Anil Choudhary, Judicial Member.
1. The appellant, M/s. Malu Paper Mills Ltd., is a registered manufacturer of newsprint under Chapter Heading 4801 of the Central Excise Tariff Act, 1985 attracting nil rate of duty. The appellant-assessee imported waste paper falling under Chapter Heading 4707 of the Customs Tariff Act and cleared the same at concessional rate of duty by availing exemption as provided vide serial No. 152-B of Notification No.21/2002-Cus. dated 1.3.2002 for use in the manufacture of newsprint. Based on intelligence that the appellant was misusing the benefit of the exemption notification as amended by Notification No.66/2004-Cus. (serial No. 152-B) by using the imported waste paper in the manufacture of paper other than newsprint, a team of officers visited the manufacturing unit situated at Nagpur on 16th November 2007 and conducted enquiry/investigation.
2.The relevant notification and the entries are quoted herein below for ready reference:-
All goods imported for use in, or supply to, a unit for manufacture of paper or paperboard
(A) All goods imported for use in, or supply to, a unit for manufacture of paper or paperboard other than newsprint;
(B) All goods imported for use in, or supply to, a unit for manufacture of newsprint
By amendment by Notification 66/2004-Cus. dated 9.7.2004, in entry No.152-A the words ‘NIL’, appearing in the column pertaining to additional duty of customs were substituted by ‘-'. Consequently, waste paper imported for use in or supply to a unit for manufacture of paper or paper board other than newsprint attracted 5% basic customs duty as well as the CVD as applicable.
After the above mentioned amendment, sr. no.152-A of Notification No.21/2002-Cus. prescribes concessional rate of basic customs duty of 5% adv. to all goods falling under chapter heading 47.07 when imported for use in or supply to a unit for the manufacture of paper or paper board other than newsprint and sr.no. 152-B also prescribes concessional rate of duty of 5% to all goods imported for use in or supply to a unit for manufacture of newsprint. The rate of additional duty of customs under entry at sr.no.152-B was nil. The concessional rate of duty was applicable subject to the following conditions:-
(a) the importer furnishes an undertaking to the Deputy Commissioner of Customs or the Assistant Commissioner of Customs, as the case may be, that such imported goods will be used for the purpose specified and in the event of his failure to comply with this condition, he shall be liable to pay, in respect of such quantity of the said goods as is not proved to have been so used, an amount equal to the difference between the duty leviable on such quantity but for the exemption under this notification and that already paid at the time of importation; and
(b) the importer produces to the said Deputy Commissioner or Assistant Commissioner, as the case may be, within six months or such extended period, as that Deputy Commissioner or Assistant Commissioner may allow, a certificate issued by the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, in whose jurisdiction the said goods have been used in such unit, that the said goods have been so used.
3.During the relevant period, the waste paper imported by the appellant was cleared by claiming the benefit of exemption under entry at serial No.152-B of Notification No.21/2002-Cus. on payment of basic customs duty (BCD) of 5% adv. and by claiming nil rate of additional customs duty. The imported was paper was brought to the factory and ustilised in the manufacture of newsprint. The appellant had also executed before the Assistant/Deputy Commissioner of Customs an undertaking to the effect that the imported goods would be used for the specified purpose, along with a bond. After consuming the imported waste paper in the manufacture of newsprint, the appellant had furnished before the Deputy Commissioner all the documents necessary so as to enable him to issue the end use certificate in terms of condition No.20(B) appended to the said notification. After due verification, the Deputy Commissioner issued end use certificate which was duly produced before the Assistant Commissioner of Customs at the port of import. He was further pleased to discharge the bond given by the appellant at the time of clearance of the consignment of waste paper.
4.During the course of enquiry/inspection on and from 16th November 2007, Shri J.N. Panpaliya, authorized signatory, had stated that the factory was using indigenous as well as imported waste paper in the ration of 60:40 to get the required brightness and tensile strength in the newsprint. This is also confirmed by Shri Upadhyay, manager-pulp. Another statement of Shri Poonamchand Malu, director, was recorded by the officers, who stated that he was responsible for all work of the unit and in respect of imported waste paper, the appellant had furnished undertaking with the Assistant Commissioner of Customs for using the imported waste paper for the specified purpose and subsequently, the end use certificate had been obtained and submitted before the Assistant Commissioner of Customs. Mr. Malu also stated that sometimes the factory had cleared paper as writing paper other than newsprint. Mr. Panpaliya further admitted that so far some quantity of paper so manufactured from imported waste paper was cleared as paper other than newsprint, thus there was violation of condition as laid down under the notification. He accepted this mistake and agreed to pay the differential duty on the quantity of imported waste paper that had been consumed in the manufacture of that quantity of paper which had been cleared as other than newsprint. It further appeared that newsprint means newsprint as defined under Notification 23/98-CE for the purpose of Chapter 48, as paper of a kind - (a) intended for the printing of newspaper; and (b) manufactured by a manufacturer of newsprint specified under Schedule of the Newsprint Control Order, 2004, and supplied against a purchase order placed upon such manufacturer by a newspaper which is registered by the Registrar of Newspapers of India.
