Case Law Details
Biocon Limited Vs Commissioner of Central Tax (CESTAT Bangalore)
Brief facts leading to the present dispute, inter alia, are that the appellant is a 100% Export Oriented Unit (EOU); that the appellant had procured raw materials/inputs for the purpose of manufacture and export of its final products; that the importation of raw materials were allowed duty-free by virtue of Notification No.52/2003-CUS dated 31.03.2003; that the appellant had also procured certain indigenously manufactured goods duty-free as per Notification No.22/2003-CE dated 31.03.2003; that the obvious purpose of these procurements of duty-free raw materials were for the manufacture of specified final product and the export thereon; and that certain quantity of such raw materials had become obsolete and unusable. This prompted the appellant to request the jurisdictional authorities for destruction of the same; that the Revenue insisted for the payment of duty involved which was paid by the appellant and only thereafter, the duty-free raw materials were destroyed under respective Mahazars, and that on 12.10.2012 & 14.04.2014 the appellant filed its claims for refund of the duty paid for the two periods involved, on the ground that the same was paid wrongly.
Revenue issued a show cause notice proposing to reject the above refund claims, which was seriously contested vide appellant’s reply thereto, but however, the said claims of the appellant were rejected vide respective Orders-in-Original against which the appeals were filed before the First Appellate Authority. The First Appellate Authority also having rejected the appeals of the assessee, the appellant has assailed the same in these appeals.
Held by CESTAT: The perusal of the orders of the lower authorities does not allege that the appellant had not fulfilled the export obligation and accordingly, the ratio in the Saint Gobin Crystals (supra) of this Bench squarely applies. Moreover, the Notification No. 52 ibid as amended by Notification Nos. 30 and 34 ibid clearly prescribe vide new Condition No.8 which is extracted elsewhere in this order that no duty shall be leviable if raw material is destroyed within the unit after intimation to the Customs authorities. A conjoint reading of the amended Notifications as well as the ratio laid down in the case of Saint Gobin Crystals (supra), leads to the only possible inference that the Revenue authorities have erred in demanding payment of duty and consequently, the appellant is entitled for refund of the same.
FULL TEXT OF THE CESTAT BANGALORE ORDER
These two appeals are filed by the assessee against the Orders –in-Appeal No.227/2013 and 39/2015/LTU respectively passed by the Commissioner (Appeals), LTU, Bangalore, dated 20.11.2013 & 23.03.2015 but however, since common facts and issue are involved, they are taken up for common disposal for convenience. When the matter was taken up for hearing, learned Authorized Representative Sh. P.Gopakumar, Joint Commissioner, at the outset contended that the issue involves interpretation of Notifications and hence, these are to be only heard before the Division Bench of CESTAT.
2. Per Contra, Sh. N.Anand, learned Advocate, points out that the issue pertains only to the post-importation procedure and nothing to do with the interpretation of any Notifications and as such, the Single Member Bench of the CESTAT has jurisdiction. He also draws attention to the Miscellaneous Order No.20284 in the appellant’s case dated 03.09.2021 wherein, the Division Bench of this CESTAT has after examination of records, directed the Registry to list the appeals before the Single Member Bench. It is therefore, clear that by the pleadings of the learned Advocate as well as the Miscellaneous Order, the Single Member Bench of the CESTAT has been conferred with the jurisdiction to dispose of these appeals.
3. Brief facts leading to the present dispute, inter alia, are that the appellant is a 100% Export Oriented Unit (EOU); that the appellant had procured raw materials/inputs for the purpose of manufacture and export of its final products; that the importation of raw materials were allowed duty-free by virtue of Notification No.52/2003-CUS dated 31.03.2003; that the appellant had also procured certain indigenously manufactured goods duty-free as per Notification No.22/2003-CE dated 31.03.2003; that the obvious purpose of these procurements of duty-free raw materials were for the manufacture of specified final product and the export thereon; and that certain quantity of such raw materials had become obsolete and unusable. This prompted the appellant to request the jurisdictional authorities for destruction of the same; that the Revenue insisted for the payment of duty involved which was paid by the appellant and only thereafter, the duty-free raw materials were destroyed under respective Mahazars, and that on 12.10.2012 & 14.04.2014 the appellant filed its claims for refund of the duty paid for the two periods involved, on the ground that the same was paid wrongly.
4. Revenue issued a show cause notice proposing to reject the above refund claims, which was seriously contested vide appellant’s reply thereto, but however, the said claims of the appellant were rejected vide respective Orders-in-Original against which the appeals were filed before the First Appellate Authority. The First Appellate Authority also having rejected the appeals of the assessee, the appellant has assailed the same in these appeals.
5. Heard Sh. N.Anand, learned Advocate for the appellant and Sh. P.Gopakumar, learned Authorized Representative for the Respondent, have gone through the documents placed on record as well as the decisions/orders relied upon during the course of arguments.
6. The import of duty-free raw materials was made with a purpose to manufacture and export the final products. It is the case of the appellant that both the Notifications in question, viz., Notification No.52/2003-CUS dated 31.03.2003; ibid and Notification No.22/2003-CE dated 31.03.2003 ibid were amended vide Notification Nos. 34/2015 and 30/2015 both dated 25.05.2015, wherein Condition No.8 of the Notification No.52 ibid was substituted by new Condition No. 8, which reads as under:
“(8) Subject to the satisfaction of the said officer, duty shall not be leviable in respect of capital goods, raw material, consumables, spares, goods manufactured, processed or packaged and scrap or waste or remnants or rejects are destroyed within the unit after intimation to Customs authorities or destroyed outside the unit with permission of Customs authorities:
Provided that this condition shall not apply in case of unit engaged in manufacture and export of gold, silver, platinum, diamond, precious and semi-precious stones.”
