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TMI Blog2008 (4) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1) were engaged in the business of the export of stainless steel utensils. They were permitted by AC Exports for getting the goods examined and stuffed in containers at their address, E-7/Vikas Industrial Estate, Bhayander (E), Thane. They used to export such goods under Duty Entitlement Pass Book (DEPB) for export of S.S. utensils such as tumblers, plates, bowls, trays, water jugs, milk jars, finger soups, spoons, serving; spoons, etc. till 1-4-2005. After 1-4-2005, the appellant no. 1 started exporting similar goods by filing shipping bills under drawback scheme classifying the aforesaid goods under serial No. 732303 of the Drawback Schedule (hereinafter referred to as Schedule) by claiming the drawback @ 11% with a cap of Rs. 8.10 per kg. On 2-9-05, vide Notfn. No. 77/2005-Cus. (N.T.) Serial No. 8215 of the Schedule was bifurcated into two parts i.e. 821501 and 821502. Serial No. 821501 covered spoons, forks, ladles, skimmers, cake servers, fish knives, butter knives, sugar tongs and similar kitchen or tableware of Stainless steel, therein the drawback rate was 11% with a cap of Rs. 24.50 per kg. On and from that date i.e. 2-9-2005, the appellant no. 1 started classifying th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chen or tableware" could be that all items exported by the appellant were covered under the said heading 821501 of the Schedule. They further claimed that after amendment of serial no. 8215, the scope of 732303 was abrogated. The appellants also contended that there was no allegation in the Show Cause Notice that they had given any false statement or they had mis-declared quality or quantity of the goods in the shipping bills or invoices; hence the goods were not liable to confiscation and the appellants were not liable to penalty. They, were also heard in person and after going through the submissions, the adjudicating authority i.e. Commissioner of Customs (Nhava Sheva) ordered for (a) confiscation of goods exported under 31 shipping bills valued at Rs. 6,24,34,869/- u/s 113h(ii) of the Customs Act, 1962. However, he also allowed the same to be redeemed on payment of redemption fine of Rs. 25 lakhs. He al lowed the drawback amount of Rs. 22,66,328/- and ordered recovery of Rs. 45,36,349/- with interest under Rule 16 of the Drawback Rules, 1995. He also imposed the penalty of Rs. 5 lakhs on appellant no. 1 and a penalty of similar amount on appellant no. 2 under section 114 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 7323 of the Drawback Schedule. As the appellant's goods were manufactured out of stainless, steel, those were rightly classifiable under heading 821501 of the schedule. He referred to the definition, of steel under Chapter 72 of the Custom Tariff. For fortifying the arguments that heading 82 of the Schedule covering Base Metal will cover stainless steel also, the Counsel of the appellants referred to the definition of base metal in Business Dictionary.com, Web page "All info about Jewelry making", the free dictionary by Forlex and Wikipedia, the free en cyclopedia. He further stated that the stainless steel kitchen and tableware were specifically included in the Schedule w,e.f. 2-9-05. Regarding use of the word 'similar' in Heading 8215, he pleaded that the doctrine of Edjusdem Genesis will support the view that the items of similar nature shall be classifiable in heading 821501 of the Schedule. According to him, the word similar was expansive and not restrictive. On limitation, he argued that the demand for recovery of drawback was made under Rule 16 of the Drawback Rules 1995; but the amount was in the nature of duty and duty could be recovered only under Section 11A of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n hierarchy than the rule. In case of conflict between the Rule and the parent Act, the Act will prevail. This is the view taken in para 27 to 35 by Hon'ble Supreme Court hi the case of Ispat Industries Ltd. v. Commissioner of Customs, Mumbai - 2006 (202) E.L.T. 561 (Supreme Court). 6.5 The larger bench of the Hon'ble Supreme Court in the case of ITW Signode India Ltd. v. Commissioner of Central Excise - 2003 (158) E.L.T. 403 (S.C.) has held in para 15 that the Act is substantive statute and the Rule is delegated legislation. In the case of conflict between two, the substantive statute will prevail, 6.6 In short, the Counsel pleaded that the notice issued for recovery of the erroneously paid drawback was barred by limitation as the same was issued after 6 months from the date of payment and there was no allegation for invoking larger period, 6.7 Notwithstanding the above submissions and as an alternate plea the appellants stated that they are eligible to the drawback of Rs. 7,96,586.80 out of Rs. 45,36,349/- disallowed as cake saver, finger soup, food saver, stainers and collander as listed in para 4(ii) of their appeal memo are in the nature of the items of CTH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 498 (Tri.