IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
COURT - I
Appeal No.E/3176/2004-DB, E/3884/2005-DB
Arising out of:
OIA No.RKS/103/SRT/2004, dt.20.07.2004
OIA No.VP/417-418/SRT-I/2005/RB, dt.22.08.2005
Passed by: Commissioner of Central Excise & Customs (Appeals), Surat-I
For approval and signature:
Mr. M.V. Ravindran, Hon ble Member (Judicial)
Mr. H.K. Thakur, Hon ble Member (Technical)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the .
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
Appellant:
CCE Surat-I
Respondent:
M/s Prime Furnishing Pvt.Ltd. & vice versa
Represented by:
For Assessee: None
For Revenue: Shri G.P. Thomas, Superintendent (AR)
CORAM:
MR.M.V. RAVINDRAN, HON BLE MEMBER (JUDICIAL)
MR. H.K. THAKUR, HON BLE MEMBER (TECHNICAL)
Date of Hearing: 15.07.14
Date of Decision: 23.07.14
Order No. A/11417-11418/2014, dt.23.07.2014
Per: H.K. Thakur
1. Both these appeals have been filed by the Revenue against two different orders-in-Appeal passed by the first appellate authority on 22.07.2004 and 22.08.2005 onthe same facts. M/s Prime Furnishing Pvt.Ltd., Mahuva, Dist. Surat (Respondent) are the manufacturers of texturised yarn, grey fabrics and MMF and is a 100% EOU. Respondent was procuring duty free raw materials from other 100% EOUs by following CT-3 procedure. As per Para 6.8 of EXIM Policy 2002-2007, respondent was permitted to sell in DTA Rejects on payment of applicable rates of duty. Revenue observed from the returns of the respondent filed for April 2002 that 120.946 Mtrs of texturised yarn rejects were cleared in DTA without obtaining permission from the Development Commissioner. The declared value of the reject yarn was Rs.21,77,022/- on which Respondent paid duty in terms of Notification No.8/97-CE, dt.1.3.97. A show cause notice dt.8.5.2003 was issued to the respondent demanding duty of Rs.39,06,725/- which was confirmed by the adjudicating authority under OIO No.87/ADJ/ADC-SKA/DEM/2003, dt.27.02.2004, along with interest, and a penalty of Rs.5 lakh was also imposed upon the respondent. An appeal against the OIO dt.27.2.2004 was decided by Commissioner (Appeals) vide OIO No.103/SRT/2004, dt.20.7.2004 under which first appellate authority held that respondent is eligible to the benefit of Notification No.8/97-CE since indigenous raw materials were used in the manufacture of finished goods which were cleared as Rejects in DTA clearance. It was held by the first appellate authority that AC/DC should recalculate the duty in terms of the provisions of main Section 3(1) of the Central Excise Act, 1944. Penalty of Rs.5 lakh imposed upon the respondent was also reduced to Rs.50,000/-.
2. Aggrieved by the OIA dt.20.7.2004 Revenue filed appeal No.E/3176/04 on the grounds that clearances from 100% EOU are not covered by Proviso to Section 3 (1) of the Central Excise Act, 1944 for payment of duty as receipt of goods under CT-3 certificate from one 100% EOU to another 100% EOU is considered as imports as per Para 9.16, 9.18 and 9.12 of EXIM Policy 1997-2002. That benefit of Notification No.8/97-CE is admissible only if goods are acquired from goods manufactured in India (A DTA unit) and not imported goods received from another 100% EOU. That in the present proceedings respondent was required to discharge duty liability under Notification No.2/95-CE as imported goods. The issue of Rs.50,000/- penalty was also remanded by CESTAT to first appellate authority as per Order No.S-105/WZB/05/C-III, dt.24.01.2005 in Appeal No.E/2790/2004.
