TMI Blog2004 (1) TMI 694X X X X Extracts X X X X X X X X Extracts X X X X ..... s I, II and C, of the SCDN, have been wrongly availed, under proviso to Section 28(1) of Customs Act, 1962, r/w Sections, 12, 17, 68 and 72 of the said Act. (ii) I order that, interest should be charged at appropriate rate on the said amount of Customs duty as confirmed at Sr. No. (i) above under Section 28AB of the Customs Act, 1962. (iii) I impose penalty of ₹ 14,38,50,280/- (Rupees Fourteen crores Thirty-eight Lakhs Fifty thousand Two hundred Eighty only) on M/s. Hanil Era Textiles Ltd. under Section 114 of the Customs Act, 1962. (iv) I confirm C. Ex. duty amounting to ₹ 41,21,171/- (Rupees Forty-one lakhs Twenty-one thousand One hundred Seventy-one only) on the entire qty. of inputs viz. Furnace Oil HSD and Lubricating Oil on which exemption under Notification No. 1/95-C. Ex. has been wrongly availed, under proviso to Section 11A (I) of the Central Excise Act, 1944 r/w Section 3 of the Act and Rule 225 of Central Excise Rules, 1944. (v) I order that interest should be charged at appropriate rate, on the C. Ex. Duty as confirmed at Sr. No. (iv) above; under Section 11AB of Central Excise Act, 1944. (vi) I impose penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read with Section 12, 17, 68 or 72 of the said Act for the period August, 2000 to December, 2000. (ii) I confirm C. Ex. duty of ₹ 1,44,929/- (Rupees one lakhs forty-four thousand nine hundred twenty-nine only) as recoverable from the E.O.U. (M/s. Hanil Era Textiles Ltd.), on the indigenous Furnace Oil/H.S.D under the provisions of Section 11A of the C. Ex. Act, 1944 for the period Aug., 2000 to Dec., 2000. (iii) I confirm Customs duty of ₹ 8,29,943/- (Rupees eight lakhs twenty-nine thousand nine hundred forty-three only) as recoverable from the E.O.U. M/s. Hanil Era Textiles Ltd., on spare parts of the D.G. sets imported, under Section 28(1) of the Customs Act, 1962 read with Section 12, 17, 68 or 72 of the said Act. (iv) I order that interest is chargeable under Section 28AB of the Customs Act, 1962 read with Section 11AB of the Central Excise Act, 1944 on the delayed payment of duty as confirmed above, for the relevant period. (v) I impose penalty of ₹ 87,48,275/- (Rupees eighty-seven lakhs forty-eight thousand two hundred seventy-five only) on M/s. Hanil Era Textiles Ltd., under Section 114 of the Customs Act, 1962 read wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had also executed B-16 and B-17 bonds with the jurisdictional Assistant Commissioner. The permitted spindle capacity in the factory was 85000 spindles. They proposed to expand their capacity by further 25000 spindles in 1993 and accordingly, obtained permission from Secretariat for Industrial Approvals (SIA) on 31-12-93. They had an existing DG Set for generation of electricity. The need for a captive power plant was felt by the Textile Mills and hence, they applied on 11-10-1993 for the import of two sets of 6 MW Captive Power Plant and necessary permission was accorded for their import, subject to the condition of maintaining value addition of 38.22% as per formula in force prior to 1-4-1993. Accordingly, they imported two DG sets of 6.5 MW each, for captive generation of electricity, for the purpose of manufacture of various types of yarns. The textile plant started production in 1994 and DG sets were commissioned and put to use in May - June, 1997 and the DG sets were used exclusively for captive requirement of power of the unit until July, 1998. However, due to circumstances such as fire in the plant on 24-12-1994 and thereafter labour strike in 1995 and 1997-98, the textile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and Central Excise Authorities. (d) That the appellants had not maintained proper account of consumption of Furnace Oil, HSD and Lubricating Oil. (e) That they had suppressed the fact of sale of electricity in DTA in the Annual Report for 1998-99. (f) That they had wrongly contended that the excess generation of electricity was due to higher connected load and would have been wasted, had it not been utilised through sale. (g) That the appellants had forged documents, for the purpose of showing that the departmental officers had been informed about sale of electricity and hence, suppressed/mis-stated the fact of sale of surplus electricity. (h) That they had arranged for a wrong and fabricated Chartered Engineer s Certificate, in respect of Furnace Oil consumption on different loads of DG sets. 5. On the basis of the above, a show cause notice dt. 6-7-2001 was issued to M/s. Hanil Era Textiles Ltd. proposing recovery of customs duty of ₹ 14,38,50,280/- together with interest, by denial of the benefit of exemption under Notification Nos. 13/81-Cus. and 53/97-Cus. to capital goods and inputs (DG sets and spare parts thereof a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to as the said Board), from the whole of duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 and the additional duty, if any, leviable thereon under section 3 of the said Customs Tariff Act subject to the following conditions, namely :- (1) The imports, clearance, export, transfer and usage of the goods and goods manufactured therefrom and the net foreign exchange earning as a percentage of export shall be subject to the conditions of the Export and Import Policy - 1st April, 1997 to 31st March, 2002 notified by the Government of India under the Ministry of Commerce Notification No. 1/97, dated the 31st March, 1997 (hereafter referred to as the said Export and Import Policy). (2) The importer has been granted necessary licence for the import of the goods for the said purpose. (3) The importer carries out the manufacture, production, packaging or job work or service in Customs bond and subject to such other conditions as may be specified by the Commissioner of Customs in this behalf. (4) Importer exports out of India 100% or such other percentage, as may be fixed by the said Board, of articles manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtation into India are used for the purpose of manufacture of articles within hundred per cent Export Oriented Unit and such articles (including rejects, waste and scrap material arising in the course of manufacture of such articles) even if not exported out of India, are allowed to be sold in India, in accordance with the Export and Import Policy, on payment of duty of excise leviable thereon under section 3 of the Central Excise Act, 1944 (1 of 1944) or where such articles (including rejects, waste and scrap material) are not excisable, customs duty equal in amount to that leviable on the inputs obtained under this equal notification and used for the purpose of manufacture of such articles, which would have been paid, but for the exemption under this notification, shall be payable at the time of clearance of such articles; . 10. The relevant portion of Notification No. 1/95 is reproduced hereunder : Exemption to specified goods meant for manufacture and packaging of articles in 100% EOU or manufacture or development of electronic hardware and software in EHTP or STP. - In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excises and Salt Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jects, waste, scrap and remnants arising out of such production, manufacture, processing or packaging of such articles) even if not exported out of India, are allowed to be cleared outside the user industry under and in accordance with the Export-Import Policy and subject to such other limitations and conditions as may be specified in this behalf by the said Board or the said Committee, as the case may be, on payment of appropriate duty of excise : Provided that goods which have been repaired, reconditioned or re-engineered shall not be allowed to be cleared outside the user industry. 11. We find that the Commissioner s order is inter alia based upon the following findings :- (a) that the appellants planned and purchased much higher capacity of DG sets as compared to their actual consumption requirements after obtaining permission of the Government for the sale. (b) That 68% of the total generated electricity was sold during the period August, 1998 to November, 1999; (c) That contract for purchase of DG sets was made in the year 1992 even before they obtained permission dated 31-12-93 from SIA; (d) That immediately after commissioning, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supdt. and Assistant Commissioner and letter dated 1-12-1999 to Development Commissioner, that they are selling surplus electricity which would otherwise be wasted. (l) That they arranged for obtaining a wrong, fabricated and manipulated Chartered Engineer s Certificate, in respect of Furnace Oil consumption on different loads of the D.G. Sets and submitted the same to give wrong consumption figures and to match their claim regarding Daily Statement (Power Plant). They intentionally and wrongly submitted about use of duty paid Furnace Oil without actually clarifying, that they meant duty free indigenous Furnace Oil. (m) That the ratio of CEGAT judgment in the case of Indian Charge Chrome Ltd. [2001 (138) E.L.T. 609 (T) = 2001 (46) RLT 828], is not strictly applicable to the present case, as in that case surplus power