5.On scrutiny of the withdrawn records viz. sales invoices, it was observed that the appellant had cleared writing paper, creamove (other than newsprint) to their customers. Details of clearance of paper other than newsprint are given in Annexure A to the show cause notice dated 17.3.2008. From the scrutiny of raw material register/form IV, and analysis of consumption of indigenous and imported waste paper there from, it was seen that during the period 9.7.2004 to October 2007, the appellant had consumed 1095.519 MT of imported waste paper in the manufacture and clearance of paper other than newsprint and more fully Annexure B to the show cause notice. This analysis of consumption of raw material revealed that the appellant had consumed imported waste paper in some months to the extent of 60 to 100%, contrary to their claim that the imported waste paper was consumed to the extent of 40%. Thus it appeared that the appellant had failed to fulfill the conditions as laid down under Notification 21/2002-Cus. as amended inasmuch as the imported waste paper had not been utilized fully in the manufacture of newsprint. Thus they also violated the terms and conditions of the undertaking submitted by them for availment of concessional duty. The tariff rate during the relevant period was 15%, 12.5% and 10% adv. It further appeared that the appellant had suppressed the fact of non-utilisation of part of the imported waste paper in manufacturing of other paper from the department while obtaining the end use certificate from the jurisdictional Assistant/Deputy Commissioner of Central Excise. Thus they have obtained the end use certificate fraudulently, by misdeclaring that the imported waste paper has been fully consumed in the manufacture of newsprint as submitted by them from time to time. Thus the appellant has wrongly claimed concessional rate of duty of 5% BCD and full exemption from CVD under entry at serial No.152-B of Notification No.21/2002-Cus. with intention to evade the customs duty on the imported waste paper. It also appeared that the appellant is liable to pay the differential BCD, CVD along with chess on the quantity of waste paper that has been consumed in the manufacture of paper other than newsprint. The details are worked out by Revenue, more fully Annexure C to the show cause notice. Accordingly the appellant was required to show cause as to why 1095.518 MT of waste paper valued at Rs.56,21,539/- imported under Notification No.21/2002-Cus. as amended, should not be confiscated under Section 111(o) of the Customs Act and further why not customs duty amounting to Rs.15,51,674/- including cess leviable on imported waste paper which has been used in the manufacture of paper other than newsprint and cleared during the period July 2004 to October 2007 as show in Annexure C to the show cause notice, should not be confirmed along with interest. Further, customs duty amounting to Rs.10,00,000/- and interest of Rs.49,837/- + Rs.1,37,164/- already paid by the appellant, to be not appropriated. Further, penalty was also proposed under Section 114A of the Act. Penalty was also proposed on the director, Shri Poonamchand Malu, under Section 112 of the Act.
