Godrej and Boyce Mfg. Co. Ltd. Vs. Commissioner of C. Ex. - Court Judgment

Excerpt:
1. the appeal is directed against the order dated 31-5-1997 passed by the commissioner of central excise, mumbai-ii. the appellants are engaged in the manufacture of excisable goods falling under chapter nos. 87 & 94 of the central excise tariff act and proceedings were initiated against them by issue of show cause notices that they have cleared excisable goods viz. steel furniture, forklift trucks and spares falling under sub-headings 9401.00, 8427.00 and 8431.00 without payment of duty to 100% export oriented units in violation of tine condition for exemption under notification no. 57/94, dated 1-3-1994 and notification no. 1/95, dated 4-1-1995. the charge was that the exemption is available only if the goods are used or consumed in the production of goods for export, whereas the disputed goods, according to the department, cannot be so used. after considering their reply and hearing them in the matter, the commissioner held that in view of the ct-3 certificate produced as prescribed under the notification, forklift trucks are eligible for exemption, but the commissioner denied the exemption in respect of various items of office furniture, storage units, partition panels, tables, executive chairs.2. shri hidayatulla, the ld. sr. counsel appearing for the appellants submitted that the condition in the notification is that the exempted goods would be brought directly to the 100% eou for use in the manufacture of export product and that there should be an undertaking given by the 100% eou along with ct-3 certificate from the jurisdictional superintendent of central excise as per the annexure to the notification. the goods in question viz. office equipment is covered by sl. no. 10 of the notification and the appellants have duly produced ct-3 certificate from the jurisdictional superintendent indicating their entitlement for removal of office equipments (furnitures) on the strength of this certificate. the ld. sr. counsel submitted that in such circumstances, the liability for any violation of the condition of the notification will be on the exporter i.e., 100% eou and not on the appellants who are the manufacturer of equipments supplied against the ct-3 certificate to 100% eou. in this context, the ld. sr. counsel relied upon the decision of the tribunal in their own case in similar circumstances being final order no. e/99/1996-b, dated 11-3-1996. the tribunal while considering the similarly worded notification no. 186/75, has held that since the bond has been executed by the consignees-plot holders-exporters, if they have violated the condition either in not utilising the goods or not exporting as required in terms of the notification, the correct course open to the department is to take action against the concerned exporters who have violated the condition. the ld. sr. counsel on the same context, relied upon the tribunal decision in the case of collector v. madras radiators & pressings ltd. - 1944 (69) e.l.t. 409 (tribunal) in which the tribunal has held that such a case is a short payment that arises not from any levy or any mistake associated with levy and payment, but from the failure of the buyer of the goods to account for them and/or to use them in the ways contemplated by the law when he was given the concession. the tribunal held that in such circumstances, the duty is payable by the beneficiary of the exemption who is the buyer of the goods and not the manufacturer.3. shri s.v. singh, the ld. dr for the department referred to the findings of the commissioner to say that items in dispute to which the exemption is already denied can hardly be called office equipment which is the material entitled for exemption.4. we have carefully considered the submissions. we find that the show cause notice issued in this case alleges that the appellants have contravened the provisions of notification no. 57/94 by clearing the excisable goods to 100% eou and that such goods are not used in connection with the production of goods or for being used^in connection with the production of such goods intended for export and the show cause notice further alleges that the goods in dispute cannot by any stretch of imagination be used in accordance with the conditions laid down in the notification. we find that in the show cause notice there is no elaboration as to how the goods in dispute do not satisfy the condition. it is only in the adjudication order, the commissioner has given a finding that office equipment covered only items like photocopying machines, shredding machines, calculators, fax machines etc. and it cannot cover furniture items like storage units, partition panels, tables etc. however, since the charge has not been set out in this manner in the show cause notice to enable the appellants to meet the charge the commissioner's order taking this ground by denying the exemption is bad in law. apart from this, we find that the ratio of the tribunal decision in the appellants' own case cited supra also supports their case. the tribunal was dealing with similarly worded notification which included supply of furnitures under tariff item 40 of the old central excise tariff to santacruz electronics export processing zone (sepz) having the similar condition stipulating the use of material received under exemption notification in export production. the charge there was also that this condition has been violated and the show cause notice has been issued to the manufacturer of the material so supplied.it is in this context that the tribunal has concluded that since the bond has been executed by the consignee exporters and if they have violated the condition of the notification, the department ought to proceed against the user manufacturer in the export processing zone for such violation. the tribunal, therefore, concluded that there was no justification to raise the demand against the appellants herein who are respondents in that case since they have supplied the goods based on a valid certificate submitted before them. in the present case also the appellants have supplied the material only against the ct-3 certificate which is prescribed in the notification itself. the fact that they had filed the classification list in which they have indicated the clearance of this goods against notification no. 57/94 will not by that reason cast the duty liability on them having regard to the scheme of the exemption under notification which has been noted in the tribunal decision supra. the observation of the tribunal about the nature of such exemption made in the decision of the case of collector v. madras radiators & pressings ltd. supra will also support the case of the appellants. in this view of the matter, the impugned order is set aside and the appeal is allowed with consequential relief as per law.

