Per P. Karthikeyan
During hearing the learned Sr Counsel for the appellants submitted that the EOU has achieved NFEP and fulfilled export obligations prescribed. It is submitted that the demand towards exemption availed on machinery, component parts and consumables etc imported and indigenously procured was confirmed on the ground that the appellant had failed to fulfill Condition No 12 of Notification No 37/2000-CE as amended by Notification No 22/2003-CE and Notification No 58/2000-Cus dated 8.5.2000 as amended by Notification No 52/2003-Cus dated 31.3.2003. It is submitted that the charge found against the appellant in this regard was that the appellant had cleared granite blocks excavated ‘as such’ . He submits that the impugned goods were dimensional granite blocks obtained as a result of processing of boulders excavated from the mines. Therefore, the charge found against the appellants to deny exemption was on an incorrect basis. The demand on this account was liable to be set aside. It was further submitted that the items cleared to DTA by the EOU were entitled to be assessed at the effective rates applicable to Notification No 2/95. He relied on several case laws in support of this claim.
The learned counsel for the revenue reiterated the reasoning followed by the Commissioner in the impugned order. He submitted that the Commissioner had adopted Rs 55/- per Sq feet as the value for assessment of DTA clearances of polished slabs. This was the lowest of the sale prices realized. Notification No 8/97 was not admissible as the appellants has not obtained permission of the appropriate authorities. The goods exported by the appellants were not articles of granite as envisaged in Notification No 37/2000. He submits that the Commissioner had rightly confirmed the demands.
We have examined the case records and the rival arguments. As regards the demand of exemption availed by the EOU on capital goods, components, spares and consumables under Notification No 37/2000-CE, 22/2003-CE, 58/2000-Cus, 52/2003-Cus was on the basis that the EOU had failed to fulfill condition No 12 of the Notification No 37/2000-CE and parallel condition contained in the Customs Notification No 58/2000 and 52/2003. From the communication dated 27.9.2005 and the submissions, we find that the appellant had cleared dimensional cut granites and not excavated boulders as such . The appellants had explained the various steps involved in the production of the goods exported eventually. The Dy Commissioner also included these goods in the list of export products, the appellants could export. Therefore the basis of confirmation of demand of exemption availed on the capital goods, machinery components, spares and consumables both imported and indigenous, we find is not sustainable. As regards the claim that the impugned goods cleared to the DTA were entitled to benefit of Notification No 2/95 and 8/97, we find that the following case laws are cited in support of the claim for exemption advanced by the appellants.
i) CCE Jaipur-II Vs Modern Polyester Yarn [2002(149)ELT 377(Tri-Del)]
In the above case, the revenue had sought to deny the benefit of Notification No 8/97 CE as well as 2/95 CE dated 4.1.95 on the ground that the respondents therein had not fulfilled the condition of seeking approval for DTA sale from the competent authority. The respondents had not adopted the procedure and fulfilled the requirement of Notification No 2/95-CE. Rejecting the appeal filed by the revenue, the Tribunal observed as follows:
“4. .We have considered the submissions of the learned DR and perused the records. We observe from the impugned Order that the Respondents had adjusted the clearance of the impugned goods against their DTA Entitlement as supported by RT-13 Return. This finding of the Commissioner (Appeals) has not been controverted by the Revenue. The Tribunal in the case of Euro Cotspin Ltd., in similar situation, has extended the benefit of Notification No. 2/95 by holding that the ‘goods should have been subjected to duty at the exempted rates after taking into account Notification No. 2/95.’ The Commissioner (Appeals) has relied upon the said decision of the Tribunal. Accordingly, we find no reason to interfere with the impugned Order. The Appeal filed by Revenue is, thus, rejected.
Yet another claim advanced is that the demand towards DTA clearances was raised without allowing the cum-duty benefit.
We find that clearances made by the appellant will be entitled to assessment in terms of Notification No 2/95 and 8/97 subject of fulfillment of export obligation by the EOU in respect of capital goods, machinery and other inputs procured by it under the EOU scheme. The matter is remanded for requantifying the liability of the appellants.
APPEAL No E/922/06.
