M/S. Winsome Spinner vs Commissioner Of Central Excise

Excise Appeal No. 3590 of 2005 - EX[DB]

[Arising out of Order-In-Appeal No. 294/CE/CHD/2005 dated 22.8.2005 passed by Commissioner of Central Excise, Chandigarh ]

For approval and signature:

Honble Ms. Archana Wadhwa, Member (Judicial)

Honble Mr. Manmohan Singh, Member (Technical)

1 Whether Press Reporters may be allowed to see 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 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?

Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes

M/s. Winsome Spinner Appellants

Vs.

Commissioner of Central Excise, Respondent

Chandigarh

Appearance:

Shri Rupender Singh, Advocate for the Appellants

Shri M S Negi, SDR for the Respondent

CORAM:

Hon'ble Ms. Archana Wadhwa, Member (Judicial)

Hon'ble Mr. Manmohan Singh, Member (Technical)

Date of Hearing: 12. 09.2013

Date of decision: .2013

ORDER NO. FO/ /2013-EX(BR)

Per Archana Wadhwa (for the Bench):

The appellant is a 100% EOU engaged in the manufacture of cotton yarn falling under heading 52.05 of the first schedule to the Central Excise Tariff Act, 1985. The appellant is also procuring duty free raw material from indigenous market as also importing the same, free of duty by availing the benefit of exemption notification No. 53/97-Cus dated 3.6.97 as also notification No. 52/03-Cus dated 31.3.03. For the purpose of import of raw materials, the appellants were granted Annexure A by their jurisdictional Central Excise Range office. In terms of notification the appellant also executed a bond.

2. The appellant imported Greek raw cotton, free of duty, in terms of notification in question vide bill of entry dated 23.6.2003. Said raw material was consigned to the appellants factory in 15 containers and from 27.6.03 onwards, they started receiving the containers in question. The receipt of the goods were recorded in gate register, stock register and appendix 18.

3. The appellants factory was visited by Central Excise officers on 5.7.03, who conducted various checks and verifications. The visiting officers entertained a view that stock of Greek raw cotton imported by the appellant free of duty was not duly entered in the statutory records, though they found that the same was entered in the gate register. As such, the officers plea that the appellant had a malafide intention for misuse of import export benefits available to 100% EOU. Accordingly, they put the stock of 298770 Kgs. of Greek raw cotton under seizure. Statement of Shri H. K.Tiwari, authorised signatory was recorded wherein he admitted the lapse of non-accountal of said raw materials in the respective registers.

4. On the above basis, the appellants were issued a show cause notice alleging that they have contravened the provisions of Rule 7(b) of Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 read with section 12 of the Customs Act, 1962 and Chapter 22 para (iv) of general conditions of duty free import of Customs Manual of instructions. As such, the notice proposes to confiscate the seized goods under Rule 25 of Central Excise Rules, 2002 and to impose penalty on the appellant. The said Show cause notice was adjudicated by the original adjudicating authority confiscating the goods involving duty of Rs.21,05,409/- with an option to the appellant to redeem the same on payment of redemption fine of Rs. 10 lakhs. He also imposed a penalty of Rs.21,05,409/-. The said order of the original adjudicating authority stand upheld by the Commissioner (Appeals).

Hence the present appeal.

5. After hearing both sides, and after going through the impugned order of authorities below, we find that main ground for Revenue to uphold the confiscation and imposition of penalty is that appellants have not observed and adhered to provisions of Rule 7(b) of Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. In terms of said Rule, the manufacturer obtaining benefits are required to inform the Revenue about receipt of the imported goods in his factory within two days of said receipt. The adjudicating authority has observed that inasmuch as the appellants have not fulfilled the said condition, as they have received the goods vide bill of entry dated 23.6.2003 and have not intimated the department within a period of 2 days. The second condition of the said Rule is that the assessee is required to maintain a simple account indicating the quantity and value of the goods imported, the quantity of imported goods consumed for intended purpose and the quantity remaining in stock bill of entry wise and shall produce the said account as and when required by the Assistant Commissioner of Central Excise or Deputy Commissioner. As such, the appellate authority has rejected the appellants plea that inasmuch as the goods were duly entered in the godown register and stock register, which are private records of the appellants and do not stand intimated to the Revenue in the list of records, the malafide of the appellant has to be upheld.

