TMI Blog2000 (12) TMI 870X X X X Extracts X X X X X X X X Extracts X X X X ..... ,00,000/- under Rule 173Q and 226 of the Central Excise Rules, 1944. The same has been ordered to be released on imposition of fine of Rs. 1,00,000/- under section 125 of the Customs Act read with Central Excise Notification No. 68/63 as has been amended. There is a penalty of Rs. 31.00 lakhs on M/s. SCL under Rule 173Q of the Central Excise Rules, 1944 read with Section 11AC of the Central Excise Rules. On the other two appellants namely M/s. Salzar Exports Pvt. Ltd. (hereinafter called as SEPL) and M/s. Salzar Electronics Ltd. (hereinafter referred to as SEL) penalty of Rs. 1,00,000/- on each has been imposed under Rule 173Q and 209A of the Central Excise Rules, 1944. 2. Briefly stated the facts are that M/s. SCL are job workers to receive raw materials under challans issued under 57F(4) read with Notification No. 214/86 from the ledger accounts of M/s. SEPL. The investigating authorities noticed that job charges for operations were shown in the records to the extent of Rs. 2.2 lakhs only and for the rest of the amount M/s. SCL had raised labour charges/delivery challans. On a perusal of their raw materials, receipt issued for production and the quantity that went into the manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e received back by M/s. SEPL and that had been fully processed and thereafter they were all exported through the shipping bills. Thereafter they had applied drawback in terms of law and taken the drawback only on the Customs duty and not on CVD or Excise duty. M/s. SCL, who had processed the goods on job work basis were fully entitled to take Modvat credit on goods so received and which was in order. The goods were meant for exports and there was a clear provision under Rule 57F(4)(iii) to avail Modvat credit. Although they had not executed bond, however, it was only a procedural lapse and for not following such procedure, substantive benefit of Modvat credit cannot be denied. As regards certain other discrepancies, they had admitted the liability only to the extent of Rs. 2,11,893/- which was proposed to be demanded on certain goods cleared as samples without payment of duty. The appellants admitted this amount and stated that they have already pre-deposited an excess amount of Rs. 7,50,000/- and after realizing this amount of Rs. 2,11,893/- the department has to refund them the balance amount. The appellants further contended that there is no allegation of any of the goods manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charge was not enunciated in the show cause notice at all and to this extent the order impugned has traversed beyond the scope of the show cause notice. Since this is also one of the factors leading to the confirmation of duty demand, therefore, it has been arrived at behind their back. (v) He also submits that the said verification report was not supplied to them by the department despite request at the original stage. Therefore, there is a miscarriage of natural justice in these proceedings. (vi) He, therefore, submits that apart from the demands for Rs. 98,878/- for PVS conduit pipes against which they are not desiring to press the appeal at this stage. The rest of the demands for duty are not established by law. 5. Learned DR Sri S. Kannan submits that the order impugned is a detailed order and has exhaustively dealt with all the issues for each category for each financial year. He submits that the order has contested that goods manufactured by the first appellant M/s. SCL were complete in all respects and therefore the procedure under Rule 57F(4) would not be applicable to the appellants as the goods should have been cleared on payment of duty from the premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te to the fact of non Modvat availment for the purpose of claiming drawback. The custard powder manufactured by them was all exported by themselves. In the case of M/s. Alpha Garments, unlike M/s. American Dry Fruit Stores, they were not assessees, but they were clearing huge percentage of their products for export and a negligible quantity for home consumption. When compared with these cases, I find that the facts in the present case of M/s. SCL are different. Like M/s. American Dry Fruit Stores, M/s. SCL are also registered manufacturer but the difference is that M/s. SCL had not exported the goods directly. M/s. SCL had cleared them to their sister units from where these goods were reported to have been exported. M/s. SCL had availed Modvat on the inputs and cleared the final products without payment of duty from their factory to their sister nits. Hence, I find the case laws cited by the assessees are not relevant to the present issue. From the records produced, I find that M/s. SEPL SEL had exported the goods through third party i.e. M/s. L T, M/s. Crompton Greaves etc. In the respective AR4s, a declaration to the effect that Modvat had not been claimed in respect of inpu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have been claimed instead of method followed by M/s. SEL SEPL i.e removal of goods without payment of duty by M/s. SCL, export of the same by M/s. SEPL SEL under bond and also leaving scope for claim of duty drawback by the merchant-exporters. Thus the method followed by the above units was designed to claim double benefits which they were not entitled to and the clearances without paying duty effected by M/s. SCL were in the nature of intentional evasion of duty and the duty demand of Rs. 1,35,002/- is sustainable. 135. Regarding the demand of duty of Rs. 1,10,218/-, M/s. SCL submitted that the goods under DC No. 764/23/3/96 to SEPL were sold by SEPL under invoice No. M126, 125, 127 all dated 25-3-96 and hence it could be evident that goods had been exported. Since the above goods were accounted in the R.6.1 register and actually exported, they had no intention to evade duty and since transactions were genuine and TDS had been paid for this, the allegation of clandestine transaction would not be sustainable. 136. I find that M/s. SCL had not disputed that these goods were manufactured without receipt of raw material from SEPL, they had not put forth any evidence to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred by time? (c) As to whether any portion of duty is required to be confirmed including penalty in the matter? 