-Bang.), approved by the Hon'ble supreme Court as reported in 2007 (210) E.L.T. A115 to canvass that these two doctrines could be applied for interpreting the expressions in Rules or Notifications also. The learned Joint CDR, therefore, pleaded that the said doctrines could be applied to interpret the scope of the words 'similar' appearing in heading 821501 of the DBK Schedule. The learned Joint CDR took us through the decision of the Tribunal in the case of Harichand Shrigopal v. CCE reported in 1996 (83) E.L.T. 281 wherein the Larger Bench of the Tribunal examined the meaning of the expression "and the like" occurring in entry 210311 of the Central Excise Schedule, which read as 'sauces, ketchup and the like and preparation thereof'. The appellants therein pleaded that 'pan chutney' should also be classified under 210311 as the words "and the like" covered pan chutney also. Applying the doctrine of Noscittur a Sociis , the Tribunal held that pan chutney is not classifiable in 2103.11 as said goods is not in the nature of sauce and ketchup. Similar views were expressed in the case of Oswal Agro Mills Ltd. [1993 (66) E.L.T. 37] and in the case of Bharat Electr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the erroneously paid drawback. The drawback is a special procedure for claiming certain benefits, when the goods are exported. These are not duty of customs as Modvat credit was not duty of excise. Even, when the Central Excise Rules were issued under the powers given under the CE Act, the Hon'ble Supreme Court clearly held that those rules are specific rules and the provisions of limitation cannot be read into the said Rules. Similarly, Notification of Duty Drawback Rules was issued under Section 75 of the Customs Act but they were not subject to Section 28 of the Act. It is wrong to say that the duty drawback Rules are subject to the provisions of Customs Act. It is only in respect of Rule 3 of the said rules, where the drawback rate/amount is being contemplated that there is a mention of subject to the provisions of Customs Act and CE Act. The Joint CDR relied on the decision of JS(RA) in the case of In Re: Partha Exports reported in 2002 (143) E.L.T. 465 (GOI) wherein it was specifically heldthat there is no time limit for recovery of the erroneously paid drawback. 7.6 The learned Joint CDR commented on the applicability of the cases referred to by the counsel for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, there is no conflict between the Act and the Rule. There is no time limit for the recovery of the erroneously paid drawback either in the Customs Act or in the Drawback Rules. The Custom Act provides time limit only for the recovery of the erroneous refund of duty and interest and not for the drawback. Thus, there is no conflict. Hence, this decision of the Supreme Court is not applicable. 7.7 On redemption fine and penalty, the learned Joint CDR reiterated the findings of the Commissioner and pleaded for not disturbing the order of the Commissioner on these issues also. FINDINGS 8. The main grounds of appeal by the appellants are as follows: (i) In the instant case, the exported goods were Stainless Steel kitchen ware as per the order given by the buyer. (ii) Stainless Steel (SS) product were kept in heading 8215 of the Draw back Schedule and that of iron steel kitchenware/tableware were placed in heading 7323 of the Drawback Schedule. The exported goods were of SS and not of iron steel. (iii) During the relevant, period, the Drawback Schedule was not aligned to the Customs Tariff or the Harmonized System of Nomenclature (HSN). (iv) In Para 4(ii) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e heading 7323 of the DBK Schedule also includes articles of Stainless Steel. This is evident from the wordings of sub-heading 732301 itself, which covers articles of SS with nickel content more than 4%. There is no force in the argument of the appellants that only heading 821501 of the DBK Schedule covers Stainless Steel kitchen and tableware. 10. The next issue to be decided in the instant case is whether the ex ported goods are covered under Heading 732303 or under Heading 8215 of the Drawback Schedule. Prior to issue of Notification 77/2005-Cus., dated 2-9-05, the Heading No. 7323 of the Schedule read as under :- 7323 Table, kitchen or other household articles and parts thereof, of iron or steel; iron or steel wool; pot scourers and scouring or polishing pads, gloves and like, of iron and steel. The said heading was further divided in three sub-headings. 732301 covered "of stainless steel with nickel content more than4%". 732302 covered "copper bottomed utensil" 732303 covered "others" At the same time, heading 8215 of the DBK Schedule read as 8215 Spoons, forks, l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of goods or a thing of a particular and distinctive kind". Thus the articles of table, kitchen and household as mentioned in heading 7323 will cover all articles including kitchen and tableware, which can be associated with kitchen, table or household. The Encyclopedia Britannica has classified tableware into 3 categories. The 1st one is hollowware, 2nd being flatware like spoons and forks and 3rd being cutlery such as knives. Apart from that, the tableware also includes variety of dishes and accessories. The examples mentioned in 8215 correspond to the flatware and cutlery but not to other categories, such as hollowware or dishes. Abroad category can be made by putting tableware and kitchenware in two categories, first being articles used for handling the food drink and the second being articles used for storing or