6. On the other hand, it is the appellants contention that goods in question were imported after issuance of annexure A by their jurisdictional Central Excise officer, who has issued the said annexure after satisfaction of the terms and conditions of the notification and after execution of bond. The goods imported were entered in the gate register, the stock register (raw material register) and appendix 18. All the raw materials procured free of duty were recorded in the raw materials register / stock register, which finds a mention in the list of account and records maintained by the appellant and submitted to the department on 1.4.02. Otherwise also, it is the contention of the appellant that the provisions of Rule 7(b) of Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 do not apply in their case inasmuch as the imports stand made in terms of provisions of notification No. 52/2003-Cus dated 31.3.02 and the said notification nowhere obliges the appellant to follow the said Rule. As much as appellant was maintaining the appendix 18, as prescribed along with stock register and as duly complied with condition 3(b) of notification in question, the reasoning of the authorities below is not in accordance with the law. Even otherwise, there is absolutely no evidence to indicate that the appellants had any malafide to misuse the benefit of duty free import of the raw material. In the absence of same, confiscation of the seized goods and imposition of penalty upon them was neither justified nor warranted.

7. We have gone through the submissions made by both sides. Admittedly Greek raw cotton was imported by the appellants in terms of notification No. 52/2003 with the due knowledge and permission of the Revenue. In this regard, we have seen Annexure A, duly issued by the Superintendent which stand issued to the appellants for import of 298770 Kgs of the raw cotton. The appellants have admittedly executed a bond for the same. As such, if the appellants have imported goods in terms of the annexure A issued by their jurisdictional Superintendent and have executed a bond for use of the same in their factory, the Revenue doubted that appellant would mis-utilise the said benefits, is without any basis. Having obtained the said annexure, and having executed the bonds and having imported the goods, the appellants was duty bound, in law, to show the use of the same.

8. Apart from the above, we also note that the goods imported by the appellants were duly entered in their gate register as also in their stock register as also in appendix 18. If that be so, we really fail to understand that having entered the goods in all the registers, how the appellants would have mis-utilised duty free import benefits, inasmuch as they were bound to show the utilization of the said raw materials which was admittedly received in their factory and was duly entered in all the above registers. We further note that lower authorities have not disputed the fact that goods were duly entered in their stock register, which is a form IV register.

9. We have seen a letter dated 1.4.02 submitted by the appellants to their Range Superintendent detailing therein various records which shall be maintained by them. S. No. 2 of the said list include the form IV register. As such, the finding of the authorities below that the goods were entered only in private registers of the appellants which were not reflected in the list of documents submitted to the Revenue is factually incorrect. Even otherwise, as already observed, the recording of raw material in the private records was also sufficient.

10. The main ground on which the lower authorities have held the goods liable to confiscation and the appellants liable to penalty as violation of provisions of Rule 7(b) of Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. For better appreciation, we reproduce the said Rule as under:

RULE 7. Manufacturer to give information regarding?[receipt of the imported goods and maintain records. - The manufacturer, obtaining benefit in these rules, shall, -

(a) give information of the receipt of the imported goods in his factory, within two days (excluding holidays, if any) of such receipt, to the Superintendent of Central Excise ????having jurisdiction over his factory; and

[(b) maintain a simple account indicating the quantity and value of goods imported, the quantity of imported goods consumed for the intended purpose, the quantity remaining in stock, bill of entry wise and shall produce the said account as and when required by the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise.]

We may also refer to Rule 2(1A) of the said Rules, which is as under:-

 These rules shall apply only in respect of such exemption notification which prescribes for the observance of these rules.]

11. As is seen from above, the said Rules of 1996 are applicable only in respect of said exemption notification which prescribes for the observance of these Rules. Admittedly, the imports in the present case stand made in terms of notification No. 52/2003-Cus dated 31.3.2003. We have gone through the said notification and found that it nowhere lays down that the benefit of notification would be available subject to observance of Rules of 1996 as referred above. It is also not the Revenues case that said notification makes it mandatory and obligatory for an import of goods under Rule of 1996 (supra). If that be so, in terms of Rule 2(1A), as reproduced above, the said Rules of 1996 are not applicable to the imports made under Notification No. 52/03 Cus dated 31.3.03. As such, the entire basis for the Revenues case in respect of violation of condition of7(b) of said Rules gets demolished.

