TMI Blog2024 (4) TMI 1011X X X X Extracts X X X X X X X X Extracts X X X X ..... ap / remnants by units not entitled to DTA sale, or sales beyond DTA sale entitlement, shall be on payment of full duties. Scrap / waste / remnants may also be exported. In the present case, it is an admitted fact that the goods were manufactured and cleared but were found short either while loading or transportation or for various other reasons which have not been explained or have any norms in the industry that envisages such shortages/losses etc; the fact that they have approached the Development Commissioner/DGFT substantiates the Revenue s argument that there was no concept of wastages or losses allowed to the Appellant. Since it is an admitted fact that neither the Development Commissioner nor the DGFT have fixed any norms in spite of their repeated representations, the question of allowing these wastages as handling losses is not within the purview of the Department. Therefore, the appellant is liable to pay duty on these wastages/losses. The eligibility of concessional duty is available, provided the DTA clearances are within 50% of overall ceiling of the FOB value of exports. The appellant claims that their clearances are within this 50% limit and if so, they are eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of exports. Such sales of scrap/waste/remnants shall not be subject to achievement of positive NFE. Notification No.23/2003 stipulates exemption to DTA clearances of specified goods produced in EOU/EHTP/STP in exercise of the powers conferred by sub-section (1) of Section 5A of the Central Excise Act, 1944 the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts excisable goods of the description specified in the column (3) of the table below, and falling within the chapter heading, sub heading, specified in corresponding entry in column (2) of the said table, produced or manufactured in an EOU or EHTP or STP to any other place in India in accordance with the Foreign Trade Policy and subject to the relevant conditions specified in the annexure to this notification and refer to the corresponding entry in column (5) of the said table from so much of the duty of excise leviable there in under Section 3 of Central Excise Act 1944 as specified in the corresponding entry in column (4) of the said table. As per the norms discussed above, the appellant is to clear scrap/waste/remnants, however, it was found that in the guise of handling l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the department or the appellant, nor there was any shortage of iron ore in the EOU at any given point of time. It is an admitted fact that the entire quantity of iron ore removed from the EOU has been exported. It is also submitted that there was no DTA sale during 2006 to 2007 and 2007 to 2008 and a very limited DTA sale from 2008 to 2011. The closing stock of iron ore as on 31.3.2010 was 4,01,295 MT and the same is reflected in the ER return for the month of March 2010. During September/October 2010 verification stock of iron ore at the railway yards and the load ports at Goa Kakinada, Chennai, Vizag, Belekeri and Krishnapatnam was carried out and it was found that there was a shortage of 61,513.30 MT and 1,59,171.68 MT MT tons and these shortages were incorporated in the Annual Report for the year 2010-2011 and the report reflects the shortage of 1,60,867 MT of iron ore fines and 59,818 MT of iron ore lumps. It is submitted that this shortage is only on account of accumulated shortages over many years due to handling, loading, unloading, multimodal transportations, weathering, different methods of weighments etc.,; and were consolidated in the Annual Report for 2010-2011. Since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Commissioner. It is stated that in order to verify the claim of handling loss to such a huge extent, clearance/export documents were verified and the quantity shown in invoices, ARE-1s, shipping Bills, Bills of Lading for relevant period, it was found that the entire quantity of iron ore removed from the manufacturing unit was exported and there was no handling loss whatsoever and they have realized the sale proceeds on the entire quantity of iron ore cleared for export from the buyer. It was also noticed that no provisions were made in the Balance Sheets for having accumulated such handling losses in any of the years. But the appellant confirms that the said quantity has not been exported and the shortage was noticed at railway yards/ports and not at factory and therefore, the said quantity of iron ore has been cleared in Domestic Tariff Area without payment of Central Excise duty and without raising any documents and without following any Central Excise procedures, thereby contravening the provisions of the Foreign Trade Policy and the Notification No.23/2003 dated 31.03.2003. 