2004 (97) ECC 183 (Tri)
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
New Delhi -- Bench-NB(B)
Shri S.S. Kang, Member (J) and Shri V.K. Agrawal, Member (T)
Dewan Rubber Industries Ltd. & Ors.
Versus
CC, Meerut-1
Misc. C/417/2003-NB(B) in Appeals No. C/249-253/2001-NB(B)
[Arising out of Order-in-Original No. 22/ADJ./Meerut-1/2001 dated 16.3.2001 passed by the Commissioner of Customs & Central Excise, Meerut-1]
Final Order No. 502-506/2004-B, dtd. 17.6.2004, Certified on 6.7.2004
Confiscation (Customs)
Import -- Hydraulic drive system (HDS) exempted duty free to use in 100% EOU -- HDS shifted to sister concern repair -- As the system has been removed without permission from the Revenue and the same is used in a premises other than 100% EOU, the conditions subject to which the same was allowed to be imported free of duty under Notification No. 13/81-Cus has been violated making the System liable to confiscation under Sec. 111 (o) of the Customs Act and redemption fine, penalty under Sec. 114A r/w Sec. 24AB of the Customs Act.
PRESENT :
Shri L.P. Asthana, Adv. for the Appellants.
Shri O.P. Arora, SDR for the Respondent.
Per : V.K. Agrawal
All these five appeals, filed by M/s. Dewan Rubber Industries and others, have been filed against a common Order-in-Original No. 22/2001 dated 16.3.2001 by which Commissioner has confirmed the Customs duty on the Hydraulic Drive System (HDS) removed by the Appellants No. 1 from their 100% EOU premises to another premises of M/s. Dewan Sugars Ltd., Appellants No. 2 and imposed penalties on all the Appellants, besides confiscating the HDS with an option to redeem the same on payment of fine.
2. Shri L.P. Asthana, learned Advocate, submitted that M/s. Dewan Rubber Industries, Appellant No. 1 a 100% Export Oriented Undertaking (EOU) manufacture bicycle tyres and tubes since March, 1993 and they are exporting these goods since April 1994; that they imported an hydraulic drive system (HDS) under Bill of Entry dated 17.4.1996 for using the same for compression of various materials for the formation of tyres and tubes; that the said HDS was cleared without payment of duty availing the exemption under Notification No. 13/81-Cus., dated 9.2.1981; that they used the HDS for a number of years in their production process; that as in the beginning of 1999, the machine developed certain technical faults, the same was shifted to M/s. Dewan Sugar Ltd., Moradabad, their sister concern for the purpose of repair and reconditioning so as to make it operational and fit for use; that Dewan Sugars Ltd. have ample facilities for undertaking repairs and technical staff. The learned Advocate mentioned that they are not disputing their liability to pay the duty on the impugned goods; that the duty, however, should be assessed on the depreciated value of the HDS; that subsequent to the seizure of the HDS, the Appellants No. 1 had requested for permission to sell the same in Domestic Tariff Area (DTA) as per paragraph 9.18 of the Export-Import Policy; that the Development Commissioner, Noida Export Processing Zone (NEPZ) granted the permission on 8.10.1999 subject to the condition that they deposit applicable Customs and Excise duties; that in terms of Paragraph 9.18 and 9.19 of the Policy also, the capital goods can be disposed of subject to payment of applicable duties on the depreciated value; that the appropriate duty may be calculated in terms of Notification No. 13/81-Cus after allowing depreciation on the import value.
3.1 The learned Advocate, further, submitted that they are not liable to pay any interest since the impugned hydraulic drive system was imported in April 1996, prior to the date on which Section 28AB of the Customs Act was brought into force; that similarly, the provisions of Section 114A of the Customs Act will not be applicable for imposition of penalty since the import was made prior to coming into force of Section 114A of the Act.
3.2 He contended that they have not committed any commission or omission which has rendered the impugned goods liable to confiscation; that as they have fulfilled the export obligations, machine was removed after informing the Central Excise Officer-in-charge of 100% E.O.U., permission has been granted by the Development Commissioner to sell the impugned machine and they are willing to discharge the duty liability, the machine is not liable to confiscation; that for these reasons, no penalty is imposable on any of the Appellants.
4. Countering the arguments Shri O.P. Arora, learned SDR, submitted that when the Officers visited the factory premises of the Appellant No. 1 on 10.9.99, they did not find the Hydraulic Drive System in the said premises; that the said system was found duly installed in the factory premises of Dewan Sugars Ltd.; that admittedly no permission was sought for removing the HDS to Dewan Sugar Ltd. as deposed by Shri H.N. Dhyani, CEO of M/s. Dewan Rubber Industries in his Statement dated 20.9.99; that it has also been admitted by Shri V.S. Dewan, Managing Director of Dewan Rubber Industries; that he has deposed in his statement that he had asked his technical person if the system could be used for sugar and that installation of the system on concrete base of the Mill House Platform of the Sugar unit was necessitated so as check whether the same could be used for sugar unit. The learned SDR contended that the Hydraulic Drive System which was imported duty free had been diverted to other unit and thus the conditions No. 2 and 8 of Notification No. 13/81-Cus. have been violated as the manufacturing operations were not carried out in Customs Bond (condition No. 2) and the System was taken outside the hundred per cent E.O.U. for repair without permission (condition No. 8). He, further, submitted that no intimation about the installation of System in 100% E.O.U. was given to the Department nor date of commencement of its use therein; that Shri H.N. Dhyani, Chief Executive Officer of M/s. Dewan Rubber Industries could not produce any document showing date of removal of the impugned System to Moradabad nor he could produce any document to evidence any defect in the system; that the transit document for shifting the system had also not been produced; that even there was no full-fledged workshop in M/s. Dewan Sugar Ltd. as admitted by Shri J.S. Cheema in his statement dated 14.9.99; that he had also deposed that he had never dealt with hydraulic drive system like one in question. He, therefore, contended that no depreciation need be allowed on the value of the impugned system and confiscation of the machine is warranted and penalty is imposable on all the Appellants.