12. In any case, we find that the appellants have admittedly maintained the separate accounts as required under Rule 7(b) and as such, cannot be held guilty of any malafide.

13. Further, the said notification No. 52/03 Cus prescribes a 100% EOU, to maintain proper accounts of receipt, storage and utilization of the goods. As already observed, the appellants have admittedly maintained such accounts.

14. Inasmuch as the goods stand entered in gate register, stock register and appendix 18, in view of the same, the finding of the lower authorities that the goods were not properly entered are absolutely incorrect.

15. Otherwise also, we find that there is no evidence on record indicating that the appellants is mis-utilising the said benefits either by clearing the imported goods free of duty or in any other manner. If the appellant have any malafide intention, they would not have first brought the goods to their factory and would not have entered the same in their gate register as also in their stock register. In the absence of any evidence to the contrary, and in view of our foregoing discussion, we find no reason to uphold the impugned orders confiscating the goods with an option to redeem the same or for imposition of penalties. Accordingly, the impugned order is set aside and appeal is allowed with consequential relief to the appellants.

(Pronounced in the open court on )

( Archana Wadhwa ) Member(Judicial)

(Manmohan Singh) Member(Technical)

Ss

Excise Appeal No.3590/2005 EX[DB]

M/s Winsome Spinners Vs. CCE, Chandigarh

Per : Manmohan Singh Member (Technical)

16. I have gone through the draft order prepared by Ld. Member Judicial in respect of above Appeal wherein it has been held that recording of entries relating to receipt of duty free goods under the provisions of Rule 7(b) of Customs (Import of goods at concessional Rate) Rule, 1996 and also in terms of Notification No. 52/2003-Customs dated 31.03.2003 are not mandatory and consequently fine and penalties against the appellants are not imposable and accordingly dropped the proceedings.

17. I do not agree with the findings of the Member Judicial as per discussion in succeeding paras. For the sake of reference, facts described in the draft order are perused.

18. To appreciate the issues involved in the proceedings, it is necessary to recapitulate the facts of the case. It is observed that M/s Winsom Spinners were granted permission under the provisions of Rule 7(b) of Customs (Import of goods at concessional Rate) Rule, 1996 read with Section 12 of the Customs Act, 1962 and General Condition of Duty free Import of Customs Manual of Instructions. When the Departmental officers conducted investigations in the factory premises on 05.07.2003, it was found that duty free receipts of Greek Raw Cotton imported vide B/E No. 313510 dated 23.06.2003 from Greece to India were not recorded in the prescribed register for a 100% EOU. Actually these goods were received on 29.06.2003 but were not recorded in the prescribed records till the date of visit i.e. 05.07.2003. as per allegation of the Revenue, appellants have shown entry only in the Gate Register maintained with security staff which was not a prescribed Register. The authorised signatory of the party admitted the lapse of non accountal of the said raw material in the said register. On the basis of confessional statement, goods were seized and later adjudicated, where the goods of 298770 Kgs. of Greek Raw Cotton valued at Rs.1,82,98,751/- involving duty of Rs.21,05,409/- were confiscated under Rule 25 of the Central Excise Rules, 2002. And Redemption Fine of Rs.10,00,000/- in lieu of confiscated goods was also imposed.

19. Issue for consideration arose whether goods which were procured duty free with the required condition of due accountal in the statutory prescribed records under provisions of Rule 7(b) of Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rule 1996.. and in terms of Notification No. 52/2003-Customs dated 31.3.2003 could be dealt leniently and mere mention in the Security Register could be considered a due compliance of the prescribed conditions.

20. I have examined the Scheme of Grant of Exemption and Statutory requirement of procedures and due accountal in the prescribed records within two days of receipt within the factory. On the basis of facts prescribed above, it clearly came out that the goods were nor recorded in the prescribed register even after the gap of 7 days. While going through the Rule 7(a) of Customs (Import of goods at concessional Rate) Rule, 1996 it is clearly stipulated that manufacturer obtaining benefit under the rule shall give information of the receipt of the imported goods in his factory within 2 days (Excluding holidays, if any)of such receipt to the Suptd. Of Central Excise having jurisdiction over his factory. Rule 7(b) Customs (Import of goods at concessional Rate) Rule, 1996 stipulates that manufacturer obtaining benefit under the Rules

maintain a simple account indicating the quantity and value of the goods imported, the quantity of the imported goods consumed for the intended purpose, the quantity remaining in the stock, bill of entry wise and shall produce the said account as and when required by the Assistant Commission of the Central Excise or Deputy Commissioner of Central Excise.

