Customs, Excise and Gold Tribunal - Delhi
Khabros Steel (I) Ltd. vs Commissioner Of Central Excise, ... on 7 January, 2002
Equivalent citations: 2003(89)ECC472, 2002(141)ELT257(TRI-DEL)
JUDGMENT K.K. Bhatia, Member (T)
1. The appellants, M/s. Khab-ros Steel India Ltd., Bhiwadi were granted Industrial Licence dated 11-6-86 by the Government of India, Ministry of Industries to establish a 100% EOU for the manufacture of Stainless Steel Cutlery (Spoons and Forks) within the installed capacity on the basis of maximum utilisation of plant and machinery of five million dozen pieces. The licence was granted subject to the condition that the entire production shall be exported excluding the rejects not exceeding 5% for a period of 10 years. The appellants imported plant and machinery, components, equipment, spares, etc., valued at Rs. 1,84,94,243/-without payment of duty of Rs. 2,11,08,034/- by availing the exemption under Notfn. No. 13/81-Cus., dated 9-2-81 read with Notfn. No. 123/81-C.E., dated 2-6-81 as amended. They also procured indigenous capital goods/raw material without payment of Central Excise, duty of Rs. 2,84,390/- and Rs. 15,86,663.40 respectively.
2. They were issued a show cause notice dated 10-1-1996 and its modification dated 22-1-1998 alleging that they had not fulfilled the export obligation and failed to export the entire production excluding 5% rejection for a period of 10 years and as such they had failed to observe the condition of the licence. In the same show cause notice a duty of Rs. 23,79,369/- was demanded in respect of the goods cleared vide AR-4 No. 3/92-93, dated 23-12-92 for which the party had failed to produce any proof of export. On consideration of the reply of the party, the Commissioner of Central Excise, Jaipur vide his order dated 15-3-2000 confirmed a demand of Central Excise duty of Rs. 18,71,053.40 on the appellants under Section 11A of the Central Excise Act, 1944 in respect of the capital goods indigenously procured. He also ordered for the confiscation of the indigenous capital goods and raw material lying with the party under Rule 173Q of Central Excise Rules, 1944. He however gave an option to the party to redeem the same on payment of fine of Rs. 15 lakhs. He further imposed a penalty of Rs. 25 lakhs on the party under Rule 173Q in respect of the indigenously processed duty free capital goods. The Commissioner confirmed a demand of Rs. 2,11,08,034/- under Section 28 of the Customs Act, 1962. He also ordered for the confiscation of the duty free imported goods under Section 111(o) of the Customs Act, 1962 but gave an option to the party to redeem the same on payment of a fine of Rs. 60 lakhs. He further imposed a penalty of Rs. 30 lakhs on the party under Section 112 of the Customs Act. In respect of the demand of Rs. 23,79,369/-pertaining to the goods cleared vide AR-4 No. 3/92-93, dated 23-12-92, the Commissioner held that no suppression clause is invoked against the party and the demand is made beyond a period of six months, the same is therefore time-barred and hence, he dropped the proceedings initiated against the party in respect of this demand.
3. The present are the appeals by M/s. Khabros Steel (I) Ltd. and the Revenue against the impugned order of the Commissioner. The Revenue have filed the appeal for the part of the demand on the party dropped by the Commissioner.
4. We have heard Shri J.M. Sharma, Consultant for the appellants and Shri R.D. Negi, SDR for the respondents/Revenue. The Id. Counsel for the appellants has raised a preliminary objection that the Collector of Central Excise, Jaipur who has passed this order has no jurisdiction in the matter since at Sl. No. 12 of the Table annexed to Notification No. 27/97-Cus. (NX), dated 7-7-97 issued by the Central Government under Section 4 of the Customs Act, 1962, the Commissioner of Customs, Jodhpur is appointed as Commissioner of Customs for the whole of the State of Rajasthan and therefore it is contended that the Commissioner of Central Excise, Jaipur who has adjudicated this case, does not have the jurisdiction to adjudicate the matter relating to the customs law unless a similar notification is issued in his favour by the Govt. of India. Shri R.D. Negi, SDR for the Revenue countering this argument contends that the Government of India, Ministry of Finance (Department of Revenue) vide their Circular No. 126/95, dated 12-12-1995 as amended by Circular No. 27/96, dated 10-5-1996 have appointed the Commissioner of Central Excise, Jaipur as the proper authority to adjudicate cases pertaining to 100% EOU falling under his administrative control. It is also submitted that the appellants as a 100% EOU are voluntarily submitting to the jurisdiction of the Commissioner of Central Excise, Jaipur for all the administrative and legal purpose such as filing of Bonds, AR. 4s, reports, re-
turns, and export obligations. Therefore, it is not open to them to challenge his authority in the present case. We find force in these submissions. The appellants are not contesting the aforestated circular of the Central Government conferring the control on the CCE, Jaipur over the 100% EOUs within his jurisdiction. It is also not in dispute that the Central Government has the power under the Customs Act to confer such jurisdiction on the Commissioners. Further more, the present case not only deals with the demand under the Customs Act but also with that under the Central Excise Act to which the appellants have raised no objection. In view of these facts and the position in law, we find no force in this preliminary objection raised by the Id. Consultant for the appellants and reject the same as untenable.
