Revenue is Bound by the Norms Fixed by SION Norms Fixed by the Ministry of Commerce: CESTAT Mumbai

M/s GKB Vision Ltd. vs. Commissioner of Customs (NS-V); Customs Appeal no. 564-567 of 2008 and 936-937 of 2008; CESTAT Mumbai; 17.01.2022.

• The Appellants, a recognized 100% Export Oriented Unit, are engaged in the manufacture of ophthalmic lenses falling under sub heading 90014000 of Central Excise Tariff Act, 1985.
• The rough ophthalmic lenses blanks required for the manufacture of ophthalmic lenses were imported by the appellants without payment of duty of Customs in terms of Notification No. 52/2003-Cus dated 31.03.2003, which exempts, inter alia, raw materials imported by the EOU for use in the manufacture of export goods; Revenue alleged that breakage, wastage and scrap of the lenses generated by the appellant were more than 9.09% provided for in the SION.
• Show cause notices were issued and were confirmed by the Original Authority as well as first Appellate Authority; being aggrieved by the order, appeal s were preferred before the Hon’ble Tribunal, which vide order dated 13.09.2017 & 14.09.2017 confirmed that duty was recoverable as the wastage permitted was more than 9%;
• However, Tribunal set aside the penalty under Section 112(b) and 117 of Customs Act, 1962; applications for rectification of mistake, filed by the appellant were also dismissed; the appellant filed appeals before the Hon’ble High Court at Bombay at Goa; High Court set aside the orders and remanded back to the Tribunal for fresh disposal on merits in accordance with law and also to consider the Ministry decision dated 23.09.2008 and 26.11.2008.
• Hence, the present appeals.

Issue:

• Issue involved in the present set up appeals is as to whether revenue was correct in demanding duty on wastage/ breakage, over and above the permissible limit, of raw materials imported duty free, during the course of manufacture of final products by the EOU.
• Whether the appellants would be eligible for the higher norms fixed by Ministry in respect of wastage/ loss/ breakage of raw materials and as to whether the demand is premature

Observations and Findings:

• On going through the records of the case, it was found find that the appellants have represented to the Ministry to revise the SION norms in blanks imported by them.
• Ministry after considering the request of the appellants have communicated to the development commissioner that a wastage of 15 percent has been fixed and the development commissioner may take necessary action under para 6.7(e) of Hand Book of Procedures Volume-I.
• Thus, it was found that that in view of the decisions dated 23/9/2008 and 26/11/2008 of the Commerce Ministry, in the appellant’s case the wastage norms were fixed at 15 percent as against the earlier norms of 9.09 percent.
• The bench was of the considered opinion that the Revenue is bound by the norms fixed by SION norms fixed by the Ministry of Commerce and therefore the benefit of the same has to accrue to the appellants.
• Coming to the other submission of the appellants that demand of duty, if any, from the EOU can only be made at the closure of the bonding period are at the time of debonding, we find that the submissions of the appellants are legally correct and acceptable.
• It was found that the same has not been considered by this bench vide order cited above. Therefore, the bench was of the considered opinion that the demand of duty was premature.
• It was found that Bombay High Court in the case of Sarala Performance Fibres Ltd. vs. UOI 2008 (226) ELT 45 (Bom) held that there is always an inherent power in the Tribunal to do justice; in these circumstances technicalities by themselves should not stand in the way if otherwise there is merit in the contention of the petitioners.
• Considering the circumstances, the order in so far as the petitioners are concerned is set aside. In view of the discussion above the applications/ appeals filed by the appellants are allowed, with consequential relief, if any. The final order stands modified in the above terms.

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