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TMI Blog2025 (3) TMI 828X X X X Extracts X X X X X X X X Extracts X X X X ..... pal to principle basis and separate entity having no relationship with the appellant the renewal of these capital goods to their premises has been done in contravention of the provisions of Notification No 52/2003-Cus and 22/2003-CE. Admittedly, M/s D&Y Technologies Pvt. Ltd. is also not EOU unit for a bonded premises removal of these goods in contravention of the provisions of the EOU scheme and the benefit executed by the appellant in this regard. It is quite evident that the there was no permission to remove the capital goods - machines from the premises of the EOU to any other place as claimed by the appellant. Further even the claim made by the appellant that they had cleared the said machines to the premises of job worker under a bonafide interpretation of the permission granted is also belied by the job work challans. It is clearly mentioned on the format of challan itself that these challans are meant only for removal of "inputs/ partially processed inputs". The claim made by the appellant of bonafides does not carry any weight and needs to be rejected. There are no merits in these submissions as the seized machines were confiscated by order dated 31.03.2017 and allowed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.11 above valued at Rs 2,99,99,153/ and Rs. 40,000/ cleared by M/s Elentec, Greater Noida without payment of duty and without following the proper procedure in this regard and seized from factory premises of M/s D&Y Technologies Pvt. Ltd. Plot No. 127, Udyog Kendra, Ecotech-III, Greater Noida on 20.07.2016 and 19.12.2016 under Section 111(j) of the Customs Act, 1962 and Rule 25 (1) (a) of the Central Excise Rule, 2002 However, I give an option to the party to redeem the said goods on aggregate payment of Redemption Fine of Rs 75,10,000/- in respect of both type of goodsre imported as well as procured indigenously: 2. I confirm demand of Customs duty (inclusive of Education Cess and Secondary & Higher Education Cess) amounting to Rs. 71,89,177/- (Rupees seventy one lakh eighty nine thousand one hundred seventy seven only) under Section 28(4) of the Customs Act, 1962 and I appropriate the amount Customs duty of Rs.58,76,842/- heady deposited by the party vide TR & Challar. No 318 dated 07-16 toward the cantamed demand of Customs duty. 3. I confirm demand of Central Excise duty amounting to amounting to H1600/(Rupees five thousand six hundred only), under Section 11A(4) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 016 should not be confiscated under Section 111(j) of the Customs Act, 1962 and Rule 25 (1) (a) of the Central Excise Rule, 2002 (ii) (a) Customs duty (inclusive of Education Cess and Secondary & Higher Education Cess) amounting to Rs. 71,89,177/- (Rupees seventy one lakh eighty nine thousand one hundred seventy seven only), as detailed in Annexure A, should not be demanded and recovered from them under Section 28(4) of the Customs Act, 1962 and why the amount of Customs duty of Rs. 58,76,842/- deposited by the party vide IR-6 Challan No 3187 dated 20.07.16 at the time of taking provisional release of seized machine should not be appropriated towards the said liability, (ii) (b) Central Excise duty amounting to Rs 5600/ (Rupees five thousand six hundred only). as detailed Annexure-A, should not be demanded and recovered from them under Section 11A(4) of the Central Excise Act, 1944, (iii) interest at the appropriate rate payable on the said amount of Customs duty and Central Excise duty not paid by them, should not be demanded and recovered from them under Section 28AA of the Customs Act, 1962 and Section 11AA of Central Excise Act, 1944; the amount of interest of Rs. 2,14, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-work permission vide permission letter dated 18.04.2016 and were under a bonafide belief that they could have remove these machines also. * These machines were received back by the appellant as per the permission granted by letter dated 24.05.2024. The removal of these goods is only procedural in nature. * In respect of the second issue, the goods were transferred from the appellant's EOU unit at Noida to the appellant's EOU unit at Greater Noida under proper documentation. However, due to paucity of space the said machines were kept at the premises of the job worker. * As the goods were cleared on EOU unit from the appellant's to another EOU unit, there should have been no demand for duty. * In case duty is demandable in respect of above, the same should be allowed only after allowing the depreciation as provided by Notification No.53/2003. * No penalty is imposable on the appellant and no redemption fine would be imposed as no element of fraud, suppression of facts, willful mis-statement etc. were found. 3.3 Learned Authorized Representative reiterates the findings recorded in the orders of the lower authorities. 4.1 We have considered the impugned orders along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stant case, the Appellant was operating under EOU Scheme where Central Government is extending certain benefits for promotion of exports and necessary procedures/safeguards have been formulated/prescribed to avert misuse of the Scheme and to prevent Revenue leakage. Those stipulated procedures are not mere technical formalities but are stringent and inflexible requirements to be complied with great precision by the manufacturer exporters working under EOU scheme without any deviation. Otherwise, the EOU scheme will be in a total chaos and interest of Revenue will be jeopardized. The present act of removal of machines/goods by the Appellant, a 100% EOU, from their bonded premises without observing any prescribed procedure and without obtaining permission in this regard from the proper authority cannot be accepted as mere ignorance on part of them but a deliberate act with malevolence motive showing utter disregard to the basic endeavor of scheme to enjoy the undue benefit of exemption. It is a well known principle of law that "Ignorance of Law is no excuse". As per Section 111(j) of the Customs Act 1962, any dutiable or prohibited goods brought from a place outside India and removed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xport Oriented Unit