ORDER
P.G. Chacko, Member (J)
1. The appellants are manufacturers of tyres and tubes for motor vehicles. They had imported various inputs for these products under 53 Value-Based Advanced Licences (VABALs) under DEEC Scheme and cleared the goods duty-free under Customs Notification No. 203/92 dated 19.5.1992. The scheme mandated the importer to export their final products in discharge of the export obligation set out in the licences. One of the conditions laid down under the above notification for exemption from payment of duty on the imported inputs was Condition No. V, which reads as follows:
That the export obligation is discharged within the period specified in the said certificate or within such extended period as may be granted by the Licensing Authority by exporting the goods manufactured in India in respect of which
a) No input stage credit is obtained under Rule 56A/57A of the Central Excise Rules 1944;
b) Facility under Rule 191A or 191B of the said rules has not been availed; and
c) Drawback has not been grated either under Section 74 of the Customs Act 1962 or under Customs & Central Excise Duty, Drawback Rules 1971.
Verification of records by officers of the Department revealed that the appellants had been availing Modvat credit under Rule 57A of the Central Excise Rules 1944 in respect of the inputs used for the products exported from their Ambattur and Sahaganj factories under the above scheme during April 1992 to October 1994. When this was pointed out to them, they debited an amount of Rs. 30,16,189/- in their RG 23A Part II, as reversal of input duty credit availed in respect of goods exported from factory under the above scheme, and intimated this- fact to the department in a letter dated 14.12.1994. However, the department, having found that the appellants had contravened Condition V(a) of the notification, issued three show-cause notices — show-cause notice dated 19.6.95 (read with Corrigendum dated 17.7.95) covering 22 VABALs, show-cause notice dated 17.7.95 covering 14 VABALs and show-cause notice dated 6.12.95 covering 17 VABALs — to the appellants for demanding duty of over Rs. 44.00 crores on the inputs imported by them under the 53 licences, by denying them the benefit of exemption under Notification No. 203/92 ibid. These show-cause notices invoked the extended period of limitation by alleging that the appellants had wilfully misdeclared that the export goods had been manufactured without availing input stage credit and had also suppressed the fact of having availed such credit with intention to evade payment of Customs duty on the imported materials. The show-cause notices also sought to levy interest on duty @ 24% per annum as per para 128 (b) of the Handbook of Procedures 1992 to 97. The imported goods were held to be liable for confiscation under Section 111(o) of the Customs Act and a penalty was proposed on the importer under Section 112 of the Act. In an interim reply dated 26.8.95, the party informed the Assistant Collector of Customs that they had expunged Modvat credit to the extent of Rs. 47,80,927.85 from RG 23A Part II as on date. However, in their final reply, they raised a series of objections. It was contended that, under para 67 of the EXIM policy, the bar to availment of Modvat credit on inputs was only where the advanced licences or materials imported thereunder were sought to be transferred and not otherwise. It was also argued that, under Sub-rule (3) [upto 31.10.1993] / Sub-rule (4) [from 1.11.1993] of Rule 57F of the Central Excise Rules, 1944, the appellants were entitled to avail Modvat credit on inputs used in final products cleared for export under bond. Incidentally, it was also pointed out that they had not availed Modvat credit on inputs imported under the above scheme. The appellants also claimed that, as all the relevant facts were known to both Central Excise and Customs authorities, there was no suppression on their part. Thus, the appellants contested all the proposals made in the show-cause notices.
2. Subsequently, the Government announced an Amnesty Scheme on 3.1.1997 allowing exporters under the VABAL scheme to expunge any Modvat credit availed by them in respect of the goods imported under the scheme and to pay interest @ 20% on the amount of credit from the date of export to the date of reversal of credit, by 31.1.1997 so that any proceedings for demanding duty on the imported inputs and / or imposing penalty on the importers on the ground of breach of Notification No. 203/92-Cus. could be dropped. Later on, in a letter dated 22.10.1997, the appellants informed the Commissioner that they had reversed Modvat credit in terms of the Amnesty Scheme and that the matter was being examined by the Central Excise authorities. On this basis, they wanted the adjudication of the show-cause notices to be kept in abeyance. In a subsequent letter, the party informed that the Commissioner of Central Excise, Chennai – II had appointed a Cost Accountant to conduct special audit of accounts under Section 14AA of the Central Excise Act. On this basis, the party requested the Commissioner of Customs to keep the case in abeyance till the Cost Accountant’s report was available. One year later, the Commissioner of Customs directed the appellants to submit the Cost Accountant’s report duly certified by the Assistant Collector of Central Excise concerned. The Cost Accountant had submitted his report on 15.7.1998, which was received by the Commissioner of Customs directly from the Commissionerate of Central Excise towards the end of March 2000. This report pertained to the Ambattur factory of the appellants. No report was received in respect of their Sahaganj factory. As per the Cost Accountant’s report, the total amount of Modvat credit to be reversed in terms of the Board’s formula was Rs. 232.75 lakhs for the period 1992-93 to 1994-95. The credit amount actually expunged was Rs. 143.50 lakhs only. The balance amount which was yet to be expunged was Rs. 89.25 lakhs. Thus, a shortfall in the amount required to be reversed as per the Board’s circular laid down in the Amnesty Scheme was found. No evidence was found of any interest having been paid by the party in terms of the said scheme. Therefore, learned Commissioner held that the benefit of the Amnesty Scheme was not available to the appellants and they were liable to pay the duty demanded in the show-cause notices, with interest thereon @ 2496 per annum. She also held the imported goods to be liable for confiscation under Section 111(o) of the Customs Act and imposed a penalty of one crore on the appellants under Section 112(a) of the Act. Hence the present appeal.