6.The appellant contested the show cause notice challenging the demand of BCD by applying the tariff rate, since the effective rate of BCD attributable to the waste paper, irrespective of its use in the manufacture of newsprint or otherwise was only 5% in terms of entry at serial No.152 of Notification No.21/2002-Cus. The appellant also denied the allegations so far as it related to fraudulently obtaining end use certificate. The appellant also furnished the details calculating the correct duty payable by the appellant on the part of the imported waste paper used for manufacture of paper other than newsprint. Thus the total to be payable works out to Rs.9,63,695/- (Rs.9,44,418/- + Rs.18,888/- + Rs.389/-). As regards confiscation of the imported waste paper, the appellant has contended that the same was not liable to be confiscated for alleged violation of post import condition. It was also submitted that the calculation of duty payable in the show cause notice by applying the tariff rate is ex facie illegal and unsustainable in law. The entry at serial No.152-A of the Notification 21/2002-Cus. also grants concessional rate of BCD of 5% adv. (as is applicable to the entry at serial No.152-B). If the waste paper is used or supplied to a unit for manufacture of paper or paper board other than newsprint, the only difference between the rates of duty under the aforesaid entries is - that why under entry 152, CVD is not payable, the same is payable under entry at 152-A. The show cause notice admits that the quantity of only 1095.518 MT was used in manufacturing of paper or paper board other than newsprint. This being so, the only duty liable to be demanded is the CVD which becomes payable by applying the exemption entry at serial No.152-
A of the said notification. It is settled proposition of law that if there are two entries applicable to same goods and if the benefit of one is denied, the benefit of other entry is available to the importer, even if not claimed at the time of import. Reliance was placed on the ruling of Hon’ble Supreme Court in the case of Share Medical Care vs. UOI - 2007 (209) ELT 321 (SC). Thus, on applying the ratio of the ruling of the Hon’ble Supreme Court, the benefit of exemption at entry at serial No.152-A is liable to be allowed to the appellant and the duty payable works out to Rs.9,63,695/-. Further, the goods are not liable to confiscation and consequently penalty under Section 114A is also not imposable. It was further submitted that as the appellant had already paid an amount of Rs.10 lakhs at the time of investigation, before issuance of show cause notice, as against the correct duty liability of Rs.9,63,695/-. Hence applying the law laid down by the Hon’ble Bombay High Court in the case of Gaurav Mercantiles Ltd.-- 2005 (190) ELT 11 (Bom.), no penalty is imposable.
7.The show cause notice was adjudicated by the Commissioner vide the impugned order-in-original confirming the proposed demand amounting to Rs.15,51,674/- under Section 28 of the Act along with interest. Further, as regards the imported waste paper of 1095.518 MT valued at Rs.56,21,539/-, it was held being not available for confiscation, a fine of Rs.15 lakhs in lieu of confiscation was imposed under Section 111(o) of the Act. Further, penalty of Rs.15,51,674/- was imposed under Section 114A of the Act and further, ordering appropriation of the amounts already paid towards duty and interest. Further, a penalty of Rs.2 lakhs was imposed on the appellant’s director, Shri Poonamchand Malu, under Section 112 of the Customs Act.
8.Being aggrieved, the appellants are before this Tribunal on the ground other than that the learned Commissioner has failed to appreciate that Notification No.21/2002-Cus. prescribes concessional rate of duty to waste paper. Clause A of entry at 152 applies to waste paper intended for use in the manufacture of paper other than newsprint and clause B thereof applies to waste paper intended for use in the manufacture of newsprint. Learned Commissioner has failed to appreciate that entry 152 covered waste paper falling under heading 4707 and prescribes concessional rate of duty of BCD of 5% adv. The only difference in the two entries at clause A and B was with regard to the CVD payable. While CVD was payable for waste paper use in the manufacture of paper other than newsprint, it was totally exempt for waste paper used in the manufacture of newsprint. Thus the learned Commissioner has misconceived the provisions of the said notification and committed error in not allowing the benefit of the entry at clause A of 152, only on the ground that the condition of clause B was violated by the appellant by using a particular quantity of the imported waste paper for manufacture of paper other than newsprint. Under the facts that the appellant has allegedly violated the condition of clause B, such violation would justify demand only of CVD and could not be a ground to charge BCD at tariff rate since there was an alternative entry as mentioned hereinabove. The learned counsel further states that the alleged diversion of imported waste paper is only about 10% of the total waste paper imported. Thus
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there is no active violation on their part and there has been substantial compliance. Further, as the appellant had paid the differential duty at the time of inspection and before the show cause notice, the whole proceedings are vitiated and bad. Further, the show cause notice is also bad for invoking the extended period of limitation. 9.Learned AR relied on the impugned order. 10.Having considered the rival submissions and upon perusal of the record, we are satisfied that there is no deliberate violation of the conditions of the exemption notification in question. We further hold that the diversion of about 10% of the imported waste paper is only incidental and does not call for any adverse inference on the part of the appellant. Further, we find that there is no case made out against fraud, suppression of facts and/or falsification of record. In this view of the matter, we hold that the appellant has not violated the conditions of Notification 21/2002-Cus. as amended. Accordingly we set aside the additional BCD (over and above 5% rate as per the notification). We set aside the penalty on the appellant-company under Section 114A of the Act. So far as the penalty on the director, Shri Poonamchand Malu, is concerned, we feel that he should have been more vigilant and should have suo motu informed the Revenue of the utilization of the imported waste paper for manufacture of paper other than newsprint. Accordingly we retain the penalty imposed on him under Section 112 of the Act, but reduce the same to Rs.50,000/- (Rupees fifty thousand only). 11.Thus the appeals are allowed as indicated hereinabove.