2005 (2) TMI 361 - AT - Central Excise

Benefit of Exemption Notification No. 13/97-Cus. - Procedure - Interpretation of statute - Methods - manufacture of Deflection Yokes on concessional rate of duty - duty demand - Interest - penalty u/s 114A - HELD THAT - There are broadly two ways of interpreting law. The first approach would be to go by the grammatical and ordinary sense of the words. In this approach, one sticks to the letter of the law. According to this approach, even if the interpretation gives rise to unjust results, which Parliament never intended, the literal meaning must prevail. In this case, if we go by a very literal interpretation, the Revenue is correct. If law and the rules framed are interpreted with mathematical rigour, then a computer can be programmed to administer law. There will not be any need for human beings. The law is for the society and society is not for the law. After all, procedures are handmaidens of law and not the other way. Another way of interpreting law is, looking into its spirit. In our view, we have to go into the spirit of the relevant Notification and the Rules and come to a decision. It is true that the respondent imported the goods for use in their factory at Bangalore. This is not in doubt. Business environment has its own dynamics. In the present case, due to reasons beyond the control of the respondents, the imported goods could not be used in the factory at Bangalore. There is nothing wrong in the respondents' being prudent businessmen in taking a decision to use these goods for the intended purpose in their factory at Gurgaon. It is only with this intention, they approached the jurisdictional DC who in turn directed them to seek AC's permission. This is very clear from the letter addressed to the Additional Commissioner. Thus, to say that the respondent intentionally diverted the goods with an intent to evade duty is not at all justified. It is also seen that neither the Notification nor the Rules prohibit the use of the goods in another factory belonging to the respondent. The Commissioner (A), after perusing the documents produced, was satisfied that the goods have been used for the intended purpose. It is also not the case of the department that the goods have been used for some other purpose, not mentioned in the notification. In our view, the Commissioner (A)'s order has no infirmity and Revenue's appeal is devoid of merit. In view of what is stated above we uphold the OIA and reject the Revenue's appeal.

Summary

Issues:
- Interpretation of Customs Exemption Notification and Rules for concessional rate of duty.
- Transfer of imported goods to another factory.
- Compliance with procedural requirements under Customs rules.
- Jurisdictional authority monitoring of utilisation of imported goods.
- Commissioner (A) order setting aside original authority's order.
- Justification for diversion of goods to Gurgaon factory.
- Relevant case laws and their applicability.
- Interpretation of law based on spirit vs. letter of the law.

Analysis:
1. Interpretation of Customs Exemption Notification and Rules:
The case involved the import of goods under a Customs Exemption Notification for use in manufacturing Deflection Yokes at a concessional rate of duty. The Rules prescribed a procedure for availing the concessional rate, emphasizing the jurisdictional authority's monitoring of goods' utilization. The issue arose as the unit at Gurgaon was not registered under the Scheme, violating procedural requirements. The Appellate Tribunal highlighted the importance of satisfying conditions for concessional relief, citing relevant legal precedents.

2. Transfer of Imported Goods to Another Factory:
The respondent transferred a portion of the imported goods to their Gurgaon factory due to labor unrest in their Bangalore factory. The Revenue raised concerns over the diversion of goods, emphasizing that the imported goods should only be used in the factory of the importer, as per the Notification. The absence of registration for the Gurgaon factory and lack of certification regarding goods' utilization were key points of contention.

3. Compliance with Procedural Requirements and Monitoring:
The Revenue contended that procedural lapses, such as not fulfilling bond execution and other requirements, led to non-compliance with Customs rules. The jurisdictional authority's monitoring of goods' utilization was crucial, and the absence of such monitoring was highlighted as a violation by the respondent.

4. Commissioner (A) Order and Legal Grounds:
The Commissioner (A) had set aside the original authority's order, ruling in favor of the respondents. The Revenue challenged this decision, arguing that the Commissioner erred in determining the goods' intended purpose without sufficient evidence. The Tribunal analyzed the legal grounds, including the Apex Court's stance on conditions for concessional relief.

5. Justification for Diversion of Goods to Gurgaon Factory:
The respondents justified the diversion of goods to the Gurgaon factory by citing circumstances beyond their control, supported by documents indicating communication with excise authorities. The Tribunal considered the evidence presented, including case laws, to assess the legitimacy of the diversion and whether the goods were utilized for the intended purpose.

6. Interpretation of Law based on Spirit vs. Letter of the Law:
The Tribunal delved into the interpretation of law, discussing the importance of considering the spirit of relevant Notifications and Rules. Emphasizing the dynamic nature of business environments, the Tribunal assessed whether the diversion of goods was justified based on the circumstances and the respondents' intentions. The analysis included a comparison between literal interpretation and interpreting laws based on their intended purpose.

7. Relevant Case Laws and Applicability:
The Tribunal referenced various legal precedents, including decisions from the Supreme Court and Tribunal, to support its judgment. These cases highlighted aspects such as procedural requirements, intended use of goods, and the justification for deviations from strict compliance with rules. The relevance of these case laws in the context of the present appeal was crucial in determining the outcome.

In conclusion, the Appellate Tribunal upheld the Commissioner (A)'s order, rejecting the Revenue's appeal based on a comprehensive analysis of the issues surrounding the interpretation of Customs rules, procedural compliance, diversion of goods, and the spirit of the law. The judgment emphasized the need to consider the practical implications and intentions behind legal provisions while ensuring adherence to statutory requirements.