CC Vs. SHASUN DRUGS AND CHEMICALS

JUDGEMENT

(1.) This appeal of the Revenue is against an order of the Commissioner of Customs, Chennai, whereby the department's proposal for recovering Customs Duty of over Rs. 12 crores on imported goods from the respondents under Section 28(1) of the Customs Act and confiscating the goods under Section 111 of the Act as also imposing penalties on the party under Sections 112 and 114(i) of the Act was dropped.

(2.) The respondents had imported raw materials during 1993 -94 duty -free under Notification No. 203/1992 -Cus., 19 -5 -92, declaring, inter alia, that they would be fulfilling all the relevant conditions under the notification. The imports were made under the DEEC scheme on the strength of Value Based Advance Licences issued by the Chief Controller of Imports and Exports, Ministry of Commerce. The chief condition under the notification was that the importer should should not avail input credit under Rule 56A/57A of the Central Excise Rules, 1944 in respect of any inputs used in the manufacture of final products to be exported under the scheme. The respondents utilised the imported raw materials along with indigenous raw materials for the manufacture of their final products which they exported during 1993 -95. Later on, the department found that the respondents had availed input credit under Rule 56A/57A on the indigenous raw materials used in the exported final products, in violation of condition V(a) of the notification. On this basis, two show cause notices were issued to the party, one dated 24 -7 -95 and the other dated 25 -9 -95, both demanding customs duty on the imported raw materials under Section 28(1) of the Customs Act. Both the notices also contained proposals to levy interest on duty, to confiscate the imported materials and to impose penalties. These proposals were contested by the party in their replies, wherein they, however, conceded the availment of input credit alleged by the department. The party, apparently, made reversal of the credits which they had taken in RG.23A Part II on the indigenous raw materials used in the final products exported in discharge of export obligation under the notification. The total amount of Modvat credits so reversed from time to time was over Rs. 83 lakhs. A major part of this credit had been reversed prior to 31 -1 -97, the date which is relevant to the Amnesty Scheme introduced by the Government in favour of importers like the present respondents who violated condition V(a) of the notification. The remaining part was reversed after 31 -1 -97. The above scheme, which was introduced on 31 -1 -97, exonerated such importers from payment of customs duty on the imported goods as also from penal proceedings under the Customs Act, provided they reversed the entire Modvat credit on or before 31 -1 -97 and also paid interest on the credit amount on or before the said date for the period from the date of export to the date of payment. If any importer of goods under the DEEC scheme did not reverse Modvat credit and did not pay interest within the stipulated time, they were liable to pay customs duty on the imported goods as well as to be subject to penal proceedings like imposition of redemption fine in lieu of confiscation and imposition of penalty. In the instant case, as already indicated, a part of the Modvat credit was reversed beyond 31 -1 -97, a small amount in February, 1997 and another small amount in August, 1997. Interest to the extent of RS. 20.8 lakhs was also paid beyond 31 -1 -97. Before the adjudicating authority, the respondents, apparently, requested for a lenient view in the matter. That authority took such a view and dropped the proposals made in the show cause notices, after noting that the party had 'substantially complied' with the conditions of the notification. Accordingly, the delay involved in reversal of a part of the Modvat credit and that involved in the payment of interest were condoned. The learned Commissioner of Customs, thus, accorded amnesty to the party.

(3.) Heard both sides. Learned Senior Counsel for the Revenue submits that, in the facts of this case, the judgment of the Hon'ble Supreme Court in Bharati Telecom Ltd. v. CC, 2001 (134) E.L.T. 327 (S.C.), is squarely applicable. The party, in that case, stood in the same factual position as the present respondents. They had worked under the DEEC scheme in a similar way. When the department noticed that they had availed input stage credit in respect of indigenously procured raw materials used in the manufacture of export goods, in violation of condition V(a) of the notification, the party reversed the Modvat credit. Such reversal was effected within the stipulated date (31 -1 -97). However, the interest on the amount of credit, which ought to have been paid on or before 31 -1 -97 under the Amnesty Scheme, happened to be paid beyond that date. The Hon'ble Supreme Court, in the cited case, held that M/s. Bharati Telecom Ltd. were not eligible for amnesty under the scheme and were consequently liable to be proceeded against on the ground of violation of conditions of Notification No. 203/92. Consequently, the party had to satisfy the department's demand of customs duty on the imported raw materials. Ld. Senior Counsel has pointed out that a review petition filed by M/s. Bharati Telecom Ltd. against the above judgment was also rejected.