellant offered 11MDM for the equipments it accepted SN's revised offer of 12.6 MDM for the said goods. There is no material disclosed, which prima facie, established that the costs of equipments as negotiated by the parties was more than 12.6 MDM and a part thereof was transferred to the cost of technical documents and therefore formed a part of the said 1 MDM. In the absence of any such material, the finding of the Commissioner in the said order is based on mere assumptions and presumptions unsupported by any evidence. The findings are untenable and unsustainable.
d) In page 23 of the order, even according to the Commissioner, allegedly "a portion of the value of the goods was transferred to the MD-601" as allegedly documents such as operation manual, documents required for assembling, commissioning and operating the goods, etc. were included in the scope of MD-601 although they formed actually parts of the normal equipments. Therefore, even according to the Commissioner, only "a portion" of 1 MDM reflected the value of the goods transferred to the technical documents cost i.e. a part of the 1 MDM only (which also is unsupported by any cogent reasoning or basis whatsoever). However, in the said order the Commissioner has gone to include the entire 1 MDM for determining the assessable value of the said goods and consequent determination of customs duty payable thereon. This by itself has vitiated the said order and has rendered the same illegal, invalid and void ab initio.
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e) The finding of the Commissioner that the value of the technical documents under the Contract MD-601 was a fictional value and alleged superficial creation out of the "overall price" of the said goods, has no merits or substance whatsoever, are conclusions which have no justification or basis whatsoever. Both the equipments under Contract MD-602 and the technical documents under Contract MD601 were imported in terms of specific permission/approval granted by the Government of India, Ministry of Industry, Department of Industrial Development, New Delhi on 4th November, 1991. It would be seen from the said approvals, copies whereof are included in the paper book, that such approvals/permissions/license were granted upon full and due scrutiny of all relevant materials and particulars, including the two agreements entered info by the appellant with SN. The technical documentation fee of 1 MDM was also duly approved upon dues scrutiny and on conditions as laid down in the approval letter. All relevant materials and particulars including the purpose for which the said technical documents were required and the value thereof along with copy of the agreement MD601 were submitted by the appellant before the Government of India by its letter dtd 5th April, 1991, a copy whereof is included in the paper book. The import of the technical documents and the fee of 1 MDM to be paid thereon were approved upon due scrutiny of these materials and documents by the concerned government of India authorities. Inspite of these documents being available on record, it is incomprehensible how the Commissioner could come to the misconceived assumption that file said cost of the technical documentation of 1 MDM represented the fictional value thereof or was a superficial creation from the price of the said goods. It is pertinent to note in this respect that the approvals were granted separately for the technical documentation and the said goods on the same date by the same authority of the Government of India and both the letters were under the signature of the same under-secretary of the Government of India. There is no material on record, and none disclosed, to show that the said approvals had been obtained by suppression of any materials or misrepresentation of facts. These documents, interalia, clearly and unequivocally demonstrate that the price of 1 MDM of the technical documents was a genuine value thereof as agreed to by the parties, as the case was, and no part thereof related to the value or cost of the imported equipments.
f) Following the decision in the case of Mangalore Refinery & Petrochemicals Ltd. v. CC, Mangalore it is to be held that in this case also no penalty can be imposed under Section 112 of the Act without finalising to original assessment.
3. In view of the findings, herein above, duty demands as arrived at liability to confiscation and penalties cannot be sustained. The order is set aside. Since provisional assessment and the project import regulations finalisation under which the imports were effected has to be arrived at, the order is set Page 261 aside with permission to the proper officer to finalize. The finalization of the project import regulations should be arrived at after hearing the appellants.
4. Appeal of M/s Tata Iron & Steel Co. Ltd allowed as remand in above terms. The order is set aside and other appeal are allowed in full.