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TMI Blog2006 (8) TMI 385X X X X Extracts X X X X X X X X Extracts X X X X ..... ngage in Trading in yarn from the same premises. 1.3 They procured raw material (yarn) from specified 12 indigenous manufacturers on CT-3 under the benefit of exemption available on such receipts. They manufactured the final products and cleared the same to holders of Advance Release Orders (AROs), Duty Free Replenishment Certificates (DFRC) and also against foreign exchange as per paras, 7.2, 7.4 and 9.10(b) of Exim Policy 1997-2002 after the concerned officers endorsed the AROs, DRFC, Advance Licences and the remittance certificates of supply effected on foreign exchange. 1.4 The transportation of the goods, both incoming and outgoing on factory gate delivery basis and vehicle numbers, if any, mentioned on the documents, were entered, as per the intimation, by the Porters/Coolies, of the purchasers is claimed. Similar claims are made for movements effected to job workers. 1.5 Under this factual position, the officers visited the factory premises, detained the goods, searched the premises same and found - (i) Daily receipts and issues of indigenous and imported raw materials, (written up to entry 55 dated 29-10-2001). (ii) Daily stock register (written up to 22-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and have not achieved the required net foreign earnings as a percentage of export performance. (4) That as per audited Balance Sheet for 1999-2000 and as transpired from the statements of their responsible concerned persons, the Appellants could not prove transportation and delivery of their goods to their customers in the local market, in terms of proviso to Section 3 of C. Ex. Act, 1944 and hence it leads to the conclusion that the said goods were cleared into local market without payment of duty and hence, C Ex. duty along with interest is payable on this count. (5) That during the period 2000-01 the finished goods shown to have been cleared to M/s. Sudarshan Texport Pvt. Ltd. and M/s. Santo-gen Textiles Mills Ltd. by the Appellants were never received by the said parties and hence, duty along with interest is payable on this count. (6) That during 2001-02 the Appellants purportedly cleared polyester Texturised yarn against foreign currency in terms of para 9.10(b) of erstwhile Exim Policy, to M/s. Sudarshan Texport Pvt. Ltd., M/s. Ceejay Exports, M/s. Awin Exim Co. and M/s. Kakada Impex but it has been admitted by the personnel of the said companies that they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 and Bond executed, with interest under Section 28AB of CA, 1962 and penalty under Section 114A of CA., 1962, 112(a) and 117 of C.A., 1962; (d) Recovery of C.E. duty of Rs. 13,60,000/- on the Texturised machine valued at Rs. 85,00,000/-, under proviso to Section 11A(1) of CEA 1944 r/w Notn. No. 1/95-C.E., dated 4-1-95 with interest under Section 11AB and penalty under Section 11AC ibid, Rules 9(2), 173Q and 226 of erstwhile CER, 1944 and Rule 25 of CER, 2002. Thus the total duty of Rs. 38,22,80,864.98 was proposed to be recovered. All the aforesaid goods be held liable to confiscation for contravention of various provisions of law. (e) (i) Confiscation of goods valued at Rs. 1,52,01,852.70 seized under Panchanama dated 16-7-2003 under provisions of Sections 111(d), 111(j) and 111(o) of C.A., 1962 and Rule 25 of CER, 2002; (ii) Confiscation of texturising machine valued at Rs. 85,00,000/- purported to be procured under CT3 Certificate dated 16-12-2002, seized on 26-9-2003 under Sections 111(d), 111(j) and 111(o) of C.A., 1962 and Rule 25 of CER, 2002; (iii) Confiscation of imported plant, machinery and parts thereof valued at Rs. 1,41,62,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Sections 111(d), (g) and (o) of CA, 1962 and Rule 25 CER, 2002. (x) Imposed penalties on other notices. 1.9 The total demand in the SCN was Rs. 38,22,80,865/- which has been reduced to Rs. 33,57,46,382/- and confirmed. The reduction is on account of the following reasons: (i) Clearances to Shrishti Impex Pvt. Ltd. involving duty of Rs. 27,45,639/- allowed to them (Reduction in Annexure B Demand). (ii) Amount of duty of Rs. 4,37,71,519.12 (Reduction in demand at Annxure D due to calculation mistake). (iii) Amount of Rs. 17,324.00 (typographical mistake in Annexure M ). 