Commissioner Of Central Excise vs Alexcon Extrusion Ltd

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI

COURT No. II

APPEAL No.E/1031/05

(Arising out of Order-in-Original No.104/Commr/03-04 dated 17/03/2004 passed by Commissioner of Central Excise, Customs & Service Tax, Raigad, New Panvel, Navi Mumbai)

For approval and signature:

Honble Mr. P.K. Jain, Member (Technical) Honble Mr. S. S. Garg, Member (Judicial)

1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

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

3. Whether Their Lordships wish to see the fair copy :Seen of the Order?

4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================

Commissioner of Central Excise, Raigad Appellant Vs. Alexcon Extrusion Ltd., Respondent

Appearance:

Shri.Hitesh Shah, Comm. (AR) for appellant Shri.G.B.Yadav, Advocate, for respondent

CORAM:

Honble Mr. P.K. Jain, Member (Technical) Honble Mr. S.S. Garg, Member (Judicial)

Date of Hearing : 04/08/2015 Date of Decision : /10/2015

ORDER NO

Per: SS Garg

1. The present appeal is directed against Order-in-Original No.104/Commr/03-04 dated 17/03/2004 passed by Commissioner of Central Excise, Customs & Service Tax, Raigad, New Panvel, Navi Mumbai, wherein the learned Commissioner did not impose equal penalty under Section 114A of the Customs Act, 1962 and under Rule 173Q of Central Excise Rules, 1944, after holding the appellant guilty of violations of conditions given in the Notification Nos.13/81-Cus dated 09/02/1981, 123/81-CE dated 02/06/1981 and 1/95-CE dated 04/01/95 by not fulfilling the export obligation.

2. Brief facts of the case are that M/s.Alexcon Extrusions Ltd., was granted letter of LI-EOB 107(89)/EO 223 (88) IL dated 08/06/1989 for setting up of a 100% EOU for manufacture of aluminium tube and tubings subject to fulfillment of certain conditions, viz., that the unit shall export its entire production for a period of 10 years or less from the date of commencement of commercial production as may be specified by the Government, the value addition shall be minimum of 36%, the undertaking shall execute a bond/legal undertaking and if the undertaking fails to fulfill its export and other obligations under the scheme, it will be liable to pay all penalties, Customs and Excise duties and such other amounts as may be decided by the Government. The assessee/respondent was permitted to import capital goods, raw materials and spares and consumables, worth of Rs.20.50 crores which will be exempted from Customs/Central Excise duties in terms of Notification No.13/81-Cus dated 09/02/81 and Notification No.123/81-CE dated 02/06/81 and1/95-Ce dated 04/01/95 for the purpose of in bond manufacture of aluminium tubes, etc. The assessee had imported duty free capital goods, raw materials and spares and consumables involving customs duty totalling to Rs.6,32,01,419/- and similarly they had also procured duty free indigenous capital goods, raw materials, spares and consumables involving Central Excise duty totalling to Rs.28,51,865/-. It is further alleged that the assessee failed to fulfil the export obligations and hence as per Notifications mentioned above, the customs duty as well as the excise duty are liable to be recovered as per the conditions of the notifications. Thereafter, a show-cause cum demand notice was issued to the assessee demanding customs duty, excise duty and also proposed to charge interest under Section 28AA of the Customs Act and penalty under Section 114A of the Customs Act, 1962 and Rule 173Q of Central Excise Rules, 1944 and Rule 25 of Central Excise Rules, 2002.

2.1 The assessee in spite of notice did not appear before the Commissioner for personal hearing. The assessee vide their letter dated 31/01/2004 submitted that their company had suffered heavy financial losses and eventually closed down with effect from 01/04/96. The bankers of the assessee initiated legal proceedings against the company and finally obtained court decree in their favour and consequently the bankers have taken possession of the assets and further that the company does not have any assets free from encumbrances from which it can meet its financial obligations. In view of this, the assessee requested to condone and grant them exemption from fulfilling their export obligation.

2.2 The learned Commissioner held that the assessee had failed to fulfill the export obligation and therefore, they are liable to pay the Customs duty to the tune of Rs.4,04,02,787/- in terms of Notification No.13/81-CE dated 09/02/81, Excise duty amounting to Rs.10,35,125/- in terms of Notification No.123/81-CE dated 02/06/81, Customs duty of Rs.1,08,62,850/- in terms of Notification No.13/81-CE, Excise duty of Rs.7,72,268/- in terms of Notification No.123/81-CE dated 02/06/81, Customs duty of Rs.1,19,35,782/- in terms of Notification No.13/81-Customs dated 09/02/81 and Excise duty of Rs.10,44,472/- in terms of Notification No.123/81-CE dated 02/06/81 & 1/95-CE dated 01/03/95. Further, the Commissioner has imposed a penalty of Rs.5.00 lakhs under Section 114A of Customs Act,1962 and also the penalty of Rs.50,000/- under Rule 173Q of Central Excise Act. Aggrieved by the order of the learned Commissioner, the department has filed the appeal before us.

