TMI Blog2012 (8) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... se the goods have not been seized at all the hence they cannot be confiscated – Held that:- Section 113 deals with liability to confiscation and not actual confiscation - section nowhere states the goods should be seized to determine the liability to confiscation - merely because the goods have been examined by the central excise authorities does not absolve the appellants of their responsibility of making the correct declarations in the export documents - This can at best a factor for determination of quantum of penalty and not for imposition of penalty per se – Penalty reduced - C/1048, 1065 & 1066/2007 - M/438/2012/WZB/CSTB/C-I - Dated:- 3-5-2012 - Ashok Jindal, P R Chandrasekharan, JJ. For Appellant: Shri T Vishwanathan, Adv. For Respondent: Shri A N Sharma, Commissioner (AR) Per: P R Chandrasekharan: The appeals and miscellaneous application are directed against order-in-original No.28/07-08 dated 31/08/2007 passed by the Commissioner of Customs (Imports), Jawaharlal Nehru Custom House, Nhava Sheva. 2. The facts arising for consideration in this case are as follows. The main appellant M/s Bharat Forge Ltd., Pune, who is a manufacturer of automobile parts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... F.O.B.) liable to confiscation under section 113(i) and (ii) of the Customs Act and also proposing penal action on three officials of the exporting firm, namely, S/Shri Pramod Cholkar, Manager, Yashwant Y Choudhary, Associate Vice-President and M.N.Deshmukh, Vice President of M/s Bharat Forge Ltd. and Shri. C.S.Parab, Partner of the CHA firm M/s Overseas Clearing Cargo (I) Pvt. Ltd. The case was adjudicated vide the impugned order wherein the goods exported under 137 shipping bills valued at Rs.23,84,68,604/- was held liable to confiscation under section 113(i) and (ii) of the Customs Act,1962, with an option to redeem the same on payment of fine of Rs.2 Crore. The drawback claim of Rs.5,09,70,429/- was disallowed. A penalty of Rs.50 lakhs was imposed on the appellant firm and a penalty of Rs. 5 lakhs each was imposed on the three officials of the appellant firm, named above. Proceedings against the partner of the CHA firm was dropped. Hence the appellants are before us. 3. The Ld. Counsel for the appellant makes the following submissions: 3.1 During the period 6-3-03 to 15-5-03, the applicant had exported 7 types of items, namely,:- a) Machined Crankshaft; b) Forged Cranks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teering knuckles under DEPB scheme under the category "Alloy steel/stainless steel forgings (machined) and the customs department in Pune, had raised an objection that steering knuckle is not a machined forging but are identifiable part of motor vehicles and hence not covered by DEPB. Accordingly DGFT issued a show cause notice for cancellation of DEPB. After representations by the appellant, the DEPB schedule was amended to read as "identifiable ready to use machined parts/components made wholly or predominantly of alloy steel/stainless steel (not less than 90% by weight) manufactured through forging process" and with effect from 1-3-2000, DEPB was granted to the exports of steering knuckle. There were reports that DEPB was not WTO compatible and the scheme would be abolished soon. Therefore, the appellant started exporting steering knuckle under claim for drawback under the all industry rate of drawback under serial nos. 73.29 and 73.30 as the entry therein was similar to the DEPB entry under which the goods were exported earlier. 3.7 There is no dispute that steering knuckle is an identifiable part and manufactured by the process of forging and hence satisfies the description ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rging process was subjected to various processes such as drilling and boring operations, cap hole drilling and taping, taper bore operations and washing, grinding, broaching, in umber punching etc. as per customer's specifications. Thereafter it was filled with two garlock bushing and affixed with identification sticker and packed in clop lock box. However, the product was mis-classified as ally/non-alloy steel forging, machined and drawback was claimed under sl. No. 73.29 and 73.30 of the drawback schedule which applies to articles of iron and steel. 4.3 From the statements recorded from Mr. Pramod Cholkar, Manager, Mr. Yashwant Choudhary, Associate Vice President and Mr. M.N. Deshmukh Vice President of the appellant firm, it is amply clear that the product is not only forged but subjected to a number of processes after forging and the product is a fully manufactured sub-assembly of a motor vehicle part meriting classification under heading No. 87.08 of the Customs Tariff. The exporter knowingly mis-declared the description of the goods to avail undue drawback benefits. 4.4 The purchase orders for the product from the foreign buyer, gives the description of the goods such as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 In as much as the export goods have been mis-declared with a view to claim ineligible drawback, the goods are liable to confiscation under the provisions of Section 113(i) and (ii) of the Customs Act, 1962. 4.10. Consequently imposition of fine in lieu of confiscation and penalty under section 114(iii) are valid and correct in law. 4.11 The ld. AR relies on the following decisions/circulars in support of his above contentions,- ( a) CCE, Madras vs. Systems Components Pvt. Ltd. [2004 (165) ELT 136] (b) Omprakash Bhatia vs. CC, Delhi [2003 (155) ELT 423 (SC)] (c) United Veneers (P) Ltd. CC, Cochin [1986 (26) ELT 322] (d) Shashikant M. Walhekar vs. CC E [1990 (45) ELT 144] (e) Penguin(MFT) International vs. CC, Cochin [1998 (35) ELT 388] (f) Commissioner vs. Kitply Industries Ltd. [2011 (257) ELT 289 (SC)] (g) Jay Yushin Ltd. vs. CCE, New Delhi [2000 (119) ELT 718] (h) CC vs. India Steel Industries [1993 (67) ELT 760 (GOI)] (i) CBEC Circular Nos. 4/2003 dated 21-1-2003, 6/2003 dated 28-1-2003 and 40/2003 dated 12-5-2003. 5. Before we proceed with the matter, we need to consider and dispose the miscellaneous appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is pending before the CESTAT, they should await the decision of the CESTAT. That being the position, the notings made in the Ministry's file has no bearing on the case pending before CESTAT. In the Doypack Systems (Pvt) Ltd. case (cited supra), the hon'ble apex court laid down the principle that if the provisions of the statute are not ambiguous, notings in the files of the Government are not relevant, as the statute has to interpreted in terms of the language used therein. In the instant case, the interpretation of the Drawback Schedule has to be made in terms of the language used therein and not based on the notings / interpretation given in the files of the Ministry on the appellant's representation. This position has been made clear by the Ministry itself to the appellant in their letter dated 18 th July, 2008. Hence we reject the miscellaneous application for admission of additional evidence. 