generated was transmitted to the grid for pooling, while in the present case generation of excess power was pre-planned, for selling into DTA. (n) That clearance of electricity into DTA was without obtaining permission from Asstt. Commissioner of Customs and C. Ex. (o) That the investigations have brought on record, that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the sale of electricity to DTA units and proposing recovery of duty, which was confirmed by the Commissioner. The assessee s appeal to the Tribunal was allowed, holding inter alia that there was no restrictive clause in Notification No. 13/81-Cus. that imported goods should be used solely or exclusively for the purpose of manufacture of goods for export and therefore there is no violation of the conditions of the Notification and hence sale of surplus power into DTA does not disentitle the appellants from the benefit of exemption under the notification. The Tribunal relied upon various judgments and notifications interpreting the expression only , exclusively , entirely etc. as also the clarification in the Commerce Ministry, letter dated 12-10-1999 and 16-11-1999. The relevant portion of the Tribunal s order is reproduced below :- 2.1 M/s. Indian Charge Chrome Ltd. (hereinafter referred to as ICCL) and M/s. Indian Metals Ferro Alloys Ltd. (hereinafter referred to as IMFA) are two associated companies engaged in the manufacture of Ferro Alloys in two of their Units operating as DPA Units. As per the facts on record, the appellants set up a 100% Export Oriented Unit (E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted. But their objection seems to be that the surplus power so generated in the Captive Power Plant besides catering to the needs of the afore-mentioned E.O.Us., has also been used by Orissa State Electricity Board for consumption/distribution in domestic tariff area, thus violating the condition of the Notification in question. On the above basis, show cause notices were issued to the various appellants which culminated into the impugned Order passed by the Commissioner. 3.1 We find from the impugned Order that no specific condition of Notification No. 13/81-Cus. has been referred to by the adjudicating authority, which according to him, has been violated. The entire case of the Revenue is based upon only one premise that the duty-free importation was allowed only for use in the exported products and any use towards the domestic tariff area has violated that condition thus making the appellants ineligible for the benefit of the Notification. For better appreciation of the Revenue s case, we reproduce below the relevant paragraph of the Commissioner s Order :- . 3.2 Now, the question required to be decided is as to whether by selling the surplus power generated by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts have referred to a number of other similar notifications, being Notification No. 173/79-Cus., dated 7-8-79, Notification No. 51/96-Cus., dated 23-7-96 and Notification No. 39/96-Cus., dated 23-7-96 - wherein the word, exclusively , has been used in contradistinction to the Notification involved in the present case. We also find that the Hon ble Calcutta High Court in the case of Nayak Associates v. U.O.I, reported in 1991 (55) E.L.T. 189, after taking into account the various precedent decisions, has held that the benefit of exemption Notification No. 70/76 granting exemption to Mill Board could not be denied on the ground that the same has been manufactured out of mixed waste paper and jute stalk and paddy straw along with caustic soda on the ground that the Notification No. 70/76 did not use the expression - only or exclusively or entirely . By applying the ratio of the above decisions to the facts of the instant case and in view of the admitted use of power in the manufacture of the exported product, we are of the view that the use of surplus power in the domestic tariff area will not amount to contravention of the provisions of Notification No. 13/81-Cus. for arriv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of V.M. Salgaocar Bros. P. Ltd. v. Commissioner of Income-tax [2000 (38) RLT 619 (S.C.)], Kunhayammed v. State of Kerala [2001 (129) E.L.T. 11 (S.C.)], and the Tribunal decision in the case of Franco Italian Co. Pvt. Ltd. v. Commissioner of C. Ex., Mumbai-II [2000 (120) E.L.T. 792 (Tribunal-LB)] and S. Kumar s Ltd. v. Commissioner of Central Excise, Indore [2003 (153) E.L.T. 217 (Tri.-LB)]. 