1997 (7) TMI 313 - AT - Central Excise

Issues Involved:

1. Compliance with Notification No. 161/76 for duty-free clearance.
2. Requirement of L-6 licence for availing Chapter X procedure.
3. Substantive vs. procedural compliance under Chapter X.
4. Allegations of misuse and intent to evade duty.

Issue-wise Detailed Analysis:

1. Compliance with Notification No. 161/76 for duty-free clearance:

The respondents had removed tyres and tubes for tractors without payment of duty under Notification No. 161/76, which grants total exemption to tyres falling under T.I. 16 of the Central Excise Tariff, subject to certain conditions. The Assistant Collector of Central Excise, Faridabad, confirmed the duty demand of Rs. 1,55,171.80, citing non-compliance with procedural requirements. However, the Collector (Appeals) set aside the demand, accepting that the substantive part of the notification was satisfied, and procedural non-fulfillment was not detrimental to the claim.

2. Requirement of L-6 licence for availing Chapter X procedure:

The learned DR argued that the benefit of Chapter X procedure could only be availed by L-6 licence holders. The consignee, M/s. Hindustan Tractors Ltd., did not possess an L-6 licence for tyres and tubes during the relevant period (June to August 1976), obtaining it only in September 1976. Therefore, it was contended that there was total non-compliance with Chapter X requirements, making duty payable by the respondents. The reliance on the Tribunal's order in Collector of Customs, Cochin v. Coods Agro Chemicals and the Supreme Court's ruling in Termax Pvt. Ltd. v. Collector of Customs was cited to support this view.

3. Substantive vs. procedural compliance under Chapter X:

The Vice President disagreed with the Hon'ble Member (Judicial), noting that the consignee was an original equipment manufacturer and had received a CT-2 certificate, albeit without specifying the commodity. The tyres and tubes were sent under a regular bond, duly enhanced, and received by the original equipment manufacturer. It was argued that the substantive requirements of the notification were satisfied, and the procedural lapse should not justify the duty demand. The Vice President emphasized that the substantive compliance indirectly fulfilled the requirement, suggesting a penalty rather than denying the benefit.

4. Allegations of misuse and intent to evade duty:

The learned DR alleged that M/s. Hindustan Tractors Ltd., in connivance with M/s. Goodyear India Ltd., camouflaged the issuance of CT-2 forms meant for motor vehicle parts to avail of Chapter X benefits. However, the Vice President found no evidence of deliberate evasion or misuse, noting that the goods moved under prescribed AR-3A forms and CT-2 certificates, with the L-6 licence subsequently issued.

Separate Judgments Delivered by the Judges:

Member (Judicial):

The Member (Judicial) held that the respondents were not entitled to duty-free clearance due to non-compliance with Chapter X requirements, emphasizing the necessity of an L-6 licence. The judgment referenced the Supreme Court's ruling in Termax Pvt. Ltd., denying exemption to those without an L-6 licence.

Vice President:

The Vice President, however, held that the substantive compliance with the notification was sufficient, and the procedural lapse was a technicality. He argued that the benefit should not be denied, citing the Supreme Court's judgment in Thermax Pvt. Ltd., which supported extending benefits when substantive conditions were met despite procedural lapses.

Third Member (Judicial):

The Third Member (Judicial) agreed with the Vice President, emphasizing that the goods moved under CT-2 certificates and AR-3A applications, with no misuse allegations. It was noted that the L-6 licence was subsequently issued, and substantive compliance was achieved. The judgment referenced similar cases where procedural lapses did not deny benefits when substantive compliance was evident.

Final Order:

In view of the majority opinion, the appeal was rejected, thereby upholding the view that substantive compliance with Notification No. 161/76 was sufficient, and the procedural lapse did not justify denying the benefit. The final order was signed by both the Member (Judicial) and the Vice President.

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