IN THE HIGH COURT OF JUDICATURE AT MADRAS
C.M.A.No.2083 of 2010
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 16.09.2021
CORAM :
The Honourable Mr.Justice T.S.SIVAGNANAM
and
The Honourable Mr.Justice SATHI KUMAR SUKUMARA KURUP
C.M.A.No.2083 of 2010
and M.P.No.1 of 2010
M/s.Sudhan Spinning Mills P. Ltd.,
Thadi Combu,
Dindigul – 624 709. …Appellant
Vs
The Commissioner of Central Excise,
Office of the Commissioner of Central Excise,
Madurai.
…Respondent
APPEAL under Section 35G of the Central Excise Act against the order dated 10.02.2010 made Final Order No.174 of 2010 in Appeal No.E/729/2007 on the file of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench at Chennai.
For Appellant : No appearance
For Respondent : Mr.T.Pramod Kumar Chopda
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JUDGMENT
T.S.Sivagnanam,J
This appeal filed by the assessee under Section 35G of the Central
Excise Act, 1944 is directed against the order dated 10.02.2010 passed by
the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench
at Chennai [‘the Tribunal’ for brevity] in Final Order No.174 of 2010, whereby the appeal filed by the appellant/assessee was dismissed.
2.The facts leading to the filing of the appeal before the Tribunal is as hereunder:
The assessee is a Private Limited Company engaged in the
manufacture of cotton yarn falling under Chapter 52 of the First Schedule to
the Central Excise Tariff Act, 1985. The assessee was initially a Domestic
Tariff Area Unit [DTA Unit] till 1999. Thereafter, it had obtained a license
as a 100% Export Oriented Unit [EOU] for the manufacture and export of
cotton yarn during the period from 27.08.1999 to 26.08.2004 and from
27.08.2004 to 29.05.2006. The assessee had imported capital goods and
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also procured indigenously manufactured goods without payment of central
excise duty as per the notification for the use and in the manufacture and
export of cotton yarns to fulfill the export obligation as prescribed in the
Foreign Trade Policy [FTP]. Subsequently, the assessee exited from their
EOU status and addressed a letter to the Development Commissioner and
sought for debonding of goods lying in stock which included imported and
indigenous capital goods. The appellant proceeded to take steps to
discontinue their EOU status by adopting the procedure in the Hand Book of
procedures for EOU as made applicable to the Export Promotion Capital
Goods Scheme [EPCG Scheme] and by letter dated 15.10.2005 addressed
the Development Commissioner to request to issue No Objection Certificate
for debonding and accordingly, a letter was issued on 10.11.2005 and based
on the said letter, the assessee approached the Assistant Commissioner of
Central Excise on 14.12.2005 and informed that the assessee would pay the
duties and debonding after their assessments and also wrote to the
Development Commissioner of Madras Export Processing Zone [MEPZ]
about their desire to opt for EPCG Scheme in terms of para 6.18 of FTP and
para 5.4 of Hand Book of Procedure and requested to recommend their case
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to the Joint Director General of Foreign Trade, Coimbatore for issue of
EPCG license. Base don the letter dated 14.12.2005, the Joint Director
General of Foreign Trade issued necessary certificate for issue of EPCG
license. Accordingly, license dated 02.02.2006 was issued to the assessee
with the condition that the license would be utilized under Customs
Notification 97/2004. Further, the assessee placed heavy reliance on the
letter dated 18.05.2006 written by the Assistant Commissioner of Central
Excise, Dindigul I Division to the Development Commissioner stating that
no customs and central excise duties are pending from the assessee Unit.
Based upon the said letter, the Development Commissioner by letter dated
29.05.2006 granted final exit from 100% EOU status in DTA. While so, the
respondent issued show cause notice dated 30.04.2007 stating that the
assessee has not paid applicable central excise duties on the depreciated
value of the indigenously procured capital goods and demanded a sum of
Rs.1,30,50,370/- together with interest. By reply dated 08.06.2007 the
assessee denied their liability and also informed that they are in the process
of performing their export obligations. The reply was rejected and the
proposal made in the show cause notice was confirmed and order-in-original
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was passed dated 24.08.2007. Aggrieved by the same, the assessee
preferred appeal before the Tribunal which has been dismissed by the impugned order.
