TMI Blog2009 (2) TMI 631X X X X Extracts X X X X X X X X Extracts X X X X ..... ed serpentine blocks and all types of natural stones in form of dressed block, slabs and tiles thereof. Serpentine is a natural stone which is traded under commercial name of green marble . The Appellant company could import free of customs duty or indigenously procure free of central excise duty, the capital goods and rough stone blocks. The Appellant were to achieve export turnover of U.S. $ 48.97 lakhs during five years from the date of commencement of production and were to achieve positive net foreign exchange earning (NFE) as per the provisions of the EXIM policy. 1.1 The inputs and capital goods, imported by a 100% EOU are fully exempt from basic customs duty and Additional Customs Duty by Notification 53/97-Cus. and its successor Notification 52/03-Cus., dated 31-3-03 and the indigenously procured inputs and capital goods are fully exempt from basic excise duty as well as additional excise duty under Notification 22/03-C.E., dated 31-3-03. As per the provisions of the EXIM policy, an EOU, can sell a part of the production to DTA with the permission of the Development Commissioner, for which the DTA quota is fixed by the Development Commissioner, based on the export perfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Central Excise Rules, 2002. The Commissioner by the impugned order-in-original dated 24-4-06 in respect of both the show cause notices has - (a) confirmed under proviso to Section 28(1) of the Customs Act, 1962 readwith Notification No. 52/2003-Cus., dated 31-3-03, the duty demands of Rs. 2,69,07,607/- and Rs. 28,00,379/- in respect of import of rough marble blocks by the Appellant company during the period from April 2003 to August 2005, alongwith interest on this duty at the applicable rate under Section 28AB of the Act; (b) imposed penalty of Rs. 2,97,07,986/- (Rs. 2,69,07,607 + Rs. 28,00,370/-) on the Appellant company under Section 114A of the Customs Act; (c) confirmed the demand of Central Excise duty of Rs. 1,53,58,771/- and Rs. 38,16,236/- against the Appellant company under proviso to Section 11A(1) of the Central Excise Act, 1944 in respect of DTA clearances of Dressed marble block, marble slabs and marble tiles during April 2003 - August 2005 period, alongwith interest on this duty at the applicable rate under Section 11AB of the Central Excise Act; (d) imposed penalty of Rs. 1,91,75,007/- (Rs. 1,53,58,771/- + Rs. 38,16,236/-) on the Appellant c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Tri. - Mum.) (c) Titan Medical Systems v. CCE - 2003 (151) E.L.T. 254 (S.C.) (3) Duty exemption cannot be denied to DTA clearances of dressed marble blocks/marble slabs/tiles manufactured out of imported marble blocks on the ground that the item exported is Serpentine stone slabs/tiles. The Development Commissioner, in term of para 28(6) of Appendix 14-I of 2002 - 07 EXIM policy has allowed broad banding/bunching of the goods to be exported by the Appellant company without specific reference to particular export goods and accordingly the export products of the Appellant company are dressed blocks/slabs/tiles of marble, Serpentine and granite, against the export of which the Appellant company earned DTA quota. As per para 10.2 of Appendix 14I of 2002-07 EXIM policy, a EOU at no point of time shall be required to co-relate every import consignment with its export, transfer to other EOUs/SEZSTP units/EHTP units of sales in DTA. (4) Commissioner s finding in the impugned order that Serpentine stone is not marble, is not correct. The petrological test report from Directorate of Mines and Geology clarifying that the goods imported - marble block (white) and the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment holds that the DTA sales were without permission, in view of Tribunal s judgments in cases of Sam Spintex Ltd. v. CCE reported in 2004 (163) E.L.T. 212 and Modern Denim Ltd. v. CCE, Ahmedabad reported in 2005 (191) E.L.T. 1174, duty on such clearances can be demanded only under Section 3(1) of the Central Excise Act, not under proviso and in that case, no duty would be chargeable. (8) The imported marble blocks are not liable for confiscation under Section 111(d) and (o) of the Customs Act, as the LOP issued to the Appellant company permits the import of the same. (9) There is no fraud, wilful mis-statement or suppression on part of the Appellant company and, therefore, neither longer limitation period of five years is invokable nor the Appellant company is liable for penalty under Section 11AC of Central Excise Act, 1944 or under Section 114A of the Customs Act, 1962. 2.2 Mrs. Archana Pandey Tiwari, the learned Jt. CDR and Shri A.K. Madan, the learned Senior Departmental Representative made the following submissions :- (1) Main issue in this case is whether the serpentine stone can be considered as marble. That the serpentine stone is different from marbl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xported, the Appellant company could not clear any dressed marble blocks/slabs/tiles made out of imported marble blocks, into DTA. (6) As per the Development Commissioner s letter dated 18-6-03 to the Appellant company regarding DTA sale permission, the DTA sale will be admissible only to similar goods or which belong to the same class as that of goods manufactured and exported from the unit. Since what was exported was the dressed blocks/slabs/tiles of the Serpentine stone, the Appellant company could not sell to DTA the dressed white marble blocks/slabs/tiles made out of imported marble blocks, as marble and Serpentine stone are not similar goods in terms of the definition of similar goods as given in the Board s Circular No. 7/2006-Cus., dated 13-1-06. 