1. The appellant is in appeal against the impugned order confirming the demand of duty on account of clandestine removal of the goods.
2. The brief facts of the case are the appellant is engaged in the manufacture of aluminum fence fittings. They were having parental unit under the same name and style located at G.T. Road, Suranussi, Jalandhar and the appellant unit located at Focal Point, Jalandhar. The appellant is manufacturing goods and supplying to their parental unit for export. The appellant is clearing the goods to the parental unit through vide ARE-1 No. 19 and 20 dated 5.10.2005 and 6.10.2005 without payment of duty as the goods are exported by the parental unit. As the parental unit did not mention the goods cleared against ARE-1 No. 19 and 20 in the shipping bills, it was alleged that the goods covered under ARE-1 have been cleared clandestinely by the appellant without payment of duty. In these sets of facts, the proceedings were initiated against the appellant to demand duty along with interest and to impose penalty on the appellant. The matter was adjudicated and it was held that the goods supplied under ARE-1 certificate were not exported, therefore, the demand of duty was liable to be paid by the appellant. Aggrieved with the said order, the appellant is before us.
3. Learned Counsel for the appellant submits that it is the inadvertent mistake of the parental unit, who failed to mention ARE-1 number on the shipping bills. It is his contention that both units are engaged in the manufacture and export of goods. There is no case found by the Revenue that any goods have been cleared by appellant in domestics market in the guise of ARE-1 certificate. Moreover, the details of the goods cleared for export trough shipping bills have been reconciled wherein it shows that the goods mentioned in ARE-1 No. 19 and 20 have duly entered in the quantity entered in invoices appended to the shipping bills. He further submits that ARE-1 certificates were produced before the Customs Authorities for their examination before Superintendent Customs for putting his signature on ARE-1 form. As it is inadvertent mistake by not mentioning ARE-1 form in the shipping bills, therefore, in the absence of any tangible proof, the charge of clandestine removal is not sustainable. Therefore, he prayed that the impugned order is to be set aside.
4. On the other hand, learned AR appearing on behalf of the Revenue reiterated the findings of the impugned order.
5. Heard the parties and considered the submissions.
6. On careful consideration made by both sides, we find that the sole case of the Revenue is that in the shipping bills, the parental unit did not mention ARE-1 No. 19 and 20, therefore, it has been alleged that the goods were cleared by the appellant without payment of duty. The appellants have produced the reconciliation statement of the invoices issued by the appellant and the invoices issued by the parental unit for export mentioned in shipping bills. If the quantity of all the invoices (issued by the appellant and issued by the parental unit) is taken for consideration then the it will result that the goods cleared through ARE-1 form No. 19 and 20 have been exported under the shipping bills in question by the parental unit. If the allegation of the Revenue is to be taken correct, in that circumstance, the Revenue also has failed to produce any evidence for procurement of the goods for export by the parental unit. Moreover, we have seen that on form ARE-1 No. 19 and 20, the Superintendent, Shri Rawal Chand has put his signature which is the evidence that the ARE-1 were produced for examination before export of the goods in question. These facts have not been examined by the adjudicating authority in true spirit. Further, the Revenue has failed to produce any evidence to whom the goods have been cleared by the appellant clandestinely without payment of duty. Moreover, no credence was given to the letter dated 7.6.2006 written by the appellant to the Assistant Commissioner, CFS, Jalandhar.
7. As the appellant has been able to show his bona fide that there was inadvertent mistake committed by the parental unit by not mentioning the ARE-1 No. 19 and 20 in the shipping bills. But the goods covered in ARE-1 No. 19 and 20 have been mentioned in the invoices covered in shipping bills. In that circumstance, the charge of clandestine removal of the goods is not sustainable.
8. Further, we find that there was procedural mistake committed by the parental unit by not mentioning the ARE-1 No. 19 and 20 in the shipping bills, in that circumstance, the penalty is imposed under Rule 27 of Central Excise Rules, 2002 to the extent of Rs. 5,000/- is confirmed.
9. In view of the above discussion, the following order is passed:
(a) the demand of duty has been set aside
(b) The penalty imposed on the appellant under Rule 25 of Central Excise Rules, 2002 read with section 11AC of Central Excise Act, 1944 is also set aside.
