Custom, Excise & Service Tax Tribunal
M/S. Sri Sai Annapurna Packaging (I) P. ... vs Cc&Ce, Guntur on 21 July, 2010
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench Division Bench
Court I
Date of Hearing: 23/03/2010
Date of decision:..
Appeal No.E/906 & 907/08
(Arising out of Order-in-original No.3/2008-CE(Commr.) dt. 27/5/2008
passed by CC,CE&ST, Guntur)
For approval and signature:
Honble Mr. M.V.Ravindran, Member(Judicial)
Honble Mr. P.Karthikeyan, Member(Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
Yes
2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
Yes
3.
Whether their Lordship wish to see the fair copy of the Order?
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
Yes
M/s. Sri Sai Annapurna Packaging (I) P. Ltd.
Mr.V.S.Prasad
..Appellant(s)
Vs.
CC&CE, Guntur
..Respondent(s)
Appearance Mr. M.V.S. Prasad, Advocate for the appellants.
Mr. M.M. Ravi Rajendran, JDR for the Revenue.
Coram:
Honble Mr. M.V.Ravindran, Member(Judicial) Honble Mr. P.Karthikeyan, Member(Technical) FINAL ORDER No._______________________2010 Per P.Karthikeyan Appeal No.E/906/08 and E/907/08 have been filed by M/s. Sri Sai Annapurna Packaging (I) Pvt. Ltd. (SAPL) and its Managing Director Shri V.S. Prasad respectively. SAPL is a 100% EOU engaged in the manufacture of HDPE / PP woven sacks laminated with Kraft paper falling under Chapter Sub Heading 4819.19 of the Central Excise Tariff. The EOU had made deemed exports of its finished goods to other 100% EOUs and had not made physical exports outside India directly. On request of the assessee, the jurisdictional Development Commissioner, VEPZ allowed SAPL to make DTA sales in terms of Para 9.9.(e) of Exim Policy 1997-2002. Three such letters of permission were issued to SAPL. Pursuant to these letters of permission, the assessee effected clearances to the DTA from 29/6/2001 to 11/5/2002. Scrutiny of the records of the assessee showed that the assessee had made clearances of its finished goods to DTA availing benefit of Notification No.8/97-CE dt. 1/3/1997 contrary to the permission granted by the Development Commissioner. As per the permission granted under Para 9.9(e) of the Exim Policy, clearances to DTA were to be made against payment of full duties and taxes leviable thereon. This requirement was clearly mentioned in the letters. An EOU could make clearances in terms of the said Notification No.8/97-CE, if such goods were made wholly from indigenous raw materials and the EOU was allowed to sell such goods in India in accordance with provisions of sub-paras (a), (b), (c) and (f) of para 9.20 of Exim Policy 1997-2002. The assessee had short paid duty on clearances of its finished goods made during the material period by availing inadmissible exemption under Notification No.8/97-CE. After due process of law, the Commissioner found that the EOU had availed inadmissible exemption under Notification No.8/97-CE for DTA sales made under para 9.9.(e) of Exim Policy. The Commissioner rejected the claim of the assessee that it was entitled to benefit of Notification No.2/95 CE for clearances made under para 9.9.(e) ibid if not under Notification No.8/97CE. The Commissioner also rejected the plea of the assessee that it was entitled to cum-duty benefit when the differential duty was demanded denying the exemption it had availed. The Commissioner held that the instructions on cum-duty price were issued under Central Excise Valuation provisions and they did not apply to the impugned clearances. She held the assessee liable to penalty under Rule 173Q and 209 of Central Excise Rules, 1994, Rule 25 of Central Excise (2) Rules, 2001 and Rule 25 of Central Excise Rules, 2002 for the respective periods when these rules were in force. She found Shri V.S.Prasad, Managing Director of SAPL as the person responsible for the assessee having indulged in transactions in violation of the Central Excise Rules. She passed the impugned order demanding differential duty of Rs.1,75,93,472/- found due on DTA sales made during the material period as well as applicable interest under Section 11AB of the Central Excise Act, 1944. She imposed a penalty of Rs.1 lakh on SAPL under Rule 173Q and Rule 209 of Central Excise Rules 44 and Rule 25 of Central Excise Rules, 2001/ Central Excise Rules, 2002. She imposed a penalty of Rs.50,000/- on Shri V.S.Prasad under Rule 209A of Central Excise Rules, 1944, Rule 26 of Central Excise Rules, 2001/Rule 26 of Central Excise Rules, 2002.
