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Customs, Excise and Gold Tribunal - Bangalore

Customs, Excise and Gold Tribunal - Bangalore

M/S. Kuntal Granites (P) Ltd ... vs Commissioner Of Central Excise, ... on 22 February, 2001
Equivalent citations: 2001 (75) ECC 168, 2001 (132) ELT 214 Tri Bang ORDER Shri S.S. Sekhon, Member (T) 1. The appellant is a Hundred percent Export Oriented Unit (E.O.U.) registered with the Central Excise and engaged in the manufacture of polished granite slabs falling under Ch.H No 6807 of Central Excise Tariff Act 1985. They are also registered under the Customs Act 1962 and had set up the unit in June 1991. 2. on 16.10.92, the Preventive Officers visited the premises and on verification of stocks/records and seized 77 Nos of Granite slabs. The appellants vide their letter dt 7.12.96, reconciling the stocks explained that 181 slabs polished/unploished were removed from the factory(licenced premises) and were lying adjacent to their office, in another shed known as Jiglur Service Centre. The same were seized on 18.12.92, 78 tiles were seized on 24.12.92 from the factory. 3. A notice was issued on 15.4.93, alleging contravention of rule 9 (1), 110-B, 100-D & 100-E alleging (a) 77 Nos of Granite slab (measuring 265.485 sq meters under seizure on 16.10.92 and 194 slab (166 unpolished & 28 polished) cleared without payment of duty from the factory and seized on 18.12.92 and 78 Nos granite slabs (SIC)(it should be Tiles), measuring 11.89 Sq mtrs under seizure should not be confiscated under rule 209 of the Central Excise Rules.

(b) Central Excise Duty amounting to Rs 2,19,994.30 on 92.82 Sq mtrs of slabs cleared without following the Central Excise Procedure/should not be demanded and recovered under rule 9(2) of the Rules, as they had suppressed the production and clearance of this quantity with intention to evade. (c) Central Excise Duty of Rs 5,54,514 on 181 slabs removed during the period 8.2.92 to 24.9.92 should not be demanded and recovered under Rule 9 (2). (d) Central Excise Duty amounting Rs 1,06,441.96 on 44.91 Sq Mtrs of slabs our of 56.8 Sq mtrs which were cleared for exhibition and not returned should not be demanded under Rule 9(2). (e) Penalty not be imposed under Rule 9(2) & 209 and confiscation of land and buildings not be ordered under rule 209(2). 4. The Commissioner vide order dt 15.3.96, ordered the confiscation of 97 slabs seized on 16.10.92 under rule 209 and ordered the appropriation of the Bond of Rs 5000/- executed at provisional release. The 194 slabs measuring 333.922 sq mtrs seized on 18.12.92 and 78 Nos on 24.12.92 were ordered to be confiscated under the provisions of rule 209. A penalty of Rs 1,50,000/- was imposed for contravention of rule 9(2) & 209 confiscation of plant & machinery under 209 (2) was ordered and a redemption fineof Rs One lakh was imposed; Duties as demanded were confirmed. The present appeal is against this order. 5. We have heard both sides and considered the material and find(a) The primary objection of the appellants about the jurisdiction of the authority to issue show cause notice by the Collector incharge on a 100% E.O.U. has a force upheld by the Board vide their instruction on the demands for duties of Customs, if export objections are not met. The instructions provide for issuance of show cause notice by Revenue, but also stipulate that adjudication should be proceeded with,only after the Development Commissioner in-charge of EOUs have been intimated about the violation. The instructions issued by Circular No 21/95-Cus dt 10.3.95 and 122/95 dt 28.11.95 are relevant and have been relied upon the Tribunal and confiscation