3. On the other hand as per the remand directions of Commissioner (Appeals) vide order dt.20.7.2004 jurisdictional Deputy Commissioner vide letter dt.25.05.2005 requantified the duty at Rs.16,46,794/-, after making an adjustment of Rs.8,01,144/- duty already paid by the respondent. Against this re-quantification respondent filed an Appeal before Commissioner (Appeals) who vide OIA No.VP/417-418/SRT-I/2005, dt.22.08.2005 held that duty quantification has been wrongly done by the lower authority by taking the value of raw materials (which was more) used for the manufacture of finished goods cleared as rejects. It was held that duty of Rs.8,01,144/- already quantified and paid by the respondent was correct and therefore set aside the requantification done by the lower authority. First appellate authority also set aside the penalty imposed upon the respondent in the OIA dt.22.8.2005.
4. Aggrieved by the OIA dt.22.8.2005 Revenue filed appeal No.E/3884/05 on the following grounds:-
i) The contention of the Commissioner (Appeals); that show cause notice No.V(Ch.54)3-44/DEM/2003 dt.8.5.2003 contains no proposal to demand duty on the raw material consumed in the manufacture of rejected polyester texturised yarn and the Order-in-Original No.87/ ADJ/ADC-SKA/DEM/2003, dt.27.2.2004 does not discuss such scenario, is not correct. That the show cause notice dt.8.5.2003 was issued to the unit by the Commissioner of Central Excise & Customs Surat demanding duty amounting to Rs.39,06,725/-. The basis to arrive at the amount of Rs.39,06,725/- has not been explained in the show cause notice. The only ground given in the show cause notice is that the Unit had cleared the rejected texturised yarn in violation of the provisions of EXIM Policy 2002-2007 and Section 3 of Central Excise Act, 1944 read with Rule 17 of Central Excise Rules, 2002 (Para 7 of the show cause notice), in as much as they have failed to apply appropriate duty on removal of rejected texturised yarn. Further the Unit had cleared the rejected texturized yarn in the guise of Domestic Tariff Area (DTA) sale without valid permission from the Development Commissioner and without intimation to the Jurisdictional Assistant Commissioner by paying improper duty instead of paying duty of Excise equivalent to Customs duties leviable under Customs Tariff Act, 1975 on the like goods when imported into India. The show cause notice further refers to the details of duty given in Annexure-A to the show cause notice. That differential duty of Rs.39,06,725/- has been arrived at by applying the rate as applicable to imported goods as provided in Proviso to Section 3(1) of the Central Excise Act, 1944 on the assessable value equal to the value of the raw material used in manufacture of the Export goods/rejected texturised yarn. That this has been possibly done as the value of the rejected texturised yarn has been declared as Rs.18/- per kg whereas value of the raw material (i.e. untexturised yarn) is Rs.38.94 per kg. However, there is no narration to this effect in the show cause notice that why the value of reject declared by the Unit is being reduced and in its place value of the raw material used in the production of rejected texturised yarn is being taken. Non-narration to this effect gives a false impression that duty demanded in the show cause notice is with respect to the raw material used in the manufacture of goods cleared as rejects and not on the finished goods. That in the show cause notice there is no averment to the effect that duty being demanded is that applicable on the raw material used in manufacture of the rejects and that the only inference could be drawn is that value of raw material has been taken as value of finished goods also as the value of finished goods cannot be less than that of raw materials.
ii) That the order of the Commissioner (Appeals) does not appear to be correct as no demand has been made by the Deputy Commissioner on the raw material. Reference to raw material has been made only to arrive at the value of finished goods. That value of the finished goods (i.e. rejected texturised yarn) has been shown as Rs.21,77,022/- whereas the value of the raw material (i.e. non texturised) yarn used in the manufacture of this goods is Rs.66,52,006/-. That earlier Commissioner (Appeals) has ordered only for calculation of duty and no order has been passed regarding value of the goods or that has been demanded on the raw materials and on the finished goods, therefore assuming that duty demanded in the show cause notice was that relating to raw materials, even then no order has been passed by the Commissioner (Appeals) in this regards earlier. That the appeal against the earlier order of Commissioner (Appeals) filed by the Department is still pending with CESTAT. That earlier appeal filed by the Department on 26.10.2004 against OIA No.RKS/103/SRT/2004 dt.20.7.2004, may be heard by CESTAT simultaneously along with the present appeal.