Depreciation to determine dutiable value Capital Goods imported Notification No. 53/97-Cus., Depreciation permissible only when capital goods cleared after Development Commissioner's approval - No such permission obtained - Depreciation not to be allowed." I also find that as per Notification 52/2003-Cus dated 31/03/20013 [condition no. (3)(d)(1)(i)], exemption from payment of the duty of customs on imported capital goods for manufacturing export articles is available, subject to the condition that the unit executes a bond, binding himself to pay on demand, an amount equal to duty leviable on the goods and interest on the said duty from the date of duty free import of the said goods till the date of payment of such duty, if such capital goods are not proved to the satisfaction of the proper officer to have been installed or otherwise used within the unit. In the instant case, the Appellant removed the capital goods imported duty free under EOU Scheme to other DTA unit and thus not installed/not used within the unit for manufacturing export articles and made them liable for payment of an amount equal to duty leviable on the goods and interest on the said du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notification ibid Capital goods prima facie liable to confiscation under Section 111(0) of Customs Act, 1962-Mens rea not required for Revenue in imposing penalty in such cases Sections 111(o), 112 and 129E ibid.". Section 11AC ibid incorporates liability to pay penalty in situation mentioned therein and once a case is covered by situation as stated in the said Section, mere deposit of duty/interest before issuance of SCN not necessarily negates situation mentioned in the said Section. Penalty under Section 11AC of Central Excise Act, 1944 is an exemplary punishment for an act of intended deception by the assessee to evade duty by adopting any of the means mentioned in the Section 11AC. Hon'ble CESTAT, Principal Bench, New Delhi, in a recent case of CCE, Kanpur vs. P.P. Polyplast (P) Ltd., reported in 2017 (346) E.L.T. 409 (Tri. Del.) categorically decided that "Penalty Imposition -Payment of duty prior to show cause notice Settled law that when statutory elements for imposition of penalty are present, there is no discretion for penalty -Payment of duty, prior to issue of show cause notices, is no ground for not imposing penalty - Section 11AC of Central Excise Act, 1944." The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he premises of job worker under a bonafide interpretation of the permission granted is also belied by the job work challans. It is clearly mentioned on the format of challan itself that these challans are meant only for removal of "inputs/ partially processed inputs". The claim made by the appellant of bonafides does not carry any weight and needs to be rejected. 4.5 Accordingly, the submission of the appellant that these goods/machines have been received back in their premises as per permission letter dated 24.05.2024 is also without any merits. The said letter is for movement of the seized/ confiscated goods under supardignama from the premises of M/s Samwon Precision Mould Mfg Pvt. Ltd. to the premises of M/sElentec India Pvt Ltd. The machineries seized have been confiscated by the the impugned order in original dated 31.03.2017. The confiscation has been upheld by the impugned order dated 11.01.2018. After confiscation the property in the confiscated goods vests with the government. The letter dated 24.05.2024 is reproduced bellow:- 4.5.1 In view of the above, we do not find any merits in these submissions as the seized machines were confiscated by order dated 31.03.2017 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case which gave rise to the questions for consideration before the Constitutional Bench. K.S. Radhakrishnan, J., who wrote the unanimous opinion for the Constitution Bench, framed the question, viz., whether manufacturer of a specified final product falling under Schedule to the Central Excise Tariff Act, 1985 is eligible to get the benefit of exemption of remission of Excise duty on specified intermediate goods as per the Central Government Notification dated 11-8-1994, if captively consumed for the manufacture of final product on the ground that the records kept by it at the recipient end would indicate its "intended use" and "substantial compliance" with procedure set out in Chapter 10 of the Central Excise Rules, 1944, for consideration? The Constitution Bench answering the said question concluded that a manufacturer qualified to seek exemption was required to comply with the preconditions for claiming exemption and therefore is not exempt or absolved from following the statutory requirements as contained in the Rules. The Constitution Bench then considered and reiterated the settled principles qua the test of construction of exemption clause, the mandatory requirements to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to be achieved and the context of the pre-requisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleased if a clear statutory pre-requisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means "actual compliance in respect to the substance essential to every reasonable objective of the statute" and the Court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed. 33. A fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance with an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cedent for availing exemption. Presumably for this reason the Bench which decided Surendra Cotton Oil Mills case (supra) observed that there exists unsatisfactory state of law and the Bench which referred the matter initially, seriously doubted the conclusion in Sun Export Case (supra) that the ambiguity in an exemption notification should be interpreted in favour of the assessee. 41. After thoroughly examining the various precedents some of which were cited before us and after giving our anxious consideration, we would be more than justified to conclude and also compelled to hold that every taxing statute including, charging, computation and exemption clause (at the threshold stage) should be interpreted strictly. Further, in case of ambiguity in a charging provisions, the benefit must necessarily go in favour of subject/assessee, but the same is not true for an exemption notification wherein the benefit of ambiguity must be strictly interpreted in favour of the Revenue/State. 