This appeal has been filed by the Executive Director Shri N. Krishnaiah of M/s Madhucon Granites Ltd seeking to vacate the penalty of Rs 10,00,000/- imposed on him under Rules 26 of CER (2)2001/CER2002. As the penal liability of the appellant is linked to the duty liabilities of M/s Madhucon Granites Ltd., remanded for determination, the appeal filed by Shri N. Krishnaiah is also allowed by way of remand. The parties shall be heard and the matter adjudicated after following principles of natural justice.
-----------------
The impugned order is assailed on various grounds. The demands confirmed against the appellants and challenged in the appeal before us are discussed below seriatim:-
2. Broadly the impugned order decided the following two issues; 1. clandestine clearance of goods manufactured by the appellant to DTA without proper permission without accountably and without payment of duty and 2. violation of the provisions of the relevant notifications in respect of the duty free imported as well as indigenous capital goods and consumables in as much as the same were used in their granite quarries contrary to the provisions of the said notifications.
3. The appellants M/s. Madhucon Granites Pvt. Ltd. (MGPL) and M/s. Varalakshmi Granites Pvt. Ltd. (VGPL) are group concerns. One of the charges found is that MGPL cleared polished granite slabs / monuments to VGPL and other places clandestinely without payment of duty amounting to Rs.44,07,409/-. There is no dispute that the EOU clandestinely cleared its finished products without payment of duty to VGPL and others as alleged. Before the Commissioner, the appellants had submitted that there were errors in computation of the demand under this head. Were the claim could be satisfactorily established, the Commissioner allowed relief. He rejected the claim by the appellants that the value adopted for computation of duty was much higher than the relevant value. It was claimed before him that the goods involved were rejects and the sale price adopted was higher. The Commissioner found that the appellants could not show any record to find that the impugned goods were reject slabs. We find that the policy provides for the manner in which rejects are to be treated for the purpose of payment of duty. The EOU is required to intimate the departmental authorities about generation of rejects. There are restrictions as regards rejects that could be allowed to be cleared by the EOU to DTA and the duty payable on the same. In the instant case, the appellants never informed the department about generation of rejects or their clearances. In the circumstances, the Commissioner s finding that what was cleared by the appellant was not rejects, we find, cannot be interfered with. In arriving at the finding that the EOU had cleared sound goods and not rejects, he had relied on the statements of responsible executives of MGPL and VGPL. As regards valuation of these goods also the Commissioner relied on these statements. The private records of the appellant had indicated the raw material cost in the region of Rs.55/- or higher. We also find that the Commissioner relied on the certificate of costing of these goods furnished by the Jr. Accounts Officer, MGPL. Shri R.Babji Venkateshwara Rao, JAO in his statement dt. 19/11/2003 had furnished the sale prices of granite slabs cleared to VGPL and sold by them. These rates were all ranging from Rs.70/- to 110/- for different varieties. Therefore, we find that any interference with this part of the impugned order is not called for.
4. The Commissioner relied on statements of the managerial personnel of MGPL to find that MGPL had used spare capacity to produce polished slabs which were removed to VGPL. As per Rule 100E of Central Excise Rules, no excisable goods shall be removed from an EOU except on payment of duty of excise leviable and except under an invoice signed by the manufacturer or his authorized agent. Therefore, impugned clearances attracted duty confirmed and the assessee incurred liability to penalty.
5. As regards the clearances of sawn slabs to VGPL, the appellants had claimed that they had done job work for VGPL; sawn slabs were not marketable. Clearances of alleged sawn slabs by the EOU are not disputed. The appellants did not produce any evidence to establish that they had received certain material from VGPL for job work as claimed. In any case, assessee has no case that it had obtained permission to undertake job work as required under the legal provisions. The Commissioner found that CSH 6802.23 of the Central Excise Tariff covered sawn slabs which read as ‘other monumental or building stone and articles thereof simply cut or sawn with a flat or even surface - Granite (unit ‘Sft.)’. We find that the Commissioner is justified in demanding duty on clearances of what was described as sawn slabs.
6. The appellants accepted clearing imported duty free consumables as alleged in the show cause notice. They disputed valuation of diamond wire cleared to VGPL claiming that the same was scrap used for packing and that its value would be 10% of the original price. The Commissioner found that the appellants had accounted clearances of diamond wire on 1/6/2003 and 19/6/2003 as follows:-. Relying on the assessee’s own records, the Commissioner found that the impugned clearance of diamond wire involved new diamond wire and not used diamond wire. Accordingly, he confirmed the demand of duty on diamond wire as proposed in the show cause notice. In the absence of contrary evidence, we find that the Commissioner s finding is sound.