5. Shri G.P. Thomas (AR) appearing on behalf of the Revenue argued that Commissioner (Appeals) has wrongly held that no penalty is imposable upon the respondent. That on merits respondent was not eligible to the benefit of Notification No.8/97-CE and both the OIAs passed by Commissioner (Appeals) should be set aside. It was his case that both the appeals filed by the Revenue should be allowed.
6. None appeared on behalf of the respondent. Shri Willingdon C. (Advocate) of the appellant vide letter dt.15.07.2014 submitted that both the appeals may be decided on merits on the basis of synopsis already filed on 21.8.2012. In the written submissions respondent has made the following arguments:-
(i) That in view of the following case-laws it is now well settled that respondent has correctly discharged duty liability under Notification No.8/97-CE:-
(a) Virlon Textile Mills Ltd Vs CCE
[2007 (79) RLT 783 (SC)]
(b) CCE Vs Amitex Silk Mills Pvt.Ltd.
[2007 (83) RLT 392 (CESTAT)]
(c) Order dt.9.7.2008 of Apex Court in the case of
CCE Vs Amitex Mills Pvt.Ltd.
(ii) That duty of Rs.16,46,794/- recalculated by Deputy Commissioner vide letter F.No.V(Ch.54) 3-44/Dem/2003, dt.25.05.2005 is on quantity of raw material which can not be demanded and is beyond the scope of show cause notice and also beyond the scope of remand under OIA No.RKS/103/SRT/04, dt.20.7.2004.
(iii) That as the entire amount of duty of Rs.8,01,144/- stand paid, there is no justification in imposing penalty.
7. Heard ld.A.R. and perused the case records including the written submissions made by the respondent. The issue involved in appeal No.E/3176/2004-DB is with respect to eligibility of Notification No.8/97-CE and whether the goods received from other 100% EOU shall be treated as imports. It has been categorically held by Commissioner (Appeals) in OIA dt.20.7.2004 that reject goods cleared in DTA have been procured by the respondent from indigenous sources. Simply by procuring such indigenously manufactured raw materials from another 100% EOU will not make them imported goods as suggested by Revenue. Relevant provisions of the EXIM Policy, considering transfer of goods from one 100% EOU to another 100% EOU as imports, are serving altogether a different purpose and will not make the goods manufactured in India as imported goods. Therefore order of the first appellate authority considering eligibility of Notification No.8/97-CE to the respondent cannot be faulted with and Revenue s appeal No.E/3176/2004 is required to be dismissed.
8. So far as requantification of differential duty is concerned, it is observed that a duty of Rs.39,06,725/- was demanded with respect to DTA clearance of rejects as per Annexure to show cause notice dt.8.5.2003. As per the Annexure to SCN duty was also demanded @ 70.79% of the value of raw materials used in the manufacture of rejects. This quantum of duty and methodology was never questioned by the respondent. Therefore, Revenue is right in agitating that though value of the raw material used in the manufacture of Rejects has been taken for requantification of duty on rejects but such a requantification does not represent duty demand on the raw materials. The appeal of the Revenue to the extent of requantification done by Deputy Commissioner under letter F.No.V(Ch.54) 3-44/Dem/2003, dt.25.05.2005 is required to be allowed by setting aside the OIA dt.22.8.2005 to that extent. We, therefore, hold that the above requantification done by the Revenue in remand proceedings, along with interest, is payable by the respondent.
9. Regarding imposition of penalty upon the respondent, the reasoning given by the first appellate authority in Para 9 of the OIA dt.22.8.2005 is acceptable as the issue involved in these appeals was capable of being interpreted differently. Accordingly, it is held that no penalty is imposable upon the respondent in these proceedings.
