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TMI Blog2008 (3) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Notification No. 177/94-Cus dated 21.10.1994. The said notification, inter alia, permitted graded percentage of gold wastage or loss depending on the value addition achieved, on the jewellery of the description specified therein, and provided that scrap, dust or sweepings may be forwarded to the Government Mint by the importer for conversion into standard gold bars and returned to the said zone in accordance with the procedure specified by the Commissioner of Customs in this regard. Amongst other conditions, the said notification required that the importer shall maintain a proper account of import, consumption and utilization of the goods and of exports made by him. Public Notice No.2/1988 dated 28.7.1988 issued by the Commissioner of Customs, Airport in terms of the abovesaid notification required the units in SEEPZ to maintain registers as per proforma annexed thereto. 3. On 11.11.1995, acting on information that the Gem Jewellery Units in SEEPZ have been misusing the facility by showing excess manufacturing wastage or loss than permissible under the above mentioned notification, causing shortage in physical stock, claiming it to be lying in the form of dust, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aiming it to be lying in dust and claiming protection under sub-proviso to condition. 10. It, therefore, appears that the aforesaid duty free gold weighing 6410.885 grams and valued at Rs.28,72,076.48 were neither exported nor were available in the physical stock and thereby violating the conditions of the aforesaid Customs Notification and, consequently, appear to have rendered themselves liable for confiscation under section 111(o) of the Customs Act, 1962. 11. It, therefore, prima facie indicates that the respondent did or omitted to do an act which act or omission rendered the abovesaid duty-free gold weighing 6410.885 grams and valued at Rs.28,72,076.48 liable for confiscation under section 111 of the Customs Act, 1962 or abetted to do an act or omission of such an act and dealt with the said gold which they knew or had reason to believe were liable to confiscation under section 111 of the Customs Act, 1962 as indicated above and thus rendered themselves liable for penal action under clauses (a) and (b) respectively of section 112 of the Customs Act, 1962 and also the mandatory penalty under section 114A of the said Act. 12. Now, therefore, the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stantial amount of metal against the shortage of 6410.885 grams alleged in the show-cause notice. Regarding imposition of penalty under section 112 of the Customs Act, 1962, it was stated that the show-cause notice was issued under section 28 of the Customs Act, 1962 for the purpose of recovery of duty and hence provision of section 112 cannot be invoked. It was asserted that the imported gold has been used for the manufacture of jewellery and that the said section can be invoked only in case where imported gold has not been utilized in a manner prescribed in the said notification. The matter of dispute is only regarding the quantum of wastage and recovery of gold therefrom and, therefore, section 111(o) of the Customs Act, 1962 cannot be invoked and, consequently, section 112(a) or 114A of the Customs Act, 1962 also cannot be invoked. It was further submitted that the show-cause notice is time barred and that since the show-cause notice is issued under section 28 of the Customs Act, 1962 penalty under section 112 cannot be levied. 17. It was also submitted that section 114A of the Customs Act, 1962 has no application to the facts of this case as the said section came ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be complied with by the respondent unit. These conditions inter alia permitted certain quantity of manufacturing loss/wastage on gold and the remaining quantity has to be exported in the form of jewellery. While computing the shortage during the time of stocking this fact has been taken into account and it is not disputed. Therefore, the Commissioner found that the duty on such shortage is recoverable and also such non-fulfilment of the conditions of the Notification and EXIM Policy would render the goods found short, liable for confiscation under section 111(d) and 111(o) of the Customs Act, 1962 and, consequently, the Unit would be liable to penal action under section 112(a) of the Customs Act, 1962 as it was due to their acts of commission and/or omission which gave rise to such shortages rendering the goods found liable for confiscation. 21. The Commissioner of Customs, in his order, has held that to the extent of maintaining of prescribed register, the respondent violated the conditions of the said notifications. The Commissioner also held that the claim of recovery of gold from the slurry/dust cannot be adjusted towards the shortage of gold found during sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1962 is wrong in law and facts and the impugned order of the Commissioner of Customs cannot be sustained. The Tribunal also held that the confirmation of duty is barred by limitation. The Tribunal observed regarding clauses (5) and (8) of the notification that one has to be practical that when the jewellery is manufactured out of the raw material and when the gold is converted from primary form to the end product, there may be certain dust which may fly from the place of manufacture or it may even be irrecoverable loss due to the process of manufacture of the final product. It can be invisible. The Tribunal observed that the table of the notification also stated the percentage of gold which could be allowed for wastage. The appeal filed by the respondent was allowed with consequential relief. 25. The appellant Commissioner of Customs, Mumbai, aggrieved by the said judgment of the Tribunal, has preferred this appeal under section 130E(b) of the Customs Act, 1962. 26. Since the respondent has laid serious stress on the question of limitation and imposition of penalty therefore, we deem it appropriate to reproduce the provisions (sections 28 and 114A) dealing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the person on whom notice is served under sub-section (1), shall determine the amount of duty or interest due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined. Provided that if such person has paid the duty in full together with interest and penalty under sub-section (1A), the proceedings in respect of such person and other persons to whom notice is served under sub-section (1) shall, without prejudice to the provisions of sections 135, 135A and 140, be deemed to be conclusive as to the matters stated therein: Provided further that, if such person has paid duty in part, interest and penalty under sub-section (1A), the proper officer shall determine the amount of duty or interest not being in excess of the amount partly due from such person. (2A) Where any notice has been served on a person under sub-section (1), the proper officer,-- (i) in case any duty has not been levied or has been short-levied, or the interest has not been paid or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any willful mis-statement or suppression of facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... President. (3) For