3. After examining the records and hearing both sides, we note that the following issues arise for consideration:
(a) Whether the appellants can be held to have fulfilled Condition V (a) of Customs Notification No. 203/92 dated 19.5.2002 in respect of the imports made under the DEEC Scheme during the period of dispute in respect of their factories at Ambattrua and Sahaganj;
(b) Whether, in the event of the appellants being found liable to pay Customs duty on their imports on account of breach of the above condition of the notification, the extended period of limitation under Section 28(1) of the Customs Act is invocable for recovering such duty from them;
(c) Whether any penalty is liable to be imposed on the appellants under Section 112 of the Customs Act and, if so, to what extent.
Similar issues had arisen before this Bench in the case of MRF Ltd. v. Commissioner of Customs, Chennai Appeal No. C/169/2002 and we rendered decision thereon in Final Order No. 212/2006 dated 29.3.2006. M/s. MRF Ltd. had imported inputs under 12 VABALs during the period October 1992 to March 1995 under DEEC scheme. These imports were made through Chennai Port for their four factories at different places. As in the present case, the imported goods were cleared duty-free under Customs Notification No. 203/92 elated 19.5.92. Subsequently, at the end of investigations, the department issued two show-cause notices, one of these covering 7 licences and the other covering 5 licences, demanding duty on the imported raw materials, alleging non-fulfilment of condition v(a) of the notification. Wilful misdeclaration and suppression of facts were also alleged against the party for invoking the larger period of limitation. A penalty was also proposed under Section 112 of the Customs Act. By the time the case was taken up for adjudication, the Amnesty Scheme had been introduced. Before the adjudicating authority, M/s. MRF took the stand that the Amnesty Scheme was not applicable to them and that, in terms of pre-existing circulars of the Board, they had reversed the input stage credit in full and therefore condition v(a) of the notification stood complied with. This argument was rejected by the Commissioner, who applied the terms of the Amnesty Scheme to the facts of the case and found that there were shortfalls in the reversal of Modvat credit and payment of interest as on 31.1.1997. Learned Commissioner accordingly (a) confirmed the demand of duty raised in the show-cause notices (b) charged interest on the amount @ 24% (c) held the imported goods liable for confiscation under Section 111(o) of the Customs Act and (d) imposed a penalty on M/s. MRF under Section 112(a) of the Customs Act. In the appeal filed by M/s. MRF, this Bench framed five issues for consideration, three of which are identical to the issues which we have framed in the present case.
4. Issues (a), (d) and (e) framed in M/s. MRF’s case are identical to issues (a), (b) and (c) framed in the present case. Issues (b) and (c) framed in MRF’s case are not relevant to the present case.
5. Learned senior advocate representing the Revenue, after noting the similarity between the two cases in respect of facts and issues, suggested that the present case be remanded to the Commissioner for fresh adjudication on the principles laid down by this Bench in MRF’s case. Learned Counsel for the appellants endorsed this suggestion. We are inclined to act upon this consensus between the two sides.
6. Unlike M/s. MRF Ltd. the present appellants have a grievance that the impugned order was passed in violation of the principles of natural justice. We find that, as the party went on seeking adjournments from time to time, learned Commissioner fixed final date for hearing under intimation to them and proceeded to dispose of the case after considering the Cost Accountant’s report. There is no evidence of any copy of this report having been supplied to the party. In the circumstances, the above plea of the appellants is not untenable. This seems to be an additional factor warranting re-adjudication of this case.
7. For the reasons already noted, we set aside the impugned order and allow this appeal by way of remand, directing learned Commissioner of Customs to decide afresh on the issues framed by us after (a) supplying the copy of the Cost Accountant’s report to the party (b) examining the relevant Bills of Entry and Shipping Bills & other export documents and (c) giving the party a reasonable opportunity of being heard. Learned Commissioner shall follow our Final Order No. 212/2006 ibid (passed in MRF’s case) while dealing with the issues on merits.
(Operative portion of the order was pronounced in open court on 31.8.206)