Amarjit Singh Kalra vs C.C.E. Jaipur I

[Arising out of Order-in-Original No. 30/2009(C.E)/Commissioner dated 28.08.2009 by the Commissioner of Central Excise, Jaipur -I].

Five Core Electronics Ltd.

Amarjit Singh Kalra Appellant

Vs.

C.C.E. Jaipur I Respondent

Present for the Appellant : Shri B.L. Narsimhan, Advocate

Present for the Respondent : Shri. Govind Dixit, DR

Coram: Honble Mr.D.N.Panda, Judicial Member

Honble Rakesh Kumar, Technical Member

Reserved on: 08.10.2014

Pronounced on:19.01.2015

FINAL ORDER NOs. 50112-50113 DATED 19.01.2015

PER: D.N.PANDA

This appeal came up against Adjudication made on 31/08/2009 with following consequences:-

(i) Customs Duty amounting to Rs.43,97,261/- (Rupees Forty Three Lac Ninety Seven Thousand Two Hundred Sixty One only) was imposed on the imported raw material recoverable from M/s. Five Core Electronics Ltd. F-622, Phase  I, RIICO Industrial Area, Bhiwadi, under proviso to section 28 (i) of Customs Act, 1962 (herein after referred to as the Act) with interest thereon under Section 28AB of the Act.

(iii) Penalty of Rs.43,97,261/- was imposed under Section 114 A of the Act on M/s. Five Core Electronics Ltd. However, concession thereon was allowed subject to deposit of duty and interest thereon within thirty days from the date of communication of the adjudication order. Accordingly such penalty was worked out to be Rs.10,99,315/- which is 25% of the duty amount.

(iv) Penalty of Rs.10,00,000/- was imposed on Shri Amarjit Singh Kalra, Director of M/s. Five Core Electronics Ltd. under Section 112(b) of the Act.

2.1 It was held in adjudication that the CPT and cabinet imported by the appellant M/s. Five Core Electronics Ltd., duty free under Notification No.52/2003-CUS dated 31.03.2003 were not used in manufacture of finished goods required to be exported as per LOP and such imported goods were sold in DTA without permission. That has resulted in failure to fulfil the conditions of the above notification. The duty free import having resulted in loss of custom duty of Rs.43,97,261/- foregone at the time of import was accordingly sought to be recovered from the appellant by the adjudication order. Ld. Adjudicating Authority also held that extended period of limitation was invokable under Provisio to Section 28(I) of Customs Act, 1962 due to suppression of the fact with intention to evade. Penalty was accordingly imposed on the appellant-Company and its officer in default for causing prejudice to revenue.

3.1 Assailing the adjudication order, both the appellants submitted that the proceedings relate to the import of the goods which underwent manufacturing process and with the permission for sale thereof in DTA those were sold. Appellant neither violated conditions of Notification nor caused prejudice to Revenue. According to appellant, the process of degaussing and aligning CPT amounts to manufacture. The CPT imported was subjected to such process before clearance to DTA. Similarly the plastic moulded cabinet imported being a raw material for manufacture of final product, making painting and shaping there was no violation of the condition of notification.

3.2 Appellant further submitted that a show cause notice was issued on 02/07/2008 in respect of the clearance made against the import of the period 01/05/2006-31/03/2007. Therefore when the import was within the knowledge of the authority, and use of imported goods in manufacture of exportable goods were also on record, there cannot be any suspicion as to the suppression of the facts. The activity of degaussing and alignment of CRT amounts to manufacture as is explained in page 50, para (ii) & (iii) of the adjudication order. Use of imported goods in such manufacture cannot be doubted when DTA sale was made as per permission. Assertion of revenue that the activity of degaussing did not amount to manufacture does not carry any sense in view of Chapter Note 6 of Chapter 85 to the Central Excise Tariff Act, 1975. Similarly, clause (iii) of the Exemption Notification No. 52/2003-Cus. dated 31/03/2003 permits use of imported goods in manufacture of finished goods to clear such goods on payment of appropriate duty of Excise leviable thereon under section 3 of Central Excise, 1944, in DTA even if not exported under Foreign Trade Policy. The Chapter Note 6 says that Article which is incomplete or unfinished but having the essential character of the complete or finished article that amount to manufacture.

3.3 Appellant says that the Software Technology Park of India issued LOP on 13/03/2006 (Ref: page 20 of appeal folder) permitting the appellant to manufacture electronic consumer goods. Details thereof appear in page 22 of the appeal folder. One such goods is Television, CKD/SKD and their parts. The said authority also in terms of Letter No. PCMG/PSE/03/STPIN/46637 dated 07/05/2007 granted permission for DTA sale for the period from 01/05/2006  31/03/2007 (Financial Year 2007) and such permission (Xerox copy at page 26 of appeal folder without any signature of designated authority) was to remain in force for one year from the date of issue. According to appellant, the DTA permission enabled the appellant to clear 14,416 of picture tubes in DTA. Therefore, the demand raised in adjudication order shall not sustain both on merit and limitation. Further, no penalty is imposable.