10. Appeals filed by the Revenue are disposed off in the manner indicated in Para 7, 8 & 9 above.
(Pronounced in Court on 23.07.2014)
(M.V. Ravindran) (H.K. Thakur)
Member (Judicial) Member (Technical)
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WEST ZONAL BENCH AT AHMEDABAD
COURT - I
Appeal No.E/3176/2004-DB, E/3884/2005-DB
Arising out of:
OIA No.RKS/103/SRT/2004, dt.20.07.2004
OIA No.VP/417-418/SRT-I/2005/RB, dt.22.08.2005
Passed by: Commissioner of Central Excise & Customs (Appeals), Surat-I
For approval and signature:
Mr. M.V. Ravindran, Hon ble Member (Judicial)
Mr. H.K. Thakur, Hon ble Member (Technical)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the .
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
Appellant:
CCE Surat-I
Respondent:
M/s Prime Furnishing Pvt.Ltd. & vice versa
Represented by:
For Assessee: None
For Revenue: Shri G.P. Thomas, Superintendent (AR)
CORAM:
MR.M.V. RAVINDRAN, HON BLE MEMBER (JUDICIAL)
MR. H.K. THAKUR, HON BLE MEMBER (TECHNICAL)
Date of Hearing: 15.07.14
Date of Decision: 23.07.14
Order No. A/11417-11418/2014, dt.23.07.2014
Per: H.K. Thakur
1. Both these appeals have been filed by the Revenue against two different orders-in-Appeal passed by the first appellate authority on 22.07.2004 and 22.08.2005 onthe same facts. M/s Prime Furnishing Pvt.Ltd., Mahuva, Dist. Surat (Respondent) are the manufacturers of texturised yarn, grey fabrics and MMF and is a 100% EOU. Respondent was procuring duty free raw materials from other 100% EOUs by following CT-3 procedure. As per Para 6.8 of EXIM Policy 2002-2007, respondent was permitted to sell in DTA Rejects on payment of applicable rates of duty. Revenue observed from the returns of the respondent filed for April 2002 that 120.946 Mtrs of texturised yarn rejects were cleared in DTA without obtaining permission from the Development Commissioner. The declared value of the reject yarn was Rs.21,77,022/- on which Respondent paid duty in terms of Notification No.8/97-CE, dt.1.3.97. A show cause notice dt.8.5.2003 was issued to the respondent demanding duty of Rs.39,06,725/- which was confirmed by the adjudicating authority under OIO No.87/ADJ/ADC-SKA/DEM/2003, dt.27.02.2004, along with interest, and a penalty of Rs.5 lakh was also imposed upon the respondent. An appeal against the OIO dt.27.2.2004 was decided by Commissioner (Appeals) vide OIO No.103/SRT/2004, dt.20.7.2004 under which first appellate authority held that respondent is eligible to the benefit of Notification No.8/97-CE since indigenous raw materials were used in the manufacture of finished goods which were cleared as Rejects in DTA clearance. It was held by the first appellate authority that AC/DC should recalculate the duty in terms of the provisions of main Section 3(1) of the Central Excise Act, 1944. Penalty of Rs.5 lakh imposed upon the respondent was also reduced to Rs.50,000/-.
2. Aggrieved by the OIA dt.20.7.2004 Revenue filed appeal No.E/3176/04 on the grounds that clearances from 100% EOU are not covered by Proviso to Section 3 (1) of the Central Excise Act, 1944 for payment of duty as receipt of goods under CT-3 certificate from one 100% EOU to another 100% EOU is considered as imports as per Para 9.16, 9.18 and 9.12 of EXIM Policy 1997-2002. That benefit of Notification No.8/97-CE is admissible only if goods are acquired from goods manufactured in India (A DTA unit) and not imported goods received from another 100% EOU. That in the present proceedings respondent was required to discharge duty liability under Notification No.2/95-CE as imported goods. The issue of Rs.50,000/- penalty was also remanded by CESTAT to first appellate authority as per Order No.S-105/WZB/05/C-III, dt.24.01.2005 in Appeal No.E/2790/2004.