2. In the appeals filed before the Tribunal, the following grounds have been taken:-
The Commissioner had erred in not considering that the permissions issued by the Development Commissioner had wrongly mentioned para 9.9(e) instead of para 9.9(b) of the Exim Policy. Para 9.9(e) of the policy were intended to allow clearances over and above 50% of the value of deemed exports. Owing to an inadvertent reference to the wrong sub-para of the Exim policy by the Development Commissioner, the Commissioner wrongly denied substantive benefit of a notification. The assessee had substantively complied with the law. The Commissioner had wrongly rejected the submission by the assessee that it had availed concession under Notification No.8/97-CE only in respect of finished goods manufactured solely using indigenous raw materials. The Commissioner erred in denying relief of cum-duty benefit to the assessee labouring under a wrong impression that valuation of the impugned goods had to be done under provisions of Customs Act, 1962 and the instructions on cum-duty price had been issued in relation to Central Excise valuation. The Commissioner had ignored the binding instructions of the CBEC in this regard. The Commissioner ignored the settled law that in the absence of mensrea and in the absence of proposal to confiscate the goods, penalty could not be imposed. The appeal filed by Shri V.S. Prasad, Managing Director of SAPL impugning penalty imposed on him is also similar worded.
3. We have heard ld. Counsel for the appellants and ld. JDR for the Revenue.
4. We have carefully perused the case records and the submissions made during hearing. From the reply furnished to the Commissioner in response to the show cause notice, we note the following submissions:-
The Development Commissioner had issued permission to the assessee to make DTA clearances under para 9.9(e) of the Exim Policy 1997-2002. The clearances made under this provision were not entitled to benefit of Notification No.8/97-CE. The Development Commissioner had allowed the appellant to clear the goods to DTA up to 50% of the value of the deemed exports as they had achieved minimum NFE. The Development Commissioner had applied the principle under para 9.9(b) in issuing the orders of permission to the assessee. Though the permission was given under para 9.9(e), actually the Development Commissioner had applied provisions of para 9.9 (b). The permission letters should be considered to have been issued under para 9.9(b) of the Exim Policy.
5. We note that the relevant paras of the policy read as follows:-
9.9 (a) .
9.9 (b) DTA sale up to 50% of the FOB value of exports may be made subject to payment of applicable duties and fulfillment of minimum NFEP prescribed in Appendix 1 of the policy. No DTA sale shall be permissible in respect of motor cars, alcoholic liquors and such other items as may be stipulated by Director General of Foreign Trade by a Public Notice issued in this behalf.
9.9 (c ).
9.9 (d) ..
9.9 (e) EOU/EPZ/EHTP/STP units may be permitted to sell finished products which are either freely importable under the Policy, or against other import licenses, in the DTA over and above the levels permissible under sub paragraph (b) above against payment of full duties, on annual basis, provided they have achieved the stipulated NFEP and export performance.