21. Further, Notification No. 52/03-Cus prescribes that a 100% EOU to maintain proper account of receipt and utilisation of the goods. Non-accountal in the required records of the impugned goods have been admitted by the authorised signatory of the appellant in his confessional statement dated 05.07.2003. I am not in agreement with the finding that Appellants have maintained such accounts as required under the Notification above.

22. It is observed that records were not maintained as required under Rule 7(a) and 7(b) of the Rules, above. It is observed that these Rules are mandatory in nature as the word used is shall and not may even if the word may would have been used, its connotation would have been shall only because it is the duty of the availer of the benefits of duty concession to comply with the condition and not have a liberal view of not maintaining prescribed record with proper timely entries and filing of intimation to the concerned authority in specified time schedule. It is established principle that if Govt. of India grants any benefit of exemption of duty subject to compliance of proper timely accountal that has to be followed strictly for availing those benefits. Liberal interpretation could not be allowed. Proper monitoring and control for due compliance of conditions has to be ensured. There is a prescription of detailed accounting indicating the quantity and the value of the goods imported, the quantity of the imported goods cleared for intended purpose, the quantity remaining in stock, Bill of Entry wise etc..

23. Stipulations under Rule 7 of Customs (Import of Goods at concessional rate) rules 1996 are extracted as below:

[7. Manufacturer to give information regarding receipt of the imported goods and maintain records.  The manufacturer, obtaining benefit in these rules, shall, -

(a) give information of the receipt of the imported goods in his factory, within two days (excluding holidays, if any) of such receipt, to the Superintendent of Central Excise having jurisdiction over his factory; and

(b) maintain a simple account indicating the quantity and value of goods imported, the quantity of imported goods consumed for the intended purpose, and the quantity remaining in stock, bill of entry wise and shall produce the said account as and when required by the (Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise.]

24. In view of the above discussion, it is evident that manufacturer M/s Winsom Spinners have failed to fulfil the mandatory requirements of the Rules and Notification, and no liberal interpretation can be given, once the value of the goods i.e. 298770 Kgs of Greek Raw Cotton valued at Rs.1,82,98,751/- involving duty of Rs.21,05,409/- allowed to be imported duty free reposing a great faith that the goods imported shall be duly accounted as per the Rules. Non accountal in prescribed registers but accountal in other registers can not be a substitute vindicating their intent to fully follow the prescribed Regulations. Once it is evident that appellant have not given the due intimation to the Department even in 7 days after receipt which was required to be given within 2 days of receipt of Duty free goods clearly indicates mens- rea and intent to avail unintended benefits not designed in the Govt. Policy. These conditions for accountal are strict as government revenue are at stake. Duty exemption is granted in the context that the goods received are duly accounted in prescribed registers and within specified time schedule. If an approach to condone these type of derelictions is adopted, then implementation of the Notification and rules referred above will not be possible resulting in prejudice to the Revenues interest. In this regard, reference is made to the Supreme Court Judgment in the case of Commissioner of C. Excise, New Delhi Vs. Hari Chand Shri Gopal reported in 2010 (26) E.L.T. 3 (S.C.) where guidelines have been laid down in similar type of situation where follow up of chapter X procedure is stipulated when exemption of duty is granted under some specific notification in para 22, 23 and para 24 of the judgement

Exemption Clause - Strict Construction

22.?The law is well settled that a person who claims exemption or concession has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the Statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. In Novopan Indian Ltd. (supra), this Court held that a person, invoking an exception or exemption provisions, to relieve him of tax liability must establish clearly that he is covered by the said provisions and, in case of doubt or ambiguity, the benefit of it must go to the State. A Constitution Bench of this Court in Hansraj Gordhandas v. H.H. Dave - (1996) 2 SCR 253, held that such a notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification, i.e., by the plain terms of the exemption.

