Dr. I.P. Lal, J.
1. This is an Appeal filed against the Order passed by the Commissioner of Customs, Kolkata.
2. Brief facts of the case are that the Appellant, during the financial years, 1998-99, 1999-2000 and 2000-01, had imported Superior Kerosene Oil (here-in-after referred to as SKO) and availed the benefit of exemption Notification Nos.23/98-Cus. dated 22.06.1998, 20/99-Cus. dated 28.02.1999 and 16/2000-Cus. dated 01.03.2000. These Notifications exempt the kerosene oil imported by M/s. Indian Oil Corporation Ltd. for ultimate sale through Public Distribution System (PDS). Investigations conducted by the Officers of the DRI, however, revealed that the imported goods were not solely used for the purposes specified in the above Notifications. Accordingly, show cause notice was issued to the Appellant and adjudicated by the Commissioner, which culminated into confirmation of Customs Duty demand of Rs.412,17,25,807/-, interest (not quantified) and equivalent amount of penalty imposed upon the Appellant. He appropriated a sum of Rs.99,06,904/- deposited by the Appellant against the said purported confirmed demand. Being aggrieved by the said Order, the Appellant preferred an Appeal before this Tribunal. The Appellant being a public sector undertaking, also applied for a COD clearance before the Committee of Secretaries seeking permission to proceed with the instant Appeal against the impugned Order of the Commissioner before this Tribunal. The Committee of Secretaries, after considering the matter, directed the Commissioner of Customs (Port), Kolkata to adjudicate the revised duty liability, if any. The Commissioner, vide his Report dated 04.09.2009, re-quantified the purported duty demand to the extent of Rs.3,21,67,445/-. The detailed break-up of duty relating to the SKO not used for the specified purposes is as follows:-
Amount of Duty
(i). Supplies to Railways : Rs.99,76,425/-
(ii). Supplies to Airforce/Defence : Rs.2,05,11,837/-
(iii). Supplies to PDS dealers beyond quota :Rs.16,79,183/-
3. Ld. Senior Advocate appearing for the Appellant has submitted that so far as the duty-demand on the SKO supplied to Railways is concerned, the Appellant has inadvertently not paid the same which has been paid by them subsequently. As regards the supplies to Airforce/Defence, it is submitted during the relevant period, supplies to defence were under subsidy scheme of the Government of India. As such, supplies to defence are akin to the supplies to economically vulnerable section of the society under PDS. The ld. Advocate submitted that pursuant to the policy decision of the Government of India contained in letter dated 13.03.2006, in spite of loosing over Rs.120 crore per annum, the Appellant had to supply SKO to defence services at subsidized rates. In regard to the supplies to PDS dealers beyond quota fixed by the State Government, the ld. Advocate has submitted that the expression, PDS, has not been defined either in the Central Excise or Customs Act or in the Notifications. It is, however, defined in the relevant Control Orders issued by the State Government covering the period in question, such as West Bengal Kerosene Control Order, 1968 and the Kerosene (Restriction of Use and Fixation of Selling Price) Order, 1993. The Control Order, 1993 defines under para 2(j) thereof, Public Distribution System to mean the system of distribution, marketing or selling of kerosene at declared price through a distribution system approved by the Central or State Government. It is evident from the definition of the expression, Public Distribution System stated above, that there is no limit or restriction placed therein, of any sale of distribution or marketing of kerosene through a dealer at declared price and through a distribution system, inter alia, approved by the State Government, as in the present case. He submitted that in this case, there is no suppression on the part of the Appellant and therefore, the penalty is not imposable on them. He relied upon the Honble Apex Courts judgment in case of Sarabhai M. Chemicals vs. CCE, 2005(179)ELT 3(SC). He further submitted that the benefit of exemption Notification should be construed liberally. In support, he cited the judgment of the Apex Court in case of CC(Prev.) vs. Malwa Industries Ltd., 2009(235)ELT 214(SC).
