2012 (10) TMI 822 - CGOVT - Central Excise

Benefit of export - Manufacturing of Bulk Drugs The applicant while accepting statutory applicability of all the relevant Rule/Notification/Circular is basically impressing upon whatever act of omission and commission, whichever occurred in this case is only of a nature of procedural error which is liable to be condoned and such substantial benefit of exemption from duty should not be denied in this case of exports. Held that - whatever may be the internal/personal agreement between different parties/agents etc. the act of duty free clearance in this case was statutorily required to be done in the manner of provision of applicable Rules/Regulations and all legal documentations should be done accordingly. Once a specific category has been chosen then the individuals becomes liable and bound by respective regulatory procedure which (admittedly) stands violated in this case - Benefit of export not available to the assessee.

Summary

Issues Involved:
1. Procedural compliance for duty-free export under bond/CT-1.
2. Validity of duty demand and penalty for procedural lapses.
3. Interpretation of relevant rules, notifications, and circulars.
4. Revenue neutrality and proof of export.

Issue-wise Detailed Analysis:

1. Procedural compliance for duty-free export under bond/CT-1:
The applicant, M/s. Dymach Pharma, Vapi, cleared goods to M/s. Sal Pharma, Hyderabad, instead of the bond holder M/s. Dymach Pharma, Mumbai, under CT-1 No. 175/07-08. The original authority found this to be a contravention of Rule 4, Rule 8, and Rule 19 of the Central Excise Rules, 2002, and Notification No. 42/2001-C.E. (N.T.), dated 26-6-2001. The goods were cleared without valid documents, making them liable for duty recovery under Section 11A(1) of the Central Excise Act, 1944, along with interest and penalty under Rule 25 of the Central Excise Rules, 2002, read with Section 11AC of the Central Excise Act, 1944.

2. Validity of duty demand and penalty for procedural lapses:
The applicant argued that the goods were eventually exported by M/s. Sal Pharma, thus complying with substantive law requirements, and that the procedural lapse should be condoned. However, the government upheld the duty demand and penalty, emphasizing that the statutory provisions must be followed strictly, as per the Supreme Court's observations in C.C.E., Vadodara v. Dhiren Chemical Industries Ltd. and M/s. India Aluminium Co. The procedural requirements stipulated in the Central Excise Rules and relevant circulars were not met, justifying the duty demand and penalty.

3. Interpretation of relevant rules, notifications, and circulars:
The applicant contended that the law allows a manufacturer to furnish a bond and export goods through a merchant exporter, citing Circular No. 87/87/94-CX and Circular No. 500/66/99-CX. However, the government noted that the specific procedure for duty-free clearance under bond/CT-1 was not followed. The relevant circulars and notifications require that the AR-4 form be signed by both the merchant-exporter and the manufacturer, which was not done in this case. The government's interpretation aligned with the Commissioner (Appeals), who upheld the duty demand and penalty while granting partial relief on fine and penalty.

4. Revenue neutrality and proof of export:
The applicant argued that since the goods were exported, the duty demand should be considered revenue-neutral, and any duty paid would be subject to refund through rebate. They also submitted proof of export to the jurisdictional authority in Mumbai, which had not been rejected. The government, however, emphasized that the procedural requirements for duty-free clearance must be followed, and the proof of export does not negate the procedural lapses. The cited case laws were deemed not directly applicable to the present case, as they involved different facts and circumstances.

Conclusion:
The government upheld the Order-in-Appeal, confirming the duty demand and penalty for procedural non-compliance while granting partial relief on fine and penalty. The revision application was rejected for being devoid of merits, emphasizing the importance of adhering to statutory procedures for duty-free export under bond/CT-1.