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TMI Blog2010 (10) TMI 882X X X X Extracts X X X X X X X X Extracts X X X X ..... As there is no dispute that the impugned goods were seized from a warehouse licensed under Section 65 of the Customs Act. Duty can be levied and collected on such goods only on their removal from the warehouse. Goods had been seized when the period allowed to fulfill export obligation was yet to expire. In the instant case, therefore, the demand of duty, interest and order of confiscation vide the impugned order are liable to be set aside as premature following the above decision. Accordingly we set aside the impugned order. MBPL shall pay duty as offered by them in accordance with law - penalty deleted too. - C/21, 23 & 502/2006 - 1290-1292/2010, - Dated:- 20-10-2010 - S/Shri M.V. Ravindran, P. Karthikeyan, JJ. Shri B.V. Kumar, Advocate, for the Appellant. Shri P.R.V. Ramanan, Special Counsel, for the Respondent. [Order per : P. Karthikeyan, Member (T)]. These appeals have been filed by M/s. Mantra Broadband Pvt. Ltd. (MBPL), M/s. Sarayu Softech Pvt. Ltd. (SSPL) and the Revenue assailing a common order passed by the Commissioner of Central Excise. 2. The facts of the case in brief are that M/s. Mantra Broadband Pvt. Ltd. (MBPL) was registered as a STPI uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner found that MBPL was issued LOP in 2000 ; PBWL and IBM sanction order were issued following the issue of the LOP. Therefore they had not followed the terms and conditions of the LOP and licence and manufacturing order issued to them. The PBWL and IBM sanction order issued were specific to the person (licensee) and the premises. These could not be transferred. MBPL had allowed the bonded premises and capital goods procured duty free to be used by SSPL without taking requisite permission from the department. The registration of SSPL with various related departments and the MOD dated 22-3-2002 among MBPL and SSPL and the owner of the premises, Shri Janardhana Raju revealed that SSPL was actually in possession of premises since March 2000. This position was corroborated with statements of responsible functionaries of SSPL and MBPL. He found that the impugned goods had not been put to use as contemplated in the Notifications No. 140/91-Cus., dated 22-10-91 and 1/95-C.E., dated 4-1-95 and their respective successive Notifications. The export performance of MBPL was Rs. 9,39,600/- even after lapse of 5 years. MBPL had failed to fulfill export obligation prescribed under the relevant EX ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scation under Section 111(o) of the Customs Act, they had incurred liability to penalty under Section 112(a) (b) of the Customs Act. They were liable for penalty under Rules 25 of Central Excise Rules, 2002/2002 for similar reasons. The demand of Customs duty and Central Excise duty were confirmed against MBPL. Since the impugned goods had been confiscated and SSPL was offered option to redeem the same on payment of fine, it was allowed liberty to pay duty due at the time of redemption. He passed the following order. (i) Confiscated the Capital Goods valued at Rs. 62,48,919/- imported by MBPL under Section 111(j) and Section 111(o) of Customs Act, 1962. He gave option to SSPL to redeem the same on payment of fine of Rs. 6,00,000/- (Rupees Six lakhs only). (ii) Confiscated indigenous Capital Goods valued at Rs. 32,06,192/- procured by MBPL under Rule 25 of Central Excise Rules, 2002. He gave an option to SSPL to redeem the same on payment of fine of Rs. 3,00,000/- (Rupees Three lakhs only). (iii) Demanded Customs Duty of Rs. 28,11,131/- (Rupees twenty Eight Lakhs Eleven Thousand Three Hundred and Forty Three only) foregone on the imported Capital Goods valued Rs. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d into India and execution of all documentation . The agreement was subject to Conditions to Closing . It was obvious from the MOU that MBPL along with some associates expressed intention to start a software company by name, Sarayu Softech Pvt. Ltd. in the premises belonging to Shri Janardhana Raju. The rental agreement between Shri Janardhana Raju and MBPL dated 20-3-2002 would be binding on SSPL. The rental deposit after deductions if any of MBPL would be transferred to SSPL. The future rentals would be paid by SSPL. If SSPL failed in any of the above terms MBPL would fulfill all the terms of the rental agreement. (b) MBPL never started SSPL nor was it responsible to start SSPL. MOU dated 22-3-2002 did not support the allegations based on which the impugned order was passed by the Commissioner. MBPL continue to function at the said premises namely, Ground Floor, No. 562/640, Survey No. 10, Bilekahalli, Begur Hobli, Bannerghatta Road, Bangalore - 560 076 for which the private bonded warehouse No. 186/2000 and the in-bond manufacturing sanction order No. 186/2000 both dated 30-3-2000 were issued. The net assets were transferred to SSPL by MBPL as per the Asset Purchase Agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iginal premises for which the LOP was granted by the Director of STPI and PBWL No. 186/2000 and IBM sanction order No. 186/2000 both dated 30-3-2000 granted by the Deputy Commissioner of Customs. As per the SHA dated 2-11-2004, there was no transfer of assets by MBPL to SSPL. What was acquired by SSPL was the shares of MBPL. (e) MBPL failed to secure export orders despite its best efforts owing to collapse of telecom industry in the US. In the circumstances, MBPL had applied to the Director, STPI for extension of further period of three years from 25-3-2005. The Director STPI communicated his no objection vide letter dated 24-5-2005 and extended the approval period by six months from the date of expiry of the Customs bonded warehouse licence, i.e. six months from 25-3-2005. Consequently, MBPL obtained extension of warehousing period from Deputy Commissioner of Customs up to 23-6-2005. The Director STPI did not grant extension of six months commencing from 23-9-2005, applied for by MBPL. In the circumstances, MBPL applied to Director STPI to permit de-bonding of the STPI unit. Vide letter dated 5-8-2005, the Director STPI granted no objection certificate for de-bonding of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/2003-C.E., dated 31-3-2003. The MOU dated 22-3-2002 and APA dated 31-12-2003 were never implemented. There was only transfer of 66,31,260 shares of Rs. 10/- each to SSPL vide SPA dated 2-11-2004. MBPL had not followed any of the conditions stipulated in their PBWL No. 186/2000 dated 30-3-2000 and IBM sanction order No. 186/2000 dated 30-3-2000, in as much as the goods imported/procured locally by them had not been transferred or sold to SSPL. Due to impossibility of export performance they themselves approached the Director, STPI to permit them to de-bond the unit on payment of applicable dues. After obtaining such formal approval and no objection from the Director, STPI, they approached the Deputy Commissioner of Customs requesting him to permit them to de-bond the capital goods imported/procured locally after payment of appropriate duties of Customs and Central Excise. This had not been permitted in view of the adjudication proceedings commenced with show-cause notice dated 24-8-2004. (h) As regards the assessee s liability to Customs duty of Rs. 28,11,131/- and Central Excise duty of Rs. 6,25,343/- forgone respectively in terms of Notifications No. 140/91-Cus., dated 22-10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs were binding on the departmental officers as held by the Hon ble Supreme Court in the case of Ranadey Micronutrients v. Collector of Central Excise [1996 (87) E.L.T. 19 (S.C.)] wherein the Supreme Court, inter alia, held that the Circulars issued by the department were not advisory in character but binding on the departmental officers. 5. In the appeal filed by SSPL, no different grounds have been raised. They have intimated that they had adopted same arguments as in the appeal filed by MBPL. It is submitted that the impugned goods are not liable for confiscation. MBPL and SSPL are not liable to pay penalty. SSPL had only acquired controlling shares of MBPL and not the individual assets belonging to MBPL. MBPL continues to operate in the original premises which were approved and licensed by STPI/Customs authorities. 6. In the appeal C 502/06 filed by the Revenue, the only challenge to the impugned order is that the Commissioner had wrongly refrained from imposing penalty on MBPL under Section 114A of the Customs Act, 1962 and Section 11AC of the Central Excise Act, 1944. It was found in the order that MBPL had colluded with SSPL and willfully suppressed the sale of bonded go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facturing Regulations provided that the Assistant Commissioner of Customs accords sanction to the applicant to carry on manufacturing process in the warehouse. The manufacturer meant the owner of the warehouse goods. Section 58 of the Customs Act provided for licensing of a private warehouse and a warehousing bond had to be executed under Section 59 of that Act. Section 62 provided that no person shall enter a warehouse or remove any goods there from without the permission of the proper officer . Section 65 provided that manufacturing and other operations in relation to the goods could be carried out only by the owner of the warehoused goods. Section 69 provided for clearance of warehoused goods for exportation. All these provisions clearly indicated that the license was granted to the owner of the warehoused goods and no third party could be entrusted with the control of the goods in question. It was therefore clear that neither the goods nor the premises could be transferred to any third party without obtaining permission from the Customs Officer. Section 59 also implied that no transfer could be made unless a fresh bond was allowed to be executed by the transferee. 