23.?Of course, some of the provisions of an exemption notification may be directory in nature and some are of mandatory in nature. A distinction between provisions of statute which are of substantive character and were built in with certain specific objectives of policy, on the one hand, and those which are merely procedural and technical in their nature, on the other, must be kept clearly distinguished. In Tata Iron and Steel Co. Ltd. (supra), this Court held that the principles as regard construction of an exemption notification are no longer res integra; whereas the eligibility clause in relation to an exemption notification is given strict meaning wherefor the notification has to be interpreted in terms of its language, once an assessee satisfies the eligibility clause, the exemption clause therein may be construed literally. An eligibility criteria, therefore, deserves a strict construction, although construction of a condition thereof may be given a liberal meaning if the same is directory in nature.

Doctrine of substantial compliance and intended use :

24.?The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the essence or the substance of the requirements. Like the concept of reasonableness, the acceptance or otherwise of a plea of substantial compliance depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means actual compliance in respect to the substance essential to every reasonable objective of the statute and the court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed.

Fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance of an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied with notwithstanding the non- compliance of directory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non-compliance for either unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted. The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases and quite often, the critical question to be examined is whether the requirements relate to the substance or essence of the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine.

On the other hand, if the requirements are procedural or directory in that they are not of the essence of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance may not be sufficient, but actual compliance of those factors which are considered as essential.

Annexure-A of Board circulars No. 66/2002-Cus dated 8/10/2002 refers to issue of registration certificate which authorises import of goods for 100% EOU at nil rate of duty under notification number 53/97-Cus dated 3.6.97. Sample copy of certification is given below:

CERTIFICATE FOR MOVEMENT OF IMPORTED GOODS WITHOUT PAYMENT OF DUTY

This is certified that:

1. M/s Winsome Spinners (Prop Winsome Textile Industries Ltd.) P.O. Baddi The Nalagarh Dist. Solan (HP) are registered Vide Registration No. 32/B/WS/94 in the central excise Baddi to Shimla (HP) of Central Excise Commissionerate, Chandigarh  las a 100% E.O.U

2. The said unit has executed bond in Form B-17 prescribed for a 100% EOU for Rs. 10 crores with the appropriate surety and the said bond has been accepted by the competent authority

3. This registration authorised them to obtain/clear the following:-

SR. Description Qty Chap No. Heading No of Cus Tariff

1. RAW COTTON 1373 Bales 52 5201.0

Gross wt. 301140 Kgs Net wt. 298770 Kgs.

Against Invoice No. 101686 dated 21.05.2003 of MC FADDEN EUROPE CO SWITZERLAND at nil rate of duty under notification no. 53/97-Cus dated 03.06.97 being a 100% EOU via NHAVA SHEVA MUMBAI FROM ICD DELHI for the manufactures of yarn at 100% EOU WINSOME SPINNERS prop (WINSOME TEXTILE INDUSTRIES LTD) BADDI Distt. SOLAN (H.P)

4. The said goods may be allowed clearance of at NIL rate of duty and the undersigned may be suitable informed

(SUPERINTENDENT)

CENTRAL EXCISE RANGE-II

BADDI DISTT., SOLAN (H.P)

Reference is also invited to Boards Circular No. 84/2001-Cus. Dated 21.12.2001 where policy and procedure for procurement, of CT-3 certificate is given.

Board Circular No. 66/2002-Cus 8th October, 2002

Simplification of Certain Procedures Relating to Functioning of EOUs EPZ/ STP/ETHP/SEZ Units-Issue of Procurement Certificate and CT-3  Reg

I am directed to invite your attention to the Boards Circular No. 84/2001-Cus dated 21st December, 2001 on the above subject. Vide

This Circular, it was conveyed that CT-3 and procurement certificates to the EOUs and units in EPZ/STP/ETHP/SEZ except for those in textile and chemical sector would be issued by the jurisdictional Superintendent of Customs of Central Excise.

2. Representations has been received from the textile units and units in Chemicals Sector that they are facing difficulties in getting procurement certificates and CT-3 from the jurisdictional Asstt. Commissioner /Dy. Commissioner. It has been pointed out that the representatives of the units have to travel long distances to obtain these certificates. In the process, a lot of time is wasted, resulting in delay in clearance of import consignments and procurement of indigenous goods.