1.10 The ld. Commissioner has arrived at his finding based on : (a) The system of physical control over EOD was replaced by record based control vide Notification No. 44/98-Customs (N.T.) dated 2-7-1998 and as per Board s Circular 88/88-Cus. dated 2-12-98, all the movements to and fro 100% EOD was subject to their recording each transaction in the specified records prescribed. (b) During the search operation on 24-1-2003, no records were found in the office premises of Appellants or, nor in the residential premises of their Directors. (c) Only following records were produced b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the stock. They furnished the stock position of raw materials as on 24-1-2003 different at different times i.e. through their letters dated 10-2-2003, 6-3-2003, affidavit in Writ Petition on 24-4-2003 and letter dated 30-7-2003. (j) The subsequent explanation offered could not establish a correlation of the stock with entries in 118 and 77 Registers. (k) In their writ petition they claimed the PTY as finished goods as manufactured by them but eventually in their reply dated 30-7-2004 and final reply dated 7-12-2004 they accepted that PTY was obtained under CT-3 Certificate. (l) As regards qty. of material in process they could not ascertain the qty. issued for manufacture and qty. in process even though sizable qty was involved which leads to the inevitable conclusion of clandestine removal by them (m) The Appellants Representatives initially offered false and misleading information and only when they were confronted with documentary evidence they came out with factual position. It is worthwhile pointing out that Shri Ashok Kumar, in spite of his being Authorised Signatory of the Appellants did not indicate on 25-1-2003 whereabouts of their records, give stock of raw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inning as 22-12-97 but later on the said date was given as 6-9-99 which was reiterated before High Court and in the final reply to the SCN, but this could not explain the imports of dyes and chemicals without payment of duty vide Bill of Entry dated 12-11-97 and CT3 issued in 98-99 for procurement of machinery and seeking permission of Development Commissioner for supply of PFY to ARO holder, which was granted on 30-12-97 for specified Qty. subject to the verification by Bond Officer, of actual manufacture of PFY. (y) QPRs for the quarters ending March 98, June 98, September 98 and December 98 showed no operations of manufacture but showed import of consumables worth Rs. 15.7 lakhs. (z) The Bank s statements of Appellants showed payments to M/s. Yangir Synthetics Ltd.(100% TOD) of Bharuch for supply of 10 MTs. of PTY valued at Rs. 5,09,000/- to them against CT3 Certificate dated 24-2-99. However as per Excise Officer of the said unit no D3 intimation or Rewarehousing Certificate was filed as the signature of excise officer on the warehousing certificate was found to be fictitious. (ab) For the year 98-99, the Appellants were required to have export turnover of US $ 61,35,314 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) Since the machines, the capital goods and machinery parts were found within the premises of an EOU, duty demands cannot be effected, since the EOU is not debonded by the impugned order or otherwise. It is settled position that duty demand on capital goods have to be determined as per the decision in the case of SIV Industries, 2000 (117) E.L.T. 281 (S.C.) (para 23), wherein the Apex Court has laid down the law on charge on rate and value to be applied as on date of debonding. Order is not in conformity with the Apex Court s decision. Since all these goods machinery, parts etc are still in the premises, no demands of duty are to be upheld on them. (iv) The raw material (yarn and finished goods), work in process, was ordered to be detained when the officers visited the unit in journey and started the enquiry, effected arrests. The fact of seizure on 16-7-2003 is found to be not to be upheld, since there is an order of detention effected in January by which the assessee had been denied the use of these goods. The courts have not upheld the fine difference between detention and seizure and the Departmental Manual Instructions also do not uphold any d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese findings prima facie, cannot be upheld. Confiscation orders arrived are to be set aside following the settled position of the law. Duty demands if any have to be arrived on such yarn, keeping in mind that they were within the premises of the EOU and not removed/cleared outside. No duty, prima facie, could be demanded. (b) Goods (yarn of various form i.e. raw material and finished goods) found to be seized on 16-7-03, is ordered to be confiscated under the same provision as in above two confiscation and ordered a common redemption fine. The redemption fine so offered cannot be upheld. (c) The ld. Commissioner has arrived on duty determination on the final products cleared based on, as it appears from his following findings - 60.1 Now turning to the question how these clearances count towards discharge of export obligation and/or are entitled to be duty free. M/s. STPL have contended in their reply dated 29-1-2004 that (a) ...that the goods cleared to ARO holders is in accordance with para 7.2., DFRC holders is in accordance with para 7.4 and against foreign exchange is in accordance with para 9.1o(b) of EXIM Policy 1997-2002 as renumbered in policy 2002.07. These cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of SIV