5. The second contention raised by the appellants is regarding the time-bar of demand. It is contended that the goods in respect of which the demand of customs duty is raised were imported from 1986 to 1988 and even the indigenous goods were procured on availing the exemption from the centra! excise duty during the period from 1988-1992. The show cause notice in this case is issued on 10-1-96 and the modification to notice is issued on 22-1-98. It is stated that there is no suppression clause invoked in the show cause notice. Therefore, it is contended that the notice is time-barred both under Section 28 of he Customs Act, 1962 and under Section 11A of the Central Excise Act, 1944. The Id. Consultant for the appellants in support of his contention is relying on the decision of the Tribunal in Deewan Chand Satyapal Agar-wal Imaging Research Centre v. Commissioner of Customs, New Delhi reported in (2001 (136) E.L.T. 1116 (T) = 2000 (39) RLT 1084 (T)] in which the Tribunal has not accepted the argument of the Revenue that limitation under Section 28 of the Customs Act, 1962 would not apply in the case of a notification requiring fulfilment of post-importation obligation and it is held that since the show cause notice had been issued beyond the limitation period under Section 28, the time-bar would apply. The Id. SDR for the respondents relies on the judgment of the Hon'ble Supreme Court in Commissioner of Customs (Import) Mumbai v. Jagdish Cancer and Research Centre [2001 (132) E.L.T. 257 (S.C.)], in which the Apex Court relying on their earlier judgment in Mediwell Hospital and Health Care Pvt. Ltd. v. Union of India [1997 (89) E.L.T. 425 (S.C)] have observed that according to the conditions of the notification in terms of which exemption on the imported goods or indigenously procured goods is availed, it is a continuing obligation for the violation of which, if the goods are ordered for confiscation and an option is given to pay fine in terms of subsection (1) of Section 125 of the Customs Act, then in terms of Sub-section (2) of that section, where an order is passed for payment of customs duty along with the order of imposition of fine in lieu of confiscation of goods, it shall only be referable to Sub-section (2) of Section 125 of the Customs Act. It would not attract Section 28(1) of the Customs Act which covers excess of duty not levied, short-levied or erroneously refunded etc. The order for payment of duty under Section 125(2) would be integral part of the proceedings relating to the confiscation and consequential orders thereon on the ground as in this case that the importer had violated the conditions of notification subject to which exemption of the goods was granted, without attracting the provisions of Section 28(1) of the Customs Act. The Id. SDR further relied on the decision of Hon'ble Karnataka High Court in Medical Relief Society of South Kanara v. Union of India [1999 (111) E.L.T. 327 (Kar.)]. In this deci-
sion the Court has observed that the goods which are exempted from payment of duty subject to any condition are liable to be confiscated in case the conditions subject to which the same are exempted from duty are not satisfied unless the non-observance thereof is sanctioned by the proper officer. The medical equipment (in the case before the court) was imported subject to the conditions that the petitioners continuously discharge the obligation of providing a medical, surgical and diagnostic treatment to atleast 40% of its outdoor patients and to indoor patients with a family income of less than Rs. 500/- per month. Failure to discharge that obligation was liable to expose the equipment to the confiscation besides entitling the department to recover the amount of duty payable on the same. The proceedings for recovery of the exempted customs duty or the confiscation of the equipment in the above circumstances does not fall foul of Section 28. Therefore, on taking together into consideration, the ratios of the judgments of the Hon'ble Supreme Court in the case of Mediwell Hospital and Health Care Pvt. Ltd., Jagdish Cancer and Research Centre and that of the Karnataka High Court in the case of Medical Relief Society of South Kanara (referred to supra), we are of the view that there is no bar against demand of differential duty, subjecting the goods to confiscation for violation of the provisons of the relevant notifications and imposition of penalty either under the customs or the central excise law. The Id. Consultant for the appellants submits that during the operation of the unit, they had exported goods worth Rs. 2.05 crores which constituted 100% of their production except waste and scrap within the permissible limit which was sold in the DTA in accordance with the EXIM Policy. It is stated that due to slump in business, they had to close down their unit in December, 1992. They had written to the Development Commissioner, NEPZ for the debond-ing of the unit as such the demand made in the show cause notice is premature. The appellants are submitting that they are willing to pay the duty as per the departmental instructions and in this regard a reference is made to the Board's instructions issued under their Circular No. 305/136/92-FIT, dated 5-6-1992 and Circular No. 43/98, dated 26-6-1998 (from F. No. 314/19/98-FIT) under which depreciation in value for capital goods ranging from 4% for every quarter in the first 'year to 2.5% for every quarter in the fourth year subject to maximum of 90% is allowed. The appellants are contending that they are willing to pay the duty at the depreciated value as provided under these instructions of the Board. However, it is contended that no penalty is liable to be imposed since neither under the Customs Act nor under the Central Excise Act any particular provision of the law is cited which is stated to have been violated and also no confiscation of the goods can be resorted to.
