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TMI Blog2010 (6) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... o VGPL and had also wrongly availed the exemption on capital goods, machinery, spares, components and consumables admissible to EOUs engaged in production and export of granite articles. After due process, the Commissioner passed the impugned order wherein he demanded the following amounts along with applicable interest and imposed equal amount of penalty under the provisions of the Central Excise Act and the Customs Act on the assessee. (i) Central Excise duty of Rs. 40,89,824/- (Rupees Forty lakhs eighty nine thousand eight hundred and twenty four only) payable on the finished goods manufactured and cleared clandestinely by MGPL to DTA. (ii) Central Excise duty of Rs. 3,78,101/- (Rupees Three lakhs seventy eight thousand one hundred and one only) on unpolished sawn slabs manufactured and cleared clandestinely. (iii) Customs duty of Rs. 2,06,627/- (Rupees Two lakhs six thousand six hundred and twenty seven only) on the imported consumables cleared to VGPL. (iv) Central Excise duty of Rs. 3,99,644/- (Rupees Three lakhs ninety nine thousand six hundred and forty four only) on indigenously procured consumables cleared to VGPL. (v) Central Excise duty of Rs. 71,07,083/- (Rupees S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-C.E. This condition required the assessee to use the machinery in connection with the operations of the EOU, that the capital goods were installed within one year of import/procurement and that the EOU should achieve NFPP and EP. They had satisfied these conditions. The condition No. 12 was a procedural condition. The demands were barred by limitation as the authorities were aware of the fact that dressed granite blocks were being produced and exported. 2.1 Demands under various other heads were also contested. 3 During hearing the learned Sr. Counsel for the appellants submitted that the EOU has achieved NFEP and fulfilled export obligations prescribed. It is submitted that the demand towards exemption availed on machinery, component parts and consumables etc imported and indigenously procured was confirmed on the ground that the appellant had failed to fulfill Condition No. 12 of Notification No. 37/2000-C.E. as amended by Notification No. 22/2003-C.E. and Notification No. 58/2000-Cus., dated 8-5-2000 as amended by Notification No. 52/2003-Cus., dated 31-3-2003. It is submitted that the charge found against the appellant in this regard was that the appellant had cleared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of duty was much higher than the relevant value. It was claimed before him that the goods involved were rejects and the sale price adopted was high. The Commissioner found that the appellants could not show any record to find that the impugned goods were reject slabs. We find that the Exim policy provides for the manner in which rejects are to be treated for the purpose of payment of duty. The EOU is required to intimate the authorities about generation of rejects. There are restrictions as regards rejects that could be allowed to be cleared by the EOU to DTA and the duty payable on the same. In the instant case, the appellants never informed the department about generation of rejects or their clearances. In the circumstances, we find that the Commissioner's finding that what was cleared by the appellant was not rejects but finished goods cannot be interfered with. In arriving at the finding that the EOU had cleared sound goods and not rejects, he had relied on the statements of responsible executives of MGPL and VGPL. The managerial personnel of MGPL had stated that MGPL used their spare capacity to produce polished slabs which were removed to VGPL. As per Rule 100E of Central Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HAN) 25 mtrs -d- Relying on the assessee's own records, the Commissioner found that the impugned clearance of diamond wire involved new diamond wire and not used diamond wire. Its records showed used diamond wire as 'used diamond wire'. Accordingly, he confirmed the demand of duty on diamond wire as proposed in the show cause notice. In the absence of contrary evidence, we find that the Commissioner's finding is sound. We sustain demand of Rs. 2,06,627/- under this head. 5.4 As regards the demand of exemption availed on indigenous consumables (Rs. 3,99,644/-) found to have been transferred to VGPL, the contention raised by the appellants has been that they had purchased such goods on account of VGPL. We find that the Commissioner rightly found that the EOU was not supposed to procure goods on behalf of a DTA unit and that it was liable to pay the exemption availed on indigenous consumables procured and transferred to VGPL. We find that the Commissioner relied on the statements of the concerned executives of MGPL and VGPL admitting removal of consumables procured by it without accountal and without payment of duty to VGPL. The demand is based on the private records of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty eight thousand five hundred and five only) on the imported capital goods utilized at quarries in as much as they have violated the conditions of the Notifications No. 52/2003-Cus., dated. 