7. The said substituted Condition is not absolute but however, is subject to the satisfaction of the said officer. The appellant has also relied on Foreign Trade Policy-2009-2014 to the extent relating to sale of unutilized material which is covered under Paragraph 6.15 of the said Policy. The effect of the said Paragraph is that an EOU can dispose of unutilized goods and services, imported or procured from DTA, with the approval of the Custom authorities without payment of duties. They have also relied upon the following decisions in support of their claim:
- BPL Display Device Ltd. Vs CCE, 2004 (174) ELT 5 (SC).
- Saint Gobin Crystals & Detectors (I) Ltd. Vs CC, 2018 (364) ELT 105 (Tri. Bang.)
- Macmillan India ltd. Vs CC, 2008 (223) ELT 449 (Tri. Bang.)
- Symphony Services Corp India Pvt. Ltd. Vs CC, 2009 (245) ELT 661 (Tri. Bang.) affirmed by the Hon’ble Karnataka High Court as reported in 2012 (275) ELT 369 (Kar.).
- Sandoz Pvt. Ltd. Vs CCE, 2012 (278) ELT 259 (Tri. Mum.)
8. On the other hand, learned Authorized Representative supported the findings of the lower authorities. He also relied on an order of this very Bench in the case of Axa Business Services Pvt. Ltd. Vs CC, Bangalore, 2017 (10) TMI 763- CESTAT BANGALORE. In the said decision of Axa Business, the facts are slightly different inasmuch as there was transfer of certain goods to the other unit without intimation to the Revenue and that there was order of confiscation and in lieu of that thereof a redemption fine was also offered. The facts in the cases on hand are different and hence the ratio of above decision is not applicable.
9. After going through the orders of lower authorities and other judicial pronouncements, I find that an almost identical issue has been decided by this very Bench in the case of Saint Gobin Crystals (supra) and wherein at Para 6 it has been held as under:
“6. After considering the submissions of both the parties and perusal of material on record, I find that it is not in dispute that the appellant has fulfilled the export obligation during the relevant period and have achieved the positive Net Foreign Exchange. Further I find that as per Para 6.15(b) of the Foreign Trade Policy 2004-2009, the appellants are entitled to destroy the raw material, spares, waste and scrap within unit after intimation to the Customs authorities or destroy outside unit with permission of Customs authorities. In the present case, the permission to destroy the obsolete material and components was sought from the jurisdictional Range Officer and vide letter dated 9-4-2009, the jurisdictional Range Officer has informed the appellant that the Assistant Commissioner has denied the permission for destroying the unutilized raw material and thereby directed the appellant to make the payment of duty foregone. It is also a fact that the order of the Assistant Registrar has not been given to the appellant and the observation of the Commissioner (Appeals) that the appellant has not challenged the order dated 9-4-2009 is not sustainable because the order is not of 9-4-2009 it is only a letter written by the Range Officer to the appellant. Further I find that the refund claim has only been rejected on the ground that warehousing period has been expired whereas the fact of the matter is the Customs licence granted to the appellant had been renewed and the goods were still in the bonded warehouse. Further I find that the claim for refund under Section 27 of the Customs Act, 1962 has not been considered at all since the impugned order gives finding beyond the scope of the proceedings. It is also a fact that the goods are still in the bonded warehouse only and the appellant’s unit will continue to be an EOU. It is well settled law that no duty is payable when the goods are in the bonded warehouse. Further I find that both the authorities have not considered the provisions of Foreign Trade Policy 2004-2009 which by Para 6.15(b) allows the appellant for destruction of the goods under intimation to the Department. In view of these infirmities, I am of the view that the impugned order is not sustainable in law and the matter needs to be remanded to the original authority to consider the claim of refund in the light of the fact that the appellant has achieved positive NFE during the period and the Customs licence of the appellant has been renewed on the date of application for destruction of the goods and further that no order of Asstt. Commissioner was communicated to the appellant denying the permission for destruction of the goods and further the original authority will also consider the FTP 2004-2009 which provides in Para 6.15(b) that the appellant can destroy the obsolete matter under intimation to the Department. In view of this discussion, the impugned order is set aside and the appeal is remanded to the original authority to decide the claim of the appellant afresh after complying with the principle of natural justice.
10. The perusal of the orders of the lower authorities does not allege that the appellant had not fulfilled the export obligation and accordingly, the ratio in the Saint Gobin Crystals (supra) of this Bench squarely applies. Moreover, the Notification No. 52 ibid as amended by Notification Nos. 30 and 34 ibid clearly prescribe vide new Condition No.8 which is extracted elsewhere in this order that no duty shall be leviable if raw material is destroyed within the unit after intimation to the Customs authorities. A conjoint reading of the amended Notifications as well as the ratio laid down in the case of Saint Gobin Crystals (supra), leads to the only possible inference that the Revenue authorities have erred in demanding payment of duty and consequently, the appellant is entitled for refund of the same.
11. In view of the above discussions, the impugned orders are set aside and the appeals are allowed with consequential benefits, if any, as per law.
(Order pronounced in the Open Court on 29/10/2021)