4. Ld. Special Counsel appearing for the Revenue has submitted that the Appellant in the present case had not fulfilled the conditions of the exemption Notifications (mentioned supra). Public Distribution System sale would be confined to exclusively the quota to be located by either the Central Government or the State Government, as the case may be, and any excess sale thereof, would be the sale of kerosene, which cannot be treated as PDS sale. He also submits that the supplies to defence cannot be equated to the expression, sale through public distribution system, as the defence constitutes a separate category of buyers. The ld. Counsel also submitted that the Appellant in this case had not indicated in the bills of entry that they were availing the exemption which is meant for sale of imported goods through public distribution system. He has further submitted that the Appellant had not made any attempt to inform the Customs Department either about the excess sale beyond the quota under the PDS or as the case may be, sale of the imported goods to Railways/Defence etc. Accordingly, they have suppressed the material facts from the Department, which resulted into wrong availment of exemption notifications by them.
5. After hearing both the sides, we find that the basic issue involved in the present Appeal is whether supplies to railways, airforce/defence and PDS dealers beyond quota fixed by the State Government, are eligible for the benefit of the exemption Notification Nos.23/98-Cus. dated 22.06.98, 20/99-Cus. dated 28.02.99 and 16/2000-Cus. dated 01.03.2000. Notification No.20/99-Cus. dated 28.02.99 exempt the goods namely, kerosene, from the duty of Customs leviable under the First Schedule and the Additional Duty under sub-section (1) of Section 3 of the Customs Tariff Act, 1975, subject to the conditions that they are imported by the Indian Oil Companies for ultimate sale to Public Distribution System. Admittedly, supplies to Railways and Defence do not fall under this category and therefore, the benefit of exemption Notifications (supra) is not available to the imported goods.specified in the Annexure to the said Notification.
6. He submitted that the impugned Notifications do not put any embargo restricting the benefit of notification only to any quota allotted by the Central/State Government. In this regard, it is noticed that the exemption Notification No.02/99-Cus. and the other Notifications exempt kerosene imported by Indian Oil Corporation Ltd. for ultimate sale through the Public Distribution System. These Notifications do not define the Public Distribution System. However, in exercise of the powers conferred by Section 3 of the Essential Commodities Act, 1955, the Central Government has framed, Kerosene (Restriction on Use and Fixation of Ceiling Price) Order, 1993. Section 2(j) of this Order defines the Public Distribution System so as to mean, the system of distribution, marketing or selling of kerosene at declared price through a distribution system approved by the Central or State Government. It is evident from this definition that right from distribution, marketing or selling through public distribution system at the declared price is to be approved by the Central or State Government. On harmonious reading of the provisions of the exemption Notifications and the above definition of the Public Distribution System, it appears that any supply/distribution not meant for sale to public distribution system or the sale through this system in excess of the quota approved by the Central Government/State Government, would not be eligible for the benefit of impugned Notifications. We also notice that Section 3A of the Control Order, 1993 puts restriction on sale and use of kerosene imported under parallel marketing system. The Appellant has not produced any evidence in their support that the supply in excess of quota fixed under PDS, was sold by the dealers only to the ultimate beneficiary of the public distribution system.
7. In view of the facts and circumstances of the case narrated above, we are of the opinion that benefit of exemption Notifications is not available to the Appellant in this case. The ld. Advocate has submitted that they were regularly filing the returns to the Department. So there was no suppression on the part of the Appellant. In support, he has relied on the judgment of the Honble High Court in case of Sarabhai M .Chemicals (supra). He has further submitted that exemption Notifications should be construed liberally, if once it is found that notification is applicable to case of assessee, as held in case of Malwa Industries Ltd. (supra). Then it should be allowed. We find that both these judgments are not relevant to the present case, inasmuch as it has been categorically found by the Adjudicating Commissioner at para 62(vii) (page 105) of his Order dated 30.09.2005, has categorically observed that the Appellant during the relevant period of dispute effected sale to the industrial customers out of the imported stock of SKO, knowing fully well that such industrial sale did not attribute to sale through Public Distribution System. The Appellant also sold the kerosene in excess of the quota fixed by the Central/State Government. He has, further, observed that from the records, it is evident that in the bills of entry, they had never indicated that certain quantity would be sold to the industrial consumers or excess sale beyond quota was made to PDS dealers in West Bengal. They did not apprise the Department about correct facts which were relevant for the purposes of assessment. In these circumstances, we uphold the Order dated 30.09.2005 read with Order dated 04.09.2009 passed by the Commissioner of Customs, Customs House, Kolkata, and reject the Appeal filed by the Appellant. Cross Objection filed by the Revenue also stands disposed off, in above terms.