2015 (11) TMI 448 - AT - Customs

Appellant Liable for Duty Due to Non-Compliance with Pre-Clearance Conditions

The court held that the appellant was not entitled to clear goods under certain notifications without ensuring compliance with pre-clearance conditions. ... 100% EOU - DTA clearance of manufactured carpets to EPCG licence holders - export obligations - extension of time limit - procedure not followed by the appellant - Held that:- appellant is a 100% EOU and they themselves are procuring the goods under Central Excise (Removal of goods at concessional rate of duty for manufacture of excisable goods) Rules, 2001 and the said rules are general rules and can be followed whether or not prescribed a particular notification and in the present case the appellant should have asked his customers to follow the said rules and for this purpose, the customers should have approached their jurisdictional authorities and produced the EPCG licence along with invalidation certificate and thereafter executed the bond as required under Notification No.44/2002 or 55/2003. Once these details steps were completed and after obtaining the relevant permission, appellant could have cleared the goods to his customers availing the benefit of exemption Notification Nos.44/2002 & 55/2003. Further, the appellant should have every month produced the copies of invoices and other deails including the copy of the letter received from the jurisdictional authorities of his customers to his jurisdictional AC/DC and it is only in this situation, the responsibility of the appellant would have been over and the assessment of the goods would be in order. Since the appellant has cleared the goods without following any of the above procedure, the benefit of above mentioned notification cannot be extended. - Decided against the appellant. The appellant did not produce the end use certificate in time and the Revenue proceeded to recover the differential duty. The appellant thereafter produced the end use certificate and it is in these circumstances, the Hon'ble Supreme Court has taken the view. In the present case, the situation is entirely different. The appellant have not cleared the goods as per the conditions of the notification. No bond was executed. Invalidation certificate, EPCG import licence, etc. were not produced at the time of clearances of the goods to the jurisdictional authorities and after the issuance of the show-cause notice at this stage, the EODC certificate is being produced and now none of the conditions of the notification can be monitored and checked. There can be no doubt that this Tribunal can look into the documents produced in the proceedings Regarding extension of time limit - Held that:- The appellant cannot be permitted not to apply for extension of time and producing the certificate at any point of time and take the plea that the AC/DC was competent to extend the time limit. Such an interpretation will make the time limit redundant. Similar is the position in respect of the block-wise export obligation to be fulfilled. - Decided against the appellant. Who is liable to pay the duty - the appellant (100% EOU) or its customers - Held that:- the appellant have not fulfilled his obligation under the law. In, this case, the appellant had cleared the goods without ensuring that his customers submit themselves to the jurisdictional authorities and fulfill pre-clearance conditions. The obligation included that their customers executes the bond with the jurisdictional authorities in terms of Notification No.44/2002 and 55/2003and also produce the EPCG licence, invalidation certificate, etc. which were required to be debited by the jurisdictional authorities after examining the validity of such licence. Under these circumstances duty is to be demanded from the appellant alone. - Decided against the appellant. Rate of CVD for levy and collection - Held that:- The carpets are also chargeable to two rates of duty vide Notification No.29/2004-CE and 30/2004-CE. The appellant is a 100% EOU and as per proviso to Section 5A(1) of the Central Excise Act, the above mentioned exemption notifications are not applicable to 100% EOUs. However, for the purpose of computing countervailing duty when the goods are being cleared from the DTA, the benefit of such notification is extended. However, since the appellant is 100% EOU, in our view as per Explanation 1 after clause (ii) of proviso to Section 3 (1) of the Central Excise Act, since there are two rates, viz., 8% and NIL rate highest of the two i.e., 8% will be chargeable. - in case of 100% EOU when the goods are being cleared, they are required to pay countervailing duty corresponding to the highest/normal rate of duty of 8% under Notification NO.29/2004-CE. Appellants have been denied the benefit of Notification No.2/95-CE and Notification No.23/03-CE - prima facie the appellant will be entitled to the benefit of the said notification. However, the Commissioner has denied due to non-submission of evidence. We consider it appropriate to remand the matter back to the Commissioner for re-examining the same and the appellant will submit permissions given by the Development Commissioner including the ones produced before us within one month from the date of receipt of this order. The appellant may be informed of any further details required, so that they can produce the same in support of their claim. The Commissioner may examine and thereafter