At, Customs Excise Service Tax Appellate Tribunal West Zonal Bench At Mumbai
By, THE HONORABLE JUSTICE: RAJU
For Petitioner: Rajesh Ostwal, Advocate And For Respondents: V.K. Agarwal, ADC (AR)
1. Appellants M/s. Anthony Garages P. Ltd. are body builders for M/s. Ashok Leyland. M/s. Ashok Leyland obtained an order for export of buses. The appellants obtained the chassis from M/s. Ashok Leyland for the purpose of making body on the same and cleared under notification 43/01-CE(NT) dated 26.06.2001 without payment of duty. The appellants manufactured the bus by making a body over the chassis and supplied to M/s. Ashok Leyland under ARE-2. The appellants also gave a bond to the revenue to safeguard the duty liability on the bus in case the same is not exported.
2. Ld. Counsel for the appellants argued that the order of the bus for
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export was cancelled and consequently M/s. Ashok Leyland did not export the bus and as a result, duty liability on the said bus arose. The appellants discharged the duty liability and interest on the same. He argued that apart from duty liability and interest, penalty has also been imposed on the appellant under Section 11AC(1)(b) of Central Excise Act. He argued that it is in the normal course of business such events occur and no mala fide can be imposed on the appellants. He argued that the appellants had done whatever was needed for the purpose of export.
3. Ld. Counsel for the appellants argued that in parallel proceeding pertaining to recovery of central excise duty on the chassis which was obtained duty free under notification 43/01-CE(NT) demand of duty was set aside. However, the demand of interest for the period from obtaining the said chassis and payment of duty on bus was confirmed. He argued that no interest can be demanded in these circumstances.
4. Ld. AR argued that the case was detected by revenue during audit and appellant had not disclosed this fact to the revenue. He pointed out that while appellant had cleared the goods vide invoice No. 190 to 194 dated 03.12.2012 but the said goods could not be exported within the time limit of 6 months from the date of export. He argued that the said failure to export was noticed by revenue during the course of audit of records by the auditors. The noticee had not disclosed the fact to the department. Consequently, he argued that it is a fit case for imposition of penalty.
5. I have gone through the rival submissions.
6. I find that appellant had desired to export the bus and the fact of failure to export was known to the appellants immediately after clearances of the bus from the factory, as the order was cancelled. The appellant however did not on their own come forward to repay the dues to the revenue voluntarily. During the course of audit, discrepancy and failure to pay the dues of the revenue was detected and consequently the proceedings for recovery started. The appellants paid the duty and part of interest before show-cause notice. However, it is apparent that it was not a voluntary effort. In these circumstances, when the fact of cancellation of order was known to the appellants, the failure to comply with the provisions of law and deposit differential duty clearly indicates to mala fides. In these circumstances, in find justification in imposition of penalty under Section 11AC, which is therefore, upheld.
7. The second issue pertains to levy of interest on a delay in respect of duty recoverable on the chassis. In this regard, Rule 7 of Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules becomes relevant. The said Rule reads as under:-
RULE 7. Recovery of duty in certain cases. - Where the goods cleared by the supplier manufacturer on the basis of information provided by an applicant manufacturer, are not used for the intended purpose, the applicant manufacturer shall be liable to pay the amount equal to the difference between the duty leviable on such goods but for the exemption and that already paid, if any, at the time of removal from the factory of the supplier manufacturer of the subject goods, along with interest and the provisions of section 11A, except the time limit mentioned in the said section for demanding duty and section 11AA of the Act shall apply mutatis mutandis, for effecting such recoveries:
Provided that where the applicant manufacturer is found to be non-existent, the supplier manufacturer shall be liable to pay the amount equal to the difference between the duty leviable on such goods but for the exemption and that already paid, if any, at the time of removal from the factory of the supplier manufacturer of the subject goods, along with interest and the provisions of section 11A except the time limit mentioned in the said section and section 11AA of the Act shall apply mutatis mutandis, for effecting such recoveries.
Provided further that if the subject goods on receipt are found to be defective or damaged or unsuitable or surplus to the needs of the applicant manufacturer, he may return the subject goods to the supplier manufacturer and every such returned goods shall be added to the non-duty paid stock of the supplier manufacturer.
Explanation. - For the removal of doubts, it is hereby clarified that subject goods shall be deemed not to have been used for the intended purpose even if any of the quantity of the subject goods is lost or destroyed by natural causes or by unavoidable accidents during transport from the place of procurement to the applicant manufacturer's premises or from the supplier manufacturer's premises to the place of procurement or during handling or storage in the applicant manufacturer's premises. The said rule clearly prescribes that in such circumstances, interest is recoverable.
8. The argument of ld. Counsel is that if demand on the duty on the chassis has been dropped on the ground that the appellants have paid duty on the full bus, and therefore, there is no loss to the government. This argument is misplaced. Had the appellants paid duty on the chassis, cenvat credit could have been available to the appellants immediately thereafter. However, they could not have utilised the said credit till clearance of the buses. In any case, the said amount would have been available to the government immediately on clearance of chassis and therefore there is an apparent loss to the government. Rule 7 of Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules also prescribed recovery of interest in these circumstances.
9. In view of the above, I do not find any merit in the appeal of the appellants. The same is dismissed