15. Ld. Counsel for the Revenue urged us to hold that the ICCL decision does not cover the issue in dispute, in the light of the judgment of the Supreme Court in National Thermal Power Corporation Ltd. v. State of M.P. [2002 (5) Supreme Court Cases 203]. However we note that the NTPC case arose under the Sales Tax Act and the issue in dispute was whether electricity has immovable property on goods, and whether Sales Tax is payable on inter-State Sale of Electricity generated by NTPC in Hyderabad and supplied to State Electricity Board of Karnataka and Kerala, while the later ICCL order of the Supreme Court, although of a Division Bench is directly on the issue in dispute in the present case, namely interpretation of Notification No. 13/81 (predecessor of Notification No. 53/97-Cus.) and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertificate has been discountenanced by the Commissioner who has held it to be a procured document) which has not been established to be false or incorrect. We also note that, at the time of negotiating purchase of DG Sets with the overseas supplier in 1992, making application to the Board of Approval/Secretariat of Industrial Approval and grant of permission by SIA in 1993 and import of DG sets in February, 1995, there was no provision in law for sale of electricity, and it was for the first time in December, 1995 that the Government of Maharashtra introduced a Policy permitting sale of electricity, and hence the appellants could not have pre-planned to import higher capacity D.G. Sets for generation of excess electricity and sale thereof in DTA. 17. Further, Para 7 of Notification No. 53/97 provides that where the articles manufactured within a 100% EOU are not excisable, then customs duty is payable on imported goods used for the manufacture of such articles in an amount equal to customs duty leviable on such articles as if imported as such. W.e.f. 18-5-2001 condition 7 provided for payment of customs duty equal in amount to that leviable on the inputs obtained under the notif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside the impugned order and allow the appeals. Sd/- (Jyoti Balasundaram) Member (Judicial) 21. [Contra per : C. Satapathy, Member (T)]. - I have carefully gone through the order recorded above by my learned Sister. The dispute relates to duty demand on D.G. Sets, Spare parts of D.G. Sets and consumables, such as Furnace oil/Lubricating oil/HSD obtained duty free by the appellant E.O.U. In view of the earlier decision of the Tribunal in the case of I.C.C.L. (supra) against which the civil appeal has been dismissed by the Apex Court on merits, I am of the opinion that no duty is demandable in respect of D.G. Sets and the Spare parts used in the D.G. Sets, which have been used for generation of power for export production, though only partly. This is, however, subject to the required fulfilment of usual conditions relating to the achievement of N.F.E.P. and export performance through value addition. 22. As regards the impugned consumables obtained duty free and used in generation of power which has not been used in export production but sold outside, I find that the learned Counsel for Revenue has made out a clear case on the basis of the judgment of the Constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been brought out in the order of a ld. Member (Judicial) and are not being repeated. 26. After considering the detailed order prepared by ld. Member (Judicial) and ld. Member (Technical) and considering the submissions made by the ld. Senior Counsel for the Revenue and the ld. Counsel for the appellants, it is found : (a) It is an admitted and accepted fact, as it also appears from the following para of the impugned order where the Commissioner has come to a conclusion : . I find that the captive power plant imported by the EOU is still lying in bond and being used for generation of power which is used for the manufacture of exportable articles. Moreover, there is not dispute that EOU has failed to discharge the export obligations assigned to them by the Development Commissioner under these circumstances, I find that proposal in the impugned SCN to cancel the licence is not justified. Therefore, I am not inclined to accept the said proposal. and the perusal of the SCN, leads to a conclusion that Exports required by an 100% EOU, as the appellants are and the same not being met, was never an issue. Therefore an order proposing a remand for verifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be built at this stage. The question of partial use, if any, of the DG set and spares would be reading into the Notification words and stipulations like use exclusively for Export production . That cannot be done. This aspect has been dealt with by ld. Member (Judicial) in the order relying upon binding