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2003 (12) TMI 152
Issues involved:
The issue involves the appellant obtaining unpacked bars of detergent from another person, packing them inside the packing of detergent powder it manufactured, and claiming credit under 57A for duty paid on the unpacked bars. The dispute arose when the authorities proposed recovery of the credit, arguing that the packing activity did not constitute manufacture.
Summary:
The Appellate Tribunal CESTAT, Mumbai, in the case, dealt with the appellant's practice of packing unpacked detergent bars obtained from another person into the packing of detergent powder it produced, and claiming credit under 57A for duty paid on the unpacked bars. The authorities challenged this practice, contending that the packing activity did not amount to manufacture. The Commissioner (Appeals) upheld this view, leading to the appellant's appeal before the Tribunal.
Upon hearing both sides, the Tribunal referred to the decision in Standard Surfactants Ltd. v. CCE, where a similar issue was addressed. The Tribunal in that case emphasized the liberal approach towards granting input credit, stating that credit can be allowed for any item in or in relation to the manufacture process. Citing this precedent, the Tribunal found the demand for recovery of credit to be unjustified and set aside the duty demand.
Furthermore, the Tribunal referenced decisions in Singh Scrap Processors Ltd. v. CCE and CCE, Mumbai v. Piramal Spinning & Weaving Mills Ltd., where it was established that even if duty was not payable on the finished goods due to the absence of manufacture, the utilization of credit towards duty payment negated the need for further recovery actions.
Based on these precedents, the Tribunal concluded that the appellant's packing activity qualified for credit under 57A, and therefore, the impugned order was set aside. The appeal was allowed in favor of the appellant.
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2003 (12) TMI 151
Issues:
Whether the appellant company is liable to pay duty on the intermediate product used within the refinery for captive consumption in the manufacture of other final exempted product.
Analysis:
The Tribunal previously held that the refinery is considered a warehouse under Rule 140(2) of the Central Excise Rules, 1944. Duty is only payable when goods are cleared from the factory, not while they remain within the refinery. This decision was followed in subsequent cases as well.
The Senior Advocate for the appellants argued that the Commissioner had dropped similar demands in other cases based on the Tribunal's previous decisions. The Commissioner, in the present case, mentioned that Haldia had not been declared as a refinery, which the Advocate disputed. He referred to an Order-in-Appeal where the Commissioner had dropped the demand for the same product consumed in the manufacture of petroleum products, citing the factory's declaration as a refinery by the C.B.E.C. in a circular dated 7-3-77.
Given the consistent decisions in favor of the appellants in previous cases, the Tribunal found no reason to deviate from the established view. Consequently, the impugned Order was set aside, and the appeal was allowed with consequential relief to the appellants on this specific issue.
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2003 (12) TMI 150
Issues: Duty credit on destroyed goods sent to job worker.
In this case, the appeal was filed challenging the findings of the Commissioner of Central Excise (Appeals) regarding the duty credit on goods destroyed at the job worker's premises before being used in the final product. The Commissioner upheld the Order-in-Original confirming the duty on the lost goods but modified it by not levying a penalty due to the loss being beyond the control of the appellants.
The Tribunal considered the matter and noted that the loss of goods at the job worker's premises due to fire was not disputed. It was established that the loss was a result of an unavoidable accident. The Tribunal referred to Central Excise law, specifically Rule 49(1) proviso, which allows the condonation of waste if it occurs due to genuine reasons and exempts duty payment on goods lost or destroyed by natural causes or unavoidable accidents during handling or storage.
The Tribunal found that the fire at the job worker's premises, even though not within the control of the original manufacturer, was not avoidable or caused by contributory negligence of the appellants or the job workers. Therefore, the Tribunal concluded that no duty payment was required on the goods lost in the fire. Consequently, the Tribunal set aside the orders of the lower authority and allowed the appeal, ruling in favor of the appellants.
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2003 (12) TMI 149
Issues:
1. Suspension of license under the Customs House Agents Licensing Regulations, 1984 for alleged non-compliance with provisions of the Customs Act.
2. Allegation of interpolation in the Shipping Bill regarding the Port of Export.
3. Applicability of previous decisions and legal precedents in determining the suspension of license.
Analysis:
1. The Commissioner of Customs suspended the license of the appellants under the Customs House Agents Licensing Regulations, 1984, citing non-compliance with the Customs Act. The issue arose from discrepancies in the shipping bills of a company, where the Land Customs Station was mentioned as TT Shed, Kolkata, while the goods were actually exported from Haldia. The Commissioner alleged that the appellants failed to advise their client properly regarding compliance with the Customs Act, specifically Section 33. However, upon review, it was found that the goods were indeed exported from Haldia after obtaining necessary permissions, and the Shipping Bill was appropriately amended to reflect this change. The Tribunal noted that there was no evidence of any lapse on the part of the appellants justifying the suspension of their license.