orders set aside (VISUAL FOOT WEAR LTD 1999 (114) ELT 60 (T),following the same, we find, the Commissioner was bound to follow the Circular dt 10.3.95 and 28.11.95 and not proceeded to adjudicate the matter without referring the same to the Board/Development Commissioner, or at least to have considered these orders and thereafter come to his findings regarding his jurisdiction. (b) We find proviso to section 3 (1) of the Central Excise Act 1944, reads as "Provided that the duties of excise which shall be levied and collected on any excisable goods which are produced or manufactured, (i) in a free trade zone and brought to any otherplace in India; or (ii) by a hundred percent, export oriented undertaking and allowed to be sold in India, shall be an amount equal to...." This difference of the levy on goods manufactured in the case of a free trade zone, a 100% E.O.U. and the other goods manufactured or produced in India cannot be ignored. The levy and collection in case of Freed Trade Zone is on a clearance and bringing the same to any place other than the zone, in India. While in the case of 100% EOU,it is on goods allowed to be cleared and sold in India;andother goods manufactured it is on all goods manufactured and removed. Thus we find that the words "allowed to be sold" in clause (ii) of proviso to section 3 (1) of the Act are very important and relevant. The Supreme Court in the case of SIV INDUSTRIES LTD - (2000 (117) ELT 281 (SC) ) have taken cognisance of the stand of Revenue in para 22 of the reported decision as follows "....It will thus be seen that it is the stand of the Revenue itself that the proviso to section 3(1) of the Act is applicable to 25% of goods, sold by an E.O.U. in DTA...." and The Hon'ble Supreme Court in this very decision in para 18 have held -

"....It also becomes apparent that in view of the E.O.U.scheme as modified from time to time and corresponding amendments to section 3 of the Act the expression "allowed to be sold in India" in the proviso to section 3(1) of the Act is applicable only to sales made upto 25% of production by 100% EOU in DTA and with the permission of the Development Commissioner." The order and the notice bring forth no evidence relied as regards the sales effected and or the permission of the said Development Commissioner. Therefore duties confirmed of a lay under the proviso to section 3 (1) cannot be upheld. (c) We have considered the submission as regards the liability for confiscation. We find from the impugned order that the Collector has com,e to a finding that, the records connected with the matter were verified and the polishing production records do not show any re-working and held that re-working, trimming explanation, given by the appellant was an after thought. He has also cometo a conclusion that the slabs under seizure (194 Nos) were seized from another premises and on verification these slabs do not show markings and therefore it was difficult for him to accept that 181 slabs cleared from the factory are part of 194 seized elsewhere and he rejected the transfer slips as an after thought. If the goods under seizure are not correlated to the goods cleared from the factory, how the Collector has determined that the same were removed from the factory in contravention of rule 9 (2). Obviously, the seizure is made at Jiglur shed,on information supplied by appellants letter dt 7.12.96, if that is the basis to accept the goods to be manufactured fully or partially, then the other explanation of the `transfer slips' cannot be rejected as `after thought'. We do not find any material to uphold the confiscation is arrived at the order. (d) We have considered the charge of difference between the RG. 1 and the Bank Statements on which allegation of clandestine removal and demand of duty are being made. We find, RG.1 is a document prescribed under rule 47,53 & 173 G of the Central Excise Act. Rule 100-H(3) under Chapter V A, applicable to 100% EOU, specifically provide that provisions of rule 47, 53 of the Rule shall not apply to excisable goods produced or manufactured by a 100% EOU. We find Rule 173A (2) provides that provisions of Chapter VII A

will not apply to 100% EOU, therefore rule 173-G will not apply to the alleged RG.1. When, excisability is itself depended on 'allowed to be sold' and the rules 47 & 53 and 173G, are not applicable, entries made in RG.1 format are not statutory and cannot have any additional evidential value than any other private record of the assessee. We rely on the decisions on the specific issue that entries in stock register (RG.1) and Bank statements, being different,cannot be sole ground for raising a presemption of manufacture and clandestine clearance. (K.J Diesel 2000 (120) ELT 505) relied by the appellants in this connection, to find the evidence to be insufficient to allege unaccounted clearance to determine any demand of duty thereon. (e) For the reasons that RG.1 is not required to be maintained, we find no reason to confiscate the goods found within the factory premises. (f) When we find that demands of duty cannot be determined, confiscations cannot be ordered, the penalty is required to be set aside. (g) In view of our findings, we find no adequate reason to order confiscation under rule 209 (2). 6. In view of our findings, we set aside the order and allow the appeal.