3. In other to mitigate the difficulties being faced by the EOUs in textiles and chemical sector, it has been decided that henceforth, the procurement certificates for clearance of import consignments would be issued to the EOUs and units in EPZ/SEZ in textile and chemical sector by Superintendent of Customs/Central Excise Further, CT-3 certificate to EOUs in textile and chemical sector would also be issued by the jurisdictiona Range Officer instead of the Asstt. Commissioner/Deputy Commissioner. However, the procurement certificate and CT-3 may be issued only to the units having clean track record. The Assistant Commissioner / Deputy Commissioner of Customs/Central Excise may examine all cases of request from EOUs/EPZ/SEZ units on merits and delegate the powers of issuing procurement certificate and CT-3 to the Range Officers. In cases of doubt, they may refer the cases to the jurisdictional Commissioners for decision. After a decision has been taken by the Assistant Commissioner/Deputy Commissioner, the jurisdictional Range Officer would issue procurement certificates and CT-3 to the EOUs/EPZ/SEZ units in all cases, but would obtain post factor approval of the Assistant Commissioner/Deputy Commissioner in charge.

4. The Chief Commissioners and Commissioners may ensure that the various instructions issued by the Board from time to time for proper monitoring and checking the misuse of EOU/EPZ/STP/ETHP Schemes are strictly followed by the field officers under their charge. In this connection, the instructions issued vide Circular No. 88/98-Cus, dated 2-12-1998 and Boards letter F.No. 305/119/2000-FTT dated 17th October, 2000 and Member (Customs)s d.o. letter F.No. 305/139/2001-FTT dated 19.10.2001 refer.

5. The Boards Circular No. 84/2001-Cus dated 21st December, 2001 stands modified upto the above extent.

6. Wide publicity may be given to the above changes by issue of a Public Notice in this regard.

7. Difficulties, if any, faced in implementation of the above changes may be brought to the notice of the Board at already date.

25. From the above references, it clearly comes out that procedural safe guards have been inbuilt so that though inputs are allowed to be received without payment of duty, but their subsequent movement receipt and proper accountal in a periodical schedule is must. A firm duty is cast on the person availing concession of duty and he can not be seen to ignoring such controls.

26. Accordingly I do not agree with findings recorded by learned member (Judicial) absolving the appellant from responsibility. I hold that Order-in-Original passed by the Commissioner is proper and legal as for as imposition of redemption find of Rs.10,00,000/- (Rupees ten lakhs only) is concerned. However as regards to justification of imposition of penalty Rupees Ten lakhs I feel it is on higher side. Considering totality of facts and merits of the case where seized goods were found in factory only and attempt to remove goods was not brought on record, penalty of Rs.5.50 lakhs (Rupees five lakhs and fifty thousand) will be sufficient under the provision of rule 25 of Central Excise Rules 2002.

27. Order-in-Original is partially modified as above.

(Manmohan Singh)

Member (Technical)

K. Gupta

The following Difference of Opinion has been referred to me:-

Whether non-accountal in statutory records but accountal in gate register and Form IV, etc. could be considered as due compliance for accountal of duty free receipts of goods and not liable to imposition of redemption fine and penalty as held by Member (Judicial).

Or

Whether non-accountal in statutory records but accountal in gate register is not to be considered as due accountal of duty free receipt of goods and thus liable to imposition of redemption fine and penalty as held by Member (Technical).

2. Heard ld. Advocate for the appellant.

3. The Difference of Opinion has arisen in the context of the following facts of the case.

4. The appellant (an EOU) has imported 2,98,770 kgs. of greek raw cotton on the basis of Annexure A issued by the Superintendent of Customs and Excise in-charge. The goods were imported vide Bill of Entry dated 23.06.2003 and after their duty free clearance from Customs, they were transported to the appellants factory in several containers on different dates. The last container entry was on 29.06.2003. On 05.07.2003, when Central Excise officers visited the factory they found the goods but noticed that they had not been entered in the relevant registers and were only entered in the gate register. In its reply to the primary adjudicating authority, the first appellate authority and also the CESTAT, the appellant insisted that the goods were entered not only in the gate registers but also in the stock (raw-materials) register; this finds mention in Order-in-Appeal as well as Order-in-Original. But both the authorities held that the said goods were not entered in the records meant for central excise purpose and did not intimate the receipt of the goods to the Central Excise Officer. The primary adjudicating authority as well as first appellate authority held that the appellant has not met the requirements as contained in Rule 7 of Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 as also condition 3(b) of the Notification No.3(b) of Notification No.52/2003-Cus. But the Show Cause Notice issued to the appellant was entirely predicated on the appellant having contravened the provisions of Rule 7(b) of the said Rules. The primary adjudicating authority ordered confiscation of the impugned goods and allowed the redemption on fine of Rs.10 lakhs and also imposed penalty of Rs.21,05,409/-. This order was upheld by the first appellate authority. After hearing the matter, one ld. Member of CESTAT set aside the impugned Order-in-Appeal, while the second ld. Member upheld the impugned order except to the extent of reducing the penalty from Rs.21,05,409/- to Rs.5.5 lakhs.

