2005 (5) TMI 222 - AT - Central Excise

Confiscation - Import - Cosmetics and toiletteries - Penalty - HELD THAT - Imports as arrived in the finding under Sections 111(a) and 111(d) cannot be confiscated, as the order travels beyond the notice issued. Penalty of Rs. 5 lakhs in lieu of confiscation cannot be upheld as ordered. Very strangely, the ld. Commissioner, has not arrived at any order of confiscation by indicating any provision of the Customs Act, 1962 in the order portion, nor offered any redemption fine which was to be offered. We therefore cannot uphold the liability to confiscation or order to confiscate. Penalty of Rs. 10 lakhs on the appellants. The order portion imposes the same, under Sections 111(a) and 111(o) of the Customs Act, 1962. We find no provision for a penalty which could be imposed under the provisions of these sections of the Customs Act, 1962 as ordered by the ld. Commissioner. The same are therefore to be set aside, as ordered, since they have been arrived without application of mind. We find that all 'manufacture' cannot be judged with reference to Section 2(f) of the Central Excise Act, 1944. Infact the board vide its orders/circulars has held and ordered the field staff, that a broader view is called for in respect of the interpretation of the provisions of Notification 1/95-C.E. and the exemption may not be restricted only to cases where 'manufacture' u/s 2(f) of Central Excise Act is involved . This view of interpretation has been adopted by the Tribunal in a Catena of decisions. The appellants had raised this ground and the permissions specially granted by the Development Commissioner, we cannot ignore the same, as nothing contrary shown. We would therefore find no reason to conclude that the imports were not to be subjected to or are not subjected to manufacture and are thus imports of Complete Consumer Goods, not permissible to be imported. The process (A) and (B) and (C) (supra) would be covered under the concept of manufacture, as there is no finding that the goods were marketable de hor that all or any one of these process; the bland allegations of deodorant cans to be finished goods would not be sufficient to hold so. The present proceedings of duty demands and confiscation are not being upheld, there is no case or cause for any impediments to such imports if a penalty as arrived. Thus, the order is set aside and the appeal allowed.

Summary

Issues Involved:
1. Eligibility for exemption under Notification 133/94-Cus.
2. Classification of imported goods as finished products or bulk materials.
3. Compliance with permissions granted by Ministry of Commerce and Development Commissioner.
4. Application of Medicinal and Toilet Preparations (Excise Duty) Act, 1955.
5. Validity of imports through Kandla Port under Drugs and Cosmetics Rules, 1945.
6. Confiscation and penalties under Section 111 of the Customs Act, 1962.
7. Definition of 'manufacture' under Central Excise Act, 1944 and Exim Policy.

Detailed Analysis:

1. Eligibility for Exemption under Notification 133/94-Cus:
The appellants claimed exemption under Notification 133/94-Cus for imports made between September 1999 and December 1999. The Customs authorities denied this exemption, arguing that the imported consignments were finished products ready for retail sale and did not require further manufacturing or processing. The appellants contended that the imported materials underwent significant processes, including filling, labeling, and packaging, which should qualify them for the exemption. The tribunal found that the processes described by the appellants could indeed fall under the broader definition of 'manufacture' as per the Exim Policy and Central Excise Act, 1944.

2. Classification of Imported Goods:
The Customs authorities classified the imported goods as finished products in retail packs, not eligible for the exemption under Notification 133/94-Cus. The appellants argued that the goods were imported in bulk and underwent various processes to make them marketable. The tribunal noted that the processes employed by the appellants, such as filling, labeling, and packaging, could be considered manufacturing operations, making the goods eligible for the exemption.

3. Compliance with Permissions:
The Customs authorities argued that the appellants violated the permissions granted by the Ministry of Commerce and the Development Commissioner, which allowed the import of cosmetics and toiletries in bulk for further processing. The appellants contended that they complied with the permissions and that the imported materials underwent significant processing. The tribunal found that the appellants had obtained the necessary permissions and that the processes employed were in line with the permissions granted.

4. Application of Medicinal and Toilet Preparations (Excise Duty) Act, 1955:
The Customs authorities issued a corrigendum demanding duty under the Medicinal and Toilet Preparations (Excise Duty) Act, 1955, arguing that the imported consignments contained alcohol. The appellants contested this, stating that the goods were classified under Chapter 33 of the Central Excise Tariff Act, 1985. The tribunal found that the presence of alcohol in the products would render them subject to the Medicinal and Toilet Preparations (Excise Duty) Act, 1955.

5. Validity of Imports through Kandla Port:
The Customs authorities argued that four consignments imported through Kandla Port violated the Drugs and Cosmetics Rules, 1945, as Kandla was not a specified port of entry for such goods. The appellants countered that Kandla Port was notified as an approved port under the Customs Act, 1962. The tribunal found that Kandla Port was indeed a notified port for the purpose of unloading imported goods, and therefore, the confiscation order under Sections 111(d) and 111(a) of the Customs Act, 1962, could not be upheld.

6. Confiscation and Penalties:
The Customs authorities ordered the confiscation of goods and imposed penalties under Sections 111(a) and 111(o) of the Customs Act, 1962. The tribunal found that the order of confiscation and penalties was not justified as it went beyond the notice issued and ignored specific notifications regarding Kandla Port. The tribunal set aside the penalties and confiscation orders, stating that they were arrived at without proper application of mind.

7. Definition of 'Manufacture':
The Customs authorities argued that the processes employed by the appellants did not amount to 'manufacture' under Section 2(f) of the Central Excise Act, 1944. The appellants contended that their activities fell under the broader definition of 'manufacture' as per the Exim Policy and CBEC Circular No. 314/30/97. The tribunal agreed with the appellants, stating that the processes employed could be considered manufacturing operations, making the goods eligible for the exemption under Notification 133/94-Cus.

Conclusion:
The tribunal set aside the order of confiscation and penalties, allowing the appeal. The tribunal recognized the processes employed by the appellants as manufacturing operations, making the imported goods eligible for exemption under Notification 133/94-Cus. The tribunal also found that the imports through Kandla Port were valid and that the penalties and confiscation orders were not justified.