3.1 It is further submitted that it is an undisputed fact that the appellant themselves have noticed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the appellant s claim that the show-cause notice and the Order-in-Original itself admits and confirms that the entire quantity of iron ore removed from the EOU has been exported and the wastage or shortage of iron ore to the extent of 2,20,685 MT cannot be attributed to the Iron ore cleared by the EOU from October 2006. The fact that what is cleared from the factory is exported goes to prove that there can be no shortage with reference to the export consignments. Once shortage is noticed, it is for the appellant to explain the said shortages with valid evidences, which has not been elucidated by them and the claim that the shortages is for several years from 2002 onwards, when they were not registered as EOU, there are no evidences as no such shortages were reported in their financial records. The appellant s claim that the DGFT has accepted the reasons for the wastage or shortage of the Iron ore and had directed the Development Commissioner, Bangalore to apply for wastage norms to the Norms Committee in the Directorate but no orders/ instructions of the DGFT or Ministry of commerce accepting their request and fixing norms of wastage/shortage is placed on record till date. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said goods have suffered Value Added Tax (VAT). Accordingly, the demand made as per the quantification made in the show-cause notice is liable to be upheld as the appellants have failed to comply with the conditions stipulated in the relevant conditional Notifications. 3.7 With regard to the limitation issue, it is submitted that the shortages were detected by the Department on 25.08.2011 and undertook investigation in the said case. After conclusion of the investigation, the show-cause notice was issued on 29.01.2014. Since the appellant had failed to prove that the shortages were for many years including the years before 2011, the demand notice issued on 29.01.2014 for the date of cause of action i.e., 25.08.2011 is well within the larger period of five years as they had failed to intimate the department of the said shortage at any time till it was noticed on 25.08.2011. Hence the said demand for the period therein is covered under the extended clause as the fact of shortage was suppressed and not declared with intent to evade payment of duty. The decision in the case of Mehta Co.: 2011 (264) ELT 481 [S.C.] is applicable in this case. Similarly, it has been held in Neminath Fabr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is exported since these losses supposedly are between the factory to the loading point of export. The details of production and sales are given in tabulated form. Details of production and sales (Qty. in MT) Sl. No. Particulars 2006-07 2007-08 2008-09 2009-10 2010-11 1 Total Qty. Iron manufactured-lumps 217750 38600 440530 175000 543000 2 Total Qty. iron manufactured fines 942924 1070600 856830 661000 586000 3 Total production 1160674 1456600 1308936 836000 1129000 4 Total Qty. Iron ore exported lumps 226631 319912 383770 134940 33000 5 Total Qty. Iron ore exported fines 818400 808216 1011975 756333 283593 6 Total Export Sales 1045031 1128128 1395745 900273 316593 7 DTA sales lumps 0 0 15716 155985 228756 8 DTA sales fines 0 0 7617 11413 196862 9 Total DTA sales 0 0 23333 167398 425618 10 Total sales 1045031 1128128 1419078 1067671 742211 11 Shortage at Railway Yards Ports - - - - 220685 12 Closing Stock 414636 743108 632966 401295 567399 The appellants have admitted vide the above Table that these are wastages or losses and also shown in their books of accounts in their Annual Report 2010-2011. 4.2 The question is whether they are liable to pay duty on these wastages ? The relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of full duties. Scrap / waste / remnants may also be exported. (f) There shall be no duties / taxes on scrap / waste / remnants, in case same are destroyed with permission of Customs authorities. (g) By-products included in LoP may also be sold in DTA subject to achievement of positive NFE, on payment of applicable duties, within the overall entitlement of sub-para 6.8(a). Sale of by-products by units not entitled to DTA sales, or beyond entitlements of sub para 6.8 (a), shall also be permissible on payment of full duties. (h) EOU / EHTP / STP / BTP units may sell finished products, except pepper and pepper products and marble, which are freely importable under FTP in DTA, under intimation to DC, against payment of full duties, provided they have achieved positive NFE. An amount equal to Anti-Dumping duty under 74 section 9A of the Customs Tariff Act, 1975 leviable at the time of import, shall be payable on the goods used for the purpose of manufacture or processing of the goods cleared into DTA from the unit. (j) In case of DTA sale of goods manufactured by EOU/ EHTP / STP / BTP, where basic duty and CVD is nil, such goods may be considered as non-excisable for payment of duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional duty. The