8.1 MB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... granted for a period of 5 years would have expired on 25-3-2005 is contested on the basis that MBPL had proceeded to transfer the goods and it closed down its shutters even before the said period. MBPL had become a non-functional company; it carried out no manufacturing activity. The departmental authorities had not initiated action with regard to the grant of permission with STPI and the case laws relied upon in this regard were not relevant. The assessee could not escape from complying with the other conditions of the exemption notification, LOP from STPI was only a condition precedent for obtaining permission. 8.3 Facts were that the goods had been transferred to SSPL along with the bonded warehouse. Therefore, SSPL had been carrying on operations in the very same bonded premises was not a relevant fact. 9. We have heard both sides. 10. We have examined the case records and carefully studied the submissions made by both sides. In the instant case, MBPL was issued with Private Bonded Warehouse Licence (PBWL) and IBM sanction order on 30-3-2000 by the Deputy Commissioner of Customs, Bangalore for warehousing non-duty paid goods for in-bond manufacture. MBPL had obtained the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied on the decisions of the Tribunal in the case of CCE, Bangalore v. Infosys Technologies Ltd. [2003 (159) E.L.T. 863] wherein the Tribunal had observed as under. ..Goods cleared into Bond and placed in a Warehouse cannot be charged to duty. Duty is to be recovered on them only on expiry of Bond Period. As regards the use of the subject goods in the warehouse, permissible or otherwise we have no assistance of the findings on that aspect in the orders of the Commissioner (Appeals). It is found that the levy of duty on goods in a warehouse of an EOU, the Supreme Court in the case of SIV Industries Ltd. [2000 (117) E.L.T. 281] had held that, ..On the satisfaction of the Board of Approvals, EOU may be debonded on its inability to achieve export obligations, value addition or other requirements. Such debonding is subject to such penalty as may be imposed and levy of the following duties :- (a) Customs duty on capital goods at depreciated value but at rates prevalent on the dates of import; (b) Customs duty on unused raw materials and components on the value on the dates of import and at rates in force on the dates of clearance. Therefore duty and penalties if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned authorities namely, a Development Commissioner. On the other hand, the Deputy Commissioner had extended the period of validity for a further period up to 31-3-1991 and the importers had requested for further extension. We find that the facts of the subject case are comparable with Vishal Footwear Ltd. case (supra). Further the mandatory nature of the Circular is recognized by the Tribunal in this decision. The ratio of this decision was followed in a case of similar facts in Premier Granites Ltd. case (supra). In T. V. Raja Reddy case (supra) also the demand raised by the department was found not maintainable as the recommendation of the Development Commissioner had not been obtained and the assessee therein had got export period extended. In Teg s Masrado Ltd. case (supra), the Tribunal held that the Development Commissioner s recommendation was essential before duty demand could be confirmed on the assessee . In that case petition of the appellants for de-bonding was pending before the competent authority and the Development Commissioner had not initiated any action for non-fulfillment of export obligation. The Tribunal followed decision in the case of Vishal Footwear L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nect Solutions Pvt. Ltd. and Nanu Software for the use of the capital goods in the warehouse, which showed that Delta had sold the goods. 13.2 On the above basis, the goods were seized. Shri Anand Srinivas of Gaia Ites, admitted that Delta had ceased their activity in March, 2003 itself, that no intimation was furnished to the jurisdictional central excise and customs authorities regarding the stoppage of the unit and that the assets of Delta were taken over by Shri Farhad Bottlewala, chairman of Gaia, to whom the premises belonged. Shri Farhad Bottlewala corroborated the statement of Anand Srinivas and Gaia paid Rs. 15,00,000/- towards duty liability on the imported and indigenously procured capital goods. 13.3 The Tribunal found that PBWL had been extended till January, 2008. Therefore the provisions of Section 72(b) of Customs Act providing for recovery of duty from the owner of the goods in the event of non-removal thereof from the warehouse at the expiry of the warehousing period, were not attracted so as to hold that M/s. Gaia Ites was required to discharge duty liability on the goods, even if it was established that Gaia Ites had purchased the goods imported duty free fr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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