2. The appellant-company was accused of interpolating the word 'Haldia' in the Shipping Bill to cover up the actual port of export. However, it was established that the amendments made to the Shipping Bill were legitimate, as the goods were genuinely exported from Haldia after obtaining requisite permissions. The Tribunal emphasized that since the goods were actually exported from Haldia, amending the Shipping Bill to reflect this was necessary and not a violation. The decision cited previous cases where similar situations were considered, highlighting the importance of accurate documentation but also the need for fairness in assessing compliance issues.
3. In considering the suspension of the license, the Tribunal referred to various legal precedents and decisions, including a recent case involving South India Shipping and Export Company. The Tribunal noted that suspending a license could have significant repercussions, affecting not only the licensee but also their employees. In this case, the Tribunal found no substantial irregularity or wrongdoing on the part of the Customs House Agent (CHA) to justify the suspension of their license. Relying on established legal principles and precedents, the Tribunal set aside the impugned order and allowed the appeal, providing consequential relief to the appellants.
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2003 (12) TMI 147
Issues involved: Interpretation of Rule 209 of the Central Excise Rules regarding confiscation and penalty for excess raw material found during a factory visit.
Summary:
The Revenue's appeal before the Appellate Tribunal CESTAT, New Delhi was based on the excess raw material found during a factory visit for the manufacture of LPG. The adjudicating authority had ordered confiscation under Rule 209 and imposed a penalty, which was not upheld by the appellate authority. The Commissioner (Appeals) also ruled out confiscation under Rule 209(1)(b).
In the appeal, the invocation of Rule 209(1)(b) was considered justified by the Revenue, as it applies when a manufacturer does not account for excisable goods. However, it was argued that the respondent, in this case, was not the producer, registered person, or dealer but merely a user of the goods. As per the definition in Section 2(d) of the Central Excise Act, the goods received by the respondent after duty discharge do not fall under excisable goods.
The Tribunal concluded that since the goods were received after duty discharge, they do not qualify as excisable goods, and therefore, Rule 209(1)(b) does not apply. Consequently, the Revenue's appeal was rejected by the Tribunal.
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2003 (12) TMI 146
Issues: Correct classification of printed plastic films under Central Excise Tariff Act, 1985
In the present appeal, the main issue revolves around the correct classification of printed plastic films under the Central Excise Tariff Act, 1985. The Revenue classified the product under Heading 3920.39 as printed plastic, while the appellants argued that it should be classified under Chapter Heading 4901.90.
Analysis:
The appellants, represented by Shri Patil, contended that the issue of classification had already been settled in their favor by the Tribunal in a previous case. The Tribunal had ruled that plain plastic films printed with brand product and seller details should be classified under Heading 4901.90. Despite this precedent, the adjudicating authority in the current case did not follow the Tribunal's decision, citing a distinction based on the location of the factories. However, the appellants argued that this distinction was unjustified and that the issue had been conclusively settled by the Tribunal. They pointed out that the Revenue had not appealed the previous decision to any higher authority.
Upon hearing the arguments, the Tribunal found that the classification issue had indeed been decided in favor of the appellant in a previous case. The Tribunal noted that the adjudicating authority's distinction based on factory locations was not reasonable. Therefore, the Tribunal set aside the impugned order and allowed the appeal, providing consequential relief to the appellant.
In conclusion, the Tribunal upheld the classification of the printed plastic films under Heading 4901.90 in line with its previous decisions and rejected the Revenue's classification under Heading 3920.39. The Tribunal emphasized the importance of consistency in applying legal precedents and disregarded the arbitrary distinction made by the adjudicating authority based on factory locations.
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2003 (12) TMI 145
Issues:
1. Valuation of imported tin plate waste
2. Comparison of value with contemporaneous imports
3. Applicability of Rule 10A and Rule 4 of Valuation Rules
4. Consideration of Supreme Court judgments in valuation
Valuation of imported tin plate waste:
The respondent imported tin plate waste from Australia in October-November 1997, declaring a value of Australian $400 per ton. The department contended that this value was too low compared to imports from Norway and France during the same period at higher prices. The Assistant Commissioner enhanced the value to US $400 per ton for some bills and US $450 per ton for others. The Commissioner (Appeals) later accepted the importer's declared value, leading to an appeal by the department.
Comparison of value with contemporaneous imports:
The department sought to support the Assistant Commissioner's decision based on the enhanced value of contemporaneous imports. The departmental representative referenced a Tribunal decision and a Supreme Court judgment to argue against the transaction value, but the respondent's representative cited a different Supreme Court judgment to support the importer's case.
Applicability of Rule 10A and Rule 4 of Valuation Rules:
The Tribunal clarified that the imports in question were made in 1997 before Rule 10A was enacted, making the cited Tribunal decision irrelevant. The Tribunal emphasized the importance of transaction value under Rule 4 of the Valuation Rules unless exceptions apply, highlighting the need to prove discrepancies in the invoice value.