42. In Govind Saran Ganga Saran v. Commissioner of Sales Tax, 1985 Supp (SCC) 205, this Court pointed out three components of a taxing statute, namely subject of the tax; person liable to pay tax; and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue, the aforesaid conclusions are expounded only as a prelude to better understand jurisprudential basis for our conclusion. We may now consider the decisions which support our view. 44. In Hansraj Gordhandas case (supra), the Constitutional Bench unanimously pointed out that an exemption from taxation is to be allowed based wholly by the language of the notification and exemption cannot be gathered by necessary implication or by construction of words; in other words, one has to look to the language alone and the object and purpose for granting exemption is irrelevant and immaterial. 45. In Parle Exports case (supra), a Bench of two-Judges of this Court considered the question whether non-alcoholic beverage base like Gold spot base, Limca base and Thumps Up base, were exempted from payment of duty under the Central Government notification of March, 1975. While considering the issue, this Court pointed out the strict interpretation to be followed in interpretation of a notification for exemption. These observations are made in para 17 of the judgment, which read as follows : "How then should the Courts proceed? The expressions in the Schedule and in the notification for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit the subject/assessee. A careful reading of the entire para, as extracted hereinabove would, however, suggest that an exception to the general rule of tax has to be construed strictly against those who invoke for their benefit. This was explained in a subsequent decision in Wood Papers Ltd. case (supra). In para 6, it was observed as follows : "... In Collector of Central Excise v. Parle Exports (P) Ltd., (1989) 1 SCC 345, this Court while accepting that exemption clause should be construed liberally applied rigorous test for determining if expensive items like Gold Spot base or Limca base of Thums Up base were covered in the expression food products and food preparations used in Item No. 68 of First Schedule of Central Excises and Salt Act and held 'that it should not be in consonance with spirit and the reason of law to give exemption for non-alcoholic beverage basis under the notification in question'. Rationale or ratio is same. Do not extend or widen the ambit at stage of applicability. But once that hurdle is crossed construe it liberally. Since the respondent did not fall in the first clause of the notification there was no question of giving the clause a lib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of law. The principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee - assuming that the said principle is good and sound - does not apply to the construction of an exception or an exempting provision, they have to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State...." 50. In Tata Iron & Steel Co. Ltd. v. State of Jharkhand, (2005) 4 SCC 272, which is another two-Judge Bench decision, this Court laid down that eligibility clause in relation to exemption notification must be given strict meaning and in para 44, it was further held - "The principle that in the event a provision of fiscal statute is obscure such construction which favours the assessee may be adopted, would have no application to construction of an exemption notification, as in such a case it is for the assessee to show that he comes within the purview of exemption (See Novopan India Ltd. v. CCE and Customs)." 51. In Hari Chand case (supra), as already discussed, the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing equipment, office equipment and captive power plants may be allowed on payment of an amount equal to the customs duty leviable on such goods on depreciated value thereof and the rate in force on the date of payment of such duty; (b) such clearance of goods (including container, suitable for repeated use) other than those specified in clause (a), may be allowed on payment of customs duty on the value at the time of import and at rates in force on the date of payment of such customs duty; (c) such clearance of used packing materials such as cardboard boxes, polyethylene bags of a kind unsuitable for repeated use may be allowed without payment of any customs duty." 6.3 A plain reading of the above condition makes it absolutely clear that depreciation is permissible only when the capital goods are cleared after getting approval from the Development Commissioner for being taken to any other place in India in accordance with the EXIM policy. In the instant case no such permission has been obtained by the appellant from the Development Commissioner and the Development Commissioner has also not renewed the LOP when it expired in September, 2001. In the absence of any such permi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rates on the correct amounts of duty. 7. Insofar as confiscation of the goods is concerned, we have not found any reason to interfere with the impugned order. However, in the facts and circumstances of the case, we are inclined to reduce the quantum of fine to a reasonable extent. In our view, a fine of Rs. 50,000/- (fifty thousand) will serve the purpose. Further, in the facts and circumstances, we reduce the quantum of the penalty on the assessee to Rs. 50,000/- (fifty thousand) and vacate the penalty imposed on the Managing Director." 4.11 Reliance is placed by the appellant on the Order-in-Appeal No.NOI-EXCUS-002-APP-1708-17-18 dated 19.02.2018 in the case of M/s D&Y Technologies Pvt. Ltd. was not part of the alleged contraventions made by the appellant. He has dropped the penalties imposed. Dropping of penalties imposed on M/s D&Y Technologies Pvt. Ltd. cannot said to be clean chit given to the appellant in matter of clearance without following the due procedure. 4.12 Taking note of all above, we are inclined to uphold the order of confiscation of these machines but to reduce the redemption fine imposed from Rs.75,10,000/- to Rs.50,00,000/-. 4.13 Penalties imposed on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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