7. As regards the demand of exemption availed on indigenous consumables found to have been transferred to VGPL, the contention raised by the appellants has been that they had purchased such goods on account of VGPL. We find that the Commissioner rightly found that the EOU was not supposed to procure goods on behalf of a DTA unit and that it was liable to pay the exemption availed on indigenous consumables procured and transferred to VGPL. We find that the Commissioner examined a couple of invoices and found that VGPL had received such consumables from MGPL against relevant goods receipts. He also relied on the statements of the concerned executives of MGPL and VGPL admitting removal of consumables procured by it without accountal and without payment of duty to VGPL. Therefore, we uphold the demand under this head. The Commissioner has cited relevant excerpts of depositions by all the responsible people concerned in MGPL and VGPL. As regards the claim of the appellants that value of two hack saw blades fixed by the authorities at Rs.7,60,000/- was incorrect and the good were of value Rs.500/- (as stated by Shri Sanjay Mutha, AGM, MGPL), we find that the Commissioner relied on the relevant CT-3 certificate to fix the value at Rs.7,60,000/-. In confirming demand of Rs.3,99,644/-, the Commissioner allowed the claim of the appellants that there was a duplication of demand to the extent of Rs.25,545/-. The demand is based on the private records of the assessee and admission by persons who authored the relevant entries in the financial / accounts of the assessee. We also find that in confirming the demand, the Commissioner rightly did not adopt the concessional rate of duty prescribed in Notification No.2/95-CE. The said notification is applicable only in respect of excisable goods manufactured in an EOU and allowed to be sold in DTA in accordance with the provisions of Exim Policy, this concessional rate cannot be made applicable to clandestine clearances contrary to statutory provisions. Notification No.2/95 lays down an effective rate of 50% of aggregate of customs duties payable on identical goods when imported into India. There is no dispute that the clearances had been made without any permission from the Department. Rule 100E of Central Excise Rules specifically prohibits removal of excisable goods from an 100% EOU without payment of duty of excise leviable on such goods and without the cover of an invoice signed by the manufacture or his authorized agent. The relevant notification No.2/95-CE prescribes the concessional rate in respect of excisable goods manufactured in a 100% EOU and allowed to be sold in India under and in accordance with the provisions of sub-paragraph of (a), (b), (c) and (d) of paragraph 9.9 or para 9.20 of the Exim Policy 1st April, 1997 31st March, 2002_______________________ of duty. In this case, the appellant has no case that the clearances were in accordance with the policy provisions and the goods were allowed to be sold in India by the competent authority.
8. The major demand raised in the impugned order is the exemption availed on indigenous and imported capital goods, machinery, spare, components and consumables used in violation of the conditions of the relevant notifications No.37/2000-CE dt. 8/5/2000 as amended, No.22/2003-CE dt. 31/3/2003, No.37/2000-Cus. as amended and under Notification No.52/2003 dt. 31/3/2003. These goods had been used at the quarries of the appellants contrary to the conditions of these notifications which extended exemption from the customs and excise duties applicable on such capital goods, machinery, spares, components and consumables when imported or as the case may be procured indigenously by MGPL. The following are the demands confirmed under this head:-
v). Central Excise duty amounting to Rs.71,07,083/- (Rupees seventy on lakh seven thousand eighty three only) @ 16% on the indigenously procured capital goods utilized at quarries in as much as they have violated the conditions of the notifications Nos.37/2000-CE dt. 8/5/2000 as amended by 22/2003-CE dt. 31/3/2003, as detailed in Annexure-C1 of the notification from MGPL under the provisions of Sec. 11A of the Central Excise Act, 1944;
vi). Central Excise duty amounting to Rs.39,42,264/- (Rupees thirty nine lakh forty two thousand two hundred and sixty four only) @ 16% on the indigenously procured consumables and lubricants utilized at quarries in as much as they have violated the conditions of the notifications Nos.37/2000-CE dt. 8/5/2000 as amended by 22/2003-CE dt. 31/3/2003, as detailed in Annexure-C3 of the notification from MGPL under the provisions of Sec. 11A of the Central Excise Act, 1944;
vii). Customs duty amounting to Rs.2,79,38,505/- (Rupees two crore seventy nine lakh thirty eight thousand five hundred and five only) on the imported capital goods utilized at quarries in as much as they have violated the conditions of the Notifications No.52/2003-Cus. dt. 31/3/2003, as detailed in Annexure C2 of the notice from MGPL under the provisions of Section 28 of the Customs Act, 1962.