6. The rate of duty applicable to clearances and the extent of clearances allowed under these paras are different. The Development Commissioner had issued three letters of permission to the EOU. The letters very clearly mentioned that the EOU should pay full duties and taxes on clearances made in terms specified. The finished goods and the value limit were also specified. Therefore, we cannot hold that the Development Commissioner had specified the relevant policy as para 9.9(e) inadvertently. The assessee admitted in its reply to the Commissioner that it was not entitled to make DTA clearances availing Notification No.8/97-CE and paying only the applicable central excise duty accordingly. As per the reply to the SCN, the appellant admitted that it had a case only if the permission accorded by Development Commissioner was treated to be have been issued under para 9.9(b) of the Exim Policy . This is not permissible. It is also submitted that the appellant had failed to seek permission specifically under para 9.9(b) of the policy. We find that the appellant not only did not seek permission under para 9.9(b) in time nor sought necessary amendment of the permission letter when the Development Commissioner had issued three such letters of permission. Therefore, we cannot waive the legal consequences.
7. The alternative claim for benefit under Notification No.2/95-CE extending concessional rate of 50% of the aggregate duties of customs payable for such goods when imported is also not admissible as per the assessee itself when the goods are cleared under para 9.9(e) of the Exim Policy. In these circumstances, we find that the Commissioner rightly confirmed the impugned demand along with applicable interest.
8. As regards the claim for cum-duty benefit denied by the Commissioner, we find considerable merit in the claim made by the assessee. When a higher rate of duty based on value is found applicable instead of the rate of duty adopted by the assessee to pay duty on clearances initially, it is only appropriate that the assessable value is worked out from the cum-duty sale price and the duty due worked out on the assessable value applying the correct rate of duty. Therefore, this matter needs to be reconsidered and correct duty liability needs to be worked out by the Commissioner. As regards the penalty imposed on the assessee for violation of provisions of Rule 100D, 100C of Central Excise Rules, 1944 and Rule 17 of Central Excise Rules, 2001/2002, we find that the assessee has consistently maintained that the Department and the appellant were under the bonafide belief that it was entitled to benefit of Notification No.8/97-CE. The appellant had informed the Department when it availed the said benefit. The Department was kept informed of every such clearance within 24 hours of making the clearance. Therefore, we cannot hold that the assessee had deliberately short paid the duty due or violated provisions relating to maintenance of accounts or issue of clearance documents. We find that as rightly claimed by the assessee, penalty could be imposed on an assessee only when it was found guilty of any act of commission or omission or rendered goods liable to confiscation (under the Act or Rules). In the instant case, there is no finding of any goods having been rendered liable to be confiscation by SAPL. We find that the Apex Court in the case of Hindustan Steel Ltd. Vs. State of Orissa [1978(2) ELT (J159) (SC)] held that penalty could not be imposed on a person just for the reason that rules provided for the same. Penalty could not be imposed unless a person was found guilty of dishonest or contumacious conduct. In the instant case, we find that the assessee and the Department believed that the impugned clearances were being made in accordance with statutory provisions. Therefore, we hold that no penalty is liable to be imposed on the assessee. The penalty imposed on the assessee is vacated. Unless the government specifically directs otherwise, when an indirect tax not discharged is found due on any transaction, the proceeds realized have to be treated as inclusive of the tax due and the liability determined accordingly.
9. The matter is remanded to the Commissioner for determining the duty liability of the assessee after allowing the cum-duty benefit to the impugned clearances. Needless to say that the assessee shall be heard before the matter is adjudicated afresh. Appeal is thus allowed by way of remand.
Appeal No.E/907/08
10. Except that the appellant Shri V.S. Prasad being the Managing Director of the EOU was in charge of the day-to-day affairs of the assessee company, in the facts of the case, no guilt or malafide can be attributed to him as regards impugned transactions. That the Department did not object to the assessee making clearances in terms of Notification No.8/97-CE is proof of the fact that when the clearances were made, the authorities were not of the view that the clearances involved violation of statutory provisions. In the circumstances, we find that the penalty imposed on Shri V.S.Prasad is not sustainable. The penalty imposed on him is set aside and the appeal is allowed.
(Pronounced in court on ..) (P.KARTHIKEYAN) Member (Technical) (M.V. RAVINDRAN) Member (Judicial) Nr ??
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