(c) The penalty of Rs. 5,000/- is imposed on the appellant under Rule 27 of Central Excise Rules, 2002.
10. The appeal is disposed of in the above terms.
(pronounced in the open court on 04.12.2017)
11. Having gone through the Final Order recorded by my Ld. brother Member (Judicial), I proceed to record a separate order.
12. Admittedly, the appellants did not submit the original and duplicate copies of ARE-1's No. 19 dt. 05.10.2005 and No. 20 dt. 6.10.2005. They had filed only photocopies of ARE-1 which did not bear the required certification (Pass for Shipment order) of the Custom Authorities at place of export i.e. CFS, Jalandhar. On the back side of these photocopies, it was mentioned that the goods have been actually exported by M/s. Broadway Overseas Ltd. (Unit No. 1) and not by M/s. Broadways Overseas Ltd. (Unit No. 2). The shipping bills did not bear any mention of ARE-1's No. BOL-2/19/05-06 dt. 05.10.2005 and BOL-2/20/05-06 dt. 06.10.05. Thus, the appellants failed to submit the required certification of exports by Custom Authorities at the place of export.
13. The appellant have argued that there was no response to their letter dt. 07.06.2006. It is evident from the record that subsequent to that letter, there was a meeting, which the appellant had with the Assistant Commissioner of Custom, CFS, Jalandhar. This is mentioned in the letter dt. 26.06.2006 from the appellants Unit-1 to the ACF, Jalandhar and letter of the ACF, Jalandhar in which he has given his non-acceptance/proof of export is dt. 30.08.2006. This was done after taking into account the letter dt. 07.06.2006 from the appellants and the letter dt. 26.06.2006 from the appellants to the Assistant Commissioner of Central Excise Division as also the report dt. 22.06.2006 by the Jurisdictional Range Officer. This entire sequence has been summed up by the Commissioner in Paragraph 10 of his order. This clearly shows that there remained continuous correspondence between the appellants and the Assistant Commissioner, CFL, Jalandhar till he gave his final findings on 30.08.2006.
14. In this regard, the Assistant Commissioner, CFL, Jalandhar had sent the following factual report dt. 30.08.2006:-
as per the records of this office, the goods of M/s. Broadways Overseas Ltd., GT Road, Suranassi, Jalandhar have been duly exported against the Shipping Bill No. detailed in your letter dt. 22.06.2006. Besides, M/s. Broadways Overseas Ltd., GT Road, Suranassi, Jalandhar, there is no other Party on record of the said Shipping Bills. The ARE-1's filed by M/s. Broadways Overseas Ltd., GT Road, Suranassi, Jalandhar stands endorsed to this effect.
As regard, the ARE-1 BOl-2/19/2005-06 dt. 05.10.2005 and Bol-2/20/2005-06 dt. 06.10.2005 of M/s. Broadways Overseas Ltd. (Unit-II), A-12, Focal Point, Jalandhar filed with this office in February 2006, the request for endorsement against the said Shipping Bills mentioned in your letter dt. 22.06.2006 has already been rejected on 07.04.2006 and 03.06.2006 as the subject ARE-1's were neither filed at the time of filing of the said shipping bills nor were produced at the time of actual shipment for the required endorsement on the reverse of ARE-1. Further, the subject Shipping Bills did not carry any information about the goods having been manufactured by other than the exporting unit i.e. M/s. Broadways Overseas Ltd., G.T. Road, Suranassi, Jalandhar. Accordingly ARE-1 Bol-2/19/05-06 dt. 05.10.2005 and Bol-2/20/05-06 dt. 06.10.2005 could not relate with the exports made under the said Shipping Bills.
15. As rightly observed by the Commissioner, on the said Shipping Bills, M/s. Broadway Overseas Ltd. (Unit No. 1), G.T. Road, Suranussi, Jalandhar has been mentioned as manufacturer/exporter and there is no mention of ARE-1 Bol-2/19/05-06 dt. 05.10.2005 and Bol-2/20/05-06 dt. 06.10.2005 on the said Shipping Bills. He has also recorded that the Divisional Assistant Commissioner did not accept the proof of export.
