TaxTMI 
TaxTMI 
2004 (1) TMI 694
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....n No. 13/81-Cus., dated 9-2-81 as amended by Notification No. 53/97-Cus., dated 3-6-1997, as detailed in Annexures I, II and C, of the SCDN, have been wrongly availed, under proviso to Section 28(1) of Customs Act, 1962, r/w Sections, 12, 17, 68 and 72 of the said Act. (ii) I order that, interest should be charged at appropriate rate on the said amount of Customs duty as confirmed at Sr. No. (i) above under Section 28AB of the Customs Act, 1962. (iii) I impose penalty of Rs. 14,38,50,280/- (Rupees Fourteen crores Thirty-eight Lakhs Fifty thousand Two hundred Eighty only) on M/s. Hanil Era Textiles Ltd. under Section 114 of the Customs Act, 1962. (iv) I confirm C. Ex. duty amounting to Rs. 41,21,171/- (Rupees Forty-one lakhs Twenty-one thousand One hundred Seventy-one only) on the entire qty. of inputs viz. Furnace Oil HSD and Lubricating Oil on which exemption under Notification No. 1/95-C. Ex. has been wrongly availed, under proviso to Section 11A (I) of the Central Excise Act, 1944 r/w Section 3 of the Act and Rule 225 of Central Excise Rule....
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....ly) as recoverable from the E.O.U M/s. Hanil Era Textiles Ltd., on imported Furnace Oil/H.S.D. under the provisions of Section 28(1) of the Customs Act, 1962 read with Section 12, 17, 68 or 72 of the said Act for the period August, 2000 to December, 2000. (ii) I confirm C. Ex. duty of Rs. 1,44,929/- (Rupees one lakhs forty-four thousand nine hundred twenty-nine only) as recoverable from the E.O.U. (M/s. Hanil Era Textiles Ltd.), on the indigenous Furnace Oil/H.S.D under the provisions of Section 11A of the C. Ex. Act, 1944 for the period Aug., 2000 to Dec., 2000. (iii) I confirm Customs duty of Rs. 8,29,943/- (Rupees eight lakhs twenty-nine thousand nine hundred forty-three only) as recoverable from the E.O.U. M/s. Hanil Era Textiles Ltd., on spare parts of the D.G. sets imported, under Section 28(1) of the Customs Act, 1962 read with Section 12, 17, 68 or 72 of the said Act. (iv) I order that interest is chargeable under Section 28AB of the Customs Act, 1962 read with Section 11AB of the Central Excise Act, 1944 on the delayed payment of duty....
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....d by the Government of India, Ministry of Industries, Department of Industrial Development vide letter dt. 14-12-1991, for the manufacture of Acrylic Yarn and Cotton Acrylic Yarn and other specified types of Yarn. They had executed a Legal Undertaking with the Development Commissioner, SEEPZ, Mumbai, and also obtained licence for private bonded warehouse under Section 58 of the Customs Act, 1962 and permission for carrying on manufacture under bond under Section 65 of the Customs Act, 1962. They had also executed B-16 and B-17 bonds with the jurisdictional Assistant Commissioner. The permitted spindle capacity in the factory was 85000 spindles. They proposed to expand their capacity by further 25000 spindles in 1993 and accordingly, obtained permission from Secretariat for Industrial Approvals (SIA) on 31-12-93. They had an existing DG Set for generation of electricity. The need for a captive power plant was felt by the Textile Mills and hence, they applied on 11-10-1993 for the import of two sets of 6 MW Captive Power Plant and necessary permission was accorded for their import, subject to the condition of maintaining value addition of 38.22% as per formula in force prior to 1-4-1....
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....ting oil, and were selling excess electricity to DTA Unit to the extent of 68% of the total generated electricity; (b) That they had contracted for the purchase of two DG sets of higher-capacity of 15.68 MVA with M/s. Wartsila Diesel, Finland for 1992, prior to obtaining permission from Ministry of Industry, Government of India. (c) That they had sold electricity to M/s. Bombay Dyeing, in DTA, Unit through MSEB, without obtaining permission from the Development Commissioner, SEEPZ/Board of Approval/SIA or from the Customs and Central Excise Authorities. (d) That the appellants had not maintained proper account of consumption of Furnace Oil, HSD and Lubricating Oil. (e) That they had suppressed the fact of sale of electricity in DTA in the Annual Report for 1998-99. (f) That they had wrongly contended that the excess generation of electricity was due to higher connected load and would have been wasted, had it not been utilised throu....