the purposes of sub-section (1), the expression "relevant date" means,- (a) in case where duty is not levied, or interest is not charged, the date on which the proper officer makes an order for the clearance of the goods; (b) in a case where duty is provisionally assessed under section 18, the date of adjustment of duty after the final assessment thereof; (c) in a case where duty or interest has been erroneously refunded, the date of refund; (d) in any other case, the date of payment of duty or interest.' '114A. Penalty for short-levy or non-levy of duty in certain cases.'Where the duty has not been levied or has not been short-levied or the interest has not been charged or paid or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any willful mis-statement or suppression of facts, the person who is liable to pay the duty or interest, as the case may be, as determined under sub-section (2) of section 28 shall, also be liable to pay a penalty equal to the duty or interest so determined: Provided that where such duty or interest, as the case may be, as determined under sub-section (2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts on the part of the assess-importer. Section 114A is a mirror-image of proviso to section 28 of the Customs Act. 28. It has been asserted on behalf of the respondents that in view of the findings of the Commissioner of Customs that there is no suppression or mis-declaration on the part of the respondent, consequently, the duty short levied or not levied has to be demanded under section 28(1) itself and not under the proviso to section 28(1). It was submitted that when there is no suppression or mis-declaration on the part of the respondent, the impugned order confirming the duty beyond the period of six months from the relevant date is not sustainable in law. 29. In the counter affidavit, it is incorporated that assuming that the manufacturing loss is in excess of the specified limits mentioned in para 10 of Notification No.177/94-Cus, even then no duty can be demanded on the loss of gold when there is no allegation or evidence that the imported gold has been diverted for other purposes, other than for the manufacture and export of gold. The requirement of Notification No. 177/94-Custom stands satisfied even in such cases. 30. The respondent has al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt registers. The unit had been claiming the maximum permissible wastage, whereas it should have been claiming only actual wastage upto the maximum permissible limit. Column 7 is the sum of columns 4 and 5 and it denotes the total weight of export. The difference between the total weight of quantity imported (in column 4) and the total weight of export (in column 7) is the closing balance or the book balance. This is reflected in column 8. If this book balance is found lying with the unit as physical stock, the shortage would be nil. However, if the physical stock is less than the book balance, there will be a corresponding shortage. It may be noted that the calculation of closing balance or book balance is based on records maintained by the respondent itself, as per the prescribed registers. Column 9 represents the physical balance which is found lying with the unit on inspection, to the extent that the figure in column 9 is less than the figure in column 8, there is a shortage and this is reflected in column 10. The shortage in the case of the respondent was 6410.885 grams. 33. It is submitted in the affidavit that the total imports and total exports are calc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tage be linked to specific bills of entry which were cleared. Thus, the date of clearance of the goods cannot, in fact, be determined, rendering the application of section 28(3)(a) an impossibility. Sections 28(3)(b) and 28(3)(c) are also inapplicable. Section 28(3)(d) states that the relevant date means - (d) in any other case, the date of payment or duty or interest. As per this section, in the present case, since duty is yet to be paid, there would effectively be no limitation period. In any event, in the case of bonded goods, the limitation period would not apply in the same manner as it does to other goods. Both under section 72(1)(d) which deals with warehousing bonds and section 143(3) which deals with import of goods on execution of bond, there is no time limit for the proper officer to make a demand in cases where the conditions of the bond have been violated. In effect, bonded goods stand on a different footing. The show cause-cum-demand notice was made both under section 28 and the terms of the bond. In calculating the limitation period, regard must be taken to the fact that there are bonded goods. Even if the provisions of section 28(3) were to be applied, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said affidavit, it is incorporated that the respondent unit has failed to maintain the requisite records documenting wastage. Even if the maximum permissible wastage was allowed to the respondent as a manufacturing loss, there is still a shortage in the physical stock. Duty is payable on this shortage amount. The goods in question are bonded goods and this must be borne in mind while computing the limitation period that the limitation is not applicable to bonded goods in the same manner as it does to other goods. 38. We have heard Mr. Gopal Subramanium, the learned Additional Solicitor General for the appellant and Mr. V. Lakshmikumaran, the learned Advocate for the respondent at length and critically analysed the cases cited by him in support of his case. 39. We deem it appropriate to deal with the preliminary objection regarding limitation raised by the respondent. The respondent has drawn our attention to the findings of the Commissioner of Customs in appeal. The relevant portion of the findings reads as under: 'No case of collusion, wilful mis-statement or suppression of facts has been brought out in the show cause notice.' 40. According to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Department has earlier issued show-cause notices in respect of the same subject-matter. It has been held that in such circumstances, it could not be said that there was any wilful suppression or misstatement and that, therefore, the extended period under Section 11-A could not be invoked. 44. This case was followed in the subsequent judgment of this court in ECE Industries Ltd. v. Commissioner of Central Excise, New Delhi (2004) 13 SCC 719. In this case, this court again held that as there is no suppression, penalty cannot be imposed. 45. This court relied on these judgments in the case of Nizam Sugar Factory v Collector of Central Excise, A.P. (2006) 11 SCC 573. In this case, this court again reiterated the legal position and held that when there is no suppression of facts, the department would not be justified in invoking the extended period of limitation. 46. In view of the clear legal position crystallized by a series of judgments that in case where the assessees are not guilty of suppression of facts, collusion or wilful misstatement of facts, therefore, the extended period of limitation cannot be invoked under proviso to section 28(1) of the Cus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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