Consideration of Supreme Court judgments in valuation:
The Tribunal analyzed previous Supreme Court judgments related to valuation rules, emphasizing the need for consistency and precedent. The Tribunal differentiated the imported goods from Australia with those from Europe, noting the lack of identical or similar goods for comparison. The Tribunal concluded that the price difference was not significant enough to warrant interference, dismissing the appeal.
In summary, the judgment focused on the valuation of imported tin plate waste, considering comparisons with contemporaneous imports, the application of valuation rules, and the interpretation of relevant Supreme Court judgments. The Tribunal upheld the transaction value unless exceptions applied, highlighting the need for consistency and relevance in valuation assessments.
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2003 (12) TMI 141
Issues Involved:
1. Excisability and dutiability of liquid sodium silicate.
2. Marketability of liquid sodium silicate.
3. Invocation of the larger period for demand.
4. Eligibility for Modvat credit.
5. Applicability of penalties under Section 11AC of the Central Excise Act.
Detailed Analysis:
1. Excisability and Dutiability of Liquid Sodium Silicate:
The core issue was whether the conversion of solid sodium silicate into liquid sodium silicate amounted to "manufacture" under Central Excise law. The Tribunal noted that the Department initially clarified that this conversion did not constitute manufacture. However, after the introduction of Note 10 to Chapter 28 of the Central Excise Tariff, which states that "labelling or relabelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to manufacture," the Department contended that the process resulted in a new, marketable product liable to duty.
2. Marketability of Liquid Sodium Silicate:
The appellants argued that the conversion process did not produce a marketable commodity. They asserted that liquid sodium silicate was not repacked from bulk to retail packs and could not be stored for long periods. The Tribunal emphasized that the Department failed to provide evidence of the marketability of liquid sodium silicate. The Additional Commissioner had noted that only solid sodium silicate was marketed, and liquid sodium silicate could not be stored for long, thus supporting the appellants' claim that the product was not marketable to consumers.
3. Invocation of the Larger Period for Demand:
The appellants contended that they held a bona fide belief, based on the Department's initial clarification, that their process did not result in an excisable product. Therefore, they argued that the larger period for demand was not invocable. The Tribunal agreed, noting that the appellants' belief was justified given the earlier departmental clarification and the lack of evidence from the Department proving the marketability of the liquid sodium silicate.
4. Eligibility for Modvat Credit:
The appellants argued that even if liquid sodium silicate were considered marketable, they would be entitled to Modvat credit. They cited several judgments to support their claim, including the Tribunal's decision in "Chamundi Steel Rerolling Mills v. CCE, Bangalore" and the Supreme Court's decision in "Formica India Division v. CCE." The Tribunal acknowledged that if the demand were to be confirmed, the appellants would indeed be eligible for Modvat credit.
5. Applicability of Penalties under Section 11AC of the Central Excise Act:
The appellants argued that penalties under Section 11AC were not applicable, citing various judgments. They maintained that the maximum penalty could not be imposed as it depended on the totality of the case's facts and circumstances. The Tribunal agreed, noting that the Department had not discharged its burden of proof regarding the marketability of the liquid sodium silicate, and the appellants' bona fide belief further justified the non-applicability of penalties.
Conclusion:
The Tribunal concluded that the Department failed to prove that the conversion of solid sodium silicate into liquid sodium silicate resulted in a marketable product. The appellants' bona fide belief, supported by the Department's initial clarification, justified their actions. Consequently, the larger period for demand was not invocable, and the appellants were entitled to Modvat credit. The penalties under Section 11AC were also deemed inapplicable. The appeals were allowed, and the impugned orders were set aside, granting consequential relief to the appellants.
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2003 (12) TMI 139
Confiscation - Valuation (Customs) - Misdeclaration of quantity and valuation of imported copper scrap - HELD THAT:- As regards the misdeclaration about the quantity of the copper scrap, which is to the tune of 82.354 M.T. we find that the appellants have not disputed that the said quantity was more than the declared quantity. However, it is their contention that the same was sent by mistake by the foreign supplier. We do not find any merits in the above contention of the ld. adv. From records it is clear that the entire exercise of getting in touch with their foreign suppliers and raising of supplementary invoices by the foreign supplier is only after the DRI stepped into the matter and started investigations.
There is no explanation by the importer as to why the foreign supplier would send such a huge quantity of goods inadvertently; as to why the foreign supplier would not come to know of the said mistake, even if committed, for a period of about a month after shipping bills; why is it that the foreign supplier realised their mistake only after start of DRI investigations in India. Accordingly we hold that there has been a misdeclaration on the part of the importer as regards the quantity of the scrap.
As regards the valuation we find that the Tribunal in the case of Prabhu Dayal Prem Chand [2002 (9) TMI 226 - CEGAT, COURT NO. I, NEW DELHI] has held that transaction value of copper scrap is not to be rejected on the basis of the prices indicated in L.M.E. Bulletin when there is no corroborative evidence of contemporaneous imports on the higher price. Similarly is the other decision of the Tribunal in the case of [2001 (10) TMI 471 - CEGAT, MUMBAI], Nheva Sheva v. Sangeeta Metals India. It was observed that the London Metal Exchange prices are only indicative of the prevailing market price, but in the absence of any contemporaneous imports of identical goods reliance on LME cannot be sustained. Inasmuch as in the present case there is no other evidence for enhancement of the value we do not find any justification in doing so. Accordingly that portion of the impugned order vide which the Commissioner has enhanced the value, is set aside.