viii). Customs duty amounting to Rs.1,39,95,520/- (Rupees one crore thirty nine lakh ninety five thousand five hundred and twenty only) on the imported consumables utilized at quarries in as much as they have violated the conditions of the Notification No.52/2003-Cus dt. 31/3/2003, as detailed in Annexure C4 of the notice from MGPL under the provisions of Section 28 of the Customs Act, 1962.
Equal amounts of penalty as the duty demanded have also been imposed on the appellants under relevant provisions of Central Excise Act and Customs Act. These demands arise on the ground that the EOU had used them at the quarries for excavation of granite blocks which were exported as such and not brought to the EOU premises.
9. Yet another ground on which the demand is confirmed is that during the material period, the goods excavated and exported were not covered by the LOP issued to the appellants. The Commissioner did not accept the following contentions raised by the appellants in this regard.
9.1. What was produced and exported during the material period was cut and dressed dimensional granite blocks. These had been produced using duty paid machinery. The demand was based on assessments of the adjudicating authority. As the quarried goods had not been exported a such, the benefit of the notifications relating to capitals, machinery, spares, components and consumables both imported and indigenous could not be denied to them. More over these goods exported during the material period were included in the list of goods permitted to be exported under the LOP issued by the Ministry of Commerce by the policy of broad banding. The appellants contended that the impugned demands could be validly raised only in the following situations;
i. if capital goods are not used within one year of procurement or re-exported etc.
ii. if capital goods procured in connection with quarrying are not used by the 100% EOU at the quarries.
iii. In case of components, spares and consumables procured duty free, the unit fails to achieve Net Foreign Exchange and Export Performance (EP).
9.2. Vide the impugned order, the Commissioner found that granite blocks exported by the appellants during the material period were covered by the LOP issued to them by the Development Commissioner (DC) only w.e.f. 4/5/2005. This was after the period of dispute. The DC had clarified that such goods exported prior to 4/5/2005 were not covered under the EOU scheme. Such goods had also been cleared to DTA contrary to the conditions of the Notification. MGPL could not substantiate their claim that the impugned goods had been produced using machinery which had been procured on payment of duty with evidence. On the other hand there was no dispute that the appellants had procured and used indigenous and imported capital goods and consumables and used them for excavation of granite blocks at their quarries. MGPL had failed to establish with evidence that the impugned machinery had not been used in excavation of the granite blocks exported or sold in DTA.
10. Citing case laws, MGPL had argued that notification had to be understood by the plain words used and no intendment could be ascribed to the words of the notification. The authorities had interpreted the notification in such a manner that even if a procedural condition was violated substantial liability towards duty on the machinery could be fastened on the assessee. In this connection, the Commissioner found that the assessee had failed to fulfill the following conditions of the Notification No.37/2000-CE dt. 8/5/2000.
“3. The goods (capital goods and consumables) are used by the unit for the purpose of quarrying of granite meant for further processing or manufacture or production of articles of granite for export by its own EOU or its unit in the zone.”
“12. Te goods so quarried shall be removed from the quarry site only for supply to unit s own processing unit in the zone or Export-Oriented Unit or for supply to an other hundred percent Export-Oriented Unit or the units in the zone engaged in processing or production or manufacture of articles of granite and export thereof and shall not be allowed to be exported as such or to be cleared in Domestic Tariff Area.”