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.... satisfied that it is necessary in the public interest so to do, hereby exempts goods specified in the Table below (hereinafter referred to as the goods), when imported into India for the purpose of manufacture of articles for export out of India, or for being used in connection with the production or packaging or job work for export of goods or services out of India, or for being used in connection with the production packaging or job work for export of goods or services out of India by hundred per cent Export Oriented Units approved by the Board of Approvals for hundred per cent Export Oriented Units, appointed by the notification of Government of India in the Ministry of Industry, Department of Industrial Policy and Promotion or the Development Commissioner concerned, as the case may be, for this purpose, (hereinafter referred to as the said Board), from the whole of duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 and the additional duty, if any, leviable thereon under section 3 of the said Customs Tariff Act subject to the following conditions, namely :- (1) The imports, clearance, expo....
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....of the Central Excise Act, 1944 (1 of 1944) or where such articles (including rejects, waste and scrap material) are not excisable, on payment of customs duty on imported goods used for the purpose of manufacture of such articles in an amount equal to the customs duty leviable on such articles, as if imported as such. (8) ...................... (9) ...................... THE TABLE Serial No. Description of goods (1) Capital goods (2 to 11) ...................... 12. Fuel, Lubricants and other consumables as approved by Commissioner on recommendation of the Development Commissioner. 13. ...................... 14. ......................" 9. With effect from 19-5-1999, Para 7 of Notification No. 53/97 was amended so as to read as under : "Notwithstanding anything contained in this notification the exemption herewith shall also apply to goods which on importation into India are used for the purpose of manufacture of articles within hundred per cent Export Oriented Unit and such articles (including rejects, waste an....
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....d per cent export oriented undertaking has been approved by the Board of Approval for hundred per cent export oriented undertaking (hereinafter referred to as the said Board) appointed by the Central Government in exercise of the powers conferred by section 14 of the Industries (Development and Regulation) Act, 1951 (65 of 1951) and the rules made under that Act; (b) the user industry brings the excisable goods directly from the factory of manufacture or from the warehouse and uses them for purposes as specified in clauses (a) to (c) above solely for export; (c) such user industry exports out of India hundred per cent or such other percentage as may be fixed by the said Board or the said Committee, as the case may be, of articles manufactured wholly or partly from the said goods for the period stipulated by the said Board or the said Committee, as the case may be, or such extended period as may be specified by the said Board or the said Committee, as the case may be. (5) Notwithstanding anything contained in this notification, the exemption contained herein shall also apply to the said....
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....Act, conditions of the Customs and Central Excise Exemption Notifications and specific wordings in the B-17 Bond executed, and Legal Agreement executed with Development Commissioner, SEEPZ to the extent that the EOU is to carry out export of 100% entire production, except the sale allowed into DTA, the Appellants have intentionally mis-used the facility provided to the 100% EOU. (h) That the appellants took permissions for sale of electricity from Maharashtra Govt. and MSEB, but did not apply for obtain permission from Development Commissioner, SEEPZ or Customs and C. Ex. Authorities. (i) That in spite of Development Commissioner, SEEPZ, making very clear in the permission letters for imports of spares for the D.G. Sets, by making the permission conditional, that the surplus electricity is not to be used for DTA sale, the appellants never approached the Development Commissioner or the Customs and C. Ex. Authorities, and continued to intentionally suppress the facts and misused the exemption. (j) That the appellants failed to maintain the prope....
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....onally in violation of the various conditions as above, along with the similar conditions of Notfn. No. 1/95-C.E., dated 4-1-1995. (q) That the appellants failed to follow the provisions of the EXIM Policy 1997-2002, the provisions of LOP, along with its conditions, the provisions of the Licence issued under Sections 58 and 65 of Customs Act, 1962 along with its conditions, provisions of B-17 executed by them, provisions and conditions of exemption Notfn. No. 13/81-Cus., dated 9-2-1981 as amended, Notfn. No. 53/97-Cus., dated 3-6-1997 as amended, Notfn. No. 1/95-C.E., dated 4-1-1995 as amended, provisions of Chapter IX of Customs Act, 1962, Chapter VA of the C. Ex. Rules, 1944 and Rule 173N of Chapter VIIA of the C. Ex. Rules, 1944. 12. We find that all the above aspects have been considered by the Tribunal in its judgment in the case of Indian Charge Chrome Ltd. v. Commr. of Customs, Bhubaneswar-I [2001 (138) E.L.T. 609 (Tri-Kolkata)] which has been upheld by the Supreme Court vide its order dt. 28-3-2003 [2003 (157) E.L.T. A137 (S.C.)]. The issue involved in the above is identical to the present case. M/s. Indian Charge Chrome ....