6. We have given our earnest consideration to the above submission. Admittedly, the appellants were permitted to import the capital goods, component parts and raw material etc. as also to procure the same without payment of duty from indigenous sources by availing the exemption under the notifications cited in the opening para of this order. They were allowed this concession on the condition that they will export the entire goods viz., S.S. Cutlery - spoons and forks (excluding rejects to the extent of 5%) for a period of 10 years. Their installed capacity was approved as 5 million dozen pieces. They manufactured and exported the goods only up to December, 1992 when they shutdown their unit. Though we find force in their argument that they were not to show the export of 5 million dozen pieces of S.S. Cutlery which is only their approved installed capacity - but they did not fulfil the condition of exporting the goods manufactured by them up to a period of ten years as stipulated under the Industrial Licence dated 11-6-86 granted to them. The grant of exemption from Customs and Central Excise duty under the relevant exemption notification is sequel to the industrial licence issued to them. They have applied for debonding of their unit which means that they have neither fulfilled their export obligation nor are they willing or are in a position to do the same. In this view of the matter, there is a clear liability on their shoulders to pay the Customs and Central Excise duties on the goods which were procured duty free with this obligation. We have seen above that the Apex Court and the Karnataka High Court in their respective judgments have approved such course of action on the ground that their liability is a continuing one and so long as it is not fully discharged, the goods would be liable for duty, confiscation and penalty etc. However, the liability of the appellants to pay the duty is only on the depreciated value as provided in the Board's instructions referred to supra. The amount of redemption fine and penalty are also to be re-determined in accordance with the depreciated value of the goods held to be liable for confiscation.
7. The Revenue have also filed cross-objections in respect of the part of the order under which the Commissioner has dropped the demand of Rs. 23,79,369/- pertaining to the goods cleared vide AR 4 No. 3/92-93, dated 22-12-92. In this matter, the Commissioner has held that since no suppression clause has been invoked in the show cause notice and the demand pertaining to these goods is beyond a period of six months, the same is time-barred. In the cross-objections of the department, it is argued that since in this case, the proof of export has not been furnished the duty payable on such goods is to be recovered under Rule 14A which at the relevant time provided that if the goods are not exported and proof of export is not furnished, full duty is payable on the goods in accordance with the provisions of law. In this case, the party did not submit the proof of export in respect of S.S. Cutlery claimed to have been cleared for export under bond. Though the party is claiming that in their letter dated 23-3-98 they had submitted the proof of export to the Range Office as well as the Divisional Office, yet, there is no supporting evidence forthcoming for this submission. It is therefore contended that in the absence of the proof of export, Central Excise duty amounting to Rs. 23,79,369/- is clearly recoverable under Rule 14A and the demand cannot be held time-barred, as there is no time prescribed to make a demand in the case of failure on the part of the noticee to furnish the proof of export. We have considered these submissions. We have already held above that there is a continuous obligation for exporting the goods and no time-bar for the purpose of demand of duty would operate. The export of the goods under this AR-4 is also part of the same obligation. However, it is observed that under the proviso to Rule 12(l)(b), the Commissioner of Central Excise is empowered to allow rebate, even if all or any of the conditions laid down in any notification issued in this rule have not been complied with. We are of the view that on the principle of parity, these provisions can be made applicable to the export under bond also. Therefore, if the Commissioner of Central Excise is satisfied that goods are indeed exported, he may not demand duty even in the absence of the production of the AR-4. For this purpose, the case should be re-examined and appellants shall be afforded another opportunity to produce any collateral evidence to establish before the Commissioner that the goods under the impugned AR. 4 have been exported.
8. In view of the above analysis, we uphold the findings of the Commissioner that the capital goods cleared by availing exemption either under a customs notification or a central excise notification are liable to pay the duty of customs or central excise as the case may be. They are also liable to confiscation and penalty. The quantum of duty, fines and penalty shall however be determined with reference to the depreciated value of the goods as discussed above. The matter is thus remanded to the Commissioner for re-adjudication. The case relating to the AR-4 No. 3/92-93, dated 23-12-92 is also remanded. The appellants shall be afforded a reasonable opportunity of making written and oral submissions. The appeal is disposed off in these terms.