3. On the other hand as per the remand directions of Commissioner (Appeals) vide order dt.20.7.2004 jurisdictional Deputy Commissioner vide letter dt.25.05.2005 requantified the duty at Rs.16,46,794/-, after making an adjustment of Rs.8,01,144/- duty already paid by the respondent. Against this re-quantification respondent filed an Appeal before Commissioner (Appeals) who vide OIA No.VP/417-418/SRT-I/2005, dt.22.08.2005 held that duty quantification has been wrongly done by the lower authority by taking the value of raw materials (which was more) used for the manufacture of finished goods cleared as rejects. It was held that duty of Rs.8,01,144/- already quantified and paid by the respondent was correct and therefore set aside the requantification done by the lower authority. First appellate authority also set aside the penalty imposed upon the respondent in the OIA dt.22.8.2005.
4. Aggrieved by the OIA dt.22.8.2005 Revenue filed appeal No.E/3884/05 on the following grounds:-
i) The contention of the Commissioner (Appeals); that show cause notice No.V(Ch.54)3-44/DEM/2003 dt.8.5.2003 contains no proposal to demand duty on the raw material consumed in the manufacture of rejected polyester texturised yarn and the Order-in-Original No.87/ ADJ/ADC-SKA/DEM/2003, dt.27.2.2004 does not discuss such scenario, is not correct. That the show cause notice dt.8.5.2003 was issued to the unit by the Commissioner of Central Excise & Customs Surat demanding duty amounting to Rs.39,06,725/-. The basis to arrive at the amount of Rs.39,06,725/- has not been explained in the show cause notice. The only ground given in the show cause notice is that the Unit had cleared the rejected texturised yarn in violation of the provisions of EXIM Policy 2002-2007 and Section 3 of Central Excise Act, 1944 read with Rule 17 of Central Excise Rules, 2002 (Para 7 of the show cause notice), in as much as they have failed to apply appropriate duty on removal of rejected texturised yarn. Further the Unit had cleared the rejected texturized yarn in the guise of Domestic Tariff Area (DTA) sale without valid permission from the Development Commissioner and without intimation to the Jurisdictional Assistant Commissioner by paying improper duty instead of paying duty of Excise equivalent to Customs duties leviable under Customs Tariff Act, 1975 on the like goods when imported into India. The show cause notice further refers to the details of duty given in Annexure-A to the show cause notice. That differential duty of Rs.39,06,725/- has been arrived at by applying the rate as applicable to imported goods as provided in Proviso to Section 3(1) of the Central Excise Act, 1944 on the assessable value equal to the value of the raw material used in manufacture of the Export goods/rejected texturised yarn. That this has been possibly done as the value of the rejected texturised yarn has been declared as Rs.18/- per kg whereas value of the raw material (i.e. untexturised yarn) is Rs.38.94 per kg. However, there is no narration to this effect in the show cause notice that why the value of reject declared by the Unit is being reduced and in its place value of the raw material used in the production of rejected texturised yarn is being taken. Non-narration to this effect gives a false impression that duty demanded in the show cause notice is with respect to the raw material used in the manufacture of goods cleared as rejects and not on the finished goods. That in the show cause notice there is no averment to the effect that duty being demanded is that applicable on the raw material used in manufacture of the rejects and that the only inference could be drawn is that value of raw material has been taken as value of finished goods also as the value of finished goods cannot be less than that of raw materials.
ii) That the order of the Commissioner (Appeals) does not appear to be correct as no demand has been made by the Deputy Commissioner on the raw material. Reference to raw material has been made only to arrive at the value of finished goods. That value of the finished goods (i.e. rejected texturised yarn) has been shown as Rs.21,77,022/- whereas the value of the raw material (i.e. non texturised) yarn used in the manufacture of this goods is Rs.66,52,006/-. That earlier Commissioner (Appeals) has ordered only for calculation of duty and no order has been passed regarding value of the goods or that has been demanded on the raw materials and on the finished goods, therefore assuming that duty demanded in the show cause notice was that relating to raw materials, even then no order has been passed by the Commissioner (Appeals) in this regards earlier. That the appeal against the earlier order of Commissioner (Appeals) filed by the Department is still pending with CESTAT. That earlier appeal filed by the Department on 26.10.2004 against OIA No.RKS/103/SRT/2004 dt.20.7.2004, may be heard by CESTAT simultaneously along with the present appeal.
