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2015 (10) TMI 2034 - MADRAS HIGH COURT

2015 (10) TMI 2034 - MADRAS HIGH COURT - 2015 (324) E.L.T. 552 (Mad.) - 100% EOU - Improper accounting of the imported materials - Manufacture of cotton yarn - Whether mentioning of Section 72 of the Customs Act, 1962 along with Section 28 would render the SCN outside the purview of Section 72 and wrong mention of provision of law in SCN is sufficient to invalidate the exercise of that power? Exemption claimed under Notification No.53/97 (Cus) Department contended that time limit specified u .....

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question of law does not arise, since the SCN does not support such a plea SCN is bereft of demand to support claim under Section 72; second question of law is not relevant to the facts of the present case Decided in favour of assessee. - Civil Miscellaneous Appeal No.350 of 2009 & M.P.No.1 of 2009 - Dated:- 26-6-2015 - MR. R. SUDHAKAR AND MS. K.B.K.VASUKI, JJ. For The Appellant : Mrs.RK.Sekina Reshma For The Respondents: Mr.Lakshmi Kumaran JUDGMENT (Judgment of the Court was delivered by .....

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said Show-Cause Notice was purporting improper accounting of the imported materials under Section 72(1)(d) through violation of the condition specified in the exemption Notification No.53/97 - Cus dated 03.06.1997 by M/s.Super Spinning Mills Ltd., who were holders of private bonded warehouse licence issued under Section 58 of the Customs Act, 1962 and were carrying out manufacturing and other operations in the private bonded warehouse, as per Section 65 of Customs Act 1962? 2. Whether wrong men .....

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arn falling under Chapter Heading 52.05 of the Schedule to both Central Excise Tariff Act, 1985 and Customs Tariff Act, 1975 and procure raw materials viz., cotton indigenously and also through imports. They were exporting cotton yarn as well as clearing under DTA sales in the domestic market. The assessee had imported cotton from various countries without payment of Customs Duty claiming exemption under Notification No.53/97 (Cus) dated 3.6.97 as amended for use in the manufacture of cotton yar .....

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uct by an Export Oriented Unit as per Sl.No.100 of Appendix 41 of Hand Book of Procedures, EXIM Policy 1997-02 vide Public Notice No.34(RE-01)/97-02 effective from 1.12.1999 in the following manner: S .No. Goods Manufactured Imported goods used Percentage of scrap or watste on imported goods 1 Combed cotton yarn below 40's cotton 25% 3. In terms of Notification No.53/97 dated 3.6.97 as amended that in case of imported cotton, permissible wastage is 25% when used in the manufacture of combed .....

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te in respect of the imported cotton. However, on scrutiny, the Department was of the view that the cotton waste generated in the Course of manufacture of combed cotton yarn out of the imported cotton, exceeded the prescribed norms on several occasions, which the importer did not declare to the Department; consequently, statements were recorded from the person concerned and a show cause notice was issued on 16.12.2003 in the following manner: "Therefore, M/s.Super Spinning Mills Ltd., D.Gud .....

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er Section 117 of the Customs Act, 1962 for contravening the provisions as detailed above and iii. interest at appropriate rate should not be recovered from them under Section 28 of the Customs Act, 1962. (emphasis supplied) 4. In response to the said notice, the assessee filed a reply denying the allegations made in the Show Cause Notice. After due process of law, the Adjudicating Authority adjudicated the matter and passed an order holding that there was no suppression by the assessee. After c .....

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that the demand is barred by limitation of time. I have perused the copies of communication between the Range Officer and SSML during the material period, which are referred below: i) SSML vide letter dated 02.02.2000 addressed to the Range Officer, submitted "Yearly return of Bond Account" for the Year 1999 furnishing the details of receipt and issue, wastage, and invisible loss for the imported materials for the period from 01.01.99 to 31.12.99. The Range Officer had signed on each s .....