16. The Ld. Advocate for the appellants invited attention to the two ARE-1 forms claiming that the stamp of appraiser on the first page indicated that ARE-1's were presented before the Custom Authorities. Significantly however, on the relevant places on the reverse side, where let export order is given by the Custom Authorities, none of the two officers have signed and certified that the goods have been exported. In the absence of let export order by the proper officers of customs, the claim of the appellants that goods were exported remains completely un-substantiated.
17. On examination of the export documents related to these two ARE-1's, the Commissioner has rightly concluded that noticee have neither filed ARE-1 Bol-2/19/05-06 dt. 05.10.2005 and Bol-2/20/05-06 dt. 06.10.2005 at the time of filing of said Shipping Bills nor they produced at the time of actual shipment for the required endorsement before the Assistant Commissioner, CFS, Jalandhar. In the absence of due certification of export (Pass for shipment order) by Customs authorities at the Place of export i.e. CFS, Jalandhar, which in fact is a Proof of Export as laid down under Para 13.2 of Chapter 7 of Export without payment of Duty of CBEC, Manual of Supplementary Instruction 2005, the inescapable conclusion is that said goods have not been exported.
18. In Para 12.1 of his order, the Ld. Commissioner has pointed out serious irregularities in the calculation chart in respect of the quantity of the some of the items as vis-à-vis. the export invoices. These have not been satisfactorily rebutted by the appellants in their submissions. Further, the findings of the Ld. Commissioner that the corresponding bank certificate of export and realization the aforesaid export invoices reveal that M/s. Broadway Overseas Ltd. (Unit No. 1) have realized the export proceeds in respect of the total quantity as shown by these export invoices and not in respect of the quantity as shown by the noticee in the chart has also not been rebutted. Since the impugned ARE-1 did not bear the certification of proper officer that shipment have been exported, the burden was on the appellants to prove that the whole quantity of a particular item exported by Unit No. 1 was not manufactured by Unit No. 1 especially when the declaration on the shipping bill was that Unit No. 1 is manufacture/exporter. This point has been brought by the Ld. Commissioner in Para 12.2 in his order and the same has not been rebutted.
19. In view of the above, the appellants have failed to substantiate their claim that they had exported the goods cleared from Unit No. 2.
20. The contention of the appellants that there is no domestic market for impugned goods has not been substantiated either before the Commissioner or before this Tribunal.
21. Mere Presentation of the ARE-1 document is no proof that the goods were even either presented for the examination. It has no evidentiary value with regard to actual export of goods in the absence of the certification at the required place on the back of the ARE-1 by the both designated officers (emphasis supplied). The Hon'ble Supreme Court in the case of Competent Authority Vs. Barangorng Jute Factory and Ors : 2005 (13) SCC 477 has held as under:-
It is settled law that where a statute requires a particular act to be done in a particular manner, the act has to be done in that manner alone. Every word of the statute has to be given its due meaning.
22. In the case of State of Jharkhand and Ors. Vs. Ambey Cement and Anothers : 2005 (1) SCC 368 : 2004 (178) ELT 55 SCC, Para 26 of the Judgment, the Court held as under:-
It is the cardinal rule of the interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way.
23. The Hon'ble High Court of Allahabad in the case of Vee Excel Drugs & Pharmaceuticals Pvt. Ltd. Vs. Union of India : 2014 (305) E.L.T. 100 (All.), while examining a case where duly certified copies of ARE-1 were not filed, held as under:-
20. The purpose of aforesaid procedure has been highlighted by respondent No. 1 in the impugned order dated 18.06.2013 by observing in Paras 9.4 and 9.5 that the ARE-I application is the basic essential document for export of duty paid goods under rebate claim. The custom certification of ARE-I proves export of goods but in absence of duly certified copies of ARE-I, rebate sanctioning authority would have no chance to compare these documents with triplicate copy of ARE-I, as stipulated in Notification dated 06.09.2004 and has no material to satisfy itself about correctness of rebate claim in respect of goods allegedly exported. It is said that in case of export of goods, regarding payment of duty under bond, in terms of Rule 19 of Rules, 2002, there is a provision under Chapter 7, Central Board of Excise and Customs Manual of Supplementary Instructions, for accepting proof of export on the basis of collateral documentary evidences if original and duplicate copies of ARE-I are lost. But in case of exports on payment of duty under rebate claim in terms of Rule 18 of Rules, 2002, there is no such provision under relevant Chapter 8 of Central Board of Excise and Customs Manual of Supplementary Instructions.
