Case Law Details
EPCOS India Limited Vs Commissioner of Central Excise (CESTAT Kolkata)
In the case of EPCOS India Limited versus the Commissioner of Central Excise, the issue revolves around the applicability of Basic Customs Duty on imported Zinc Oxide used in the manufacture of Pre-Calcined Ferrite Powder (PCFP). The appellant contests the demand for customs duty, citing exemption Notification No.26/2002-Cus dated 01.03.2002.
The appellant, EPCOS India Limited, imports Zinc Oxide, among other materials, for the production of Ferrites and PCFP. The contention arises from the Customs department’s denial of duty exemption under Notification No.26/2002-Cus dated 01.03.2002. The crux of the matter lies in whether the imported Zinc Oxide was indeed utilized in manufacturing PCFP, thereby qualifying for the exemption.
Upon examination, it’s revealed that the appellant did import Zinc Oxide under the mentioned notification. However, a dispute arose concerning the actual utilization of this material in PCFP production. The department initially raised concerns based on a letter from the appellant, later rectified, regarding PCFP production. Nevertheless, subsequent investigations confirmed the usage of Zinc Oxide in PCFP manufacturing, with some quantities sold in the market and others used in further production.
The appellate authority considered the evidence, including reports from field investigations, affirming the utilization of Zinc Oxide in PCFP manufacture. Consequently, the appellant’s entitlement to the duty exemption under the mentioned notification was upheld.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The appellant is in appeal against the impugned order wherein Customs duty has been demanded from the appellant by denying the benefit of exemption Notification No.25/1999-Cus dated 28.02.1999 at Sl.No.148 of List A.
2. The facts of the case are that the appellant is manufacturer of ‘Ferrites, Soft Ferrites Component/Parts and Soft Ferrite Powder. For the purpose of undertaking the manufacture of the aforesaid item, the appellant imported Zinc Oxide (99% purity), Manganese Oxide, Polyvinyl Alcohol etc.. The appellant imported Zinc Oxide by availing exemption provided vide Sl.No.148 of list A of Notification No.25/1999-Cus dated 28.02.1999 as amended by Notification No.26/2002-Cus dated 01.03.2002. According to the said Notification, the Basic Customs Duty (BCD) on import of Zinc Oxide would be Nil, provided that the imported Zinc Oxide is used for the manufacture of Pre-Calcined Ferrite Power (Spray Dried) (PCFP). Further, as required under the Notification, the appellant had obtained the necessary registration under Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. The appellant used the imported Zinc Oxide for manufacturing of PCFP, some portion of which was cleared by the appellant into the open market, but the remaining part of the PCFP was used captively to manufacture Ferrite Cores. Such manufacture of Ferrite Cores were cleared for export. During the course of audit, the appellant wrote a letter dated 08.12.2009 explaining their activity and stated that they do not produce PCFP, but the same was rectified by the appellant vide their letter dated 18.03.2010 in which they clarified that they manufactured PCFP during the impugned period. Thereafter, visit took place in the appellant’s premises and on the basis of that investigation, it was concluded that the imported Zinc Oxide was used by the appellant in the manufacture of PCFP which was partly sold in the open market and further used in the manufacture of Ferrite Cores. Thereafter, a show cause notice was issued to the appellant alleging that the appellant is not entitled to claim the exemption as no PCFP is being manufactured by the appellant as per their own admission by letter dated 08.12.2009. The matter was adjudicated and demand against the appellant have been confirmed. Aggrieved from the said order, the appellant is before us.
3. The Ld. Counsel for the appellant submits that it is a fact on record that during the course of investigation it was found by the jurisdictional authorities of the appellant that the appellant is manufacturing PCFP by using imported Zinc Oxide. Merely on letter given by the appellant which was further rectified, the demand cannot be confirmed against the appellant. It is further submitted that the PCFP manufactured by using imported Zinc Oxide was sold in the open market as well as used in further manufacture of excisable goods which has been cleared on payment of duty. In that circumstances, the benefit of Notification No.25/1999-Cus dated 28.02.1999 as amended by Notification No.26/2002-Cus dated 01.03.2002 cannot be denied to the appellant.
4. He further submitted that part of the demand is barred by limitation. Therefore, extended period is not invocable.
5. On the other hand, the Ld.AR for the department supported the impugned order.
6. Heard the parties, considered the submissions.
7. On going through the records placed before us, the sole issue before us is to examine whether the imported Zinc Oxide has been used by the appellant in the manufacture of PCFP or not to avail the benefit of exemption Notification No.25/1999-Cus dated 28.02.1999 as amended by Notification No.26/2002-Cus dated 01.03.2002?
8. We find that the jurisdictional authorities visited the factory premises of the appellant and they have examined the production process and filed their report. The contents of the report are extracted below:-
U4.5 I find, before issuance of the SCN at sl.no.2 under C. No. V(15)01-CE/Adjn/ADC/Kol-III/2012/5449 dt.4.4.12 covering the period February 2011 to September 2011, investigation was carried out by the field formation regarding production of pre calcined ferrite powder. Verification of records and manufacturing process was carried out, in person, at the premises of the noticee by the jurisdictional Division Officer and Range Officer. The report dated 22.2.12 submitted by the Divisional Officer categorically spelt out that the said noticee manufactures pre calcined ferrite powder (spray dried), small quantities of which are cleared to buyers and the rest is used within the factory to manufacture ferrite parts and ferrite cores. Moreover, verification of records by the field formation proved no irregularity in the data supplied by the noticee to CRAD regarding the quantity of pre calcined ferrite powder produced by them during the material period. The officers also stated that the notice’s using of zinc oxide to produce pre calcined ferrite powder (spray dried) has also been evidenced from a Chartered Engineer’s certificate dt. 18.5.11 and a write up of the noticee dt. 13.2.12.
4.6 I find, before issuance of the SCN at Sl.No.4 under C. No. V(15)66-CE/Kol-III/ADC/Adjn/2013/13752 dt.5.9.2013 covering the period August 2012 to July 2013, a report was called for form the field formation to confirm whether the noticee has not produced any pre calcined ferrite powder during the material period from imported zinc oxide. In his report dated 30.8.13, the Divisional Officer informed that the subject goods, i.e., pre calcined ferrite powder has been incorporated in amended registration certificate dated 27.7.2012. Also, the Divisional Officer informed that pre calcined ferrite powder has been manufactured by the noticee during the material period, i.e., August 2012 to July 2013. The R.O. also reported that pre calcined ferrite powder has been incorporated in the amended registration certificate no.02/EPCOS/IMPORT/KLY/2012-13 dated 27.07.12. He also opined that there is no evidence/short coming on the part of the assessee regarding manufacture of pre calcined ferrite powder as it has been duly incorporated in the amended registration certificate.”
9. As it is a fact that during the investigation, it was found that the imported Zinc Oxide has been used by the appellant to manufacture PCFP, and some has been further used to manufacture final product which suffered duty and some part has been sold in the open market, therefore, the appellant has established that the imported Zinc Oxide has been used in the manufacture of PCFP.
10. In that circumstances, we hold that the appellant is entitled to claim the benefit of Notification No.25/1999-Cus dated 28.02.1999 as amended by Notification No.26/2002-Cus dated 01.03.2002, which exempts Basic Customs Duty on imported Zinc Oxide which has been used in the manufacture of PCFP.
11. Therefore, we hold that that the impugned order does not deserve any merits.
12. Accordingly, the same is set aside.
In the result, the appeal is allowed with consequential relief, if
(Operative part of the order was pronounced in the open Court.)
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