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TMI Blog2008 (8) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... sposal of the appeals. 1.1 The main Appellant M/s Apex Recycling Pvt. Ltd., B-7, Badli Industrial Area, New Delhi (hereinafter referred to as ARPL) is a 100% EOU. The second Appellant Shri Raj Kumar Maheshwari is Managing Director of ARPL and the third Appellant Shri A.C. Sebastian is the authorized signatory of ARPL. ARPL were issued an LOP dated 05/9/01 by the Development Commissioner, Noida Export Processing Zone for recycling of ferrous and non-ferrous scrap- while the item permitted for import are various types of ferrous and non-ferrous scrap, their finished products for export are segregated ferrous and non-ferrous metal scrap, ingots, metal granules, slag (byproduct), zinc oxide, lead oxide and Iron (byproduct). They are operating as an EOU since November 2001. They import only the metal scrap. They don't have any imported capital goods. Vide letter dated 15/2/08, of the Development Commissioner, the bonding period of the unit was extended for one year for 2008-09. The Appellant Company was importing metal scrap free of Customs duty under Notification 53/97-CUS dated 03/06/97 and subsequently under its successor Notification No. 52/03-CUS dated 31/3/03. Under both these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re seized. Those files contained an inspection certificate NO-N020038 dated 10.11.05 issued by M/s Alex Stewart(Assayers), England, as per the requirement of para 2.32(1) of the EXIM policy for the import of metal scrap from war affected countries and the certificate showed the net quantity as 25.44MT and the value as US$66144. Besides inquiry with the MD and employees of the Appellant Company, inquiry was conducted overseas with the customs authorities of USA and Italy from where a number of consignments of metal scrap had came. On completion of inquiry, the Additional Director General, DRI issued a show cause notice dated 17/1/07 to the three Appellants asking them to show cause to the Commissioner of Central Excise, Delhi- I as to why - (i) 1338.507 MTs of imported scrap seized from factory premises on 20/1/06 and 50.40 MTs of metal scrap covered under B/E/ No. 481200 and 481211 dated 19/1/06, seized from factory premises on 03/2/06 and 104.08 MTs of metal scrap covered under B/E/ No. 480394 and 480396 dated 16/1/06 seized at ICD Tughlakabad on 21/1/06 and 21/4/06 should not be confiscated under Section 111 (d), (m) (o) of the Customs Act, 1962; (ii) Benefit of Notificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is entitled to take action in accordance with the law; (iv) the Commissioner shall adjudicate the matter within a period of six months from the date of the order. 1.4 The case was adjudicated by the Commissioner vide order-in-original dated 21/05/08. But this is only part adjudication. By this order the Commissioner - (a) upheld the allegations of under invoicing and misdeclaration of grade of the scrap and also denied the benefit of duty exemption under Notification 52/03-CUS in respect of the seized goods; (b) ordered the confiscation of the goods under seizure under Section 111 (d), (m) (o) of the Customs Act for misdeclaration of value description and violation of post importation condition and imposed redemption fine of Rs. five crore in lieu of confiscation; (c) ordered cancellation of the private bonded warehouse licence issued to the Appellant company; (d) imposed penalty of Rs. two crore on Shri R.K. Maheshwari and penalty of Rs. 50,000,00/- on Shri A.C. Sebastian under Section 112 (a)/114A of the Customs Act and Rule 26 of the Central Excise Rules; (e) ordered enforcement of bond in respect of 104.08 MT of seized goods at ICD which had been provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not attain positive NFE are totally erroneous on facts and perverse. Neither the exports effected by the Appellant company have been valued nor there is any finding that the value thereof would not result in achieving positive NFE, as required by the EXIM policy and the exemption notification. (v) It is not permissible to cancel private bonded warehouse licence of a 100% EOU, when its LOP is still valid. (vi) The duty demand on the seized goods is linked with the issue of achieving positive NFE and if there is shortfall, the recovery of duty has to be in proportion to the shortfall in achieving positive NFE. The exercise of determining whether an EOU has achieved positive NFE involves determining the value of Exports and the value of imports and payments made in foreign exchange towards commission, royalty etc. But no such exercise has been done in the adjudication order passed by the Commissioner and without any such calculation, he has given a finding that the Appellant company has failed to achieve positive NFE. Having done so, instead of quantifying the duty demand, the job of quantification of duty demand has been passed on the Divisional AC who has quantified the duty