11. He found that similar conditions were laid down in the customs notification governing import of specified goods meant for quarrying of granite under the EOU scheme. He found that on a plain reading of the conditions of the notification, there was no ambiguity that the appellants were not eligible for exemption in respect of the capital goods, machinery, consumables etc. used in quarrying of granite exported or sold in DTA during the material period. MGPL had argued that the impugned proceedings could have been validly initiated only with the clearance of DC; that the DC had included the granite blocks also in the list of items allowed for export under the policy of broad banding showed that those items were also permissible for export. Clearance of blocks directly from the quarries was only technical offence which did not warrant demand of duty on the capital goods or consumables. In support of the claim that proceedings could be initiated only with the clearance of the DC, the assessee relied on the following case laws:-
a. Kuntal Granites Pvt. Ltd. Vs. CCE [2001(132) ELT 214 (Tri.)]
b. ABN Granites Ltd. Vs. CC, Cochin [2001(133) ELT 483 (Tri. Bang.)]
c. Verifone (I) Ltd. Vs. CC [2005(192) ELT 327(Tri. Bang.)]
12. The Commissioner observed that the above case laws held that for non-fulfillment of export obligation, customs authorities could adjudicate the dispute only after DGFT arrived at a finding on the same and found that in the case at hand, the DC had communicated his definite conclusion that export of dimensional granite blocks under EOU scheme was not permitted earlier and that usage of duty free capital goods and consumables for excavation of granite blocks from the quarries for direct export was in contravention of the Foreign Trade Policy and relevant customs and excise notifications. This was in response to a query raised by the appellant and communicated vide his letter No.8/EOU-219/VSEZ, 4525 dt. 27/9/2005. Therefore, the impugned proceedings was in tune with the ratio of the case laws cited by the assessee; these had been with the approval of the DC.
13. The Commissioner held that the infractions were deliberate and imposed equal amounts of penalty on the EOU as the amounts demanded under the Central Excise Act and Customs Act. The Commissioner also imposed a penalty of Rs.10 lakhs on Shri N.Krishaniah, Executive Director, MGPL u/r 26 of Central Excise Rules, 2000/2002.
14. We have also considered the following grounds raised in the appeal before arriving at the above findings. As regards the demand relating to capital goods and consumables used at the quarries of the appellant in the production of granite blocks exported directly from quarries as such or sold in DTA, the main argument against the demand is that the quarried boulders were not exported as such directly from the quarries. They were exported directly after a process of manufacture. It is claimed that the granite blocks exported were classifiable under chapter heading 6802. It is argued that the heading covered roughly sawn blocks and stone of any shape including blocks or shapes or sheets whether or not in form of finished articles. We find that the impugned order did not confirm the demand for the sole reason that the EOU had exported excavated granite blocks as such from the quarries. He found that the impugned goods were not covered by the LOP issued to the EOU. Therefore, the exports could not be treated to be under the EOU scheme. The DC had categorically clarified that these exports had not been counted for fulfillment of export obligations.
15. We reproduce the notification No.37/2000-CE dt. 8/5/2000, as under:-
Exemption to specified goods for use in a granite quarry by 100% EOU/EPZ/FTZ
In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts excisable goods specified in the Table below (hereinafter referred to as the said goods), when brought for use in a granite quarry for the purpose of quarrying of granite (hereinafter referred to as the said purpose), by hundred percent export oriented units approved by the Board of Approvals for hundred per cent export oriented units, appointed by a notification of Government of India in the Ministry of Industry (Department of Industrial Policy and Promotion), or the Development Commissioner concerned, as the case may be, (hereinafter referred to as the said EOU Board) or by units within an Export Processing Zone or a Free Trade Zone specified in Annexure-I to this notification (hereinafter referred to as the Zone), approved by the Board of Approvals for Export Processing Zone appointed by a notification of Government of India in the Ministry of Industry (Department of Industrial Policy and Promotion) or the Development Commissioner concerned, as the case may be, for the said purpose (hereinafter referred to the said EPZ Board), from the whole of duty of excise leviable thereon under section 3 of the Central Excise Act, 1944 (1 of 1944) and the additional duty of excise leviable thereon under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), subject to the following conditions, namely :-
(1) The unit has been granted necessary approval for procurement of said goods for the said purpose.
(2) The said goods are brought directly to the unit from the factory of manufacture or from the warehouse.
(3) The said goods are used by the unit for the purpose of quarrying of granite meant for further processing or manufacture or production of articles of granite for export by its own export oriented unit or its unit in the Zone.
