Cce-Ludhiana vs M/S. Aarti International

[Arising out of order-in-appeal no. 403 & 404/CE/Chd/06, dt. 05.05.06 passed by CCE-Ludhiana]

1. Whether Press Reporter may be allowed to see the Order for Publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy of the order?

4. Whether order is to be circulated to the Department Authorities?

CCE-Ludhiana Appellant

Vs.

M/s. Aarti International Respondent

Appearance: Shri R.K. Grover, DR for the respondent.

Shri R. Santhanam, Advocate for the appellant

Coram: Honble Shri Rakesh Kumar, Member (Technical)

Honble Shri S.K. Mohanty, Member (Judicial)

Final Order No. 51992-51993/2015

Per: Rakesh Kumar

The facts leading to filing of these appeals by the Revenue are, in brief, as under:

1.1 The Respondent are 100 per cent EOU engaged in manufacture of cotton yarn in their factory at Vishwakarma Chowk, Miller Ganj, Ludhiana. The respondent had been issued a private bonded warehouses licensed under section 58 of the Customs Act, 1996 and also permission under section 65 of the Customs Act, 1962 for manufacture under bond. Notification no. 52/03 CE dated 31/3/2003 and its predecessor notification no. 53/97 CUS dated 3/6/1997 exempted the specified goods, when imported into India or procured from a public or a private bonded warehouses, by a 100 per cent EOU for manufacture of articles for export out of India from the whole of the duty of the customs leviable under first schedule to the Customs Tariff Act, 1975 and also from the additional customs duty leviable under section 3 of the said customs tariff, 1975. By section 116 of Finance Act, 1999 an additional levy of Rs. 1 per liter was imposed on HSD with effect from 1/3/1999 and subsequently this levy was enhanced to Rs. 1.5 per liter by section 168 of the Finance Act, 2003. The notification no. 52/2003 CE dated 31/3/2003 and predecessor notification no. 53/97 CUS dated 3/6/1997 did not exempt the HSD from the levy under section 116 of the Finance Act, 1999, as amended by section 168 of the Finance Act, 2003. In the present case, the respondent during February, 2004 to July 2004 procured under bond certain quantity of HSD for use in their unit for manufacture of goods for export.

The HSD had been procured from M/s. ESSAR Oils who had imported the same and cleared the same for warehousing. The respondent had procured the HSD, in question, from the bonded warehouse of M/s. ESSAR oil without payment of duty. The Department was of the view that since the HSD procured by the respondent was not exempt Under section 116 of the Finance Act, 1999 as amended by section 168 of the Finance Act, 2003, differential duty totalling Rs. 11,37,864/- would be recoverable from the respondent. It is on this basis that after issue of show cause notice, the Joint Commissioner by two separate orders confirmed the total duty demand of Rs. 11,37,864/- against the Respondent along with interest on it under section 28AB and imposed penalty of equal amount on them under section 114A of Customs Act, 1962. On appeals being filed to the Commissioner (appeals) against these orders, the commissioner (appeals) by a common order-in-appeal dated 11/8/2006 set aside the Joint Commissioners order holding that the duty was not demandable from the respondent, as it is M/s. ESSAR Oils who had imported HSD.

Against this order of the Commissioner (appeals), these appeals have been filed by the Revenue. In respect of the Revenues appeal, the respondent have filed cross-objections.

2. Heard both the sides.

3. Shri R.K. Grover, ld. DR, assailed the impugned order by reiterating the grounds of appeal and pleaded that notification no. 52/03CUS dated 31/3/2003 and its predecessor notification no. 53/1997 CUS dated 3/6/1997 exempted the goods, procured by a 100% EOU either by direct import or from the bonded warehouse, only from the basic custom duty and additional custom duty leviable under Customs Act; that this notification did not exempt the HSD imported, from the levy under section 116 of the Finance Act 1999; that since the goods procured by the respondent are not exempt from the additional duty under section 116 of the Finance Act, 1999 as amended by section 168 of the Finance Act, 2003, this duty would be recoverable from the respondent, as the respondent had procured the HSD free of duty from the bonded warehouse of M/s. ESSAR Oil and for this purpose, it is not material that it is ESSAR oil who had originally imported the HSD and had cleared for warehousing under into bond bill of entry; that in this regard he relies upon the para 34 of Chapter 3 titled procedure for clearance for imported and exported goods in the CBECs Custom Manual of Instructions issued on 4/9/2001; that according to this circular, in case of the goods cleared for warehousing, the duty is payable at the time of ex-bond clearance of the goods at the rate of duty applicable at the time of ex-bond clearance, that since it is the respondent who had procured the goods from bonded warehouse of M/s. ESSAR Oils under ex-bond bill of entry, it is the respondent who will be liable to pay additional duty payable under section 116 of the Finance Act, 1999 read with section 168 of the Finance Act, 2003. He, therefore, pleaded that impugned order is not correct.