3.4 Ld. Counsel for the appellant relied on the decision of Tribunal in the case of STL Exports Ltd. Vs. CC, Indore [2004 (164) ELT 179 (Tri.  Del.)] to submit that upon demand of central excise duty, there cannot be demand of custom duty in respect of the same product and for the same period under para  7 of Notification No.53/97-Cus. Reliance was also placed on Larger Bench decision of the Tribunal in the case of Weston Electronics Ltd. Vs. CC, Delhi-III [2001 (130) ELT 451 (Tri.  LB)] to submit that yamming process is fixing the deflection yoke with the picture and then adjusting them electronically to keep proper light rays on screen. This process amounts to manufacturing and a new and distinct article known in the market as television sub-assembly comes into existence. Therefore manufacturing under section 2(f) of Central Excise Act, 1944 was carried out by appellant. When goods manufactured in 100% EOU or free trade zone is allowed to be sold in GTA benefit under Notification No.97/91-CE is available on the clearance of colour picture tube with deflection yoke which amounts to manufacture.

3.5 Appellants further submitted that when the goods were allowed to be manufactured as per LOP, there cannot be doubt relating to manufacture of colour picture tube by the appellant since appellant carried out such manufacture. Similarly cabinets imported had also undergone manufacturing process.

4.1 Per contra, stand of Revenue in the course of hearing was that there was no manufacturing operation at all carried out by the appellant. The appellant was not having DTA sale promotion for clearance of the picture tube, which is claimed to have been undertaken by degaussing and alignment process. When examination of Shri Amarjit Singh Kalra, Director was done on 29.01.2008, he explained that after degaussing, alignment of width and height of picture tube is adjusted by moving mechanical rings present on defection unit of the CPT. The inserted CPT were subjected to the process of degaussing and alignment. This process is basically aimed at removing colour patches that may form due to any magnetic field on the screen of the CPT when in use. Similarly, the cabinet parts were subject to spray painting on their outer surface to make them better looking and further use.

4.2 Revenue precisely submits that degaussing does not amount to manufacture and cabinet re-painting is also not manufacture.

4.3 Heard both sides and perused the record.

5.1 Ld. Adjudicating Authority while examining the contentions of the appellant as well as the evidence on record has found that CPT and PMC were removed from DTA without carrying out any manufacture activity because the CPT and cabinet imported were not mentioned to be any raw-material in the Bill of Entry as well as invoices of the exporter. Degaussing does not amount to manufacture because it does not change the character and nature of the innput. CPT itself were imported. Those were capable of performing their own function without undergoing any processing.

5.2 Appellant did not get any permission for carrying out degaussing and alignment of CRT from the appropriate authority. Similarly, plastic cabinets were imported without indicating any manufacturing process to be carried thereon in absence of entry in LOP in that regard. Similarly spray painting does not amount to manufacture. Those were neither meant for export nor independently manufactured but used as accessories. As per LOP, CPT and moulded cabinets were raw-materials and those were not subjected to a manufacturing process for which those are not included in the list of items to be manufactured while LOP was granted. Therefore, CPT and PMT cleared in DTA were mere imported materials and components only.

5.3 The appellant also did not inform to the Department about carrying out of any activity to be called degaussing and spray painting as manufacture. The terminology degaussing and alignment of CRT and spray painting of plastic moulded cabinets were only nomenclature given by appellant to give an impression that certain processes were carried out on such goods imported and sold in the DTA. There was failure to fulfil the conditions of the Notification 52/2003-Cus., dated 31/03/2003. The duty free goods not being used in manufacture violation of condition of export calls for recovery of the customs duty foregone by the Department.

6. The citations relied on by the appellant are not profitable to it when there was no manufacturing of CPT and cabinet activity carried out by them. Degaussing and spray painting is not known in trade parlance as manufacturing activity. When the goods imported were declared to be used in manufacturing process, but not so used, the duty foregone on import thereof is recoverable. The goods sold in DTA were the imported CPT and PMC misconceiving that manufacturing was done. Thus, the benefit of Notification claimed is not tenable and plea of excise duty is immaterial. Customs duty is recoverable.

7. The dispute being on the claim whether the activity amounts to manufacture there shall not be levy of penalty.

8. Shri Amarjit Singh Kalra, Director appears to have conscious knowledge about duty forgone by State at the time of import of the goods and also no DTA permission was obtained for sale of raw materials imported without use in manufacture as is revealed from his statement recorded in the course of investigation. Therefore intention of evasion of duty cannot be ruled out. Accordingly, penalty imposed on him does not warrant consideration.

9. For the aforesaid reasonings, both the appeals are dismissed.

[Pronounced in the open Court on 19.01.2015].

(RAKESH KUMAR) (D.N.PANDA)

TECHNICAL MEMBER JUDICIAL MEMBER

Bhanu

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C/649 & 650/2009-CU[DB]