Inasmuch as the appeal has been partly allowed on the point of valuation and has been partly rejected on the print of misdeclaration of quantity, we reduce the redemption fine from Rs. 15,00,000/- (rupees fifteen lakhs) to Rs. 7,00,000/- (rupees seven lakhs). Penalty imposed upon the first appellant M/s. Drunkey Exports is also reduced from Rs. 5,00,000/- (rupees five lakhs) to Rs. 2,50,000/- (rupees two lakhs fifty thousand). However, penalty imposed on Shri Rajesh Sonthalia, the second appellant is set aside in toto. Both the appeals are disposed of in above terms.
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2003 (12) TMI 138
Issues: Confiscation of Indian Currency for illegal export, liability for absolute confiscation, reduction of penalty amount, consideration of mens rea in exporting currency illegally, justification for absolute confiscation, conversion of confiscation into redemption option.
Confiscation of Indian Currency for Illegal Export:
The appellant was found in possession of Indian Currency exceeding the permissible limit while boarding a flight to Australia. The lower authority confiscated the currency and imposed a penalty. The regulations strictly prohibit exporting Indian Currency beyond a specified amount, and any excess amount is considered prohibited goods liable for confiscation under the Customs Act, 1962. The possession of Indian Currency beyond the prescribed limit constitutes an attempt at illicit exportation, justifying confiscation. The appellant's argument of carrying savings for a foreign trip due to being pensioners was considered, but the violation of regulations was confirmed.
Liability for Absolute Confiscation:
The regulations clearly define the permissible limit for exporting Indian Currency, and any amount exceeding this limit is subject to absolute confiscation. The appellant's possession of Rs. 84,000 beyond the permissible limit of Rs. 10,000 (for both the appellant and his wife) was deemed as prohibited goods, justifying absolute confiscation. The Manual of Instructions by CBEC reiterated the strict prohibition on exporting Indian Currency exceeding the limit, leaving no room for relaxation in confiscation.
Reduction of Penalty Amount:
While the lower authority imposed a penalty of Rs. 5,500, the Commissioner (Appeals) reduced it to Rs. 1,000 considering the circumstances. The appellant's age, being pensioners, and lack of mens rea in exporting the currency illegally were taken into account. The Tribunal's decision in a similar case supported the conversion of absolute confiscation into an option for redemption, which was applied in this case as well. The appellant was given the option to redeem the confiscated currency by paying a redemption fine of Rs. 11,000, while the penalty amount was confirmed at Rs. 1,000.
Consideration of Mens Rea in Exporting Currency Illegally:
The appellant's lack of mens rea in illegally exporting the currency was acknowledged, as he was considered a bona fide passenger and a retired officer of a State Government Undertaking. Despite the absence of mala fide intent, the confiscation was upheld due to established contraventions in line with departmental practices. However, the absolute confiscation was set aside, converting it into a redemption option based on the appellant's circumstances and lack of wrongful intent.
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2003 (12) TMI 137
Determining the unit price of Rough Marble Blocks of Iranian origin - Confiscation of goods - Redemption fine and penalty - Quantum of of fine - difference of opinion is placed before the Hon'ble President for reference to Third Member.
Whether the fine and penalty are required to be reduced to 20% and 5% respectively of the CIF value determined for the marble imported by the appellants and the appeal partly allowed, as proposed by Member (Judicial).
HELD THAT:- The Member (Judicial), reduce the fine and penalty to 20% and 5% respectively, of the CIF value determined. Fine is therefore reduced to Rs. 3,50,000/- and the penalty to Rs. 17,500/-.
The Member (Technical) was of the view that the quantum of fine and penalty imposed by the Adjudicating Commissioner does not require any interference. The appeal is rejected as devoid of any merit.
Third Member Order - I agree that the Commissioner's order does not disclose the calculation on which he has determined the profit margin. I however do not find that this by itself is sufficient to hold as incorrect the fine determined by the Commissioner. It is not contended that the fine determined is contrary to the provisions of Section 125(2). In that situation, I do not find any requirement of law for the adjudicating authority to furnish a precise basis for the fine that he has determined. The exercise of discretion in the matter of determination of fine is not ex facie arbitrary, capricious or mala fide. It would have been easy enough for the appellant to demonstrate the incorrectness of the Commissioner's conclusion by furnishing figures. This has not been attempted.
It is a settled law that fine and penalty are to be determined upon the facts of each case. The judgments of the Supreme Court cited by the Departmental Representative make this clear. The Court has also not found incorrect the action of the Tribunal in determining the fine based on facts available to it. The Tribunal's decision in Jai Bhagwati Impex Pvt. Ltd.[2001 (11) TMI 579 - CEGAT, MUMBAI], fixing a fine of 50% which has not been interfered with by the Supreme Court [2002 (5) TMI 848 - SC ORDER] is itself sufficient to show that the margin of profit on marble has not been consistently found to be 20%.
