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2016 (1) TMI 1060 - CESTAT NEW DELHI (LB)

2016 (1) TMI 1060 - CESTAT NEW DELHI (LB) - 2016 (343) E.L.T. 257 (Tri. - Del.) - 100% EOU - diversion of duty free material - Notification No.52/2003-Cus, dated 31.03.2003 - Whether non-accountal in statutory records but accountal in gate register and Form IV, etc. could be considered as due compliance for accountal of duty free receipts of goods and not liable to imposition of redemption fine and penalty - third member decision. - Held that:- As the entire Show Cause Notice is predicated u .....

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e not entered in the re-warehousing register as re-warehousing had not been completed is not unreasonable. However, it comes out that the goods were not only entered in the gate register as noted by the ld. Member (Technical) but also entered in the raw-material register. - In addition, the goods were actually duly found in the factory and it is not a case that there was any shortage noticed. It is also to be noted that these goods are imported only after a certificate authorising their imp .....

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(TECHNICAL) For the Petitioner : Shri Rupender Singh, Advocate For the Respondent : Shri M S Negi, SDR ORDER Per Archana Wadhwa (for the Bench): The appellant is a 100% EOU engaged in the manufacture of cotton yarn falling under heading 52.05 of the first schedule to the Central Excise Tariff Act, 1985. The appellant is also procuring duty free raw material from indigenous market as also importing the same, free of duty by availing the benefit of exemption notification No. 53/97-Cus dated 3.6.9 .....

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ing the containers in question. The receipt of the goods were recorded in gate register, stock register and appendix 18. 3. The appellants factory was visited by Central Excise officers on 5.7.03, who conducted various checks and verifications. The visiting officers entertained a view that stock of Greek raw cotton imported by the appellant free of duty was not duly entered in the statutory records, though they found that the same was entered in the gate register. As such, the officers plea that .....

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Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 read with section 12 of the Customs Act, 1962 and Chapter 22 para (iv) of general conditions of duty free import of Customs Manual of instructions. As such, the notice proposes to confiscate the seized goods under Rule 25 of Central Excise Rules, 2002 and to impose penalty on the appellant. The said Show cause notice was adjudicated by the original adjudicating authority confiscating the goods involving duty of & .....

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ve not observed and adhered to provisions of Rule 7(b) of Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. In terms of said Rule, the manufacturer obtaining benefits are required to inform the Revenue about receipt of the imported goods in his factory within two days of said receipt. The adjudicating authority has observed that inasmuch as the appellants have not fulfilled the said condition, as they have received the goods vide bill of entry .....

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llate authority has rejected the appellants plea that inasmuch as the goods were duly entered in the godown register and stock register, which are private records of the appellants and do not stand intimated to the Revenue in the list of records, the malafide of the appellant has to be upheld. 6. On the other hand, it is the appellants contention that goods in question were imported after issuance of annexure A by their jurisdictional Central Excise officer, who has issued the said annexure aft .....

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the provisions of Rule 7(b) of Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 do not apply in their case inasmuch as the imports stand made in terms of provisions of notification No. 52/2003-Cus dated 31.3.02 and the said notification nowhere obliges the appellant to follow the said Rule. As much as appellant was maintaining the appendix 18, as prescribed along with stock register and as duly complied with condition 3(b) of notification in q .....

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of notification No. 52/2003 with the due knowledge and permission of the Revenue. In this regard, we have seen Annexure A, duly issued by the Superintendent which stand issued to the appellants for import of 298770 Kgs of the raw cotton. The appellants have admittedly executed a bond for the same. As such, if the appellants have imported goods in terms of the annexure A issued by their jurisdictional Superintendent and have executed a bond for use of the same in their factory, the Revenue doubt .....

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he registers, how the appellants would have mis-utilised duty free import benefits, inasmuch as they were bound to show the utilization of the said raw materials which was admittedly received in their factory and was duly entered in all the above registers. We further note that lower authorities have not disputed the fact that goods were duly entered in their stock register, which is a form IV register. 9. We have seen a letter dated 1.4.02 submitted by the appellants to their Range Superintende .....

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rities have held the goods liable to confiscation and the appellants liable to penalty as violation of provisions of Rule 7(b) of Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. For better appreciation, we reproduce the said Rule as under: RULE 7. Manufacturer to give information regarding?[receipt of the imported goods and maintain records. - The manufacturer, obtaining benefit in these rules, shall, - (a) give information of the receipt of .....

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Commissioner of Central Excise.] We may also refer to Rule 2(1A) of the said Rules, which is as under:- These rules shall apply only in respect of such exemption notification which prescribes for the observance of these rules.] 11. As is seen from above, the said Rules of 1996 are applicable only in respect of said exemption notification which prescribes for the observance of these Rules. Admittedly, the imports in the present case stand made in terms of notification No. 52/2003-Cus dated 31.3.2 .....

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3.03. As such, the entire basis for the Revenues case in respect of violation of condition of7(b) of said Rules gets demolished. 12. In any case, we find that the appellants have admittedly maintained the separate accounts as required under Rule 7(b) and as such, cannot be held guilty of any malafide. 13. Further, the said notification No. 52/03 Cus prescribes a 100% EOU, to maintain proper accounts of receipt, storage and utilization of the goods. As already observed, the appellants have admit .....