7. On a careful consideration of all the material on record, we are of the considered opinion that - (i) that there is no dispute on the fact that the entire raw materials were supplied by M/s. SEPL and M/s. SEL to the first appellant M/s. SCL under the cover of challans and documentation made under Rule 57F(4)/Notification No. 214/86 as amended. The first appellant M/s. SCL processed the materials and manufactured the necessary items like LB Switches, Terminal connectors and other accessories falling under Chapter 85 of CETA as well as PVC conduit tubings falling under Chapter 39 ibid. (ii) that there is no dispute that M/s. SEPL SEL were working under bond under the relevant notification and the entire goods so manufactured and received by them after due further processing were all exported. (iii) that there was no dispute on M/s. SCL having applied for drawback for customs duty only and having received the same. 8. The question that arises for our consideration is as to whether M/s. SCL, who had received the goods under the cover of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .the Central Government hereby permits for the purpose of export outside India, the manufacture in bond of the export products specified in column (2) of the Table hereto annexed from the excisable goods specified in column (3) thereof provided that the provisions of Chapter X of the said rules are followed. 2. The manufacturer shall file a declaration with the Commissioner of Central Excise having jurisdiction over the factory of manufacture describing the finished goods proposed to be manufactured along with their rates of duty leviable and manufacturing formula with particular reference to quantity or proportion in which the materials are actually used as well as quality, tariff classification, [rate of duty payable] on the materials so used, both in words and figures in relation to the finished goods to be exported. 3. The Commissioner of Central Excise may call for sample of finished goods or may inspect them in the factory of manufacture to satisfy himself about the correctness of the ratio of input and output mentioned in the declaration filed before the [commencement of export] of such goods. 4. The Commissioner of Central Excise may permit a manufacturer to remove th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty and therefore, the clearances of goods made by M/s. SCL, all the manufactured items to M/s. SEPL d M/s. SEL are in terms of the Notification under Rule 13 and therefore, they are not liable to pay any duty as raised by the department in the matter. The reason being that goods are clearly exempt from duty and raw materials had been received by M/s. SCL from a manufacturer in bond of the export products and all the products had been exported. There is no% dispute regarding this and when this being the case, the question of levy of duty, on goods received in bond for export, does not arise. The Commissioner had not dealt with this aspect of the matter and has merely gone on to hold that as M/s. SEPL SEL have claimed duty drawback, therefore, the goods manufactured and cleared by the job worker i.e. M/s. SCI to them are required to pay duty. There is no such Rule or any provision of law stating that legitimate claim for duty drawback will disentitle the job worker working under Rule 57F(4) on receipt of materials from in bond exporter to pay duty. The Commissioner has totally misdirected himself in his findings in para 133 and has not adverted to the Customs Notification under R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rza Tanners Ltd. as reported in 1999 (114) E.L.T. 1032 (T) = 2000 (37) RLT 46 (CEGAT) and we respectfully follow the same. A major portion of the goods have been shown to have been eventually exported. We find that leather tanneries operators were working on an assumption of liberalised system of exports and there has been no clear finding arrived at of the goods having entered the Indian domestic market so that the levy of Excise duty would be attracted; we are aware that Excise levy is on production and manufacture, but its recovery has been deferred by law up to the stage they enter the area of domestic consumption. Therefore, it is imperative and necessary for Revenue to establish for even goods for which procedures have not been followed that the goods entered the domestic market. Since the same has not been done, the demand cannot be upheld, we would find that the appeal in this case should be allowed; (c) we have considered the submissions regarding the marketability of shoe uppers . We are of the view that since there is no finding on the subject by the Commissioner, no finding need be arrived at this stage by this Bench; (d) since the appellants are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recting them to pay Excise duty, when they cleared the goods received from in bond export manufacturer and the same having been sent back under the relevant challans issued under Rule 57F(4). Therefore, the findings arrived at by the Commissioner in para 133 on this issue is not in keeping with the law laid down and he has not justified in not applying the ratio of the judgments rendered in the cases of M/s. American Dry Fruit Stores as reported in 1992 (61) E.L.T. 709 and that of M/s. Alpha Garments as reported in 1996 (86) E.L.T. 600. The ratio of both these judgments are clearly applicable to the facts of the present case. The Commissioner s attempt to distinguish both the judgments is not correct, although the Revenue has not proceeded to recover the Modvat credit on the ground of irregular availment without executing of duty and also has not made this as a ground for directing the first appellant M/s. SCL to pay duty on the goods removed by them to the Merchant-Exporters. However, the Commissioner has taken up this ground and learned DR has argued the very plea, we are of the considered opinion that there is no merit in the argument of DR and findings of the Commissioner and w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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