.I also do not find it possible to agree with the contention of the Counsel for the appellant that the difference in the conclusion of the two members of the Bench has only occurred because the Member (Technical) had gone by the incorrect figures of fine and penalty contained in the order of the Member (Judicial). While his order touches upon this aspect, a reading of it makes it clear that he has been guided solely by these figures. I am unable to say whether or not the demurrage incurred by the appellant justifies the lower fine. No evidence has been produced before me in support. There is no reference to this claim in the orders of the members of the Bench that heard the appeal. The memorandum of appeal does not refer to any such expenses, or contain a ground based upon them.
As a result of these discussions, I am of the view that the fine and penalty determined by the Commissioner require to be upheld and agree with the Member (Technical).
MAJORITY ORDER - The impugned order is upheld and the appeal rejected.
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2003 (12) TMI 132
Issues involved:
Classification of goods under sub-heading No. 3921.10 or Heading No. 94.04 of the Central Excise Tariff Act.
Analysis:
The judgment by the Appellate Tribunal CESTAT, New Delhi, involved the classification of goods manufactured by M/s. J.J. Foam P. Ltd. under sub-heading No. 3921.10 or Heading No. 94.04 of the Central Excise Tariff Act. The issue was whether the PU Foam sheets for mattresses, which were taped with cotton tape as packing, should be classified under Heading No. 94.04 as confirmed by the Commissioner (Appeals) or under sub-heading No. 3921.10 as claimed by the appellants. The appellant cited Trade Notice No. 4/1993 and a Board's Circular to support their classification under Heading No. 39.21. On the other hand, the learned SDR referred to previous Tribunal decisions to argue for classification under Heading No. 94.04. The Tribunal considered the submissions and previous decisions, including the case of Sheela Foams (P) Ltd., and noted that the PU Foam sheets, when cut to size of mattresses and affixed with industrial tape on the edges, became mattresses classifiable under Heading No. 94.04.
The Tribunal emphasized that the form in which the goods are cleared is relevant for classification and that the Trade Notice did not provide for mattresses to be classified differently under Heading No. 94.04. The decision also considered the clarification received from the Customs Cooperative Council regarding the classification of PU Foam sheets intended for use as mattresses. Based on the precedent set by previous decisions, the Tribunal concluded that the impugned product, being PU Foam sheets cut to size of mattresses with industrial tape on the edges, should be classified under Heading No. 94.04. The Tribunal upheld the duty demand but agreed with the appellants that no penalty should be imposed as they had regularly filed classification declarations, and the change in classification was made in good faith. Therefore, the penalty imposed on the appellants was set aside, and both appeals were disposed of accordingly.
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2003 (12) TMI 130
Issues involved: Inclusion of cost of transportation from factory to depot in assessable value of goods.
Summary:
The appeal before the Appellate Tribunal CESTAT, Mumbai involved the question of whether the cost of transportation from the factory to the depot should be included in the assessable value of goods manufactured by the appellant. The appellant cleared the goods to the depot from where they were sold, and the issue pertained to clearances between October 2000 to December 2001. The notice issued to the appellant proposed to include the cost of transportation to the depot in the assessable value, considering the depot as the place of removal.
The appellant's representative argued that after an amendment to Section 4 of the Act in July 2000, a depot was no longer considered a place of removal. According to Rule 5 of the Central Excise Valuation Rules, the cost of transportation from the place of removal to the place of delivery should be excluded from the assessable value if it is separately charged to the buyer and shown in the invoice. The appellant contended that the cost of transport was separately shown in the invoice and charged to the buyer.
On the other hand, the departmental representative relied on a Supreme Court judgment in Prabhat Zarda Factory Ltd. v. CCE, where the cost of transport to the depot was held includible in the assessable value. However, it was noted that this judgment was based on a concession made by the appellant's counsel and was applicable to a period before the 2000 amendment. The appellant argued that post-amendment, the cost of transport should not be included, and Rule 7 of the Valuation Rules should apply for sales made from a depot.
The Tribunal found that the Supreme Court judgment in Prabhat Zarda was not applicable to post-amendment scenarios, and the circular issued by the government clarified that the cost of transport should not be included in such cases. Citing the judgment in Dhiren Chemicals v. CCE, the Tribunal held that the circular would bind the department, and the appeal was allowed, setting aside the impugned order.