(4) The unit executes a bond with the Assistant Commissioner of Customs or Central Excise or Deputy Commissioner of Customs or Central Excise in the prescribed form and for such sum as may be specified by the Assistant Commissioner of Customs or Central Excise or Deputy Commissioner of Customs or Central Excise, binding itself :-
(a) to use the said goods only for its own export oriented unit or its unit in the zone, as the case may be;
(b) to fulfil the export obligation and Net Foreign Exchange Earning as a Percentage of Export and comply with conditions stipulated in this notification and the Export and Import Policy;
(c) to pay on demand an amount equal to the duty as leviable on the goods and interest at the rate of 20% per annum on the said duty from the date of duty free procurement of the said goods till the date of payment of such duty, if -
(i) in the case of capital goods, such goods are not proved to the satisfaction of the Assistant Commissioner of Customs or Central Excise or Deputy Commissioner of Customs or Central Excise to have been installed or otherwise used within a period of one year from the date of procurement thereof or within such extended period not exceeding five years as the Assistant Commissioner of Customs or Central Excise or Deputy Commissioner of Customs or Central Excise may, on being satisfied that there is sufficient cause for not using them as above within the said period, allow;
(ii) in case of goods other than capital goods, such goods are not proved to the satisfaction of the Assistant Commissioner of Customs or Central Excise or Deputy Commissioner of Customs or Central Excise to have been used in connection with the quarrying of granite or re-exported within the period of one year from the date of procurement thereof or within such extended period as the Assistant Commissioner of Customs or Central Excise or Deputy Commissioner of Customs or Central Excise may, on being satisfied that there is sufficient cause for not using them as above within the said period, allow;
(iii) in case of components, spares and consumables procured duty free, the unit fails to achieve the Net Foreign Exchange Earning as a Percentage of Exports (NFEP) and Export Performance (EP) as specified in Appendix-1 of the Export and Import Policy within one year of procurement of such goods or within such extended period, not exceeding one year, as the Assistant Commissioner of Customs or Central Excise or Deputy Commissioner of Customs or Central Excise may on being satisfied that there is sufficient cause, allow :
Provided that the Commissioner of Customs or Central Excise may extend the period of achievement of Net Foreign Exchange Earnings as a Percentage of Export (NFEP) or Export Performance (EP) for further period not exceeding five years from the date of procurement.
(5) The unit maintains a proper account of receipt, consumption and utilisation of the said goods and of granite so quarried and transferred to his processing unit or to any other export oriented unit or units in the Zone, and shall submit such accounts periodically to the Development Commissioner of the Zone and to the Assistant Commissioner of Customs or Central Excise or Deputy Commissioner of Customs or Central Excise, in such form and in such manner as may be laid down by the Development Commissioner.
(6) The manufacturer of the said goods follows the procedure contained in rules 156A and 156B of the Central Excise Rules, 1944 (hereinafter referred to as the said Rules) as modified by rule 173N of the said Rules.
(7) The unit follows the procedure contained in the Chapter X of the Central Excise
Rules, 1944 with the modification that the certificate in form CT-3 as specified in Annexure II to this notification shall be used by the Customs or Central Excise Officer-in-charge of the unit in place of the certificate in form CT-2 provided in the said Central Excise Rules.
(8) The quarries are in the name of the unit either on lease-basis or on ownership basis . The location and area of quarries or any subsequent change in location of quarry or quarries at a later stage, shall be intimated by the unit to the Development Commissioner and the Assistant Commissioner of Customs or Central Excise or Deputy Commissioner of Customs or Central Excise.
(9) The Assistant Commissioner of Customs or Central Excise or Deputy Commissioner of Customs or Central Excise may, subject to such conditions and limitations as he may specify and subject to the provisions of the Export and Import Policy, allow -
(a) the unit to supply granite so quarried to other Export Oriented Units or units in the Zone without payment of duty;
(b) the said goods to be taken out temporarily without payment of duty for repairs and return thereof;
(c) the unit to export the said goods;
(d) destruction of obsolete capital goods without payment of duty, if such goods are
destroyed in the presence of the Customs or Central Excise Officer.
(10) The said goods shall not be transferred or shifted to any other site or quarry owned or taken on lease by the unit without permission of the Assistant Commissioner of Customs or Central Excise or Deputy Commissioner of Customs or Central Excise.
(11) The accounts of the said goods used at the quarrying site shall be kept in the site in a properly constructed office to enable the verification of the same as and when required.