Judgment:
1. The appeal is directed against the order dated 31-5-1997 passed by the Commissioner of Central Excise, Mumbai-II. The appellants are engaged in the manufacture of excisable goods falling under Chapter Nos. 87 & 94 of the Central Excise Tariff Act and proceedings were initiated against them by issue of show cause notices that they have cleared excisable goods viz. steel furniture, forklift trucks and spares falling under sub-headings 9401.00, 8427.00 and 8431.00 without payment of duty to 100% Export Oriented Units in violation of tine condition for exemption under Notification No. 57/94, dated 1-3-1994 and Notification No. 1/95, dated 4-1-1995. The charge was that the exemption is available only if the goods are used or consumed in the production of goods for export, whereas the disputed goods, according to the department, cannot be so used. After considering their reply and hearing them in the matter, the Commissioner held that in view of the CT-3 certificate produced as prescribed under the notification, forklift trucks are eligible for exemption, but the Commissioner denied the exemption in respect of various items of office furniture, storage units, partition panels, tables, executive chairs.

2. Shri Hidayatulla, the ld. Sr. Counsel appearing for the appellants submitted that the condition in the notification is that the exempted goods would be brought directly to the 100% EOU for use in the manufacture of export product and that there should be an undertaking given by the 100% EOU along with CT-3 certificate from the jurisdictional Superintendent of Central Excise as per the Annexure to the notification. The goods in question viz. office equipment is covered by Sl. No. 10 of the Notification and the appellants have duly produced CT-3 certificate from the jurisdictional Superintendent indicating their entitlement for removal of office equipments (furnitures) on the strength of this certificate. The ld. Sr. Counsel submitted that in such circumstances, the liability for any violation of the condition of the notification will be on the exporter i.e., 100% EOU and not on the appellants who are the manufacturer of equipments supplied against the CT-3 certificate to 100% EOU. In this context, the ld. Sr. Counsel relied upon the decision of the Tribunal in their own case in similar circumstances being Final Order No. E/99/1996-B, dated 11-3-1996. The Tribunal while considering the similarly worded Notification No. 186/75, has held that since the bond has been executed by the consignees-plot holders-exporters, if they have violated the condition either in not utilising the goods or not exporting as required in terms of the notification, the correct course open to the department is to take action against the concerned exporters who have violated the condition. The ld. Sr. Counsel on the same context, relied upon the Tribunal decision in the case of Collector v. Madras Radiators & Pressings Ltd. - 1944 (69) E.L.T. 409 (Tribunal) in which the Tribunal has held that such a case is a short payment that arises not from any levy or any mistake associated with levy and payment, but from the failure of the buyer of the goods to account for them and/or to use them in the ways contemplated by the law when he was given the concession. The Tribunal held that in such circumstances, the duty is payable by the beneficiary of the exemption who is the buyer of the goods and not the manufacturer.

3. Shri S.V. Singh, the ld. DR for the department referred to the findings of the Commissioner to say that items in dispute to which the exemption is already denied can hardly be called office equipment which is the material entitled for exemption.

4. We have carefully considered the submissions. We find that the show cause notice issued in this case alleges that the appellants have contravened the provisions of Notification No. 57/94 by clearing the excisable goods to 100% EOU and that such goods are not used in connection with the production of goods or for being used^in connection with the production of such goods intended for export and the show cause notice further alleges that the goods in dispute cannot by any stretch of imagination be used in accordance with the conditions laid down in the notification. We find that in the show cause notice there is no elaboration as to how the goods in dispute do not satisfy the condition. It is only in the adjudication order, the Commissioner has given a finding that office equipment covered only items like photocopying machines, shredding machines, calculators, fax machines etc. and it cannot cover furniture items like storage units, partition panels, tables etc. However, since the charge has not been set out in this manner in the show cause notice to enable the appellants to meet the charge the Commissioner's order taking this ground by denying the exemption is bad in law. Apart from this, we find that the ratio of the Tribunal decision in the appellants' own case cited supra also supports their case. The Tribunal was dealing with similarly worded notification which included supply of furnitures under Tariff Item 40 of the old Central Excise Tariff to Santacruz Electronics Export Processing Zone (SEPZ) having the similar condition stipulating the use of material received under exemption notification in Export production. The charge there was also that this condition has been violated and the show cause notice has been issued to the manufacturer of the material so supplied.

It is in this context that the Tribunal has concluded that since the bond has been executed by the consignee exporters and if they have violated the condition of the notification, the department ought to proceed against the user manufacturer in the export processing zone for such violation. The Tribunal, therefore, concluded that there was no justification to raise the demand against the appellants herein who are respondents in that case since they have supplied the goods based on a valid certificate submitted before them. In the present case also the appellants have supplied the material only against the CT-3 certificate which is prescribed in the notification itself. The fact that they had filed the classification list in which they have indicated the clearance of this goods against Notification No. 57/94 will not by that reason cast the duty liability on them having regard to the scheme of the exemption under notification which has been noted in the Tribunal decision supra. The observation of the Tribunal about the nature of such exemption made in the decision of the case of Collector v. Madras Radiators & Pressings Ltd. supra will also support the case of the appellants. In this view of the matter, the impugned order is set aside and the appeal is allowed with consequential relief as per law.