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ey would not have first brought the goods to their factory and would not have entered the same in their gate register as also in their stock register. In the absence of any evidence to the contrary, and in view of our foregoing discussion, we find no reason to uphold the impugned orders confiscating the goods with an option to redeem the same or for imposition of penalties. Accordingly, the impugned order is set aside and appeal is allowed with consequential relief to the appellants. ORDER Per : .....

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dropped the proceedings. 17. I do not agree with the findings of the Member Judicial as per discussion in succeeding paras. For the sake of reference, facts described in the draft order are perused. 18. To appreciate the issues involved in the proceedings, it is necessary to recapitulate the facts of the case. It is observed that M/s Winsom Spinners were granted permission under the provisions of Rule 7(b) of Customs (Import of goods at concessional Rate) Rule, 1996 read with Section 12 of the .....

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05.07.2003. as per allegation of the Revenue, appellants have shown entry only in the Gate Register maintained with security staff which was not a prescribed Register. The authorised signatory of the party admitted the lapse of non accountal of the said raw material in the said register. On the basis of confessional statement, goods were seized and later adjudicated, where the goods of 298770 Kgs. of Greek Raw Cotton valued at ₹ 1,82,98,751/- involving duty of ₹ 21,05,409/- were conf .....

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.2003 could be dealt leniently and mere mention in the Security Register could be considered a due compliance of the prescribed conditions. 20. I have examined the Scheme of Grant of Exemption and Statutory requirement of procedures and due accountal in the prescribed records within two days of receipt within the factory. On the basis of facts prescribed above, it clearly came out that the goods were nor recorded in the prescribed register even after the gap of 7 days. While going through the Ru .....

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ount indicating the quantity and value of the goods imported, the quantity of the imported goods consumed for the intended purpose, the quantity remaining in the stock, bill of entry wise and shall produce the said account as and when required by the Assistant Commission of the Central Excise or Deputy Commissioner of Central Excise. 21. Further, Notification No. 52/03-Cus prescribes that a 100% EOU to maintain proper account of receipt and utilisation of the goods. Non-accountal in the required .....

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have been used, its connotation would have been shall only because it is the duty of the availer of the benefits of duty concession to comply with the condition and not have a liberal view of not maintaining prescribed record with proper timely entries and filing of intimation to the concerned authority in specified time schedule. It is established principle that if Govt. of India grants any benefit of exemption of duty subject to compliance of proper timely accountal that has to be followed st .....

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s below: [7. Manufacturer to give information regarding receipt of the imported goods and maintain records. The manufacturer, obtaining benefit in these rules, shall, - (a) give information of the receipt of the imported goods in his factory, within two days (excluding holidays, if any) of such receipt, to the Superintendent of Central Excise having jurisdiction over his factory; and (b) maintain a simple account indicating the quantity and value of goods imported, the quantity of imported goods .....

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Greek Raw Cotton valued at ₹ 1,82,98,751/- involving duty of ₹ 21,05,409/- allowed to be imported duty free reposing a great faith that the goods imported shall be duly accounted as per the Rules. Non accountal in prescribed registers but accountal in other registers can not be a substitute vindicating their intent to fully follow the prescribed Regulations. Once it is evident that appellant have not given the due intimation to the Department even in 7 days after receipt which was r .....

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es referred above will not be possible resulting in prejudice to the Revenues interest. In this regard, reference is made to the Supreme Court Judgment in the case of Commissioner of C. Excise, New Delhi Vs. Hari Chand Shri Gopal reported in 2010 (26) E.L.T. 3 (S.C.) where guidelines have been laid down in similar type of situation where follow up of chapter X procedure is stipulated when exemption of duty is granted under some specific notification in para 22, 23 and para 24 of the judgement E .....

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conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. In Novopan Indian Ltd. (supra), this Court held that a person, invoking an exception or exemption provisions, to relieve h .....

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be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification, i.e., by the plain terms of the exemption. 23. Of course, some of the provisions of an exemption notification may be directory in nature and some are of mandatory in nature. A distinction between provisions of statute which are of substantive character and were built in with certain specific objectives of policy, on the one hand, and those which are merely procedural and t .....

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iterally. An eligibility criteria, therefore, deserves a strict construction, although construction of a condition thereof may be given a liberal meaning if the same is directory in nature. Doctrine of substantial compliance and intended use : 24. The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably expected of it, but failed or faulted in some minor or inconsequent aspects which cannot .....

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the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means actual compliance in respect to the substance essential to every reasonable objective of the statute and the court should determine whether the statute has been followed sufficiently so as to carry out the intent of the s .....

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ent has been substantially complied with notwithstanding the non- compliance of directory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non-compliance for either unimportant and tangential requirements or requi .....

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irements are procedural or directory in that they are not of the essence of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance may not be sufficient, but actual compliance of those factors which are considered as essential. Annexure-A of Board circulars No. 66/2002-Cus dated 8/10/2002 refers to issue of registration certificate which authorises import of goo .....