3. We have carefully considered the submission from both the sides. During the period of dispute i.e. during April 2003 - August 2005 period, till December 2003, the finished goods to be exported, as per the LOP, were - marble slabs/tiles and Granite tiles . In December 2003, the basket of the items for export was expanded to include - Serpentine slabs/tiles, dressed serpentine blocks and dressed marble blocks . Howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tifications, the duty exemption is available even if a part of the finished goods, made out of the duty free imported and/or domestically procured goods, instead of being exported, are sold in DTA as per the provisions of the EXIM policy. In this case, there is no dispute about the fact that the dressed marble blocks and marble slabs/tiles manufactured out of imported marble blocks, instead of being exported, were sold in DTA. The question to be decided is as to whether the Appellant company can be said to have fulfilled the condition of the duty exemption under Notification 52/03-Cus. by exporting dressed blocks, slabs and tiles of serpentine made out of domestically procured Serpentine stone and clearing the dressed marble blocks, slabs and tiles made out of imported white marble blocks into DTA within the DTA quota determined by the Development Commissioner. 4.1 It has been pleaded that serpentine stone, procured domestically is, a variety of marble, known in the trade parlance as green marble and that the export obligation has been met by exporting a similar product - dressed serpentine block, and serpentine slabs/tiles manufactured out of domestically procured serpentine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded from the purview of HSN heading 25.15. (6) In terms of price, serpentine and marble are not comparable. The imported white marble is about three times costlier than the serpentine stone, used for manufacture of dressed serpentine blocks, slabs and tiles for export. (7) As per the Board s circular No. 7/2006-Cus., dated 13-1-06, similar goods are those, which although not alike in all respects, have like characteristics and like component materials which enable them to perform the same function and to be commercially interchangeable and the quality of the goods, reputation and existence of trade mark, if any, are among the factors to be considered in determining whether the goods are similar. Judged on the basis of this criteria, the goods exported and the goods cleared to DTA are not similar at all. 4.1.2 Since except for the name - green marble used for serpentine stone, there is nothing in common between marble and serpentine, and since the domestically procured serpentine stone (on which there is no central excise duty) is much cheaper than the imported marble blocks (imported free of duty), and thus the dressed white marble blocks, slabs and tiles made out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial. In this case, since export of dressed marble blocks, marble slabs tiles made out of imported white marble blocks is almost nil, the Appellant company could not sell the products made out of imported white marble blocks unit DTA against the DTA entitlement earned by export of dressed blocks, slabs and tiles of serpentine stone and the DTA sales of the Appellant company cannot be counted towards their export obligation. 4.1.3 In view of the above discussion, we hold that the condition for duty free import by a 100% EOU, as prescribed in Notification No. 52/03-Cus. has not been fulfilled in respect of imported marble blocks and, therefore, the same are not eligible for duty exemption, and since these marble blocks, after their use have not been used for the intended purpose, the same would be liable for confiscation under Section 111(o) of the Customs Act and the Appellant company and its Director would be liable for penalty under Section 112(a) of the Customs Act. However since the goods are not available for confiscation, and it is not the Department s case that the same had been released against provisional release bond, in view of judgments of Hon ble Punjab Haryana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Notification No. 52/03-Cus. could be charged on the imported marble blocks used for making dressed marble blocks and marble slabs/tiles and this duty, as discussed in the earlier in para 4.1.3 above is, in any case, chargeable. We do not agree with the Commissioner s finding that the definition of manufacturer in Section 2(f) of the Central Excise Act and the above-mentioned judgments of Hon ble Supreme Court are not applicable to 100% EOUs for which the term, manufacturer as defined in the EXIM policy is applicable and for this reason, the DTA clearances of dressed marble blocks and marble slabs/tiles would attract central excise duty, as - (a) the definition of manufacturer , as given in the EXIM policy is relevant only for the purpose of duty free import of inputs and capital goods under customs Notification No. 52/03-Cus. and its predecessor notification and excise duty free domestic procurement of indigenously manufactured inputs or capital goods for use in or in relation to manufacture (as defined in EXIM policy) of the finished goods ; and (b) the DTA clearances attract Central Excise duty only under proviso to Section 3(1) of the Central Excise Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssistant Commissioner, mentioned in addition to dressed marble blocks, marble slabs and marble tiles, the dressed serpentine blocks/serpentine slabs/tiles and other slabs/tiles of other stones also, as the Appellant company s finished products for export. Since all the exports were under Central Excise supervision, the jurisdictional Central Excise Officers could not be unaware of the fact that except for one small consignment of marble slabs and granite slabs, all exports of the Appellant company were of dressed serpentine blocks/serpentine slabs/tiles. Appellant s letter dated 27-7-03 to the Assistant Commissioner indicates that the Departmental officers were also aware of DTA clearances of the marble slabs/tiles. In case of a 100% EOU, the jurisdictional range officer invariably gets intimation about the receipt of duty free imported goods or domestically procured goods and the confirms the receipt of the same in the EOU to the concerned Customs house/Central Excise range and therefore the jurisdictional central excise officer cannot be unaware of the fact that while the Appellants are importing marble blocks and domestically procuring serpentine blocks, they are exporting only ..... X X X X Extracts X X X X X X X X Extracts X X X X
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