decisions mentioned therein and has to be approved. The eligibility of notification to DG Sets and Spares thereof is to be upheld in the facts of the case. (d) The order of ld. Member (Technical) appears not to have considered the application of the decision and its acceptance on merits by the Supreme Court, i.e. the Tribunal decision of Indian Charge Chrome Ltd. [2001 (136) E.L.T. 601]. The reliance on the Constitution Bench in the case of the A.P. v. N.T.P.C. - [2002 (5) SCC 203] by ld. Member (Technical) as follows : 2. As regards the impugned consumables obtained duty free and used in generation of power which has not been used in export production but sold outside, I find that the learned Counsel for Revenue has made out a clear case on the basis of the judgment of the Constitution Bench of the Apex Court in the case of the A.P. v. N.T.P.C. - 2002 (5) SCC 203 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fact that the DG sets have given best efficiency of about 90 to 95% load factor. Hence, if the surplus power was not sold and the DG sets were run at load of 55% to 60% the fuel consumption per unit would have been higher. Moreover, the utilities i.e. water pump, lube oil, circulation pump, centrifuge, cooling tower, etc. would in any case had to run whether the DG sets run at 60% or 95%. Further, if the excess power had not been wheeled to MSEB grid, the yarn plant load would have fluctuated very frequently, which again would have increased the power variation, fuel consumption at one hand and would have affected the life of the power plant. Hence, due to above factors, the appellants had used only marginal fuel extra for generating this surplus power which was sold to M/s. Bombay Dyeing. The lube oil and spare consumption depends on number of hours the DG sets run and not on how much load. Hence, in any event whether the plant run at lower or higher capacity, the lube oil and spares consumption would be the same. The ld. Commissioner failed to appreciated the above facts and has passed the impugned order confirming duty on the lube oil and spare parts also. The above facts can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mported duty free in terms of the conditions of the LOP, the licence, the LUT, the B-17 Bond, the conditions of the Notification No. 13/81-Cus., dated 9-2-1981 amended and 53/97-Cus., dated 3-6-1997 only for the purposes of production of Yarn (i.e. for production of electricity to the extent of required and utitlised for the production of Yarn). The EOU had also imported duty free spare parts and misused the same in the 3 DG sets (2 Wartsila make and 1 SKODA make). By this it is clear that the DG sets and the spare parts and specific imported quantity of Furnace oil/Lubricating oil all were mis-utilised intentionally in violations of the conditions of the said Notification. Similarly in respect of Furnace oil HSD indigenously procured duty free, in terms of Notification No. 1/95-C. Ex., dated 4-1-1995 part of the quantity were mis-utilised intentionally in violations of the various conditions as above, along with the similar conditions of Notification No. 1/95 C. Ex., dated 4-1-1995. This finding of Commissioner, therefore, in light of the submissions of the appellants could be upheld, only if it was based on technical data and material. The findings, as extracted herein, exhib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s ever took place by the working of the DG Sets or/and that DG Sets and Spares thereof were only partially used. These findings confirm the reliance to be placed on the case of M/s. Indian Charge Chrome Ltd. [2001 (136) E.L.T. 601] in the facts of this case. (f) The findings as arrived at by the ld. Member (Judicial) as regards the interpretation of the Notifications in this case and reliance placed on the Tribunal s decision in the case of Indian Charge Chrome Ltd. [2001 (138) E.L.T. 609] which has been upheld on merits by the Hon ble Supreme Court and following the same it has to be held that the eligibility of the exemption Notification is covered in favour of the assessee even in this case. (g) The plea of the appellants that electricity manufactured in the EOU is not covered under the Central Excise Tariff is well founded. When the goods are not covered under the Central Excise Tariff there can be no levy on the removal of such goods from the EOU. Especially when it is found that there is no contravention of the Notification under which the consumables were received. No excess consumables are found to have been utilised in this case to call for denial of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