21. In other words, from Chapter 8 read with procedure in the notification and the Rules, it is clear that the competent authority has chosen not to relax the condition of submission of original and duplicate ARE-I along with rebate claim in any exigency and that is why, no such provision as is available in Chapter 7 read with Rule 19 of Rules, 2002 has been made.
22. It is not in dispute that the procedure laid down with regard to filing of ARE-I before export of goods has not been followed in the present case by petitioner. The petitioner, however, claim that it should be treated a mere technical error so as not to affect substantially his rebate claim while respondents case is that it is mandatory procedure whereupon the entire rebate claim shall be founded.
23. From a bare reading of Rule 18 of Rules, 2002 it is evident that in order to entitle a person to claim rebate, it is open to Government of India by notification to provide a procedure for claiming rebate benefit. It is in purported exercise of power there under that the Notification dated 06.09.2004 has been issued which specifically contemplates filing of ARE-I, verification of goods sought to be exported and sealing of goods after such verification by authorities on the spot, i.e., factory premises etc. In case the procedure of filing ARE-I is given a go-bye, the authorities available on spot shall not be able to verify that the goods sought to be exported are same, the description whereof has been mentioned in the vouchers or not. The objective is very clear. It is to avoid surreptitious and bogus export and also to mitigate any paper transaction.
24. It also cannot be doubted that ignorance of law is no excuse to follow something which is required to be done by law in a particular manner. It is well established that when law requires something to be done in a particular manner, any other procedure adopted or the procedure deviated or not followed would be illegal inasmuch as, one has to proceed only in the manner prescribed under law. The principle was recognized in Nazir Ahmad Vs. King-Emperor : AIR 1936 PC 253 and, thereafter it has been reiterated and followed consistently by the Apex Court in a catena of judgments, which we do not propose to refer all but would like to refer a few recent one.
The principles laid down in Para 23 and 24 of the above judgment are directly applicable to the present case.
24. The appellant's contention that Revenue should explain from where goods procured and exported by parental unit came is erroneous. The burden is on the appellants to show that they exported the goods under those ARE-1s, which they have failed to discharge. Since substantive benefit is involved, the law in fact requires that in the event of failure to export, the exporter should pay duty on his own. But the same has not been done.
25. Since no exception has been provided to the requirement of certification of let export, the same is mandatory. As the proof of export has not been produced, and since the goods were cleared from the factory, but were not exported, the Commissioner's conclusion that goods have been diverted to DTA is unexceptionable. As such, there is no infirmity in the order of the ld. Commissioner and the same is sustained.
As there are contrary views and difference of opinion between the Members, the point of difference of opinion are framed as under:
POINTS OF DIFFRENCE
(a) Whether in the facts and circumstances, the Member (Judicial) is correct in holding that duty cannot be demanded and consequently penalty under Rule 25 of Central Excise Rules read with Section 11AC of the Central Excise Act, 1944 is not imposable on the appellant. Or the Member (Technical) is correct in holding that there is no merit in the appeal.
(Pronounced in the court on 26.05.2017)
26. The following difference of opinion stand referred to me for the resolving the difference between the two original Members of the Bench:-
(a) Whether in the facts and circumstances, the Member (Judicial) is correct in holding that duty cannot be demanded and consequently penalty under Rule 25 of Central Excise Rules, 2002 read with section 11AC of the Central Excise Act, 1944, is not imposable on the appellant; or the Member (Technical) is correct in holding that there is no merit in the appeal and the same is required to be dismissed.
27. As the facts of the case already stand narrated in the order proposed by learned brother Member (Judicial) as also Member (Technical), I find that the narration of the same can be avoided so as to avoid redundancy.