31-3-2003, as detailed in Annexure C2 of the notice from MGPL under the provisions of Section 28 of the Customs Act, 1962. iv. Customs duty amounting to Rs. 1,39,95,520/- (Rupees one crore thirty nine lakh ninety five thousand five hundred and twenty only) on the imported consumables utilized at quarries in as much as they have violated the conditions of the Notification No. 52/2003-Cus., dated 31-3-2003, as detailed in Annexure C4 of the notice from MGPL under the provisions of Section 28 of the Customs Act, 1962. 6.1 Equal amounts of penalty as the duty demanded have also been imposed on the appellants under relevant provisions of Central Excise Act and Customs Act. These demands arise on the ground that the EOU had used goods procured at the quarries for excavation of granite blocks which were exported as such and not brought to the EOU premises. 7 Yet another ground on which the demand is confirmed is that during the material period, the goods excavated and exported were not covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tantial liability towards duty on the machinery could be fastened on the assessee. In this connection, the Commissioner found that the assessee had failed to fulfil the following conditions of the Notification No. 37/2000-C.E. dated 8-5-2000. "3 The goods (capital goods & consumables) are used by the unit for the purpose of quarrying of granite meant for further processing or manufacture or production of articles of granite for export by its own EOU or its unit in the zone." "12 The goods so quarried shall be removed from the quarry site only for supply to unit's own processing unit in the zone or Export-Oriented Unit or for supply to an other hundred percent Export- Oriented Unit or the units in the zone engaged in processing or production or manufacture of articles of granite and export thereof and shall not be allowed to be exported as such or to be cleared in Domestic Tariff Area." 10 He found that similar conditions were laid down in the customs; notification governing import of specified goods meant for quarrying of granite under the EOU scheme. He found that on a plain reading of the conditions of the notification, there was no ambiguity that the appellants were not eligi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hapes or sheets whether or not in form of finished articles. We find that the impugned order did not confirm the demand for the sole reason that the EOU had exported excavated granite blocks 'as such' from the quarries. He found that the impugned goods were not covered by the LOP issued to the EOU. Therefore, the exports could not be treated to be under the EOU scheme. The DC had categorically clarified that these exports had not been counted for fulfilment of export obligations. 13 We reproduce the Notification No. 37/2000-C.E. dated 8-5-2000, as under :- Exemption to specified goods for use in a granite quarry by 100% EOU/EPZ/FTZ In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts excisable goods specified in the Table below (hereinafter referred to as the said goods), when brought for use in a granite quarry for the purpose of quarrying of granite (hereinafter referred to as the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty free procurement of the said goods till the date of payment of such duty, if - (i) in the case of capital goods, such goods are not proved to the satisfaction of the Assistant Commissioner of Customs or Central Excise or Deputy Commissioner of Customs or Central Excise to have been installed or otherwise used within a period of one year from the date of procurement thereof or within such extended period not exceeding five years as the Assistant Commissioner of Customs or Central Excise or Deputy Commissioner of Customs or Central Excise may, on being satisfied that there is sufficient cause for not using them as above within the said period, allow; (ii) in case of goods other than capital goods, such goods are not proved to the satisfaction of the Assistant Commissioner of Customs or Central Excise or Deputy Commissioner of Customs or Central Excise to have been used in connection with the quarrying of granite or re-exported within the period of one year from the date of procurement thereof or within such extended period as the Assistant Commissioner of Customs or Central Excise or Deputy Commissioner of Customs or Central Excise may, on being satisfied that there is sufficie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toms or Central Excise or Deputy Commissioner of Customs or Central Excise