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executed bond in Form B-17 prescribed for a 100% EOU for ₹ 10 crores with the appropriate surety and the said bond has been accepted by the competent authority 3. This registration authorised them to obtain/clear the following:- SR. Description Qty Chap No. Heading No of Cus Tariff 1. RAW COTTON 1373 Bales 52 5201.0 Gross wt. 301140 Kgs Net wt. 298770 Kgs. Against Invoice No. 101686 dated 21.05.2003 of MC FADDEN EUROPE CO SWITZERLAND at nil rate of duty under notification no. 53/97-Cus da .....

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ertificate is given. Board Circular No. 66/2002-Cus 8th October, 2002 Simplification of Certain Procedures Relating to Functioning of EOUs EPZ/ STP/ETHP/SEZ Units-Issue of Procurement Certificate and CT-3 Reg I am directed to invite your attention to the Boards Circular No. 84/2001-Cus dated 21st December, 2001 on the above subject. Vide This Circular, it was conveyed that CT-3 and procurement certificates to the EOUs and units in EPZ/STP/ETHP/SEZ except for those in textile and chemical sector .....

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clearance of import consignments and procurement of indigenous goods. 3. In other to mitigate the difficulties being faced by the EOUs in textiles and chemical sector, it has been decided that henceforth, the procurement certificates for clearance of import consignments would be issued to the EOUs and units in EPZ/SEZ in textile and chemical sector by Superintendent of Customs/Central Excise Further, CT-3 certificate to EOUs in textile and chemical sector would also be issued by the jurisdictio .....

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ion. After a decision has been taken by the Assistant Commissioner/Deputy Commissioner, the jurisdictional Range Officer would issue procurement certificates and CT-3 to the EOUs/EPZ/SEZ units in all cases, but would obtain post factor approval of the Assistant Commissioner/Deputy Commissioner in charge. 4. The Chief Commissioners and Commissioners may ensure that the various instructions issued by the Board from time to time for proper monitoring and checking the misuse of EOU/EPZ/STP/ETHP Sche .....

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egard. 7. Difficulties, if any, faced in implementation of the above changes may be brought to the notice of the Board at already date. 25. From the above references, it clearly comes out that procedural safe guards have been inbuilt so that though inputs are allowed to be received without payment of duty, but their subsequent movement receipt and proper accountal in a periodical schedule is must. A firm duty is cast on the person availing concession of duty and he can not be seen to ignoring su .....

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re found in factory only and attempt to remove goods was not brought on record, penalty of ₹ 5.50 lakhs (Rupees five lakhs and fifty thousand) will be sufficient under the provision of rule 25 of Central Excise Rules 2002. 27. Order-in-Original is partially modified as above. ORDER R.K. Singh. Member (Technical) The following Difference of Opinion has been referred to me:- Whether non-accountal in statutory records but accountal in gate register and Form IV, etc. could be considered as due .....

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facts of the case. 4. The appellant (an EOU) has imported 2,98,770 kgs. of greek raw cotton on the basis of Annexure A issued by the Superintendent of Customs and Excise in-charge. The goods were imported vide Bill of Entry dated 23.06.2003 and after their duty free clearance from Customs, they were transported to the appellants factory in several containers on different dates. The last container entry was on 29.06.2003. On 05.07.2003, when Central Excise officers visited the factory they found .....

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ecords meant for central excise purpose and did not intimate the receipt of the goods to the Central Excise Officer. The primary adjudicating authority as well as first appellate authority held that the appellant has not met the requirements as contained in Rule 7 of Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 as also condition 3(b) of the Notification No.3(b) of Notification No.52/2003-Cus. But the Show Cause Notice issued to the appella .....

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to the extent of reducing the penalty from ₹ 21,05,409/- to ₹ 5.5 lakhs. 5. Ld. Counsel for the appellant has contended that the entire case was based on the allegation that the appellant had not observed and adhere to provisions of Rule 7(b) of the said Rules, while as per Rule 2 (1A) of the said Rule, these Rules shall apply only in respect of such exemption Notification which prescribes for the observance of the said Rules. 6. Ld. Departmental Representative reiterated the stateme .....

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ired to be followed, the Notification makes a clear mention to that effect. In any case, in view of Rule 2(1A) of the said Rules and in view of the fact that Notification No.52/2003-Cus does not prescribe for the observance of the said Rules, the appellant was not required to follow the said Rules and therefore the question of the appellant violating Rule 7(b) thereof does not arise. As the entire Show Cause Notice is predicated upon the appellant having violated the said Rule 7(b), jurisprudent .....

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ber (Technical) that the goods were not entered in any register except gate register is on the face of it not factually correct. 9. Ld. Advocate for the appellant showed me a dated 01.04.2002 in terms of which the appellant had duly intimated the customs authorities about the maintenance of the register (among others) in which entries of all the impugned goods were made. He also showed me the Daily Cotton Bill, where also the entries were made. He also showed the gate register, where entries mad .....

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