3.The assessee has raised the following substantial questions of law for consideration:
“1.Whether on the facts and circumstances of
the case, the Appellate Tribunal is right in law in confirming the demand of Rs.1,30,50,370/- equal to the central excise duty arrived on the depreciated value of the indigenously procured capital goods under section 11A of the Central Excise Act, 1944?
2.Whether on the facts and circumstances of the
case, the Appellate Tribunal is right in law in brushing aside the case on merits and holding that fulfillment of export obligation to a higher limit is not relevant in view of the fact that the payment of duty is already compensated by fixing export obligation demand of duty again from the appellant is not justifiable?
3.Whether on the facts and circumstances of the
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case, the Appellate Tribunal is right in law in not
adjudicating upon the issues with regard to the fulfillment
of export obligation when the same was raised and pleaded before it?”
4.We have heard Mr.T.Pramod Kumar Chopda, learned counsel
appearing for the revenue. None appears for the appellant/assessee. The
matter has been on the Board of the Court for final hearing from January
2020 and the order sheet reveals at every stage the Board of this Court,
where one of us [TSSJ] was a member from the year 2018 and repeatedly
adjournment was sought for and very recently also on four occasions,
adjournment was sought for and those requests were accommodated, yet
today [16.09.2021], when the matter is taken up, none appears for the appellant.
5.The sheet anchor of the case of the appellant is based upon the letter
written by the Assistant Commissioner, Central Excise, Dindigul I, dated
18.05.2006 to the Development Commissioner, wherein it has been stated
that the assessee has paid all the customs and central excise duty and
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nothing is pending from their Unit. We have perused the letter dated
18.05.2006 which has been addressed by the Assistant Commissioner to the
Development Commissioner, MEPS, Tambaram. In paragraph 2 of the
letter which has been mentioned that the entire excise duty liability of
Rs.1,30,50,369/- on indigenous capital goods against the EPCG license has
been discharged by the assessee. The final exit order was given by the
Assistant Development Commissioner by order dated 29.05.2006. The
effect of such letter was considered by the Tribunal. In fact the Tribunal in
paragraph 4 of its order records the response of the assessee to a query
raised by the Tribunal. The Tribunal has called upon the assessee to state as
to whether they are contesting the dutiability of the indigenously procured
capital goods on merit or they are contesting the amount of duty quantified.
The candid response of the assessee has been recorded by the Tribunal in the following terms:
“…………. On a query from the Bench, the
learned counsel states that the appellants are not contesting the dutiability of the indigenously procured capital goods on merit nor they are contesting the amount of duty quantified. ”
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6.Thus, it is clear that the assessee did not contest the dutiability of
the indigenously procured capital goods on merit or on the quantum.
Therefore, their plea was that based on the letter of the Assistant
Commissioner dated 18.05.2006 central excise duty liability stood
discharged. Unfortunately the assessee who has been registered under the
provisions of the Central Excise Act has failed to take note of rudimentary
legal principles. If the assessee claims that he has discharged the duty
liability, the same should be established in the manner known to law by
producing the necessary challan or an order to the said effect passed by the
competent Assessing Officer. The Tribunal rightly held that the letter dated
18.05.2006 by the Assistant Commissioner to the Development
Commissioner, MEPZ is not an order. Furthermore, the Tribunal rightly
took note of the legal position that the assessment order is not required to be
appealed against for raising a demand of short levy or non-levy and this
power is exercisable in terms of section 11A of the Central Excise Act, 1944
and section 28 of the Customs Act, 1962. In this regard, the decision relied
on by the revenue had been taken note of, namely, Venus Enterprises vs.