28. The short issue required to be decided as to whether the goods covered by ARE-1 Nos. 19 & 20, dated 05.10.2002 and 06.10.2005 were cleared by the assessee's parent Unit for exp[ort purposes, even though, the same were not mentioned in the shipping bills and whether the same were diverted clandestinely to the domestic market. Learned Member (Judicial) has accepted the assessee's stand that non-mentioning of the said ARE-1 's in the shipping bills was on account of an inadvertent mistake of the appellant's parent Unit and there are other evidences on record showing that the said export had actually taken place. He had also gone by the fact that apart from making bald allegation of clandestine clearances, Revenue has not produced any evidence on record to show that the goods have actually not been exported.
28.1 On the other hand, Learned Member (Technical) has accepted the findings of the adjudicating authority by observing that though the ARE-1's were presented before the Customs authorities but the reverse side of the same does not show the signature of the proper officers allowing 'let export order' and in the absence of 'let export order' by the proper officers, the appellant's claim that the goods were exported remain unsubstantiated.
29. After carefully appreciating the submissions made by learned advocate Shri Sudhir Malhotra for the appellants and Shri Vijay Gupta, AR for the Revenue and after going through the impugned order, I find that the Revenue's allegations are that the goods in question stand clandestinely removed to the domestic market in which case the benefit of non-duty paid clearance for export cannot be extended. For making such allegations, the Revenue has not produced any evidence as to show and establish that the goods were diverted and as to how compensation for the same was received by the assessee. It is a matter of settled law that clandestine activities of any manufacturer, alleged by the Revenue, are required to be substantiated by production of tangible and positive evidences. The same cannot be made on the basis of assumptions and presumptions,.
29.1 Revenue, in the present case, has arrived at the above finding on the basis of surmises and conjunctures on the sole ground that ARE-1 Nos. 19 & 20 were not mentioned in the shipping bills. It is seen that the appellant had produced evidences on the record to show that the said goods cleared under the said ARE-1 were duly reflected in the invoices issued by the parent Unit for export, though the same were not mentioned in the shipping bills. The order of learned Member (Technical) is indeed on the procedural technical violations and does not conclude on the basis of any evidences. Admittedly, a particular act is required to be done in a particular manner as provided under the statute but an inadvertent mistake to follow the procedural aspect cannot be adopted for arriving at the conclusions against the assessee.
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It has to be kept in mind that it is the Revenue which is alleging clandestine removal and as such, the onus to prove the same lies heavily upon them. Admittedly, Revenue has not been able to produce any evidences to that effect. As such, I am of the view that the inadvertent mistake of non-mentioning of ARE-1 Nos. 19 & 20 in the shipping bills cannot lead to any adverse conclusion against the assessee, especially, when such exports stand established by other parallel documents. Reliance by learned Member (Technical) on the decision of Allahabad High Court in the case of Vee Excel Drugs and Pharmaceuticals Pvt. Ltd., Vs. Union of India reported in 2014 (305) E.L.T. 150 (All.) may not be appropriate inasmuch as the issue in that case was relatable to the assessee's rebate claim in respect of exported goods. It was in that scenario, the Hon'ble court observed that the proper procedure for export is required to be followed and the factum of export is required to be established by production of essential documents for the purpose of claiming export benefits. However, in the present case, the issue does not relate to any export relief claimed by the assessee but the same is relatable to the allegations made by the Revenue for clandestine clearance of the goods. As already observed, such allegations are required to be substantiated by production of evidences. There is not even an iota of evidence produced by the Revenue to show that instead of exporting the goods, the appellant had diverted the same in the local market. 30. It is also seen that the appellant's have submitted before the lower authorities that the goods in question do not have any local market, inasmuch as, the same stands manufactured by them for export purposes only. There is no rebuttal by the Revenue to the above stand of the assessee. The negative onus to prove that the goods have no market in India cannot be placed upon the assessee and it was for the Revenue to negate the above plea of the appellant by establishing that the goods are capable of being used in India. 31. For all the above reasons, I agree with the order passed by learned Member (Judicial) for setting aside the impugned order and allowing the appeal. The appeal papers may be placed before original Bench for recording of the majority order. ORDER No. 62110/2017. In view of the majority decision, the impugned order is set-aside and appeal is allowed with consequential.