Excise & Customs -Case Law update

1. Finding of fact by the Tribunal

In the present case, the respondent manufactured goods for the Indian Railways and made supplies against specific contracts to them. The Department classified the goods under Chapter Sub-heading 4009.92 which was disputed by the respondent. However, the respondent obtained clearance of the goods on payment of duties under protest. Thereafter two applications were filed for refund of excess amount paid under protest. The Tribunal while determining the issue whether the goods supplied to the respondent included the element of Excise duty went through the correspondences exchanged by and between contracting parties, and the certificate issued by the Railway administration and held that price fixed under contract did not provide for an element of Excise duty. The Department went in appeal to the Hon’ble Supreme Court.

The Hon’ble Supreme Court, while rejecting the appeal of the Department declined to interfere with the decision of the Tribunal on the ground that the issue whether Excise duty has been passed is essentially a question of fact and it is well settled that the finding of fact arrived at by the Tribunal should be accepted by the Court. [CCE, Calcutta vs. Panihati Rubber Ltd. 2006(202) E.L.T 41 (SC) decided on 8-9-2006].

2. Plea of unjust enrichment against the State undertakings

The issue was whether Doctrine of unjust enrichment can be raised as a plea against the State undertakings. The Division Bench of the Hon’ble Karnataka High Court ruled that the doctrine of unjust enrichment is inapplicable to State undertakings unless it is proved that the Government undertakings are totally different. The High Court relied on the judgment of the Hon’ble Supreme Court in the case of Mafatlal Industries Limited vs. Union of India and Others (1997 (89) E.L.T. 247(SC)) wherein the apex court has categorically ruled that there cannot be any unjust enrichment against the State Government.

[C.C.E, Bangalore-II vs. Karnataka State Agro Corn Products Ltd. 2006 (202) E.L.T. (Kar.)]

3. Revenue not filed appeal –

Order attained finality – Same issue cannot be raised in case of other assessee

The issue involved was whether “bitumenised hessian based felt” would be classified under Tariff Heading 59.09 or under Tariff Heading 68.07 and whether the process of making blown grade bitumen out of straight grade bitumen amounts to manufacture.

The Hon’ble Supreme Court while affirming the decision of the Tribunal regarding the classification of bitumenised hessian under Tariff Heading 59.09 stated that if an earlier order is not appealed against by the Revenue and the same has attained finality, then it is not open to the Revenue to accept judgment/order on the same question in the case of one assessee and question its correctness in the case of some other assessees. This observation was made in view of the fact that the issue of classification of bitumenised hessian based felt had been already settled by the Tribunal in an earlier case and the Revenue had not preferred an appeal against that order.

On the issue whether the process of making blown grade bitumen out of straight bitumen amounts to manufacture, the Hon’ble Supreme Court held that the issue has been settled in CCE vs. M/s. Titikar Industries & Ors. [2006 (202) E.L.T 215 (SC)] wherein it was held that the activity doesn’t amount to manufacture.

[CCE, Navi Mumbai vs. Amar Bitumen & Allied Products Pvt. Ltd. 2006 (202) E.L.T 213(S.C.)]

4. New conditions are not required to be imported, exemption allowed based on the purpose of the Notification

The appellants supplied pipes to their customers mainly government organizations working under government approved schemes by availing exemption vide Notification No. 6/2002 which allowed clearance of such pipes without payment of Excise duty. These pipes were used for transportation of drinking water. The Department denied the exemption on the ground that the exemption is available for pipes up to the first storage point only.

It was held that exemption was available to water pipes beyond first storage point; i.e., for all storage points. It was held that new words are not to be imported and the purpose and the meaning of a Notification are to be understood from its wording itself. The Notification has not distinguished between first storage point and the subsequent ones. The purpose is clear in its language:– “processes to make the water fit for human or animal consumption” and any process required for this purpose should be included.

In the instant case, unless pipes for storage facility/points till supply for consumption are given exemption, the very purpose of supplying fit water for human consumption stands defeated.

5. Reference to the Larger Bench, issue subsequently dismissed by Supreme Court, Reference stands answered

It was held by the Larger Bench of the Hon’ble Tribunal that where there is a reference to the Larger Bench of the Tribunal in respect of the validity of the decision of the majority and in the meanwhile an appeal by the Department against the said judgment is dismissed by the Hon’ble Supreme Court, the reference to the Larger Bench stands answered in terms of the said decision of the Hon’ble Supreme Court. [Simplex Mills Pvt. Ltd. vs. CCE, Mumbai 2006 (202) E.L.T 189 (Tri-LB)]

6. Extended period of limitation is an exception, not a Rule – Case has to be made out for invoking the same

The issue involved was that the appellant had claimed the benefit of Notification No. 135/89-C.E by making misstatement regarding description of product in the classification list. The Department invoked the extended period of limitation under the proviso to section 11A(1) of the Central Excise Act, 1944.