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g 52.02 is exempt from whole of the duty. " Accordingly, the Adjudicating Authority passed the following order: "21. From the above correspondence that took place over a period of time, it is clear that the issue of waste generated was well within the knowledge of jurisdictional Central Excise Officers. Hence, it cannot be said that there was suppression of facts regarding cotton waste generated. Therefore, there is no case for invoking extended period of limitation. Hence, the demand .....

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he case and that the applicable provisions were those of Section 72(1) of the Customs Act, which did not specify any time limit. The Commissioner (Appeals) rejected the contention of the Department and held that Section 72 of the Customs Act was not applicable to the facts of the case and it was not open to the Department to change their stand after having invoked Section 28 of the Customs Act for demanding duty. The Commissioner (Appeals) further held that the Department had no basis to sustain .....

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has not been spelt out how the said Section would be applicable. Similarly in the Order in Original also the adjudication authority had only denied the benefit of notification 53/97-CUS for the reason that while manufacturing cotton yarn, excess waste has been generated in the use of imported raw materials in contravention of the notification in question and accordingly the adjudicating authority has confirmed the demand, though it has dropped it on the question of time limit under Section 28 o .....

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home consumption of exportation and the same are not duly accounted by the importer whereas this is a case where the department contends that imported raw materials which have been bonded correctly and which have been used in the manufacturing process correctly have resulted in excess generation of waste which have been cleared in DTA. Hence the situation contemplated under the provision 72(1)(d) is not relevant to the facts of the case. 4.5 In this case the goods/waste/scrap were neither bonded .....

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der and accordingly dropped the proceedings. In this connection it may be noted that the Department's contention that sec 28 of Cus. Act has been wrongly invoked and that cannot be relied upon is totally misconceived for the reason that there is an application of mind on part of the Officer who has invoked proviso to sec 28(1) of the Cus Act which envisages demand of duty for a period of 5 years in cases of various situations mentioned therein. After having invoked Section 28(1) without invo .....

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l in nature and in that situation quoting of wrong section or rule will be applicable and would not vitiate the proceedings. But in the instant case the situation is not the same. In Para 8 of the show cause notice there is a clear cut allegation regarding knowledge on the part of the respondents about the provisions of Exim policy about prescription of waste norms and a specific allegation to the extent that the respondents did not inform the department about the generation of such excess cotto .....

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issions made by the counsel. The SCN invoked Section 28 read with Section 72 of demanding duty of Customs from the respondents on a certain quantity of the imported raw material. It invoked the extended period of limitation under the proviso to Section 28(1) of the Act on the ground that the notice had deliberately suppressed the generation of excess cotton waste before the department. The entire drift of the SCN was in the direction of a demand of duty under the proviso to Section 28. The notic .....

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ion or exportation (or) are not duly accounted for to the satisfaction of the proper officer. For such a demand of duty, the ingredients of clause (d) of sub-section (1) of section 72 should be alleged and proved. This has not been done in the present case. As already observed, the tenor of the SCN is for demand of duty under the proviso to Section 28(1) of the Customs Act. Therefore, the claim of the appellant that Section 28 was erroneously mentioned in the SCN and that it was Section 72 which .....

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ed on the decision in the case of Collector of Central Excise, Calcutta V. Pradyumna Steel Ltd. reported in 1996 (82) ELT 441 (SC) and submits that in the said decision, the Supreme Court held as follows: It is settled that mere mention of a wrong provision of law when the power exercised is available even though under a different provision, is by itself not sufficient to invalidate the exercise of that power. Thus, there is a clear error apparent on the face of the Tribunal's order dated 23 .....

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demand duty was not in terms of Section 72 of Customs Act. The entire exercise of the Department was on the question of invoking the extended period of limitation. A passing reference to Section 72 will not cure the defect because the assessee or the importer was not put on notice in respect of the charge or demand for duty in terms of Section 72 of the Customs Act. 12. The decision relied on by the appellant does not apply to the facts of the case, as the case before the Supreme Court arose ou .....

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