2006(05)LCX0229

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH AT BANGALORE

Dr. S.L. Peeran, Member (Judicial) and T.K. Jayaraman, Member (Technical)

Femco Filters (P) Ltd.

Versus

Commissioner of Customs, Bangalore

Final Order No. 1031& 1032/2006 decided on 16.05.2006 in Appeal no. C/104 & 105/2004

Cases Quoted -

Bakelite Hylam Ltd. 1997(03)LCX0041 Eq 1997 (091) ELT 0013 (SC)(mentioned)

FAL Industries Ltd. v. CC 2002(09)LCX0126 Eq 2003 (159) ELT 0215 (Tri-Chennai) (referred)

Fenner India Ltd. 1995(03)LCX0110 Eq 1995 (077) ELT 0008 (SC)(mentioned)

Philips India Limited v. CC 2000(12)LCX0185 Eq 2001 (137) ELT 0697 (T) (mentioned)

Woodcraft. Products Ltd. 1995(03)LCX0070 Eq 1995 (077) ELT 0023 (SC)(mentioned)

Advocated By -

K.S. Ravi Shankar, Advs. for the Appellant
Ganesh Havanur, SDR for the Respondent

JUDGMENT

T.K. Jayaraman, Member (Technical)

1. These appeals have been filed against Order in Appeal No. 405/2003-CUS dated 12th November, 2003 passed by the Commissioner of Customs (Appeals), Bangalore.


2. The brief facts are as follows:

The appellants imported an item called Particle Counter and Accessories under the EPCG Scheme vide Customs Notification No. 160/92 dated 20th April, 1992 and paid concessional rate of duty at 15 per cent. At the time of import they executed a bank guarantee to the extent of Rs. 2,80,000. The appellant could not fulfill the export obligations. Hence, revenue proceeded against the appellants for recovery of differential duty. The adjudicating authority held that the impugned items are liable for confiscation and imposed a redemption fine of Rs. 2,50,000. He demanded differential duty amounting to Rs. 5,72,477. Interest at 24 per cent was also demanded. A penalty of Rs. 1,00,000 was imposed. A penalty of Rs. 50,000 was imposed on Shri P.M. Zainful Abdeen, Director of the appellant company. The appellant approached the Commissioner (A). The Commissioner (A) upheld the order of the original authority. The appellants strongly challenge the impugned order.


3. Shri K.S. Ravi Shankar, learned Advocate appeared for the appellants and Shri Ganesh Havanur, learned SDR appeared for the revenue.


4. The learned Advocate urged the following points.

(i) The differential duty is only Rs. 2,73,120 according to the bank guarantee, which was extended from time to time but not Rs. 5,72,477.

(ii) The differential duty has been based on a wrong classification resorted to by the authorities as CTH 9029.10 instead of 9026.80. The appellants relied on HSN.

(iii) The JDGFT took into account the duty payment demanded by them and paid by the appellants on 13th February, 2004 at Rs. 2,73,120 and closed their case. The above duty is what has been worked out at the time of executing bank guarantee.

(iv) During the relevant period there was no provision for payment of interest in Notification No. 160/92 Cus. The appellant relies on the decision of the Tribunal in Philips India Limited v. CC reported in 2000(12)LCX0185 Eq 2001 (137) ELT 0697 (T) Paras 9, 11 & 12.

(v) The HSN classification is binding on the revenue as per the Apex Court's decision in the case of Woodcraft Products Ltd. 1995 (077) ELT 23; Fenner India Ltd. 1995 (077) ELT 8 and Bakelite Hylam Ltd. 1997 (091) ELT 13.

(vi) Reliance was placed on the definition of "Particle Counter" as given in McGraw Hill Dictionary of Scientific and Technical and Terms. (vii) In the case of FAL Industries Ltd. v. CO 2002(09)LCX0126 Eq 2003 (159) ELT 0215 (T), it was held that when there was non-fulfillment of EPCG obligation and duty was paid, there was no deliberate attempt to violate Notification No. 160/92. Hence, no confiscation or penalty would be sustained. Hence penalty under Section 112 is not sustainable on the company or on the director.


5. The learned SDR reiterated the impugned order.


6. We have gone through the records of the case carefully. At the time of import of the equipment under the EPCG licence, the appellants have, executed bank guarantee with DGFT. The idea of giving bank guarantee is that in case of non-fulfillment of the condition of the notification, the importer will be liable to pay the differential duty. The differential duty shown along with the bank guarantee is Rs. 2,73,120. When the appellants failed to fulfill the export obligations under the EPCG scheme, they were liable to pay the differential duty in terms of the bank guarantee executed by them. They paid this amount. This fact is not disputed. The point of dispute is the amount of differential duty. According to the revenue, the differential duty is Rs. 5,72,477 but the appellants contend that it is Rs. 2,73,120. This is on the account of the fact that the Department has classified the goods under CTH 9029.10 of the Customs Tariff whereas according to the appellant, the correct classification is CTH 9026.80. The contention of the appellant is that the goods should be classified under CTH 9026.80 has not been accepted by the lower authority in view of the fact that in the bill of entry, the classification shown was CTH 9029.10. The original authority has not examined the issue of classification properly.


7. The appellate authority in the impugned order has given the tariff description under 9026 and 9029 and comes to the conclusion that the impugned goods will be classified only under 9029. He has not given any other reason. CTH 90.26 covers instruments and apparatus for measuring or checking the flow, level, pressure or other variables of liquids or gases, whereas CTH 90.29 covers various types of counters such as revolution counters, production counters, taxi meters, milometers, hydrometers and alike. The Particle Counter, which is the impugned goods, are different from the Counters covered by 90.29. Heading 90.29 counts the events. For example the revolution counter counts the number of revolutions per minute. Similarly, the other counters covered by 90.29. Whereas the impugned goods actually determine the number of particles in the gas. Hence, in our view the impugned goods are more appropriately classified under 90.26 and there is a lot of force in the contention of the appellant. If this view is taken, the differential duty would be Rs. 2,73,120 and not Rs. 5,72,477 as demanded. Further, we find that during the relevant period, there was no provision under Notification No. 160/92 for demand of interest. Therefore, the demand of interest is not sustainable. As regards the confiscation, we find there was no deliberate violation of the conditions of the notification. The appellant could not fulfill the export obligations due to circumstances, which were beyond his control. In such a case, imposing penalty and confiscating the impugned goods cannot be sustained. Therefore, we set aside the confiscation of the impugned goods. When the confiscation is set aside, no penalty can be levied. In view of the above observations, we set aside the impugned order and allow the appeals with consequential relief.

(Operative portion of this Order was pronounced in open court on conclusion of hearing)

Equivalent 2006 (111) ECC 0353

Equivalent 2006 (137) ECR 0353 (Tri.-Bangalore)

Equivalent 2006 (076) RLT 0807 (CESTAT-Ban.)

Equivalent 2006 (203) ELT 0494 (Tri. - Bang.)