2019 (6) TMI 264 - AT - Central Excise

Mechanism for recovery of Excise duty - recovery of amount under Rule 8 of the Customs (Import of goods at concessional rate of duty for manufacture of excisable goods) Rules, 1996 - Goods used for manufacture of optical fibre cables classifiable under Chapter heading 8544 70 - benefit of N/N. 24/2005-CUS dated 01.03.2005 - HELD THAT - The customs duty is payable as per the Tariff read with any notifications at the time of import before such goods are cleared. Wherever any notification is available, subject to conditions, such conditions must be fulfilled. In case of any doubt regarding eligibility of exemption notification, the same must be construed strictly and any benefit of doubt must be given to the revenue and against the assessee - As was evident from the excise returns filed by the assessee themselves, the optical fibre cables which they had manufactured fall under Chapter heading 9001 which were not individually sheathed. Therefore, the exemption notification was not available to the products used in manufacture of OFC falling under Chapter heading 9001. Mechanism for recovery of duty - HELD THAT - The importer may, out of real constraints or practical considerations use the material in some other manner. In such case, the demand under section 28 will not sustain. Further, there are imports in schemes such as EPCG where there is a time limit of 8 years under the Foreign Trade Policies for fulfilment of the conditions. This is clearly beyond the normal period as well as extended period of limitation under section 28. Therefore, Section 28 is the normal section for recovery of duties. Section 143 of the Customs Act provides for recovery of duty, etc., by way of bond which is as much a part of the Customs Act as section 28. However, in order to recover duty under section 143 the bond has to be enforced and demand cannot be raised under section 28 for enforcement of a bond. The usual method of enforcing any bond is by filing of civil suit and the time limit prescribed under section 28 does not apply to any such civil suits - Section 142 provides for recovery of sums due to the Government. Therefore, whenever any bond executed under the Customs Act, Rules or Regulations also mentions that amounts may be recovered under section 142 without prejudice to any other mode of recovery, the amount may be recovered by following the procedure under section 142. If the bond does not mention so, the normal provisions to proceed upon the bond apply. The impugned order sought to recover the amount under Rule 8 of the Customs (Import of goods at concessional rate of duty for manufacture of excisable goods) Rules, 1996 which is not a mechanism for demand of duty. Therefore, the impugned order needs to be set aside on that ground alone. Demand under section 28 - Penalties - HELD THAT - As rightly pointed out by the learned counsel for the appellant, the same can be demanded only by the Customs officers and not the Central Excise officers - Consequently, penalties imposed under section 112 of the Customs Act also need to fail due to lack of jurisdiction itself without going into the merits of the imposition of such penalties. Appeal disposed off.

Summary

Issues Involved:
1. Classification of optical fibre cables under the appropriate tariff heading.
2. Eligibility for customs duty exemption under Notification No. 24/2005-CUS.
3. Mechanism for recovery of customs duty.
4. Imposition of penalties under Section 112 of the Customs Act.

Issue-wise Detailed Analysis:

1. Classification of Optical Fibre Cables:
The primary issue is whether the imported raw materials used by the appellant for manufacturing optical fibre cables (OFC) fall under Tariff heading 8544 or 9001. The distinction is crucial because the customs duty exemption under Notification No. 24/2005-CUS applies only to goods used in the manufacture of OFC classifiable under heading 8544. The Tribunal found that the appellant's manufactured OFCs were classifiable under heading 9001 as they were not individually sheathed, thus not qualifying for the exemption.

2. Eligibility for Customs Duty Exemption:
The appellant claimed exemption under Notification No. 24/2005-CUS, which is conditional upon the goods being used for manufacturing OFC under heading 8544. The Tribunal concluded that since the manufactured OFCs fell under heading 9001, the exemption was not applicable. This decision was based on the principle of strict interpretation of exemption notifications, as established by the Hon’ble Apex Court in the case of Dilip Kumar & Co. and others.

3. Mechanism for Recovery of Customs Duty:
The Tribunal examined the appropriate mechanism for recovering the differential customs duty. The normal mechanism under Section 28 of the Customs Act allows recovery within one year or an extended period of five years in cases of fraud, collusion, etc. However, Rule 8 of the Customs (Import of goods at concessional rate of duty) Rules, 1996, was cited, which mandates recovery if the imported goods are not used as intended. The Tribunal noted that Rule 8 is not a provision for demanding duty but indicates recovery action, which can include enforcing the bond executed under Section 143 of the Customs Act.

4. Imposition of Penalties:
Penalties were imposed under Section 112 of the Customs Act on the appellant and its officers. The Tribunal found that the demand for customs duty could only be raised by customs officers, not Central Excise officers, rendering the penalties imposed under Section 112 invalid due to lack of jurisdiction.

Conclusion:
The Tribunal set aside the impugned order on the grounds that Rule 8 of the Customs (Import of goods at concessional rate of duty) Rules, 1996, is not a mechanism for demanding duty. The demand under Section 28 could only be initiated by customs officers. Consequently, the penalties imposed under Section 112 also failed. The department was advised to take legal action to enforce the bond executed by the appellant. The appeal was disposed of accordingly.