Virgo Valves & Controls Pvt. Ltd. Vs Commissioner of Central Excise (CESTAT Mumbai)
Conclusion: When the unit was de-bonded and no dues certificate was issued to the assessee, it was the duty of the officer, who gave no dues certificate to verify the contents whether any dues liability was pending against the assessee or he had correctly declared the true facts for de-bonding of unit. When the concerned officer had de-bonded the unit along with no dues certificate, allegation of suppression could not be alleged against assessee in this case.
Held:
In the instant case, assessee had made complete declaration in respect of their “finished goods” as well ‘WIP – Indigenous” while making the request for de-bonding. These were examined and verified by the jurisdictional Central Excise Authorities while issuing the “No Dues Certificate” to assessee. Even the figures stated in the declaration made by assessee in their declaration, no dues certificate issued by the authorities do tally. Subsequent to issue of the no due certificate by the jurisdictional officer, the revenue could not have proceeded to issue the show cause notice dated 09.02.2016, by taking the same figures as declared by assessee to the jurisdictional authorities as early as in 2013. These figures also were reflected in the no dues certificate issued by the jurisdictional authorities. Revenue had invoked extended period of limitation as provided for by Section 11 A of Central Excise Act to make this demand. It was held that when the unit was de-bonded and a no dues certificate was issued to the respondent, it was the duty of the officer, who gave no dues certificate to verify the contents whether any dues liability was pending against the assessee or he had correctly declared the true facts for de-bonding of unit. When the concerned officer had de-bonded the unit along with no dues certificate, allegation of suppression could not be alleged against the respondents in this case. Hence, there was no infirmity with the impugned order, wherein the lower appellate authority had held that “facts that how the extended period under Section 11A(1) was invocable in the above circumstances, the demand raised against the respondent was time barred”.
FULL TEXT OF THE CESTAT MUMBAI ORDER
This appeal is directed against the order in original No PUN-EXCUS-001-PR-COM-007-16-17 dated 23.06.2016 of Principal Commissioner Central Excise, Pune – I. By the impugned order, the Principal Commissioner has held as follows:
“ORDER
(i) I confirm the demand of total duty amounting Rs. 1,56,55,368/- (Rupees One Crore, Fifty six Lacs, Fifty Five Thousand, Three Hundred and Sixty Eight Only on the Noticee M/s. Virgo Valves & Controls Ltd. (now Virgo Valves & Controls Pvt. Ltd), Survey No. 277, Village Mann-Hinjewadi, Taluka-Mulshi, Dist. Pune – 411 057, an EOU unit as discussed in Paral1.08 & 11.13 above under the provisions of Section 11A (5) of Central Excise Act, 1944 read with Rule 14 of the CCR,2004 for contravention of proviso to Section 3(1) of the Central Excise Act, 1944 read with Para 6.18 of FTP.
(ii) I appropriate the total amount of Rs.83,16,040/-(Eighty Three Lacs, Sixteen Thousand and Forty Only) already paid by the Noticee (Rs.65,05,647/- paid on De-bonding of due to valuation of WIP + Rs. 18,10,393/- paid on De-bonding due to valuation of Stock of Finished goods as against the total duty of Rs. 1,56,55,368/-demanded in the subject SCN.
(iii) I order recovery of interest as applicable on the total differential amount of duty Rs.73,39,328/-payable and stand confirmed as at (i) above under the provisions of Rule 14 of the CCR, 2004, read with Section 11AA of the Central Excise Act, 1944;
(iv) I impose a penalty of Rs.73,39,528/-(Rupees Seventy three Lacs Thirty Nine Thousand Three Hundred and Twenty Eight Only)on the Noticee under Rule 15(2) of the CCR, 2004, read with Section 11AC of the Central Excise Act, 1944.
I also give an option to the Noticee, under the second proviso to Section TTACO the Finance Act, 1994, to pay penalty equivalent to 25% of the differential amount i.e. Rs.18,34,832)-(25% of Rs.73,39,328/-= Rs.18,34,832/-) as determined confirmed, at (i) above, provided they pay the entire said differential amount along with interest payable thereon as ordered vide(iii) above as well as the 25% penalty, within 30 days of the date of communication of this order.
13.00 This order is issued without prejudice to any other action that may be taken against the noticee under the provisions of Chapter-V of the Finance Act, 1994 and/ or the rules made thereunder and/ or any other law for the time being in force.”