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.... power requirements of two 100% E.O.Us. one to be set up by M/s. Charge Chrome Ltd. and the other already set up by M/s. IMFA. It seems that initially, a dispute as regards the importation of Captive Power Plant under the said Notification arose, which dispute travelled up to the Hon'ble Supreme Court and vide its Order dated 5-6-1985, the Hon'ble Supreme Court held that Notification No. 13/81-Cus., dated 9-2-1981 is applicable to the importation of the Power Plant by the appellants. Thereafter, a Miscellaneous Application filed by the Revenue was dismissed by the Hon'ble Supreme Court by observing that the same seeks review of the earlier Order of the Court. We find that although all these backgrounds have been discussed in the impugned Order by the Commissioner, but the same is not very relevant to the dispute involved in the present appeals and as such, the factual position relating to importation of Captive Power Plant by the appellants can be avoided. 2.2 The dispute in the present appeal relates to the fulfilment of post-importation conditions of Notification No. 13/81-Cus. which, according to the Revenue, have been violated by the appellants. Admittedly, the Ca....
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.... generation of power by ICCL, which in turn was utilised for manufacture of Charge Chrome for export purposes. Evidently, electricity by its very nature has to be consumed instantaneously and cannot be stored and as such, whatever power is generated, the same is consumed by the appellants for manufacture of Charge Chrome and the rest is fed into the Grid for supply of electricity to IMFA. The electricity supplied by ICCL is appropriated by Orissa State Electricity Board and is pooled in the Grid System and the same cannot be segregated for the purpose of distribution to any particular consumer. As such, it is not possible to match the electricity produced at a given point of time with that of the electricity consumed at the same point of time. There will always be either surplus or deficit. The appellants' contention that in the absence of a restrictive clause in the Notification that the imported goods will be solely or exclusively used for the purposes of manufacture of goods for export, no violation of any conditions of the Notification can be said to have been committed. 3.3 It is seen that the Tribunal in the case of C.C., Mumbai v. Shefali Arts reported in 1999 ....
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....in the DTA by 100% EOU/EPZ units and has advised this Office that pending requests of the unit are to be considered in the light of the guidelines and the proposal to be submitted for further consideration of the BOA." Para 4 of the said letter permits 100% EOU to sale/supply surplus power in the DTA in keeping with the guidelines issued by the concerned power utility agency. In view of the foregoing, we hold that the sale of surplus power has not resulted any contravention of the conditions of the Notification justifying denial of the benefit of the same and confiscation of the Power Plant in question. There is also no justification for imposition of personal penalties upon the appellants. The impugned Order is accordingly set aside and all the appeals are allowed with consequential relief to the appellants.' 13. The Revenue challenged the said order before the Hon'ble Supreme Court in Civil Appeal D. No. 1317/2002 contending inter alia that a power plant of higher capacity was deliberately set up, that 59% of the power generated was sold to DTA units, that at the time of duty free import of the captive power plant, ICCL did not disclose that they would be selling....
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....st instantaneously with its consumption and it cannot be stored. 16. The contention that since electricity by its very nature cannot be stored the appellants deliberately imported higher capacity D.G. sets in order to generate more electricity and sell the same in DTA quantum of electricity and sale in DTA is not only factually incorrect, as the use of electricity in the manufacture of the export products namely various types of yarn and fulfilment of export obligation is not disputed, but also not relevant in the face of the finding of the Commissioner that capital goods and inputs were not used "only for the manufacture of yarn". In other words it is not disputed that the imported capital goods and imported and indigenously procured inputs were used for the purpose of manufacture of the export product. It is not the finding of the Commissioner that the goods in question were not used for such purpose. Therefore ld. Counsel attempt to argue that the goods in disputes were not used for the purpose of manufacture of export goods is contrary to record and cannot be accepted. If both the phases of the project envisaged by the appellants were completed, there would not have bee....
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.... which the 100% EOU has been set up, which in this case is yarn; therefore the question of payment of Customs duty does not arise when the non-excisable item is electricity which is not the article referred to and covered by condition 7 of the notification. 18. Fuels/Consumables used for generation of electricity are also not chargeable to duty under Notification Nos. 13/81-Cus., 53/97-Cus. and 1/95-C.E. as of each of the Notifications provide for payment of duty leviable on the goods as are not proved to the satisfaction of the Assistant Commissioner of Customs/Central Excise to have been used in connection with the production of goods for export out of India, and there is no dispute that Fuel/Consumable imported or indigenously procured by the appellants herein were so used. It is also pertinent to note that paragraph 6 of Notification No. 53/97-Cus. was amended by Notification No. 65/99, dated 19-5-1999 so as to provide inter alia for payment of duty and interest at the rate of 20% per annum, on the duty from the date of duty, free importation or procurement, till date of payment of duty, on raw materials, components spares and consumables (other than capital goods) impo....