5. Ld. Counsel for the appellant has contended that the entire case was based on the allegation that the appellant had not observed and adhere to provisions of Rule 7(b) of the said Rules, while as per Rule 2 (1A) of the said Rule, these Rules shall apply only in respect of such exemption Notification which prescribes for the observance of the said Rules.

6. Ld. Departmental Representative reiterated the statement of Shri HK Tiwari, wherein he admitted that the impugned goods were not entered in the raw-material register and thus the allegation is sustainable.

7. I have considered the contentions of both sides. I find that the impugned goods were cleared duty free under Notification No.52/2003-Cus, dated 31.03.2003. Perusal of the said Notification makes it absolutely clear that the said Notification does not prescribe for the observance of the said Rules. Incidentally, whenever the said Rules are required to be followed, the Notification makes a clear mention to that effect. In any case, in view of Rule 2(1A) of the said Rules and in view of the fact that Notification No.52/2003-Cus does not prescribe for the observance of the said Rules, the appellant was not required to follow the said Rules and therefore the question of the appellant violating Rule 7(b) thereof does not arise. As the entire Show Cause Notice is predicated upon the appellant having violated the said Rule 7(b), jurisprudentially Show Cause Notice is not sustainable and the lower authorities have travelled somewhat beyond the Show Cause Notice by involving condition 3(b) of Notification No.52/2003-Cus, which is not permitted for them to do.

8. Further, the goods were duly entered not only in the gate register but also in the raw-material register. This fact has been noted by ld. Member (Judicial) in the Difference of Opinion order as well as by the lower adjudicating authorities and therefore observation by ld. Member (Technical) that the goods were not entered in any register except gate register is on the face of it not factually correct.

9. Ld. Advocate for the appellant showed me a dated 01.04.2002 in terms of which the appellant had duly intimated the customs authorities about the maintenance of the register (among others) in which entries of all the impugned goods were made. He also showed me the Daily Cotton Bill, where also the entries were made. He also showed the gate register, where entries made although that was an admitted fact by both the ld. Members.

10. I also find that the primary adjudicating authority as well as first appellate authority have essentially proceeded on the ground that the appellant violated the provisions of Rule 7(b) of the said Rules. Indeed while ld. Member (Judicial) takes note of the fact that appellant was not required to follow the said Rules, ld. Member (Technical) proceeds on the same fallacy that the appellant was required to follow the Rule 7(b) of the said Rules. I find that the condition 3(b) of the Notification No.52/2003-Cus requires the appellant to maintain a proper account for the receipt, storage and utilisation of the said goods. As has been brought out, the goods had arrived just a few days before the visit of the central excise officers, and re-warehousing was not complete and therefore the appellants contention that the goods were not entered in the re-warehousing register as re-warehousing had not been completed is not unreasonable. However, it comes out that the goods were not only entered in the gate register as noted by the ld. Member (Technical) but also entered in the raw-material register. In addition, the goods were actually duly found in the factory and it is not a case that there was any shortage noticed. It is also to be noted that these goods are imported only after a certificate authorising their import is given by a central excise officer and thus, the central excise officers are in the know of the duty free imports authorised by them for the 100% EOU.

11. Thus taking into account the entire matrix of facts and circumstances, my finding and view are in conformity with those of ld. Member (Judicial) and therefore, I side with her in this case.

(R.K. Singh)

Member (Technical)

SSK

Final Order No. 53342/2015  Ex(DB)

MAJORITY ORDER

In view of the majority order, the impugned order is set aside and the appeal is allowed with consequential relief to the appellant.

(Pronounced on 12.10.15 )

ASHOK K ARYA ARCHANA WADHWA

TECHNICAL MEMBER JUDICIAL MEMBER

Raja

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