2004 (96) ECC 518 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-NB(C)

Shri V.K. Agrawal, Member (T) and Shri P.G. Chacko, Member (J)

Pawan Foam Products (P) Ltd.

Versus

CC, New Delhi

C/ROA 201/03, C/A Nos. 428-29/97-NB(C)

[Arising out of Order-in-Original No. KKB/ICD/TKD/11/97 dated 16.9.97 passed by the Commissioner of Customs, New Delhi]

Final Order No. A/213-214/04-NB-C & M/34/04-NB-C, dt. 24.2.2004, Certified on 16.3.2004

Limitation

Extended period of Limitation -- Import of ten consignments of Toluene Di-Isocyanate as a raw material for the manufacture of thermoplastic polyurethane -- Appellant made out consistent case that they did not conceal anything from the Central Excise Authorities with intent to evade duty -- Crucial evidence of the Range Superintendent's letter dt. 5.5.97 has not been rebutted in the impugned order -- Record showing that the appellants had disclosed relevant information to the Department during and soon after, the period of imports and such information was enough for vigilant authorities of the Department to check the veracity of the facts presented by the party and to proceed against them, if found necessary, within the normal period of limitation -- Duty demand is time barred. -- Customs Act, -- Sections 28, 114-A, 112, 111.

PRESENT :

Shri Bipin Garg, Adv. for the appellant.

Shri P.M. Rao, DR for the respondent.

Case Cited :

Fertilizer Corporation of India Ltd., 1985 (21) ELT 500........................................... [Para 3]

Per : P.G. Chacko

The miscellaneous application seeks to restore the two appeals which were dismissed for non-prosecution as per Final Order No. A/533-34/03-NB(C) dated 1.10.2003. It is stated that the Counsel for the appellants could not attend the hearing of the case on 1.10.2003 on account of his illness and that his non-appearance on that day was not intentional. After hearing both sides, we are inclined to accept the above explanation. Accordingly, we recall the Final Order dated 1.10.2003 and restore the appeals to the respective original numbers. We also take up the appeals for final disposal.

2. The appellants imported ten consignments of Toluene Di-Isocyanate (TDI, for short) during the period 28.4.94 to 6.3.95 as raw material for the manufacture of Thermoplastic Polyurethane (TPU, for short). The consignments were cleared against payment of customs duty at the concession rate of 20% ad valorem in terms of Notification No. 36/94-Cus dated 1.3.94 which exempted Isocyanates of Chapter 28 of the First Schedule to the Customs Tariff Act, 1975, imported into India for the purpose of manufacture of TPU and articles thereof, from so much of the duty of customs leviable thereon as was in excess of the amount calculated at the rate of 20% ad valorem and also from the whole of the additional duty of customs leviable under Section 3 of the Customs Tariff Act. Later on, the Department conducted investigations in respect of the clearance of the above goods, the results whereof suggested that the imported raw material had not been used in the manufacture of TPU and/or articles thereof and the benefit of exemption under the Notification had been wrongly availed. It further appeared that the appellants had suppressed facts from the department with intention to evade payment of duties of customs leviable at normal rates on the imported goods. On this basis, a show-cause notice dated 9.1.97 was issued to the appellants raising a demand of duty of over Rs. 92 lakhs on the appellant-company under Section 28 of the Customs Act and proposing to impose penalty on the company under Section 114-A of the Act. The show-cause notice, which invoked the extended period of limitation under the proviso to Section 28(1) ibid on the ground of wilful suppression of facts, also proposed to impose a penalty on Shri Amit Kaka, Director of the Company, under Section 112(a) of the Act for his alleged omissions and commissions which allegedly rendered the goods liable for confiscation under Section 111 of the Act. The allegations were denied and the demand of duty and proposal to impose penalty were contested. The Commissioner of Customs, who adjudicated the dispute, confirmed the demand of duty against the company and imposed on them a penalty of equal amount. He also imposed a penalty of Rs. 1 lakh on Shri Amit Kaka. The appeals filed by the company and its Director are against the order of the Commissioner.

3. Heard both the sides. The Counsel for the appellants submitted that they had planned to start manufacture of TPU and articles thereof only in 1993; that they got the Industries Certificate amended for this purpose w.e.f. 25.9.93; that they set up a small scale industrial (SSI) unit for the purpose and started importing TDI from April, 1994 for the purpose of manufacture of TPU and articles thereof; that they failed to manufacture products of commercial grade out of the imported raw material due to technical flaws and faults and the entire raw material became waste; that this fact was intimated to the Central Excise Range officer through letter dated 7.4.95; that, on account of the losses, the appellants closed down the unit and intimated the same to the department through letter dated 26.6.95; that their factory was engulfed in a devastating fire on 24.4.96 in which the entire plant, stock of unused raw material and unmarketable products, records of the factory etc. were reduced to ashes;