de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment of India, Ministry of Finance, Department of Revenue, issued under Section 28AB of the Customs Act, 1962 on the said duty, from the date of importation or procurement till the date of payment of nil duty". Thus if for example the shortfall in achieving positive NFE is 50%, only 50% of the total duty chargeable on the imported inputs will be payable. In this case, the show cause notice does not quantify the duty chargeable. From the Commissioner's letter dated 21/07/08 to ADG, DRI it appears that a corrigendum to the Show cause notice dated 17/1/07 was to be issued by the DRI. But when no corrigendum was issued by the DRI and six month's time limit given by the Hon'ble Delhi High Court vide its order dated 22/11/07 in this case was going to expire, the Commissioner, instead of approaching the Hon'ble High Court for extension of the time limit, adjudicated the incomplete show cause notice. The order does not discuss at all as to how the NFE achieved, after taking into account the export of the resultant products obtained by processing of the seized scrap as per the Hon'ble High Court's order dated 22/11/07 and exports made earlier, is negative and if it is negative, what is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pment Commissioner has powers to cancel the LOP of an EOU wherever warranted and shall exercise powers of adjudication under Section 13 read with Section 11 of the Foreign Trade (Development Regulation) Act, 1992 in respect of EOUs. As per Appendix 14-IG annual performance review of each 100% EOU has to be done by the Development Commissioner and after completion of five years, if it is noted that a 100% EOU has not achieved positive NFE, the Development Commissioner shall initiate penal action under Foreign Trade (Development Regulation) Act, 1992. 3.2.1 From the above provisions of the EXIM policy it is clear that it is the Development Commissioner who is responsible for monitoring the performance of a 100% EOU in meeting the export obligation and achieving positive NFE, and determining for each five year block from the date of commence of production of the unit ,whether it has achieved positive NFE, and it is the Development Commissioner who is empowered to take penal action and even cancel the LOP of a unit, which fails to comply with the conditions of the LOP. It is only when the LOP has been cancelled by the Development Commissioner that the unit has to be debonded. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how that these export declarations have, indeed, been obtained from the US Customs or Customs authorities of Italy through Indian counselate/High commission in those countries. Hon'ble Supreme Court in case of Commissioner of Customs, Calcultta vs. South India Television (P) Ltd. reported in 2007 (214) E.L.T. 3 (S.C.) has held that when for proving undervaluation, the Department relies on declaration made by the supplier in the exporting country, it has to show as to how such declaration was procured. In this case, the copies of the reports received from the Customs authorities of the exporting countries have not been given to the Appellants in spite of their request for the same. In respect of 50.40 MTs of Scrap covered by B/E/ No. 481200 481211 dated 19/1/06, the only evidence of under invoicing, relied upon by the Revenue is the inspection certificate issued by M/s Alex Stewart, England, the assayers, as per the requirement of para 2.32(1) of the EXIM Policy for import of metal scrap originating from war affected countries, for certification that scrap does not contain any arms, ammunition, mines, shells etc. There no discussion in the commissioner's order as to how valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... convinced that the appellant's company has mis-declared the imported goods both in terms of description as well as value. 4. From the above discussion, it is clear that not only there are serious irregularities in the adjudication proceedings, like delegating the quantification of duty demand in respect of seized goods to the Assistant Commissioner ,who quantified the duty demand without hearing the Appellants, the adjudication order itself suffers from a number of serious defects. We fail to understand as to how the Commissioner in para 48 of the order has arrived at the finding that-"the allegation of not attaining NFEP because of undervaluation is sustainable" without quantifying the total value of exports and total actual value of imports during the entire period of operation of the EOU. In this regard even the directions of Hon'ble Delhi High Court in its order dated 22/11/07 have been disregarded. Similarly it is not understood that when in para 44 of the order the Commissioner gives the finding that he does not find the allegation of import of "Brass Scrap Honey" to be true on the basis of CRCL reports received out of 45 samples drawn, how in para 47 of the order he giv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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