keeping the food and drink (hollowware). The heading 8215 covers by way of example, articles of tableware and kitchenware, which are used for handling food/drink and not for storing or keeping them. 14. A perusal of both the headings reveals that heading 7323 is general whereas 8215 is specific as entry 8215 enumerates articles of kitchenware and tableware, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ics Ltd reported in 2002 (145) E.L.T. 287 (S.C.) had held that the expression "or any other process", occurring in the Notification 109/1986-C.E., dated 27-2-1986, after some specific processes is to be understood in the same sense, in which the process including 'stentering/tentering' would be understood. The Hon'ble Apex Court upheld that the scope of 'any other process' was limited. In this case also, similar kitchen or tableware have to be understood in the sense that spoons, forks, 'ladles, sugar tongs, etc. are understood i.e. food/drink handling articles and not in the sense of food/drink storing or keeping articles (hollowware). In the case of Pradeep Agarbatti v. State of Punjab reported in 1997 (96) E.L.T. 219 (S.C.), the Hon'ble Supreme Court was interpreting Entry No. 16 of Schedule A of Punjab General Sales Tax Act, 1948, where the word 'perfumery' was placed between cosmetics and toilet goods. The assessee argued that 'dhoop' is also a perfumery and hence should be classified in the same entry. The Hon'ble Supreme Court applied the doctrine of Nosittur a Sociis to hold that the word perfumery draws its colour from the words "cosmetics and toilet goods", which wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as recovery of Modvat credit wrongly availed of, as provided under Rule 57(1) of the erstwhile Central Excise Rules 1944. It is significant to note that in the Raghuvar ( India ) Ltd. case also, the Central Excise Rules were framed under the Central Excise Act and the time limit was prescribed for recovery of duty, etc. under Section 11A of the CE Act. The Hon'ble Supreme Court in para 13 of the said judgment clearly held that - "the recovery of credit availed of and utilized in utter breach of the faith and mutual trust and confidence which is the raison d'etre for the proper and successful working of the Modvat scheme and that too in gross violation of the mandatory requirements necessarily to be fulfilled before ever claiming or availing of such benefits cannot be said to be the same as the demand for payment to be made under Section 11A of the Act of any excise duty not levied or paid or has been short-levied or short-paid. They fall into two distinct and different categories altogether with basic as well as substantial differences to distinguish them from each other". In the same para the Hon'ble Supreme Court observed that - "Section 11A is not an omnibus pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the Duty Drawback Rules was issued under Section 75 of the Customs Act but they were not subject to Section 28 of the Act. It is only in respect of Rule 3 of the said rules, where the drawback rate/amount is being contemplated that there is a mention of 'subject to the provisions of Customs Act and CE Act'. If the argument of the appellants that the rule is subject to the provisions of Customs Act and hence the provision of limitation is to be borrowed from Section 28 of the Customs Act, it is clearly mentioned in Rule 3 of the Drawback Rules that the said Rule is also subject to the provisions of CE Act and rules made thereunder. Both these Acts provide different periods of limitation for recovery of duty/interest. It is thus erroneous to plead that the entire duty drawback rule is subject to the provisions of Section 28 of the Customs Act. As there is no limitation provided under Rule 16 of the Drawback Rules and the Duty Drawback Rules are not subject to the provisions of Section 28 of the Customs Act or Section 11A of the CE Act, no limitation can be read into Rule 16 of the Duty Drawback Rules, 1995. 18. The learned Joint CDR has relied upon the decision of JS(R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no question of imposition of the redemption fine :- (i) Associate Marketing Services v. CC (Airport), Chennai reported in 2006 (195) E.L.T. 287 (Tri.-Chennai) (ii) Ram Khazana Electronic v. CC, Aircargo, Jaipur reported in 2003 (156) E.L.T. 122 (Tri.-Del.) (iii) Vikas Chandra v. CC, Chennai reported in 2003 (158) E.L.T. 316 (Tri. Chennai) (iv) Sunsui India v. CC, Jaipur reported in 2005 (180) E.L.T. 483 (Tri.-Del.) (v) Ashwani Kumar Jain v. CC, Meerut reported in 2004 (173) E.L.T. 260 (Tri.-Del.) (vi) Mahalaxmi International Exports v. CC, Jaipur reported in 2004 (169) E.L.T. 68 (Tri.-Del.) Following the ratio of the above case laws, we hold that the imposition of redemption fine of the 25 lakhs is not justified. The same is set aside. 23. As regards the imposition of the penalties of Rs. 5 lakhs each on the appellants No. 1 and 2 is concerned, we find that the ingredients of Section 114 of the Customs Act, 1962 are absent in this case. There was no contumacious act or omission on the part of both the appellants. The appellants had claimed Drawback under the amended serial no. of the Drawback schedule. They had bona fide belief that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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