4. Shri R. Santhanam, Advocate, the ld. counsel for the respondent, defended the impugned order by relying upon the judgment of the Tribunal in the case of CCE-Chandigarh Vs. Rana Polycot Ltd. reported in 2011 (265) ELT 340 (Tri-Del) wherein the Tribunal relying upon its earlier judgment in the case of STI India Limited Vs. CCE-Indore reported in 2008 (222) ELT 112 (Tri-Del) and also larger benchs judgment in the case of Paras Fab International Vs. CCE-Kandla reported in 2010 (256) ELT 556 (Tri-LB) had held that the additional customs duty leviable under section 116 of the Finance Act, 1999 is not recoverable from the 100 per cent EOU, which had procured the HSD from importer who had cleared the imported HSD for warehousing. He pleaded that above judgment of the Tribunal is squarely applicable to the facts of this case and hence, there is no merit in the Revenues appeal. He pleaded that in the present case, the show cause notice for demand of duty has been issued on 17/10/2005 while the purchases had been made by the respondent from ESSAR oil from period February, 2004 to July, 2004 and since in the circumstances of the case, the extended limitation period is not applicable, the duty demand has been raised beyond normal limitation period and hence, the demand is time barred. In this regard, he pointed out to the Tribunals judgment in the case of Rana Polycot Ltd. (supra) wherein the Tribunal had rejected the revenues appeal holding that the demand is time barred.

5. We have considered the submissions from both the sides and perused the records.

6. In this case, the respondent had procured the HSD from ESSAR Oil under ex-bond bill of entry filed by ESSAR oil during period from February, 2004 to July, 2004. The respondent had procured this HSD without payment of duty in terms of notification no. 52/03CE. The departments contention is that the additional custom duty leviable under section 116 of the Finance Act, 1999 read with section 168 of the Finance Act, 2003 is not exempt under notification no. 52/03. But instead of demanding this duty from ESSAR oil, show cause notice has been issued on 17/10/2005 to the respondent for demand of this duty. The show cause notice has been issued by invoking extended period of the proviso to section 28 of the Customs Act, 1962. The question arises as to whether the extended limitation period of 5 years is invokable. In this case if it is not invokable, the demand would be time barred. We find that the same issue relating to limitation was involved in case of CCE-Chandigarh Vs. Rana Polycot Limited (Supra) and the Tribunal in para 9 of the order had held that extended limitation period is not invokable.

7. Therefore, irrespective of whether the additional customs duty leviable under section 116 of the Finance Act, 1994 is recoverable from the respondent or not, the demand is time barred.

8. So far as the merits of the case is concerned, the question to be answered is as to whether the additional customs duty leviable under section 116 of the Finance Act, 1999 read with section 168 of the Finance Act, 2003 can be recovered from the respondent when the respondent had received the goods from the importer  M/s. ESSAR Oil Limited and M/s. ESSAR Oil Limited, who had imported the goods, had cleared the same for warehousing bond under into bond bill of entry and subsequently had cleared the HSD to the respondent under ex-bond bill of entry. We find that this issue stands decided in the favour of the respondent by the Tribunal s judgment in the case of STI India Limited Vs. CCE- Indore reported in 2008 (222) ELT 112 (Tri-Del) and also by Larger Bench Judgment in the case of Paras Feb International Vs. Commissioner of Central Excise Kandla reported in 2010 (256) ELT 556 (Tri-LB).

9. In view of the above, we hold that the duty should have been recovered from M/s. ESSAR Oil and not from the respondent. We, therefore, do not find any merit in the Revenues appeal. The same are dismissed.

10. Cross-objection filed by the respondent also stand disposed off.

(Rakesh Kumar)

Member (Technical)

(S.K. Mohanty)

Member (Judicial)

Ritu

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