(12) The goods so quarried shall be removed from the quarry site only for supply to unit s own processing unit in the Zone or Export-Oriented Unit or for supply to an other hundred percent Export-Oriented Unit or the units in the Zone engaged in processing or production or manufacture of articles of granite and export thereof and shall not be allowed to be exported as such or to be cleared in Domestic Tariff Area.
2. Without prejudice to any othpr provision contained in this notification, the Assistant Commissioner of Customs or Cental Excise or Deputy Commissioner of Customs or Central Excise may, subject to such conditions and limitations as he may deem fit to impose under the circumstances of the case for the proper safeguard of the revenue interest and also subject to such permission of the Development Commissioner, where it is exclusively required under the Export and Import Policy, allow the unit to clear the said goods to any place in India in accordance with the Export and import Policy-
(a) such clearance of capital goods may be allowed on payment of an amount equal to the excise duty leviable on such goods on the depreciated value thereof and at the rate in force on the date of payment of such duty,
(b) such clearance of goods other than capital goods, may be allowed on payment of
excise duty leviable on such goods on the full value at the time of their clearance from the factory of manufacture and at the rates in force on the date of payment of such excise duty.
Explanation.- The depreciation in respect of goods covered by clause (a) shall be allowed for the period from the date of their use in a quarry to the date of payment of duty.
Note : For the purpose of this notification Export and Import Policy means the Export and Import Policy, 1997-2002 published by the Government of India under the Ministry of Commerce, Notification No. 1(RE-99)/1997-2002, dated 31st March, 2000, as amended from time to time.
TABLE
1.
Hydraulic Excavators
2.
Pneumatic Compressors
3.
Jack Hammers
4.
Hydraulic Drilling Machines
5.
Line Drillers
6.
Front End Loaders
7.
Pneumatic Grinders
8.
Diamond Wire Saws
9.
Dressing Machine
10.
Core Drilling Machine
11.
Jet Burners
12.
Cranes
13.
Derricks
14.
Tippers and Dumpers
15.
Welding Machine
16.
Generating sets
17.
Steel Chains and Steel Ropes
18.
D-Shackles
19.
Diamond Wires
20.
Diamond Segments
21.
Tungsten Carbon Drill Rods
22.
Steel Feathers and Wedges
23.
Burner Nozzle
24.
Welding Rods
25.
Hydraulic Oil and Lubricants
26.
Explosives
27.
Chisels, Hammers, Chain Pulley Blocks
28.
Steel Pillow Kits
29.
Dust Collector
30.
Consumables and tools
16. The demand is confirmed for failure of the appellant to fulfill the condition No.12. Identical condition appears in the corresponding customs notification No.58/2000-Cus. dt. 8/5/2000. Notification No.52/2003-Cus. dt. 31/3/2003 incorporated the same benefit w.e.f. 31/3/2003. This is reproduced hereunder:-
The goods so quarried shall be removed from the quarry site only for supply to unit’s own processing unit in the Zone or Export-Oriented Unit or for supply to an other hundred percent Export-Oriented Unit or the units in the Zone engaged in processing or production or manufacture of articles of granite and export thereof and shall not be allowed to be exported as such or to be cleared in Domestic Tariff Area.
17. The activities of the EOU are monitored by the DC in the Ministry of Commerce. The EOU is set up in terms of the policy provisions and functions subject to such provisions. An EOU is allowed to import / procure capital goods and consumables without payment of duty subject to the condition that it will achieve positive net foreign exchange annually and will discharge the export obligation within the prescribed time frame. Capital goods and inputs are kept in the bonded warehouse where the manufacture of specified export takes place. An EOU imports specified capital goods and consumables for manufacture and items allowed to be manufactured and exported as per the LOP. In the instant case, there is no dispute that the dimensional granite blocks exported by the EOU from its quarries were not one of the export products specified in the LOP issued to the appellants prior to 4/5/2005. In the letter No.8/EOU-219/VSEZ, 4525 dt. 27/9/2005, the DC replied the appellant s quarries as follows:-
As per this letter, there could not be any manner of doubt that the impugned goods were not allowed to be exported by the appellants under the EOU scheme during the material period. Export of dimensional granite blocks from the quarries during the material period did not entitle EOU for the exemption under the EOU scheme in respect of the capital goods and consumables deployed in its production.