7. Now we take up the appeals for consideration. The first issue for consideration is whether the goods, namely, automobile parts exported by the appellant is eligible for all industry rate of drawback under serial no. 73.29 and 73.30 of the Drawback Schedule as it stood at the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In other words, the first two digits of the revised heading refer to the corresponding chapter where as the subsequent two digits are the running numbers allotted for purpose of the drawback Table." While aligning the Drawback Schedule further with the Customs Tariff at the 4 digit level, the Ministry vide letter DOF No. 609/38/2005-DBK dated 2-5-2005, clarified as follows:- "5. The existing drawback schedule is based on a mixed classification that has grown out of precedent and convenience over the decade. Basically, the first two digits reflect the chapter heading while the subsequent two digits are in most cases arbitrary, derived from precedent and convenience. It has been felt that the classification system to be used for notifying the All Industry Rates of Duty Drawback should be insulated from any charge of classificatory confusion. It has therefore, been decided to adopt the HS classification as the basis for fixing drawback rates. Thus, the new drawback schedule is now fully aligned with the HS nomenclature at the four digit level." 7.2 From the above circulars, two things are absolutely clear. The first two digits of the drawback schedule refer to the Chapter o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt are obtained under forging process, they are eligible for all industry rate of drawback under serial nos. 73.29 or 73.30. The above judgment dealt with eligibility to exemption of "investment castings" under notification 223/88-CE. The said notification provided excise duty exemption on castings and cast articles falling under sub-heading 7325.10 under S.No.1 and under S.No.3, castings and cast articles falling under Chapters 84,85 or 87 were also given exemption. Since the goods were castings, this Tribunal held that the benefit of the said notification is available, even if the product is a cast article and not castings as the notification used the expression casting and cast articles' and all the chapters, namely, 73,84,85 and 87 were covered by the notification. We do not know how the ration of this judgment can apply to the facts of the present case. Under sl.nos. 73.29 and 73.30 forgings (rough)/unmachined/semifinished/machined/identifiable ready-to-use machined parts/ components, of steel manufactured through forging process, of both non-alloy steel and alloy steel have been notified under the drawback schedule. But under Chapter 87 no such product is notified. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case the goods have not been seized at all the hence they cannot be confiscated. Section 113 deals with liability to confiscation and not actual confiscation. The said section nowhere states the goods should be seized to determine the liability to confiscation. Liability to confiscation arises for violations of the provisions of the Customs Act, 1962 as specified in clauses (a) to (I) of section 113. This has nothing to do with the seizure of the goods. Therefore, the contention of the appellant in this regard is totally misplaced. 7.6 The appellant has argued that they exported the impugned goods under claim for drawback for the reason that they used to export these goods earlier under claim for DEPB vide sl. No.529 and 530 of the DEPB schedule which read as follows:- "529 Identifiable ready to use machined parts/components made wholly or predominantly of carbon steel/non-alloy steel (not less than 90% by weight) manufactured through forging process, not elsewhere specified. 530 Identifiable ready to use machined parts/components made wholly or predominantly of alloy steel/stainless steel (not less than 90% by weight) manufactured through forging process, not elsewher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. Thus it is obvious that this argument is purely an afterthought and is rejected. Thus the conduct of the appellant in the instant case serious doubts about their bonafide. 7.8 The next issue for consideration is whether the appellant is liable to redemption fined and penalty. In the instant case no goods have been seized nor the goods appears to have been released provisionally under bond. The goods have been exported and are not available for confiscation. If that be so, the question of confiscation and imposition of fine in lieu of confiscation can not be sustained. Accordingly we set aside the fine of Rs.2 crore imposed on the goods already exported. 7.9 As regards penalty imposed on the appellants, we find that the penalty has been imposed under section 114(iii) of the Customs Act on the main appellant and its officials. As per the provisions of the said section, "114 Any person who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 113, or abets the doing or omission of such an act, shall be punishable - (i) (ii) (iii) in the case of any othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the adjudicating authority by the appellant nor the adjudicating authority has given any finding in this respect. For conversion, an application for the same has to be made under Section 149 of the Customs Act, which does not seem to have been done in the instant case. In view of this position, the appellant has to make an application for conversion of the drawback shipping bills involved in the instant case to DEPB shipping bills along with supporting documents if permissible and in accordance with law. If any such application is made, the adjudicating authority shall consider the same in accordance with law and decide the matter after giving a reasonable opportunity to the appellant to present their case. 8. In sum, we hold that the appellant is not eligible for duty drawback at all industry rates on the impugned goods under serial nos. 73.29 and 73.30 of the drawback schedule as it stood at the relevant time. The impugned goods, though exported, are liable to confiscation. In as much as the goods are not available for confiscation, the question of imposing fine in lieu of confiscation does not arise and accordingly the fine of Rs. 2 crore imposed is set aside. The penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X
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