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2003 (12) TMI 129
Issues Involved:
1. Definition and classification of "IT Software" under Entry 231 of Notification 20 of 1999.
2. Eligibility for exemption from customs duty for imported data cartridges.
3. Interpretation of "source code" and "object code" in the context of software.
4. Requirement and timing of producing certificates for exemption under Entry 184 of Notification 20/99.
5. Imposition of penalties on ONGC Ltd. and Tullow India Operations Ltd.
Detailed Analysis:
1. Definition and Classification of "IT Software":
The principal question revolves around whether the imported data cartridges qualify as "IT Software" under Entry 231 of Notification 20 of 1999. The definition includes "representation of instructions, data, sound or image including source code and object code recorded in a machine-readable form and capable of being manipulated or providing interactivity to a user, by means of an automatic data processing machine." The Tribunal examined whether the imported data met these criteria. The Commissioner and experts concluded that the data cartridges did not contain executable programs, source code, or object code, and were not interactive, thereby failing to meet the definition of software.
2. Eligibility for Exemption from Customs Duty:
The appellants, ONGC Ltd. and Tullow India Operations Ltd., claimed exemption from customs duty based on the definition of IT software. The Tribunal found that the imported data cartridges did not qualify as software under the notification's definition. The data lacked source code, object code, and interactivity, and were merely digital representations of seismic survey responses, not executable programs.
3. Interpretation of "Source Code" and "Object Code":
The Tribunal referred to definitions from the Random House Webster's Computer and Internet Dictionary to clarify "source code" and "object code." Source code is the original form of program instructions written by a programmer, while object code is the intermediary form produced by a compiler. The imported data did not contain these elements, further supporting the conclusion that the data was not software.
4. Requirement and Timing of Producing Certificates:
Tullow India Operations Ltd. argued that the exemption under Entry 184 of Notification 20/99 should apply, even though the required certificate from the Directorate General of Hydrocarbons was produced after importation. The Tribunal referred to a precedent in SKF Bearings India Ltd. v. CC, which held that the delay in producing such certificates should not bar the exemption. The Tribunal remanded the matter to the Commissioner to reconsider the acceptability of the certificates and the applicability of the exemption.
5. Imposition of Penalties:
The Tribunal found no justification for the penalties imposed on ONGC Ltd. There was no evidence that ONGC, a wholly owned Government of India corporation, sought to evade duty. The belief that the imported goods were software under the relevant notification was plausible. Consequently, the penalty on ONGC was set aside.
Conclusion:
The appeal of Tullow India was allowed and remanded to the Commissioner for reconsideration of the certificates and exemption eligibility. The appeal of ONGC was allowed in part, with the penalty set aside. The Tribunal confirmed that the imported data cartridges did not qualify as software under the notification's definition, thereby denying the claimed exemptions.
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2003 (12) TMI 128
Imposition of penalties under Rule 209A - Words and Phrases - HELD THAT:- The expression "any other manner" should be understood in accordance with the principle of ejusdem generis and would, then, mean "any other mode of physically dealing with the goods". This position has been recognized in Godrej Boyce & Mfg. Co.[2002 (2) TMI 263 - CEGAT, MUMBAI] which has been followed in A.M. Kulkarni [2003 (2) TMI 507 - CESTAT MUMBAI]. The decision in Ram Nath Singh [2002 (11) TMI 145 - CEGAT, NEW DELHI] is also to the same effect. Any person to be penalized under the above rule should also be shown to have been concerned in physically dealing with excisable goods with the knowledge or belief that the goods are liable to confiscation under the Act/Rules. In the instant ease, neither of the essential ingredients of offence under Rule 209A has been shown to exist. We have already noted the Commissioner's findings against these appellants.
The above findings of the learned Commissioner do not come anywhere near satisfying the essential requisites for penalty under Rule 209A. There is no finding that the appellants had dealt with any excisable goods in any manner specified or contemplated under Rule 209A, let alone any finding of mens rea.
As regards the penalties imposed on Paras Vora and Ajit Singh Bhatia as partners of the respective firms, these penalties were imposed in addition to the like penalties imposed on the firms and hence cannot be sustained in view of the settled law on the point vide B.C. Sharma [2000 (8) TMI 137 - CEGAT, COURT NO. I, NEW DELHI], Chandrakant Sanghvi [2000 (9) TMI 286 - CEGAT, MUMBAI] and Harish Dye & Ptg. Works [2000 (11) TMI 266 - CEGAT, MUMBAI]. The same is the case with the penalty imposed on Vishal Agarwal in addition to that imposed on his proprietorship viz. Vishal Transport Service.
Thus, we set aside the penalties imposed on the appellants and allow these appeals.
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2003 (12) TMI 126
Issues:
- Disallowance of Modvat/Cenvat credit
- Imposition of penalties under Central Excise Rules
- Extended period of limitation invoked
Disallowance of Modvat/Cenvat credit:
M/s. Amit Industries, engaged in manufacturing electrical stampings and laminations, faced disallowance of Modvat/Cenvat credit amounting to Rs. 47,53,082. The dispute arose due to an abnormally high percentage of scrap generation in their manufacturing process, particularly at the sorting stage. The department contended that the rejected material at the sorting stage was not eligible as an input for Modvat credit. The appellants argued that they had declared the rejected materials in their classification and Modvat declarations, and the department had access to this information through their returns. The Tribunal found that the information provided by the appellants was sufficient for the department to understand the utilization of scrap in the manufacturing process. Citing precedent cases, the Tribunal held that there was no suppression of facts by the appellants, and thus, the demand for disallowance of credit was barred by limitation. Consequently, the demand and penalties imposed were set aside.