It was held that the entire demand was hit by time limit specified under section 11A(1) of the Central Excise Act, 1944. A proceeding under section 11A(1) of the Act indisputably could be initiated within a period of six months, as the law then stood. The proviso appended to section 11A of the Act extending the period of limitation is required to be applied if the conditions precedent therein are satisfied. The manufacturing process indisputably was disclosed by the respondent and at no point of time, Revenue doubted the correctness or otherwise of the manufacturing process or ingredients disclosed by the assessee. The applicability of the extended period of limitation is, therefore, required to be considered in the aforementioned context. The proviso provides for an exception. It is not the rule. A case, therefore, has to be made out for attracting the same. [CCE, Chandigarh vs. Punjab Laminates Pvt. Ltd. 2006 (202) E.L.T. 578(SC)]

7. Delegation of powers under section 35E of the Central Excise Act, 1944

The issue involved in this case was whether the Commissioner can authorize any other Central Excise Officer to apply to the Tribunal on his behalf in terms of section 35E of the Central Excise Act, 1944?

The Larger Bench of the Tribunal held that section 35E of the Central Excise Act, 1944 empowers the CBEC to direct the Commissioner for applying to the Tribunal on specified points and the Commissioner is not empowered to authorize any other Central Excise Officer to apply to the Tribunal on his behalf. It is clear from the provisions of section 35E which provides for the Board to direct only the Commissioner and not any other officer. Further, filing of an appeal is a substantive function which cannot be delegated. Therefore, any appeal filed in contravention of the conditions under section 35E will not be maintainable.

[CCE, Surat-I vs. Pradeep Kumar Shyam Sukha 2006 (202) E.L.T 605 (Tri-LB).]

8. Demand based on statement of persons

The Hon’ble Tribunal held that any demand based on statement of persons who do not turn up for cross examination is not sustainable. It was also held that when charge of receipt of any additional consideration in monetary terms is not found, the valuation as per invoice price has to prevail and even if goods are sold at prices less than manufacturing cost, sale price will constitute assessable value under section 4 of the Central Excise Act, 1944.

[Kasat Chemicals Pvt. Ltd. vs. CCE, Pune 2006 (202) E.L.T 666 (Tri- Mumbai)]

9. Role of Customs Authorities under the DEPB Scheme

The appellants exported certain marine products under the DEPB Scheme for which DEPB credit rate of 4% was allowed in the DEPB Pass Book by the Licensing Authority. The Customs Authorities denied the DEPB credit on the ground that the exporter/appellant had not given a declaration in the Shipping Bill to the effect that the preservatives and chemicals prescribed in Standard Input Output Norms relating to Fish and Marine products have been used in the export product. The appellants questioned the order of the Customs Authorities as ultra vires and beyond the purview of their functions.

It was held by the Hon’ble Tribunal that the role of the Customs Authorities under the DEPB Scheme was only to verify exporter’s declaration, quantity and FOB value of export products and in case they find any discrepancy between goods declared and those exported, they can only report it to DGFT. The Custom Authorities do not have the authority to reduce DEPB credit as classification under the DEPB schedule is not their function.

[Vishal Exports Overseas Ltd. vs. Commissioner of Customs, Kochi 2006 (202) E.L.T 101 (Tri-Bang.)]

10. High Court order upholding confiscation of goods, discretion still available on the levy of penalty

The issue involved was whether the Hon’ble High Court’s decision upholding the confiscation of goods is binding on the Tribunal. The Tribunal ruled that though the High Court’s decision is binding on it but the Tribunal can always sit in judgment over the correctness or otherwise of the quantum of fine and penalty imposed. The Tribunal can modify the quantum of punishment and penalty if it feels that the penalty imposed is unreasonable even though no appeal has been filed by the respondent as these are matters of discretion.

[Commissioner of Customs, Chennai vs. Vijex Office Equipment Pvt. Ltd. 2006 (202) E.L.T 123 (Tri-Chennai)].

11. Clearance of goods from Custom Bonded Warehouse after issue of exemption Notification. Whether exemption available?

The appellant imported certain goods in November 2001 and filed the Bill of Entry in January 2002 to avoid further interest. Thereafter the appellant paid duty by filling ex-bond bill of entry and sought removal of goods from the warehouse. In March, 2002, the Government of India issued an exemption Notification in respect of the goods in question when those were within the bonded warehouse under Customs Jurisdiction. Thereafter, the appellant filed a refund claim which was rejected by the authorities.

It was held that the appellant was entitled to the refund claim as in spite of payment of duty before; it was the Customs authorities which did not permit the clearance of goods. Since the goods were cleared from the warehouse after coming into force of the Notification, the importer was entitled to its benefit and get refund of duty.

[Secretary, Council of Science & Technology, UP vs. Commissioner of Customs (Port) 2006 (202) E.L.T 241 (Cal.)]

12. Delivery of adjudication order – Proof of valid service

The issue involved in this case was two fold (i) whether dispatch of the adjudication order by speed post amounts to a valid service under section 153(a) of the Customs Act, 1962 in absence of proof of actual delivery of the speed post? and (ii) whether simultaneous affixing of the order on the notice board while dispatching it by speed post is sufficient compliance of section 153(b) of the Customs Act?

It was held that the delivery of order/decision/summons/notice in post office for onward transmission to addressee by registered post is not a sufficient proof of valid service. The concept of deemed service under section 27 of General Clauses Act, 1897 was held to be inapplicable as there is no scope of presumption in taxing matters. It was held that the service has to be effected in accordance with the terms and conditions under section 153 of Customs Act and section 37C of Central Excise Act, 1944. On the issue of simultaneous affixing of the order on the notice board and dispatch by speed post, it was held that the legal requirement was not served.

[Margra Industries Ltd. vs. Commissioner of Customs, New Delhi 2006 (202) E.L.T. 244 (Tri-LB]