5. Shri G.P. Thomas (AR) appearing on behalf of the Revenue argued that Commissioner (Appeals) has wrongly held that no penalty is imposable upon the respondent. That on merits respondent was not eligible to the benefit of Notification No.8/97-CE and both the OIAs passed by Commissioner (Appeals) should be set aside. It was his case that both the appeals filed by the Revenue should be allowed.
6. None appeared on behalf of the respondent. Shri Willingdon C. (Advocate) of the appellant vide letter dt.15.07.2014 submitted that both the appeals may be decided on merits on the basis of synopsis already filed on 21.8.2012. In the written submissions respondent has made the following arguments:-
(i) That in view of the following case-laws it is now well settled that respondent has correctly discharged duty liability under Notification No.8/97-CE:-
(a) Virlon Textile Mills Ltd Vs CCE
[2007 (79) RLT 783 (SC)]
(b) CCE Vs Amitex Silk Mills Pvt.Ltd.
[2007 (83) RLT 392 (CESTAT)]
(c) Order dt.9.7.2008 of Apex Court in the case of
CCE Vs Amitex Mills Pvt.Ltd.
(ii) That duty of Rs.16,46,794/- recalculated by Deputy Commissioner vide letter F.No.V(Ch.54) 3-44/Dem/2003, dt.25.05.2005 is on quantity of raw material which can not be demanded and is beyond the scope of show cause notice and also beyond the scope of remand under OIA No.RKS/103/SRT/04, dt.20.7.2004.
(iii) That as the entire amount of duty of Rs.8,01,144/- stand paid, there is no justification in imposing penalty.
7. Heard ld.A.R. and perused the case records including the written submissions made by the respondent. The issue involved in appeal No.E/3176/2004-DB is with respect to eligibility of Notification No.8/97-CE and whether the goods received from other 100% EOU shall be treated as imports. It has been categorically held by Commissioner (Appeals) in OIA dt.20.7.2004 that reject goods cleared in DTA have been procured by the respondent from indigenous sources. Simply by procuring such indigenously manufactured raw materials from another 100% EOU will not make them imported goods as suggested by Revenue. Relevant provisions of the EXIM Policy, considering transfer of goods from one 100% EOU to another 100% EOU as imports, are serving altogether a different purpose and will not make the goods manufactured in India as imported goods. Therefore order of the first appellate authority considering eligibility of Notification No.8/97-CE to the respondent cannot be faulted with and Revenue s appeal No.E/3176/2004 is required to be dismissed.
8. So far as requantification of differential duty is concerned, it is observed that a duty of Rs.39,06,725/- was demanded with respect to DTA clearance of rejects as per Annexure to show cause notice dt.8.5.2003. As per the Annexure to SCN duty was also demanded @ 70.79% of the value of raw materials used in the manufacture of rejects. This quantum of duty and methodology was never questioned by the respondent. Therefore, Revenue is right in agitating that though value of the raw material used in the manufacture of Rejects has been taken for requantification of duty on rejects but such a requantification does not represent duty demand on the raw materials. The appeal of the Revenue to the extent of requantification done by Deputy Commissioner under letter F.No.V(Ch.54) 3-44/Dem/2003, dt.25.05.2005 is required to be allowed by setting aside the OIA dt.22.8.2005 to that extent. We, therefore, hold that the above requantification done by the Revenue in remand proceedings, along with interest, is payable by the respondent.
9. Regarding imposition of penalty upon the respondent, the reasoning given by the first appellate authority in Para 9 of the OIA dt.22.8.2005 is acceptable as the issue involved in these appeals was capable of being interpreted differently. Accordingly, it is held that no penalty is imposable upon the respondent in these proceedings.
10. Appeals filed by the Revenue are disposed off in the manner indicated in Para 7, 8 & 9 above.
(Pronounced in Court on 23.07.2014)
(M.V. Ravindran) (H.K. Thakur)
Member (Judicial) Member (Technical)
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