1. The Revenue filed this appeal against the order-in-original passed by the Collector, Customs, Bombay. In the impugned order, the Collector held that in the Notification No. 159/86-Cus. as amended by Notification No. 99/87-Cus. dated 1.3.1987, which provides concessional rate of duty, require the importer to use the machines for export production failing which the importer was required to pay differential duty. In this Notification there was no condition which prohibits the importer and the use of these machines for the production of the items for home consumption.
2. The brief facts of the case are that the respondents made import of 14 chain making machines and 30 kgs. soldering powder in the year 1987 and 1988. The machines were assessed to customs duty after giving the benefit of Notification No. 159/86-Cus. as amended vide Notification No. 99/87-Cus. dated 1.3.1987. The respondents sold the jewellery manufactured on these machines on retail and wholesale basis in the local market. However, they also exported some jewellery manufactured on these machines. A show cause notice was issued to the respondents alleging that as to why the 14 chain making machines should not be confiscated under Section 111(d) and 111(o) of the Customs Act, 1962 and why the differential duty amount of Rs. 10,19,150.20 for 14 machines and 30 kgs. of soldering powder imported should not be recovered from them under Section 28(1) of the Customs Act, 1962 and why the penalty should not be imposed under Section 112 of the Customs Act, 1962. After adjudication, the proceedings were dropped by the Collector, Customs, Bombay.
3. Shri R.S. Sangia, JDR appearing on behalf of the Revenue submitted that chain making machines were imported by the respondents and the benefit of Notification No. 159/86-Cus. as amended by Notification No.99/87-Cus. dated 1.3.1987 was extended to them. He submits that Notification provides a concessional rate of duty to the items imported which are designed for use in the manufacture of gem and jewellery by the registered exporter of gem and jewellery and used in the processing and manufacturing of gem and jewellery for the purpose of export. He submits that the respondents also executed a Bond to the effect that the imported goods shall be used for the purpose specified in the Notification and in the event of failure to comply with the conditions, he shall be liable to pay an amount equal to the difference between the duty leviable on the said imported goods and the duty paid by the respondent under the Notification. He submits that machines were not used exclusively for export production and therefore, the respondents violated the terms and conditions of the Notification. He submitted that the respondents admitted the fact that they are also supplying the goods manufactured from these machines in the local market. He therefore, prays that the appeal be allowed.
4. Shri Kishore Punamaya, Partner appearing on behalf of the respondents submitted that the Notification docs not indicate any prohibition on the use of the machines for processing of jewellery for domestic market. He submits that only the spare capacity of these machines was used towards manufacture of gem on job work basis for domestic market. He submitted that in the impugned order, the Collector, Customs held that the respondents made export of 177685.100 gins, of jewellery during the period 1.1.1990 to 30.10.1992. He submits that by export of jewellery they were complying with the terms and conditions of the Notification. He therefore, prayed that the appeal be dismissed.
5. Heard both sides. In this case a show cause notice was issued to the respondents stating therein that they have violated the terms and conditions of the Notification No. 159/86-Cus. dated 1.3.1986 as amended by Notification No. 99/87-Cus. dated 1.3.1987. Respondents made import of 14 chain making machines and 30 kgs of soldering powder and availed the concessional rate of duty as provided under the Notification. The relevant portion of the Notification is reproduced below: Exemption to specified machineries/equipments for registered exporters of gem and jewellery.In exercise of the powers conferred by Sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 44/84-Customs, dated the 1st March, 1984, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in column (2) of the Table hereto annexed and designed of use in the manufacture of gem and jewellery, by the registered exporters of gem and jewellery and cooperative societies of goldsmiths and artisans, and used in the processing and manufacture of gem and jewellery for the purpose of export, when imported into India, from (a) so much of that portion of the duty of customs leviable thereon, which is specified in the said First Schedule to the Customs Tariff Act, 1975 (51 of 1975), as is in excess of the amount calculated at the rate of thirty-five per cent cut valorem; and (b) the whole of the additional duty leviable thereon under Section 3 of the said Customs Tariff Act; Provided that the importer furnishes an undertaking to the effect that the said imported goods shall be used for the purpose specified above and in the event of his failure to comply with the aforesaid conditions, he shall be liable to pay an amount equal to the difference between the duty leviable on the said imported goods but for the exemption contained herein and that already paid at the lime of importation.
6. In pursuance of this Notification, the respondents executed an undertaking that the imported goods shall be used for the purpose specified in the Notification and in the event of their failure, they shall be liable to pay an amount equal to the difference between the duty leviable on the said imported goods and duty already paid under the Notification.
7. Respondents admitted the fact that they supplied the gold jewellery processed on these machines imported under the Notification for domestic market. The contention of the respondents is that they had also made export of jewellery and only the spare capacity of the machines were used for manufacture of jewellery for domestic market.Collector of Customs, Bombay v. Perfect Machine Tools Co. Ltd. held that a particular item not expressly excluded from the Notification, not necessarily to be treated to have been included therein. The Hon'ble Supreme Court in this case relied upon the earlier decision in the case of Novopan Pvt. Ltd., Hyderabad v. Collector of Central Excise Supreme Court held that in case of doubt and ambiguity in the taxing statute the benefit must go to the State.
9. In the present ease, the Notification provides concessional rate of duty to the goods imported for use in processing and manufacturing of gem and jewellery for purpose of export. This does not mean that the goods imported under the Notification can be used for manufacture of gem and jewellery for domestic market.
10. Shri Kishore Punamaya, Partner of the respondent M/s. Gold Craft Industries in his statement recorded under Section 108 of Customs Act, 1962 stated that the machines were imported under exemption Notification and they have carried out major manufacture of gem and jewellery on job work basis for local sale. Therefore it is clear that the respondent made import of 14 chain making machines and 30 kgs. of soldering powder after 1.3.1987 and availed the benefit of the Notification No. 159/86-Cus. as amended by Notification No. 99/87-Cus.
dated 1.3.1987 and that the respondents had not fulfilled the conditions of the Notification.
11. In view of the above discussions, we are unable to agree with the findings of the Collector, Customs, Bombay in the impugned order and that in the instant case, all the conditions of the said Notification have been complied with.
12. This appeal is filed against the adjudication order and in this case, the question of confiscation and redemption fine in lieu of confiscation and the question of imposition of penalty is involved which are to be gone into by the adjudicating authority, therefore, the impugned order is set aside and the matter is remanded to the jurisdiction Commissioner, Customs for de novo adjudication after granting an opportunity of personal hearing to the respondents.