Industries Ltd. [2000 (117) E.L.T. 281 (S.C.)] in clarifying under their Circular No. 618/9/2002-CX, dated 13-2-2002, that clearances of EOU if not allowed to be sold in India they would continue to be chargeable to duty under main Section 3(1) of Central Excise Act, 1944, and have, following the decision of the Larger Bench of CEGAT in the case of Himalaya International v. CCE Chandigarh 2003 (154) E.L.T. 580 (Tri-LB), withdrawn that circular and have clarified that all the goods manufactured by EOU and cleared in DTA before final debonding of EOU shall be chargeable to duty under proviso to Section 3(1) of the Central Excise Act, 1944 and under no condition, goods produced in 100% EOU can be charged under main Section 3 of Central Excise Act, 1944 . Therefore, clearances of EOU in the DTA which are sold in the DTA under proper permission or otherwise would be chargeable to duty under proviso to sub-section (1) to Section 3 and would not be entitled to the benefit of exemption under Notification No. 125/84-CE. The prohibitory condition in the Notification No. 125/84-CE that the exemption shall not apply to such goods if allowed to be sold in India is to be interp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchaser by M/s. STPL and paid to the Department by M/s. STPL. The permission of Development Commissioner under Para 9.10 (b) of Policy only implies that such clearances would count towards fulfilment of export obligation. But these are not regarded as Deemed Exports in terms of Chapter 10 of the Exim Policy 97-02 as it is no one of the enumerated categories of supply in Para 10.2. Therefore, such clearances are eligible for exemption from payment of excise duty (or even to refund of terminal excise duty under Para 10.3 of the Exim Policy 97-02. Consequently M/s. STPL were required to discharge the duty liability on these clearances which they have failed to do so. It is further observed that M/s. STPL have attempted to evade payment of duty by showing clearances to M/s. Sudarshan Texport on payments being made in foreign exchange when foreign exchange was purchased in the name of M/s. Sudarshan Texport from the Bank - mere payment of the small premium for purchase of $ (U. S. dollar) from Government Bank cannot be taken to justify or authorize non-payment of duty which is much higher than the 3% cost involved in purchasing $. Thus, on a cost of Rs. 125/- for one KG of yarn (ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, Belapur - 2006 (193) E.L.T. 440 (Tri. - Mumbai) (f) Jumbo Bag Ltd. v. Commissioner of Central Excise, Chennai - 2005 (184) E.L.T. 214 (Tri. - Chennai) (i) The findings of the Commissioner as regards the relative costs in procuring the foreign exchange and that being a reason to deny the supplies made under various export schemes, duty free, is questioning the wisdom of Exim Policy framers, which surely the ld. Commissioner cannot and intends to do. (ii) The finding arrived that the persons to whom such supplies were made and the permission of Development Commissioner were on applicable Excise Duties and the assessee EOU was to collect the same and has failed cannot justify the demands of duty on the assessee. If goods in the hands of such persons were to be on discharge of Excise Duty, the Central Excise Law should have provided accordingly. Receivers of excisable goods cannot be made liable to duty by executive fists. Notification 125/84 appropriately exempted all goods other than allowed to be sold and that would include supplies made and not sold in DTA quota, especially when such supplies go into determine the allowed to be sold DTA quota as per the Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cross-examination cannot be upheld. (e) The other material of findings on textile sales and bank invoices on yarn and non-receipt of job work goods will have to be gone into in detail. No prima facie findings either way can be arrived with hearing both sides. (f) When it is found that prima facie therefore no duty demands can be upheld and no penal consequences can be arrived, we would grant full waiver of the pre-deposit requirements in these applications and recovery of stay of duty penalty and interest pending the regular hearing of the appeals. (g) The enormity of the amounts of demands with interest and penalty as arrived and that the entire function of the EOU has come to a stand still by the order of confiscation of plant/machinery and raw material which was not called for and is not upheld, we would consider that these cases are fit cases to call for full waiver the pre-deposit requirements under Section 35F and Section 129E of the Central Excise Act, 1944 and Customs Act, 1962 respectively. The plea of the assessee and the other applicants that the liability are exorbitant and the stoppage of entire production has resulted in stippling the capacity to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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