KRISHNA FILAMENT LTD. Vs. COMMISSIONER OF CENTRAL EXCISE,

JUDGEMENT

(1.) The applicants herein who are engaged in the manufacture of HDPE and Poly Propylene Ropes falling under Chapter 54 of the Schedule to the Central Excise Tariff Act, 1985 in their factory at Boisar, Thane District were required to import various machineries for the manufacture of the above goods and for this purpose they applied on 16.10.1997 for grant of licence under Section 58 of the Customs Act, 1962 to establish a Private Bonded Warehouse in their factory premises. A licence was issued to them and subsequently, during the period 28.11.1997 to 17.8.1998 they imported 16 consignments of capital goods namely wire rope making machines in knocked -down condition and the consignments were warehoused in the Customs Private Bonded Warehouse on execution of double duty bond. They applied for an EPCG licence for import of these goods, which was given to them on 13.2.1998. On 6.1.1998 they applied to the Jurisdictional Assistant Commissioner for permission to assemble the machinery lying in their Customs Bonded Private Warehouse and the same was granted vide letter dt. 8.1.1998. On 2.7.1998, Notification No. 44/98 was issued deleting interalia Regulation 7 of the "Manufacture and Other Operations in Warehouse Regulations, 1966" (hereinafter referred to as MOOWR), according to which plant machinery fixtures and accessories necessary for carrying on the manufacturing process or other operations in the warehouse and consumable stores required for the maintenance thereof must be duty paid. Thereafter on 17.8.1998 and 28.8.1998 the applicants applied for permission to manufacture their finished goods in Bond under Section 65 of the Customs Act, which permission was granted on 1.9.1998. On 9.9.1998 the applicants were issued with a letter of Permission for setting up a 100% EOU in their Boisar factory premises, pursuance to which the Development Commissioner , SEEPZ attested the list of imported capital goods and the Assistant Commissioner of Customs (100% EOU), Mumbai advised Jurisdictional Assistant Commissioner to re -assess the imported capital goods under Notification No. 53/97 -Cus. Accordingly the applicants filed 16 Bills of Entry on 2.11.1998 for the 16 consignments in question for assessment to duty claiming exemption under Notification No. 53/97 -Cus. Between 7.11.1998 and 15.9.1999, 16 Show Cause -cum -Demand notices covering a total amount of Rs. 56,41,88,883.52 on the above 16 consignments, were issued on the ground that the applicants contravened the provisions of Section 59 and 61 of the Customs Act, as they failed to pay Customs duty even after the expiry of they Double Duty Bond executed by them as the time of warehousing the imported goods. In the meanwhile the jurisdictional Assistant Commissioner passed an order cancelling the Customs Private Bonded Warehouse Licence dt. 22.10.1997; the Commissioner (Appeals) rejected the applicants appeal against cancellation; and against this, Appeal No. C/74/2000 -Mum has been filed by the importers and is pending before this Tribunal. On 30.12.98 Commissioner of Central Excise Mumbai III issued a Show Cause -cum Demand notice proposing recovery of duty of Rs. 54,35,42,529/ - on the imported goods on the ground of contravention of the provisions of Regulation 7 of the MOOWR, 1966. The applicants replied to this notice vide their letter dt. 15.3.1999. On 22.3.1999 the applicants applied to the Jurisdictional Assistant Commissioner for grant of necessary permission to operate the 100% EOU and in April 99 fresh licence was issued which is valid upto 31.10.2001. In August 2000 they received notice of personal hearing before the Deputy Commissioner for the 16 show cause notices and they attended the hearing on 10.8.2000. They received another notice subsequently for personal hearing in the show cause notice dt. 30.12.1998 and the applicant attended before the Commissioner of Central Excise. In 4th May 2001 another letter was issued to the applicants informing them that the Commissioner had fixed personal hearing on 25.5.2001 which hearing was attended by them. Thereafter the present impugned order came to be passed confirming duty demand of Rs. 56,41,88,284/ - and imposing penalty of equal amount and ordering recovery of interest and confiscating imported goods with option to redeem on payment of a fine of Rs. 64 Crores. The order was of adjudication of total of 17 notices, one dt. 30.12.1998 answerable to the Commissioner and the other 16 notices issued by Jurisdictional Range Superintendent answerable to Deputy Commissioner. The thrust of the finding of the Commissioner is that the act of installation of imported goods amounts to illicit clearance of imported goods for home consumption. Hence this application.

(2.) We have heard Shri V.M. Doiphode Ld. Counsel and Shri M.H. Shaikh Ld. DR. We see prima facie force in the contention of the applicants that the order is bad in law inasmuch as no hearing was granted to them on the 16 show cause notices raising demand on the ground that the applicants failed to pay duty even after expiry of the period of the bond executed by them while warehousing the goods. We also see substance prima facie in their plea that the Regulation 7 of the MOOWR, 1966 is not applicable to their case since this Regulation, requires that plant machinery etc. for carrying on manufacturing process or her operations in the warehouse must be duty paid while the applicants filed the application in terms of Section 65 of the Customs Act, for installation of the low making machinery and it is not the finding of the Commissioner that such installation amounted to manufacture. Further there is no charge or finding that the applicants carried on the process of manufacture of wire rope in the warehouse. We also take note of the fact that the applicants stated the process of manufacture of wire rope only after 1.9.98, after the repeal of Regulation 7 of the MOOWR, 1966. In such a situation the impugned order passed in proceedings initiated after the repeal of Regulation 7 without the protection of saving clause is "NON -EST" in the light of the judgment of the Apex Court in the case of Kolhapur Canesugar Works Ltd. v. Union of India [2000(119) ELT (S.C.)], we also hold that prima facie the finding that the installation of the imported goods by the applicants in the warehouse tantamount to illicit clearance of the imported goods for home consumption is not tenable as the installed machinery is very much in the warehouse and has not been removed from the. For these reasons we are of the view that a strong prima facie case for to talk waiver has been made out by the applicants and we accordingly waive pre -deposit of duty and penalty and stay recovery thereof pending the appeal. (Pronounced in Court)