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Commissioner of Customs, Chennai [2006 (199) ELT 405 (Mad.)] which
had been upheld by the Hon’ble Supreme Court as reported in 2007 (209)
ELT A61 (SC). Furthermore, the Tribunal in paragraph 6 has once again
recorded that the assessees are not challenging the fact that they are required
to pay the excise duty on the amortized value of the indigenously procured
capital goods duty-free under the EOU scheme when they converted to
EPCG scheme on merit and they are also not challenging the fact that the
quantum of duty computed which was payable by them has not been
actually paid. The only challenge which was made by the assessee before
the Tribunal is that the Assistant Commissioner’s letter dated 18.05.2006
has not been appealed against and reversed and hence, no demand of duty
can be raised. This contention was rightly rejected by the Tribunal by taking
note of the fact that the assessee was fully aware of the duty liability which
was clear from their letter dated 14.11.2005, which reads as follows:
“This has reference to our opting out of EOU
Scheme and operate under the EPCG Scheme Regarding.
We are glad to inform you that the Development
Commissioner, Madras Export Processing Zone, Chennai
has given his inprincipal No Objection Certificate to us
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for Exit from the EOU Scheme to operate under EPCG Scheme. A copy of the letter received from the Development Commissioner is enclosed herein for your reference.
As stipulated in the letter, we are agreeable to
pay Customs & Central Excise Duty for the Capital Goods
[on the Amortized Value], Raw materials, Consumables
and Finished goods in stock at the applicable rate of Duty both for the Imported and Indigenous goods.
After assessing the Duty amount to be paid for
the plant & machinery and other materials in stock, we
will submit a separate letter shortly for doing the needful.”
7.A reading of the above letter will clearly show that the assessee in
no uncertain terms agreed to pay Customs & Central Excise Duty for the
Capital Goods on the amortized value, Raw materials, Consumables and
Finished goods in stock at the applicable rate of Duty both for the imported
and indigenous goods. Furthermore, in the letter dated 01.12.2005 when the
assessee addressed the Development Commissioner, they have indicated the
duty liability in respect of indigenous capital goods and also submitted the
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invoices in respect of such capital goods.
8.Thus, the Tribunal was right in stating that the intention of the
assessee was not as that of an honest tax payer as they failed to come
forward to disclose that they have not paid the duty amount. That apart, as
observed earlier the letter dated 18.05.2006 cannot be regarded as an
assessment order and it is merely an inter-departmental communication.
Admittedly, there was no adjudication done prior to the letter dated
18.05.2006 for it to be considered as an adjudication order and at best, it
can be taken to be an inadvertent mistake committed by the authority in
addressing the Development Commissioner. Precisely, for this reason the
Tribunal has granted relief to the assessee by deleting the penalty which also
in our considered view is a proper exercise of discretion by the Tribunal.
Before the Tribunal, the assessee having admitted to the fact that they have
not discharged the duty liability took an alternate stand that they have been
burdened with fulfillment of export obligation to a higher limit and if it is so,
they will be entitled to draw back and consequently, the demand would be
revenue neutral. This issue was considered by the Tribunal and rightly held
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to be not relevant dispute before the Tribunal as the appellant had to
approach the DGFT authorities for making any adjustment subject to their
eligibility. Thus, we find that the Tribunal has rightly re-appreciated the facts and rejected the appeal filed by the appellant/assessee.
9.Thus, we find no question of law much less the substantial question
of law arising for consideration in this appeal. Accordingly, the appeal fails and is dismissed. No costs.
(T.S.S.,J.) (S.S.K,J.)
16.09.2021
Index: Yes/No
Internet:Yes/No
Speaking Judgment/Non speaking Judgment
cse
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C.M.A.No.2083 of 2010
T.S.SIVAGNANAM,J.
AND
SATHI KUMAR SUKUMARA KURUP,J.
cse
To
The Customs, Excise and Service Tax
Appellate Tribunal, South Zonal Bench at Chennai
C.M.A.No.2083 of 2010
16.09.2021
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C.M.A.No.2083 of 2010
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