Imposition of penalties under Central Excise Rules:
In addition to disallowing Modvat/Cenvat credit, penalties were imposed on M/s. Amit Industries and Shri Suresh Kumar Agarwal under various provisions of the Central Excise Rules. The Tribunal found that since there was no suppression of facts by M/s. Amit Industries, the penalties imposed on them were not justified. The penalty on Shri Suresh Kumar Agarwal was also set aside as the allegation of aiding and abetting the offense committed by M/s. Amit Industries was deemed irrelevant in the absence of any suppression of facts. The Tribunal emphasized that for a penalty under Rule 209A, specific conditions must be met, which were not applicable in this case due to the absence of suppression of facts. Therefore, the penalties imposed were overturned.
Extended period of limitation invoked:
The central issue revolved around the invocation of the extended period of limitation for demanding duty from M/s. Amit Industries for the period from 1-4-96 to 31-3-2000. The department alleged suppression of facts by the appellants, justifying the use of the extended limitation period. However, the Tribunal found that the information provided by the appellants through their declarations and returns was adequate for the department to ascertain the utilization of scrap in the manufacturing process. Relying on previous decisions, the Tribunal concluded that there was no suppression of facts, rendering the demand beyond the normal limitation period invalid. As a result, the demand for duty and the penalties imposed were set aside, leading to the allowance of the appeals.
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2003 (12) TMI 125
Issues:
1. Liability for penal action despite payment of duty before the issuance of show cause notice.
2. Shortage of finished products and imposition of penalty.
Issue 1: Liability for penal action despite payment of duty before the issuance of show cause notice.
The case involved the manufacture of Leaf Spring and Stabilizer. The Revenue Department found a shortage of finished products and an additional amount received from a customer. The respondents contended that they disclosed the additional amount received and the relevant price variation clause. The Tribunal noted that the respondents had no intention to evade duty regarding the additional amount, as it was disclosed in the relevant return. Therefore, the respondents were not liable for penal action concerning the additional amount received.
Issue 2: Shortage of finished products and imposition of penalty.
Regarding the shortage of finished products, the respondents failed to explain the shortage and admitted to it. The Tribunal referred to a previous case where it was held that even if duty was paid before the issuance of a show cause notice, penal action could be imposed for contravention of the Central Excise Act/Rules. As the shortage was not accounted for by the respondents, a penalty of Rs. 25,000 was imposed. The Tribunal found that this penalty was appropriate based on the facts and circumstances of the case, and the appeal was disposed of accordingly.
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2003 (12) TMI 124
Imposition of penalty - Customs House Agent - smuggling sandalwood while attempting to export it as roof tiles - appellant appended his signature on the documents without verification - HELD THAT:-There was no allegation that appellant had knowledge and he had abetted in the committal of the offence. The penalty has also been imposed solely on the ground that appellant had appended his signature in various documents without due verification of the contents of the goods which was later found to be other than what was declared in violation of provisions of Customs Act. The Tribunal judgment which has been referred to by the Counsel that some degree of knowledge of contravention of law on the part of the abettor must be shown for imposition of penalty u/s 112 of Customs Act as held in the case of Liladhar Pasoo Forwarders Pvt. Ltd. v. CC, Mumbai [2000 (8) TMI 156 - CEGAT, MUMBAI] also would apply to the facts of the case.
The Tribunal also likewise held in the case of Shaikh & Pandit v. CC, Calcutta [2000 (10) TMI 511 - CEGAT, KOLKATA] that penalty u/s 114 cannot be imposed on CHA who is in pursuance of Regulation 10(2)(b) of CHALR'84 merely assisted in storing goods and rendering services required under aforesaid Regulation, thereby concluding that, in the absence of any evidence on record it cannot be suggested that agent played any active role in attempting to export prohibited goods. This judgment also applies to the facts of the case.
The case law cited by the Counsel in the case of Syndicate Shipping Services Pvt. Ltd. v. CC, Chennai [2003 (3) TMI 158 - CEGAT, CHENNAI] on identical facts also applies to the present case. This Bench in the aforesaid case clearly noted that no positive evidence on record had been produced to show any mala fide intention on the part of CHA or that he was an accomplice or abettor and, therefore, held that penalty was not imposable. Same view has been expressed by the Calcutta Bench in the case of Jha Shipping Agency v. CC (Port) Calcutta [2000 (9) TMI 199 - CEGAT, KOLKATA]. Thus, the appellants, which are on identical score, the penalty of Rs. 5 lakhs on the appellant is required to be set aside by allowing the appeal and we order accordingly.