3. The learned Commissioner (AR) has submitted that the order-in-original passed by the learned Commissioner is not in accordance with the law inasmuch as after holding the respondent guilty of committing the breach of conditions of exemption notifications and thereby rendered themselves liable for penalty under Section 114A of the Customs Act, 1962 and for penalty under Rule 173Q of Central Excise Rules, 1944, did not impose penalty equal to the duty determined as provided in the respective Act/Rules. In support of his submission, he relied upon the judgements in the case of CC (Exports), Chennai Vs. KRM International Ltd., reported in 2014 (309) ELT 456 (Mad) and the case of CC, Tuticorin Vs. Pothys Cotton Products (P) Ltd. reported in 2014 (307) ELT 522 (Mad) wherein in both the cases the Honble High Court of Madras has held that after coming to force the provisions of Section 114A inserted by the Finance Act, 1996, a person is liable to pay penalty equal to duty.

3.1 The learned AR also cited the decision of the Apex Court in the case of Impression Prints Vs. CCE, Delhi reported in 2005 (187) ELT 170 (SC), in support of his arguments that the penalty provided under Section 114A of the Customs Act is mandatory in nature and the adjudicating authority has no discretion to reduce the same.

4. On the other hand, the learned Counsel for the respondent submitted that the provisions of Section 114A of Customs Act, 1962 & 11AC of Excise Act, 1944 providing mandatory penalty of equal amount cannot be invoked in this case as the said provision brought into statute book with effect from 20/09/1996 wherein the period in dispute in this case is from November 1990 to February 1996. In support of his submission, he cited the decision of this Tribunal in the case of Lakshmi Packaging (P) Ltd., Vs. CCE, Coimbatore reported in 1998 (98) ELT 91 (Tri) wherein the Tribunal has observed that with regard to the levy of penalty, since the period involved is 1991 to 1995, the statutory penalty of 100% of duty evaded in terms of Section 11AC could not have been invoked as the said section came into force on 20/09/1996 in view of the judgement of the Honble Supreme Court in the case of Brij Mohan Vs. CIT reported in 120 ITR-1. He further submitted that the penalty provisions of Section 114A of the Customs Act, 1962 and 11AC of the Central Excise Act, 1944 are applicable prospectively and cannot be invoked retrospectively.

5. We have heard both the sides and perused the records.

5.1 The only point for consideration before us is whether the Commissioner after holding the respondents guilty of committing violations of exemption notifications could have imposed penalty lesser than that provided in 114A of the Customs Act and 11AC of the Central Excise Act. We find that the period in dispute in this case pertains to November 1990 to February 1996. It is also not in dispute that the provisions of 114A of the Customs Act, 1962 and 11AC of the Excise Act, 1944 came into force with effect from 20/09/1996. Further both these provisions have not been specifically made applicable retrospectively. The judgements cited by the learned AR in the case of Pothys Cotton Products (P) Ltd. (supra) and KRM International Ltd. (supra) are not applicable in the facts and circumstances of the case as the period involved in this case is from November 1990 to February 1996, when the provisions of Sections 114A and 11AC of the Customs Act were not in force. Both the penalty provisions are applicable prospectively and not retrospectively as held by the Tribunal in the case of Lakshi Packaging (P) Ltd. (supra). Further the judgement of the Honble Apex Court in the Impression Prints (supra) cited by the learned AR is also not applicable in the facts and circumstances of this case. Though in that case an argument was raised on behalf of the assessee that the penalty cannot be imposed retrospectively but the Honble Apex Court did not consider the same as the same was not raised before the lower authorities. It is pertinent to mention here that in the case of Commissioner Vs. Macandy Prasad Radhakrishna Prasad Pvt. Ltd.  1999 (107) ELT A121 wherein the Honble Supreme Court dismissed the appeal of the Revenue by holding that the provisions of Sections 11AB & 11AC being of substantive characters are not to be applied retrospectively. Therefore, keeping in view of the facts and circumstances of the case and the law as discussed above, we are of the considered view that there is no merit in the Revenues appeal and the same deserves to be dismissed and we order accordingly.

6. Thus, the Revenues appeal is dismissed.

(Pronounced in Court on )

(P.K. Jain) Member (Technical) (S.S. Garg) Member (Judicial) pj

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Appeal No.E/1031/05