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....side, they produced more electricity and consequently used more consumables for such production which was not otherwise required for the export production. Hence, I am of the opinion that they are liable to pay duty on the quantity of such consumables which has been used in the production and sale of electricity outside. The quantity of consumables which have been used for production of power used in the export production has to be allowed duty free subject to fulfilment of usual conditions relating to the achievement of N.F.E.P. and export performance through value addition. 23. In view of the foregoing, I am of the opinion that the impugned order needs to be set aside and remanded back to the Adjudicating Commissioner for fresh adjudication as it is necessary to verify as to whether the required N.F.E.P. and export performance through value addition has been achieved by the appellant unit and to separately quantify the duty liability in respect of the quantity of consumables used in the production and sale of electricity outside. I order accordingly. Sd/- (C. Satapathy) Member (Technical) DIFFERENCE OF OPINION 24. The following difference of opinion is....
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....rmined in this case. (b) From the records, as available in the file it appears that on 27-8-2003 a letter was addressed by Additional Commissioner of Central Excise to Registrar CESTAT with copies to the two ld. Members enclosing the order of the Development Commissioner SEEPZ (Special Economic Zone) wherein that authority had questioned the NFEPs and the Export Performance of the assessee EOU. Since NFEPs or the Export Performance was never an issue, in these proceedings the production of this document and reliance thereto by the Addl. Commissioner of Central Excise, who had addressed this letter, for the information of the Registrar with copies to the two ld. Members for information, has to be ignored. Once the exports are admitted to have been met, verification of the fulfilment of conditions relating to achievements of NFEP through value addition which was never the case of Revenue even at the SCN stage is not called for. (c) From the two orders, of the ld. Members, it is found that ld. Member (Judicial) has concluded that the exemption was available and no duty could be demand....
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.... in the case of the A.P. v. N.T.P.C. - 2002 (5) SCC 203 that generation of electricity is dependent upon the connected load. Applying the ratio of the said decision of the Constitution Bench, it becomes clear that only because the appellants sold electricity outside, they produced more electricity and consequently used more consumables for such production which was not otherwise required for the export production. Hence, I am of the opinion that they are liable to pay duty on the quantity of such consumables which has been used in the production has to be allowed duty free subject to fulfilment of usual conditions relating to the achievement of N.F.E.P. and export performance through value addition." does not bring out how it can be arrived at that "only because appellants sold electricity etc., they produced more electricity and consequently use more consumables". (e) It is also found that the Commissioner has also come to a conclusion, that generation of electricity will always be equal to the load put on the DG sets in the Captive Power Plants and ....
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.... would be the same. The ld. Commissioner failed to appreciated the above facts and has passed the impugned order confirming duty on the lube oil and spare parts also. The above facts can be noticed from the fact that during the period June, 1997 to July, 1998, when there was no sale of power in DTA and power plant was entirety used for yarn production, the lube oil and spare parts consumption were not less. The ld. Commissioner would have taken into account the above facts while passing the impugned order. (iii) The appellants further say that how much would be the consumption of furnace oil for DG sets of specified quantity would be covered by technical parameters. The appellants had installed total 3 DG sets (i.e. 2 DG sets of Wartsila Diesel make and one SKODA), with the capacity of 15.68 MW. With the said capacity, based on the technical parameters, specified quantum of inputs consumption would be there and hence, Dept's allegation that they have mis-led the consumption of furnace oil by obtaining fabricated documents to show excess consumption is incorrect. (v) Without prejudice to the above, the appellants further say that the consumption of furnac....
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....x., dated 4-1-1995." This finding of Commissioner, therefore, in light of the submissions of the appellants could be upheld, only if it was based on technical data and material. The findings, as extracted herein, exhibit that the same is not based on any such material, therefore cannot be upheld : (f) The allegations that the excess fuel lubricating oil etc. were used in the generation of excess electricity, which was to be and eventually sold cannot be established, when the appellants have very strenuously pleaded and produced material, to the effect that their consumption of 'fuel' is within the expected input-output norms as fixed for manufacture of 'yarn', during the period, which the assessee EOU was required to comply with in relation to the product for Export. They have also produced technical literature to exhibit the need to work, the DG sets in question, at an optimum level of performance to save those Capital goods (DG set) from being spoiled and damaged. The appellants have also brought on record certain abnormal situations in the form of strikes, etc., which resulted in the disruption o....