computation of duty required to be paid would be as follows : Basic Customs duty = Rs. 25/- Value for the purpose of special additional duty if leviable = Rs. 100/- + Rs. 25/- = Rs. 125/- special additional duty if leviable= 4% of Rs. 125/-= Rs. 5.0/- Total duty payable but for this exemption= Rs. 25/-+ Rs. 5.00/-= Rs. 30.00/- Thirty per cent. of the aggregates of the duties of customs= 30% of Rs. 30.00/-= 9.00/- Duty required to be paid in accordance with this notification = Rs. 9.00/- 4 ANNEXURE Sr. No. Conditions 4. If,- (i) the goods are produced or manufactured wholly from the raw materials produced or manufactured in India; (ii) such finished goods are cleared into Domestic Tariff Area in accordance with sub-paragraphs (a), (b), (d) and (h) of Paragraph 6.8 of the Export and Import Policy; and (iii) the goods, if manufactured and cleared by the unit other than export oriented undertaking are wholly exempt from duties of Excise or are chargeable to NIL rate of duty. 3. This Notification shall come into force on the 1st day of April, 2003. Explanation.- For the purposes of this notification,- (i) aggregates duty means aggregate of ,- (i) the duty of excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, shall be on payment of full duties. Scrap / waste / remnants may also be exported. 4.5 The Case laws relied upon by the appellant are on different set of facts altogether. The decisions are either on stock taking errors or based on certain assumptions or merely on calculation errors. In the present case, it is an admitted fact that the goods were manufactured and cleared but were found short either while loading or transportation or for various other reasons which have not been explained or have any norms in the industry that envisages such shortages/losses etc; the fact that they have approached the Development Commissioner/DGFT substantiates the Revenue s argument that there was no concept of wastages or losses allowed to the Appellant. 4.6 The Hand Book of Procedures at Para 6 States: The 6.06 Conditions of Import of goods by EOU / EHTP / STP / BTP units shall be subject to following conditions: (a) Goods shall be imported into EOU / EHTP / STP / BTP premises. However, agriculture and allied sectors and granite sector units in EOU may supply / transfer capital goods and inputs in farm / fields / quarries with prior intimation to jurisdictional Customs authorities, provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Committee in DGFT, will decide on a case-to-case basis. At para (e), it is categorically mentioned that entire production and clearance in an EOU is based on SION norms and these Norms are specified by the DGFT. Also, 2% wastages could be allowed, if SION norms are not specified and the norms have to be finally approved by the Norms Committee in DGFT. Since it is an admitted fact that neither the Development Commissioner nor the DGFT have fixed any norms in spite of their repeated representations, the question of allowing these wastages as handling losses is not within the purview of the Department. Therefore, the appellant is liable to pay duty on these wastages/losses. The eligibility of concessional duty is available, provided the DTA clearances are within 50% of overall ceiling of the FOB value of exports. The appellant claims that their clearances are within this 50% limit and if so, they are eligible for the benefit of the concessional rate of duty. Notification No.4/2006 dated 01.03.2006 is not relevant for 100% EOU. 4.7 The Supreme Court of India in the case of Atul Commodities Pvt. Ltd. Versus Commissioner of Customs, Cochin 2009 (235) E.L.T. 385 (S.C.) on 24-2-2009 has he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly the department came to know that the work order was to carry out the job for furniture also. A bare perusal of the records shows that the aforesaid reply was sent by the respondent on receipt of a letter issued by the Commissioner of Central Excise on 27-2-1997. If the period of limitation of five years is computed from the aforesaid date, the show cause notice having been issued on 15-5-2000, the demand made was clearly within the period of limitation as prescribed, which is five years. 4.10 The same has been relied upon by this Tribunal in the case of - Alumayer India Pvt. Ltd. Versus Commr. of Cus. C. EX., Hyderabad-IV 2012 (278) E.L.T. 123 (Tri. - Bang.) where it was observed as follows: 17 . As regards the limitation not being governed by the fact of the Department coming to know of the transaction involving evasion by the assessee, the ratio of the Neminath Fabrics case cited by the learned JCDR is apposite and relevant. In the said judgment, the Hon ble High Court of Gujarat read the ratio of Nizam Sugar Factory (supra) and held that the date of knowledge of the offending transaction/evasion by the Department was not relevant to reckon the limitation in terms of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X
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