MRF LIMITED Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) THE appellants, M/s. MRF Limited, Chennai (MRF for short) are engaged in the manufacture of Automotive Tyres, Tubes and allied products. They also export these goods. During the period June 1992 to January 1996, they exported tyres and tubes (manufactured in their factories at Thiruvottiyur, Goa, Arkonam and Medak) in terms of 12 Value -Based Advance Licences [VABALs] issued to them by the competent authority under the Ministry of Commerce, Govt. of India. The corresponding imports of inputs under the VABAL scheme (otherwise called Duty Exemption Entitlement Certificate [DEEC] scheme) were made during the period October 1992 to March 1995. Duty -free clearances of these inputs were obtained by MRF under Exemption Notification No. 203/92 -Cus. dt 19.5.92 issued (as part of the DEEC scheme) by the Central Government. One of the conditions stipulated under the Notification [Condition No. v(a)] was that the export obligation (which was required to be discharged under the VABAL scheme) in relation to the imported inputs should be discharged within the specified period by exporting the goods manufactured in India, in respect of which no input stage credit was obtained under Rule 56A/51A of the Central Excise Rules, 1944. Upon scrutiny of MRF's records, the department found that they had violated the said condition by availing input stage credit under Rule 57A in respect of the export goods. It was also found (a) that they had suppressed the fact that they had so availed credit and (b) that it had been wilfully misdeclared that the export goods had been manufactured without availing such credit. Intention to evade payment of Customs duty leviable on the imported inputs was also attributed to MRF. On this basis, two show -cause notices (SCNs) were issued to MRF, the first one dated 19 -6 -95 covering 7 licences and the second dated 23 -11 -95 covering 5 licences, both in respect of their factories at Thiruvottiyur, Goa, Arkonam and Medak. The first SCN (read with its corrigendum dated 31 -10 -95) demanded Customs duty of Rs. 67,50,92,455/ - from MRF on the inputs imported under the 7 licences from October'92 to May'94. The second notice raised a similar demand of Customs duty of Rs. 5,37,57,908/ - on them in respect of the inputs imported under the 5 licences from August'94 to March'95. These demands were raised in terms of the proviso to Section 28(1) of the Customs Act read with Notification No. 203/92 -Cus. ibid. Interest on duty was also sought to be levied from the party @ 24% per annum from the date of clearance of imports to the date of final payment in terms of para 128B of the Hand Book of Procedures 1992 -97. The SCNs also held the imported goods to be liable for confiscation under Section 111(o) of the Customs Act and proposed to impose penalty on the importer under Section 112 of the Act. After receipt of the first SCN, MRF informed the department in writing that they had expunged in full the Modvat credit availed in respect of VABAL exports for the period June'92 to March'93, 1993 -94 and 1994 -95. The credits so expunged in respect of the exports from their factories were stated in reply to the SCN. MRF also produced certificates of expunction of credit from the respective Superintendents of Central Excise. They responded similarly to the second SCN also. The Commissioner of Central Excise (adjudicating authority) called for and obtained information, from the Asst.Commissioners of Central Excise in respect of the above factories, as to the actual amounts of Modvat credit to be expunged by MRF in terms of the formula prescribed by the Central Board of Excise and Customs [CBEC].

(2.) THE appeal is accompanied by voluminous records. Paper Book -I filed with the appeal contains copies of SCNs, copy of impugned order, copy of Customs Notification No. 203/92, extracts from EXIM Policy 1992 -97, copies of 'amnesty scheme' circulars dated 3.1.97 and 10.1.97, copies of CBEC circulars dated 13.2.95, 2.3.95 and 26.6.97, copies of Order -in -Original No. 34/97 dated 31.7.97 and Order -in -Appeal No. 23/98 dated 26.2.98 pertaining to the Thiruvottiyur factory, copy of Final Order No. 1839/99 dated 27.7.99. passed by this Bench in Department's appeal No. E/1707/98, copy of MRF's Customs House Agent's letter dated 24.10.94, copy of letter dated 4.9.98 of the Commissioner of Central Excise, Goa issued to the Asst.Commissioner of Central Excise, Panaji Division, extract from the Finance Act, 1998 [KVS Scheme, 1998] and copies of letters, sent in reply to SCNs or otherwise, of the appellants. Paper Book -II filed with the appeal contains 2 affidavits, one by Shri Mammen A. Mathew, Corporate Manager -Materials (Imports) and the other by Shri S. Narayanaswamy, Manager -Export (Finance), and the annexures thereto. Paper Book -III is a compilation of the correspondence between the appellants and the department.

(3.) WE examined all the records and heard learned Sr.Advocate Shri F.S. Nariman (assisted by Sh. G. Ganesh, Sr.Advocate) for the appellants and ld.Sr.Advocate Shri M. Chandrasekharan (assisted by Sh. C. Hari Shankar, Advocate) for the respondent.