5. We have considered the submissions of both the sides. M/s. Dewan Rubber Industries had imported the Hydraulic Drive System availing the exemption from payment of Customs duty under Notification No. 13/81-Cus. This Notification provides exemption to the specified goods imported for the purpose of manufacture of articles for export out of India or for being used in connection with the production or packaging of goods for export by 100% E.O.U. It is not in dispute that when the Officers visited the factory premises of 100% E.O.U. on 10.9.99 the said System was not found installed there and the same was found installed on concrete base in the factory premises of M/s. Dewan Sugars Ltd. in another city, viz., Moradabad. It is also not disputed by the Appellants that the impugned System had been shifted from Meerut unit of Appellants No. 1 to Moradabad Unit of Dewan Sugars Ltd. The learned Advocate for the Appellants is not contesting the duty liability of the Appellants No. 1 in respect of the impugned System. He, however, is requesting for the payment of Customs duty on the depreciated value of the System as according to him the System was put to use by 100% E.O.U. inasmuch as the Customs Inspector verified on 10.2.96 the issuance of the said machine for use in the manufacturing process at 100% E.O.U. premises. This verification, on perusal, is found to be contained in the Issue Application Record (Part-1) maintained by 100% E.O.U. wherein it is mentioned that hydraulic drive system was issued. No other material or evidence has been brought on record by the Appellants to prove that the impugned system was used in the process of manufacture of goods by the 100% E.O.U. There is no record of the transport of the system from 100% E.O.U. to Moradabad unit as according to the Appellants transit documents were lost in transit. The Commissioner in the impugned Order has also discarded their plea of System being sent for repair to Moradabad unit as Jaswinder Singh Cheema, Chief Engineer of Dewan Sugars Ltd., had admitted in his statement dated 14.9.99 that he had no prior experience of dealing with test/repair of the impugned system nor was he supplied with any technical literature of the system and there was no full-fledged workshop in the Sugar Unit. Further, the System was found installed on concrete base of the Mill House Platform of Dewan Sugars Ltd. and the Managing Directors of Dewan Rubber Industries had deposed that the installation was necessitated to check whether the system could be used for sugar unit. In view of all these facts we hold that the duty is payable by M/s. Dewan Rubber Industries Ltd. and they have not succeeded in making out any case for depreciation in value as the use of the impugned Hydraulic Drive System by 100% E.O.U. has not been established.
5.1 As the System has been removed without permission from the Revenue and the same is used in a premises other than 100% E.O.U., the conditions subject to which the same was allowed to be imported free of duty under Notification No. 13/81-Cus has been violated making the System liable to confiscation under Section 111(o) of the Customs Act. Considering the value of the impugned System and the duty involved thereon, we are of the view that redemption fine of Rs. 25 lakhs is not on the higher side at all. We, therefore, uphold the redemption fine. Penalty under Section 114A of the Customs Act and interest under Section 28AB of the Customs Act are attracted as the impugned goods have been removed after the insertion of these provisions in the Customs Act. The date of importation of the System is not relevant for determining the question of invocability of the provisions of these Sections. The relevant factor is when the condition of the Notification was contravened which is only on or after 10.12.1996 when the System was withdrawn. However, the penalty imposed is the maximum penalty which is not warranted. We feel that interest of justice will be served if the penalty on M/s. Dewan Rubber Industries is reduced to Rs. 50 lakhs. We order accordingly. No separate penalty on M/s. Dewan Rubber Industries Ltd., 100% E.O.U. is imposable as the penalty has already been upheld (though reduced) on M/s. Dewan Rubber Industries Ltd. We accordingly set aside the penalty of Rs. 5 lakh imposed separately on 100% E.O.U.
5.2 A separate penalty is imposable on Shri V.S. Dewan, Managing Director as knowingly he has sent the impugned system to another unit. We, however, reduce the penalty imposed on him to Rs. 2 lakhs only. Penalty is also imposable on M/s. Dewan Sugars Ltd. as they have dealt with the goods imported duty free for the use of 100% E.O.U. which they were not. We, however, reduce the penalty to Rs. 2 lakhs. We also set aside the penalty imposed on Shri G.K. Saxena and Shri C.B. Tiwari as there is nothing to show that they were knowing about the fact that the import of the System was not meant for 100% E.O.U. but only for Sugar Unit. All the appeals are disposed of in the above manner.
………………….