18. We find that the appellants had submitted during the adjudication proceedings that it had fulfilled the export obligation and had achieved prescribed NFEP. The impugned order does not give a finding to the contrary. We find that the appellants had exported dimensional granite slabs and had not exported granite blocks quarried as such . This is obvious from the course of production of the impugned goods explained by the appellants. If the appellants had achieved prescribed NFEP and fulfilled the export obligation in respect of the goods received under Notification No.37/2000-CE and 53/2000-Cus. cannot be denied to the appellants.
19. That the export obligation was fulfilled in the case of machinery involved is not one of the finding in the impugned order. We find that the impugned capital goods / machinery being bonded goods, their eligibility to the benefit of the notification denied in the impugned order would crystallize only over a period of time allowed for completing the export obligation. If the export obligation is fulfilled in respect of these capital goods and consumables as claimed by the appellants before us, excluding the impugned exports within the time prescribed or allowed, the benefit of notification denied would still be available in respect of these goods. We remand this matter for fresh decision in this regard by the Commissioner. The appellants shall be heard before such a decision is taken.
20. As regards the clearances to DTA of the finished goods / export products of the EOU, the appellants have sought exemption in terms of Notification No.8/97-CE and 2/95-CE. They have relied on the decision of the Tribunal in the case of CCE, Jaipur-II Vs. Modern Polyster Yarn [2002(149) ELT 377 (Tri. Del.)], wherein it was decided that respondents therein entitled to benefit of Notification No.8/97-CE as well as 2/95-CE though it had not fulfilled the condition of seeking approval for DTA sale from the competent authority. We find that in the case of clandestine removal in Euro Cotspin Ltd. Vs. CCE, Chandigarh reported at 2001(127) ELT 52 (Tri. Del.), this Tribunal held as follows in a case of clandestine removal of finished goods to DTA
“9.Section 3 of the Central Excise Act relates to levy of Central Excise Duty. Sub-section (1) of the Section 3 stipulates that all excisable goods which are produced or manufactured in India shall be subject to duties at the rates specified in the Central Excise Tariff. Second proviso to sub-section (1) of Section 3 provides that excisable goods which are produced/manufactured in a 100% Export Oriented Undertaking and allowed to be sold in India shall be subject to excise duty equal to the aggregate of the duties of Customs leviable on like goods produced/manufactured outside India if imported into India. Notification 2/95 grants exemption to the goods produced in 100% EOU and supplied to domestic tariff area. Thus, duties of excise are leviable on excisable goods manufactured in India either at the rates specified in the Central Excise Tariff (under sub-section (1) of Section 3 or an amount equal to the aggregate of duties of customs leviable on goods produced outside India and imported into India. In either case, the goods are to be subjected to effective rates of duty after taking into account Exemption Notifications. In the present case M/s. Euro Cotspin Ltd. is a 100% EOU and the goods have been cleared into Domestic Tariff Area according to the finding in the order. Therefore, the goods should have been subjected to duty at the exempted rates after taking into account Notification No. 2/95. Therefore, the appellant’s submission that the rates applied are incorrect and the correct amount of duty payable would be much less merits acceptance. The appellant's claim for treating the price realised as cum-duty is also in accordance with settled law (Sri Chakra Industries case). Their submission that a separate duty demand is not tenable in respect of raw-materials received by them also merits acceptance since non-duty paid supply of raw materials to 100% Export Oriented Units is not subject to any condition. 100% Export Oriented Units work under a separate self-contained scheme and duty free supply of raw materials to them and clearance of 25% of goods produced from such raw materials to the Domestic Tariff Area are parts of that Scheme. There is no warrant to deny bits and parts of that scheme.
21. We also find considerable merit in the claim by the appellants that the DTA clearances of goods manufactured wholly out of the indigenous raw materials to assessment in terms of Notification No.8/97-CE. We allow this part of the appeal.
22. In the light of the decisions of the Tribunal discussed above, we find that the appellants are entitled to the benefits of notification No.8/97-CE and 2/95-CE. They are also entitled to cum-duty benefit where duty is demanded for clandestine clearances. We remand the matter for re-quantification of the duty liability of the appellant in view of our above finding.