may, subject to such conditions and limitations as he may specify and subject to the provisions of the Export and Import Policy, allow - (a) the unit to supply granite so quarried to other Export Oriented Units or units in the Zone without payment of duty; (b) the said goods to be taken out temporarily without payment of duty for repairs and return thereof; (c) the unit to export the said goods; (d) destruction of obsolete capital goods without payment of duty, if such goods are destroyed in the presence of the Customs or Central Excise Officer. (10) The said goods shall not be transferred or shifted to any other site or quarry owned or taken on lease by the unit without permission of the Assistant Commissioner of Customs or Central Excise or Deputy Commissioner of Customs or Central Excise. (11) The accounts of the said goods used at the quarrying site shall be kept in the site in a properly constructed office to enable the verification of the same as and when required. (12) The goods so quarried shall be removed from the quarry site only for supply to unit's own processing unit in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25. Hydraulic Oil and Lubricants 26. Explosives 27. Chisels, Hammers, Chain Pulley Blocks 28. Steel Pillow Kits 29. Dust Collector 30. Consumables and tools 14 The demand is confirmed for failure of the appellant to fulfill the condition No. 12. Identical condition appears in the corresponding Customs Notification No. 58/2000-Cus., dated 8-5-2000. Notification No. 52/2003-Cus., dated 31-3-2003 incorporated the same benefit w.e.f. 31-3-2003. The condition appearing in the Customs Notification is reproduced hereunder :- The goods so quarried shall be removed from the quarry site only for supply to unit's own processing unit in the Zone or Export Oriented Unit or for supply to an other hundred percent Export Oriented Unit or the units in the Zone engaged in processing or production or manufacture of articles of granite and export thereof and shall not be allowed to be exported as such or to be cleared in Domestic Tariff Area. 15 We find that the activities of the EOU are monitored by the DC in the Ministry of Commerce. The EOU is set up in terms of the policy provisions and functions subject to such provisions. An EOU is allowed to import/procure capital goods and consu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OU scheme; for consideration of your case liberally for the deviation of the provisions of the relevant Notifications/procedures. If there is the revenue loss to the Government an you have claimed. You are further advised to get your quarries located it 'Ongole'' and "Tekkali" declared as bonded premises as additional locations to your EOU after obtaining necessary permission for inclusion of additional locations form this office; as export of Dimensional Granite Blocks directly from quarries other than from the bonded premises of the EOU is not permissible as per policy. Yours faithfully, (K. Govinda Roa) Asstt. Development Commissioner Copy to The Jr. Commissioner of Customs & Central Excise, Hyderabad-III Commissionerate. LB Stadium Road, Basheerbagh, Hyderabad - 500 004, w.e.f. his letter No. 25/2005 Hyd-III/Adjn. dated 22-8-2003. As per this letter, there cannot be any manner of doubt that the impugned goods were not allowed to be exported by the appellants under the EOU scheme during the material period. Export of dimensional granite blocks from the quarries during the material period did not entitle EOU for the exemption under the EOU scheme in respect of the capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sable goods which are produced or manufactured in India shall be subject to duties at the rates specified in the Central Excise Tariff. Second proviso to sub-section (1) of Section 3 provides that excisable goods which are produced/manufactured in a 100% Export Oriented Undertaking and allowed to be sold in India shall be subject to excise duty equal to the aggregate of the duties of Customs leviable on like goods produced/manufactured outside India if imported into India. Notification 2/95 grants exemption to the goods produced in 100% EOU and supplied to domestic tariff area. Thus, duties of excise are leviable on excisable goods manufactured in India either at the rates specified in the Central Excise Tariff (under sub-section (1) of Section 3 or an amount equal to the aggregate of duties of customs leviable on goods produced outside India and imported into India. In either case, the goods are to be subjected to effective rates of duty after taking into account Exemption Notifications. In the present case M/s. Euro Cotspin Ltd. is a 100% EOU and the goods have been cleared into Domestic Tariff Area according to the finding in the order. Therefore, the goods should have been subj ..... X X X X Extracts X X X X X X X X Extracts X X X X
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