that a FIR on the incident was promptly filed with the police; that due intimation of the incident was also given to other Governmental agencies; that, in his statements dated 19.8.96 and 23.9.96, Shri Amit Kaka had consistently explained all these facts to the departmental officers; that, in their reply to the show-cause notice, the appellants had specifically pleaded that there was no suppression of facts on their part and, therefore, no demand of duty could be raised on them by revoking the larger period of limitation under the proviso to Section 28(1) of the Customs Act; that this plea was ignored by the Commissioner and that the other relevant submissions made by them were not properly examined by the Commissioner. The Counsel further submitted that there was no evidence on record to prove the department's allegation that the imported materials had been diverted to the premises of M/s Maruti Foam (P) Ltd. The preponderance of evidence in the case would go to show that the entire raw material was consumed in the trial run of the factory with no commercial utility. Referring to the Notification, Counsel submitted that the notification had intended to grant duty concession to goods imported into India for the purpose of manufacture of TPU. The Department had no case that the subject goods had not been imported for the said purpose. The Notification did not insist on actual utilization of the goods for the manufacture of TPU. In this connection, Counsel relied on the Tribunal's decision in two cases of Fertilizer Corporation of India Ltd., 1985 (21) ELT 500 and 1990 (50) ELT 494. On the limitation issue, he advanced more vehement arguments. He submitted that the order of the Commissioner could not be sustained as it did not take into account of party's plea of time-bar. Referring to the penalty imposed on the appellant-company under Section 114-A of the Customs Act, Counsel submitted that the provision of law was not in existence during the period of import (28.4.94 to 6.3.95). The provision was brought into force only on 28.9.96 and was, therefore, not envocable in this case. Insofar as the penalty imposed under Section 112(a) on Shri Amit Kaka was concerned, the impugned order did not state any valid ground for imposing the penalty.

4. The DR submitted that there was no explanation by the appellants as to why they were wasting the expensive raw material for trial run of their unit over a long period of time. There was also no explanation as to why any record were not maintained at their registered office. The DR also sought to distinguish the case law cited by the Counsel.

5. Upon careful examination of the records and submissions, we find that this case can be disposed of with a decision on the limitation issue. The demand of customs duty is in respect of the goods imported and cleared during 28.4.94 to 6.3.95. The demand was raised in the show-cause notice issued on 9.1.97. It is admittedly beyond the normal period of limitation. The reason stated in the notice for invoking the extended period of limitation is that the appellants had wilfully suppressed material facts from the department with intent to evade payment of duty. This ground, in our assessment, has been successfully rebutted in this case. The Counsel has referred to two letters, on dated 19.5.94 and the other dated 7.4.95, submitted by the appellant-company to the Central Excise Range officer. The letter dated 19.5.94 pertained to SSI declaration and the second letter dated 7.4.95 intimated unsuccessful manufacture of TPU out of the imported raw material. Our attention has been invited to the Central Excise Range Officer's letter dated 5.5.97 (copy available) which acknowledged receipt of the above two letters of the company. Reference has also been made to yet another letter (copy available) of the appellant-company, which was submitted to the jurisdictional Assistant Collector on 26.6.95. This document carries a dated seal of the Assistant Collector's office evidencing receipt of the letter by that office on the same date. The letter reads thus:-

"Please refer to our declaration dated 19.5.94 and letter dated 7.4.95. As already informed, we could not get success in manufacturing of Thermoplastic Polyurethanes and all chemical used has become waste including T.D.I. Now, we have dropped the idea to manufacturing of Thermoplastic Polyurethanes."

Our attention has been drawn to the statements of Shri Amit Kaka. In his statement dated 19.8.96, Shri Amit Kaka stated inter alia that the imported raw material was not sent to M/s. Maruti Foam (P) Ltd. because they did not have the facility of manufacturing TPU. In his statement dated 23.9.96 also, he reiterated the same. A query as to how the appellants had disposed of the imported TDI was answered thus:

"The material i.e. T.D.I. 80 imported by us at lower rate of duty was used and consumed in the manufacturing of thermoplastic P.U. article but unfortunately, we could not succeed in manufacturing of the same upto the mark and as required by the market, the major part of T.D.I. got damaged and wasted during the course of production and the same was lying in the factory premises and was remained to ashes after the fire broke out in our factory."

Shri Amit Kaka also produced copies of the FIR filed with the police and the letters sent to various other authorities regarding the fire incident. The Sales Tax Department's survey report on the damages caused by the fire was also among the documents produced to the Central Excise officers who interrogated him. We have perused the reply to the show-cause notice besides Amit Kaka's statements and other documents available on record and we find that the appellants have made out a consistent case that they did not conceal anything from the Central Excise authorities with intent to evade duty. We have particularly noted that the crucial evidence of the Range Superintendent's letter dated 5.5.97 (copy whereof had been submitted to the adjudicating authority) has not been rebutted in the impugned order. What has appeared to us from the evidence on record is that the appellants had disclosed relevant information to the Department during, and soon after, the period of imports and such information was enough for vigilant authorities of the Department to check the veracity of the facts presented by the party and to proceed against them, if found necessary, within the normal period of limitation. The larger period of limitation was invoked without any cogent evidence of suppression of facts or of intent to evade payment of duty. Ld. Commissioner had not looked into the party's plea of limitation at all. We are, therefore, constrained to vacate the demand of duty as time-barred, and we do so. Consequently, there can be no penalty on the appellant-company. Even otherwise, as rightly pointed out by the Counsel, Section 114-A could not have been invoked against the company in relation to a demand of duty for the period 28.4.94 to 6.3.95 when the said provision of law was not on the statute book. As regards the penalty imposed on Amit Kaka under Section 112(a) of the Customs Act, we find that he has been penalized under the said section merely for "being responsible for functioning of the company." We are afraid, this reason did not come anywhere near the statutory requisite for a penalty under the said provision of law. Section 112 lays down that any person who renders any goods liable to confiscation under Section 111 of the Act renders himself liable to be penalized. In the absence of any finding that Amit Kaka, by his commissions or omissions, rendered the subject goods liable to confiscation under Section 111, we are unable to sustain the penalty imposed on him under Section 112 of the Act.

6. In the result, the demand of duty and the penalties stand set aside and the appeals stand allowed.

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