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2003 (12) TMI 122
Issues:
- Dispute over valuation of free supply items in Exhaust System
- Allegation of short-levy, suppression of facts, interest, and penalty
- Appellant's contention on lack of intent to evade duty and timely rectification
- Appellant's argument on incorrect valuation by buyer
- Commissioner's rejection of time-bar defense
- Analysis of the mistake, intent, and applicability of penalty and interest
Analysis:
The appellant, a manufacturer of Automobile Components, faced a dispute regarding the valuation of free supply items in the Exhaust System supplied to M/s. Hyundai Motor India Ltd. The appellant voluntarily rectified the valuation error, paying around Rs. 1.28 crore towards differential duty before any proceedings were initiated. The Central Excise authority issued a show cause notice alleging short-levy due to suppression of facts, leading to the imposition of penalty and interest by the Commissioner.
The appellant contended that the initial short-payment was not intentional but a result of failure to correctly incorporate changes in the price of free supply items. They argued that the duty paid was available as credit to the buyer, negating any intent to evade duty. Citing the Supreme Court's decision in AMCO Batteries Ltd. v. C.C.E., Bangalore, the appellant emphasized the absence of wilful suppression or intent to evade duty.
On the aspect of time-bar, the appellant claimed that the error arose due to the incorrect valuation adopted by M/s. Hyundai Motor India Ltd., as 115% of the purchase price of the catalyst was erroneously considered. The Commissioner rejected the time-bar defense, attributing the rectification to the Audit Officers' visit rather than voluntary disclosure by the appellant.
Upon analysis, the Tribunal found that the error in valuation led to both higher and lower valuations, with no benefit to the appellant as the duty paid was reimbursed by the buyer. The Tribunal concluded that the penalty and interest were not sustainable as the case did not involve suppression of facts with intent to evade duty, as required by the proviso to Section 11A. Therefore, the penalty and interest were set aside, partially allowing the appeal in favor of the appellant.
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2003 (12) TMI 118
Issues Involved:
1. Classification of crimped uncut waste under Central Excise Tariff.
2. Compliance with remand directions by the Tribunal.
3. Validity of Chemical Examiner's report and request for retest.
4. Consideration of Board's Circular and expert opinion from IIT.
5. Emergence and treatment of waste during the manufacturing process.
6. Determination of duty liability and classification of the waste.
Detailed Analysis:
1. Classification of Crimped Uncut Waste:
The primary issue in this appeal is whether crimped uncut waste should be classified under sub-heading 5503.19 as waste, as claimed by the appellants, or under sub-heading 5501.20 as polyester tow or staple fibre. The appellants argued that the waste arises during the drawing and crimping process and contains defects such as uneven crimps and fused portions, making it unsuitable as polyester staple fibre. The Commissioner, however, classified it under sub-heading 5501.20, asserting that crimping is not essential for the final product and relying on HSN Explanatory Notes.
2. Compliance with Remand Directions by the Tribunal:
The Tribunal had remanded the matter twice, directing the Commissioner to consider the re-test of samples, the Board's Circular, and the expert opinion from IIT Delhi. However, the Commissioner failed to comply with these directions and reiterated the earlier findings without conducting the re-test or considering the expert opinion and the Board's Circular, leading to the Tribunal setting aside the impugned order.
3. Validity of Chemical Examiner's Report and Request for Retest:
The appellants contested the Chemical Examiner's report and requested a re-test, which was initially denied. The Tribunal noted that steps for re-testing were taken but not completed, and the right to re-test was not forfeited. The Commissioner's refusal to conduct a re-test and reliance on the initial report was deemed non-compliant with the Tribunal's directions.
4. Consideration of Board's Circular and Expert Opinion from IIT:
The Board's Circular dated 15-12-1989 clarified that waste could arise during the crimping process and should be classified under Heading 55.03. The Commissioner disregarded this Circular, which was binding, and also dismissed the IIT report on the grounds that the sample was not drawn in the presence of departmental officers. The Tribunal found this dismissal unjustified, emphasizing that the IIT report concluded the waste did not have the characteristics of polyester staple fibre.
5. Emergence and Treatment of Waste During the Manufacturing Process:
The Tribunal recognized that waste is an inevitable by-product in the manufacture of synthetic filament and tow, as supported by the Swadeshi Polytex and Reliance Industries cases. The appellants' process of crimping and the resultant waste were consistent with industry standards, and the Tribunal rejected the Commissioner's view that no waste should emerge.
6. Determination of Duty Liability and Classification of the Waste:
The Tribunal concluded that the classification under sub-heading 5501.20 was based on incorrect assumptions and non-compliance with remand directions. The Chemical Examiner's report did not address whether the sample contained defects to be treated as waste. The Tribunal held that even if the waste could be used for spinning, it did not cease to qualify as waste. Consequently, the appeal was allowed, setting aside the impugned order and granting consequential relief to the appellants.
Conclusion:
The Tribunal's detailed analysis underscored the necessity of adhering to procedural directions, considering expert opinions and binding circulars, and recognizing the technical realities of manufacturing processes. The appeal was allowed, and the classification of crimped uncut waste under sub-heading 5503.19 was affirmed, providing relief to the appellants.
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