decide the eligibility or otherwise. Another issue raised in the impugned order is the denial of benefit of Notification No.52/2003-Cus (earlier NO.53/97-Cus) for imported inputs and Notification No.22/2003-CE dated 31/03/2003 (earlier No.1/95 dated 01/04/95). The said notifications are relating to exemptions on inputs imported or procured locally for the purpose of manufacture. - This dispute is already decided by us in this order and appellant is required to pay additional duty. Under the said circumstances, we do not find any substance for denying the benefit of said notifications and demanding duty on the inputs. Matter remanded back for decided certain issues raised first time. - Decided partly in favor of appellant. Issues Involved:1. Applicability of Notification No. 44/2002-Cus and 55/2003-Cus.2. Liability of the appellant or their customer regarding the said notifications.3. Production of certificates and compliance with conditions of the notifications.4. Computation of countervailing duty.5. Denial of benefits under Notification No. 2/95-CE and 23/03-CE.6. Denial of benefits under Notification No. 52/2003-Cus and 22/2003-CE.7. Invocation of extended period of limitation and B-17 bond.8. Confiscation of goods and imposition of redemption fine.9. Additional issues raised during arguments.Issue-wise Detailed Analysis:1. Applicability of Notification No. 44/2002-Cus and 55/2003-Cus:The court reviewed the conditions of the said notifications, which include the requirement for importers to execute a bond and fulfill export obligations. The appellant did not ensure that their customers complied with these conditions before clearing goods at a concessional rate. The appellant should have verified that their customers had executed the necessary bonds and submitted the required documents to the jurisdictional authorities. The court concluded that the appellant was not entitled to clear goods under the said notifications without ensuring compliance with pre-clearance conditions.2. Liability of the Appellant or Their Customer:The court held that the appellant is responsible for ensuring that their customers comply with the conditions of the notifications. Since the appellant did not ensure compliance, they are liable for the differential duty. The appellant cannot shift this responsibility to their customers.3. Production of Certificates and Compliance with Conditions:The appellant produced certificates for 94% of the clearances after the adjudication proceedings. The court rejected this, stating that the certificates should have been produced within the stipulated time, and the delay cannot be condoned. The appellant's failure to comply with the pre-clearance conditions and produce the required documents in time led to the rejection of their claims.4. Computation of Countervailing Duty:The appellant argued that the countervailing duty should be computed at a nil rate based on the Supreme Court's decision in SRF Ltd. However, the court held that as per Explanation 1 to Section 3(1) of the Central Excise Act and the Customs Tariff Act, the highest of the two rates (8% as per Notification No. 29/2004-CE) should be applied. The court distinguished the SRF Ltd. case, stating that it did not address the specific issue of clearance from a 100% EOU to DTA.5. Denial of Benefits under Notification No. 2/95-CE and 23/03-CE:The court found that the appellant prima facie met the conditions of the notifications, such as achieving positive NFE and DTA clearances within the permissible limits. The matter was remanded to the Commissioner for re-examination, allowing the appellant to submit the necessary evidence.6. Denial of Benefits under Notification No. 52/2003-Cus and 22/2003-CE:The court set aside the demands for customs duty on imported inputs and central excise duty on locally procured inputs. It was undisputed that the inputs were used in manufacturing carpets cleared against EPCG licenses. The court held that the benefit of the said notifications should not be denied.7. Invocation of Extended Period of Limitation and B-17 Bond:The court remanded the matter to the Commissioner to re-examine the applicability of the extended period of limitation and the validity of invoking B-17 bond alone without reference to Section 11A of the Central Excise Act. Both sides were allowed to present factual and legal arguments.8. Confiscation of Goods and Imposition of Redemption Fine:The court set aside the redemption fine imposed on the appellant, as the goods were not available for confiscation and were cleared on payment of duty (though disputed). The court found that this was not an appropriate case for imposing a redemption fine.9. Additional Issues Raised During Arguments:The court noted that the appellant raised several issues during arguments that were not previously mentioned in the grounds of appeal or during the adjudication process. While the court would normally reject such submissions, it remanded the matter to the Commissioner to examine these issues in the interest of justice.Conclusion:The appeals were disposed of with specific directions to the Commissioner to re-examine certain issues, including the applicability of notifications, computation of countervailing duty, and the invocation of extended period of limitation. The court emphasized the importance of complying with the conditions of exemption notifications and the responsibility of the appellant to ensure such compliance.