2.1 Appellant was erstwhile a 100% Export Oriented Unit. After fulfilling the export obligations as per the scheme, the de-bonded and got converted into an DTA unit. At the time of debonding they paid the debonding duty as required and after satisfying in respect of the payment of debonding duty, they were issued “No Dues Certificate” by the jurisdictional Assistant Commissioner, vide his letter dated 21st May 2013. Taking note of the “No Dues Certificate”, Development Commissioner, vide order dated 04.07.2013, issued ‘Final Debonding Order”.
2.2 A show cause notice dated 09.02.2016, was issued to the appellant, alleging that they had short-paid the duty at the time of De-bonding, stating following grounds:
(i) Para 6.18 of FTP contains provisions regarding conditions and procedures subject to which an EOU can exit from the EOU scheme. It is provided in Para 6.18 (b) that the assessee shall assess duty liability arising out of de-bonding and aster paying applicable duties, it shall obtain “No dues certificate” from Customs and Central Excise authorities. Based on the “No dues certificate” issued by the Customs and Central Excise authorities, Development Commissioner, if satisfied, can issue de-bonding order. The duty payable on goods being de-bonded is an amount equal to aggregate of the Custom duties as per proviso to Section 3(1) of the Central Excise Act, 1944. Entitlement to clear goods at concessional rate of duties as per Section 6.8 of FTP is not available to a de-bonding unit, as the exit from EOU scheme is allowed under Para 6.18.
(ii) The Appellant had classified Work-in-Progress (WIP) as indigenous and imported and the Department accepted it and allowed the unit to pay duty accordingly, vide its letter dated 0804-2013. It appeared that “This classification of WIP inventory as indigenous and imported was incorrect as Work in Progress was nothing but partially finished product. The provisions of S. No. 3 of Notification No.23/2003 CE dated 31-03-2003 (i.e. payment of duty equivalent to only Central Excise duty when finished goods are manufactured wholly out of indigenous raw materials) was applicable only to finished goods cleared under Para 6.8 of FTP. Since the de-bonding units paid duty under Para 6.18 of FTP, benefit of concessional duty under Para 6.8 cannot be applied to de-bonded units
(iii) Thus Appellant had wrongly availed duty concessions vide Central Excise Notification No.23/2003 CE dated 31-03-2003 ” read with Para 6.8 of FTP, since the de-bonding units pay duty under Para 6.18 of FTP; as per the proviso to Section 3(1) of the Central Excise Act, 1944. The Appellant had also contravened the provisions of Section 6.8 of FTP (as this was not available to a de-bonding unit; as the exit from EOU scheme was allowed under para 6.18).
(iv) Thus there was a short levy of duty on De-bonding due to valuation of WIP (indigenous) of Rs.1,36,07,370/- (Rupees One Crore, Thirty Six Lakhs, Seven Thousand ,Three Hundred Seventy only), as on 30-04-2013 and,
(v) There was a short levy of duty on De-bonding due to valuation of Stock of Finished goods of Rs.20,47,998/- (Rupees Twenty Lakhs, Forty Seven Thousand, Nine Hundred Ninety Eight only), as on 30-04-2013.
2.3 Show Cause notice therefore demanded the duty short levied by invoking extended period of limitation as per Section 11 A (5) read with Rule 14 of CCR, 2004 for contravention of provisions of Section 3 (1) of the Central Excise Act, 1944 read with para 6.18 of FTP. Interest was also demanded on the duty short paid and penalty was proposed as per Section 11AC, ibid.
2.4 The show cause notice was adjudicated as per the impugned order referred in para 1, above. Aggrieved by the impugned order, appellants have filed this appeal.
3.1 We have heard Shri S. Narayanan, Advocate for the appellant and Shri Sydney D Silva, Additional Commissioner, Authorized Representative for the revenue.
4.1 We have considered the impugned order along with the submission made in appeal and during the course of hearing.
4.2 In the present case admittedly the appellant was earlier functioning as an 100% Export Oriented Unit and was following the prescriptions as laid down in Foreign Trade Policy, Customs Act, 1962 and Central Excise Act, 1944. After achieving the required NFE norms as determined by the Development Commissioner, they applied for permission to de-bond and exit from the scheme vide their letter dated 29.11.2012./ 03.12.2012. Along with the application they also submitted “Summary of Imported & Indigenous: Inputs Goods”, which is placed at Exhibit F (p.143) of paper book. The details as stated in the said statement are reproduced below:
