ORDER
Archana Wadhwa, Member (J)
1. The appellant is a 100% EOU set up in the Santacruz Electronic Export Processing Zone (SEEPZ). The appellant hold a licence for manufacture of studded gold jewellery for which purpose they import standard gold and semi precious/precious stones and mountings for studded jewellery. The import is made either directly or through MMTC. The exemption was claimed under the provisions of Notification No. 196/87-Cus and 177/94-Cus for the purposes of import of gold and stones. The appellant’s factory was visited by the revenue authorities on 11/11/95, who conducted the stock taking of the gold and concluded that there was certain shortage of the same. It was also believed that inasmuch as the appellants have failed to maintain proper accounts showing wastage of gold, they cannot claim wastage to the maximum of the limit prescribed under the said notification.
2. Subsequently, on 21/11/97 a show cause notice was issued alleging that the appellants had imported gold through MMTC in terms of the Notification No. 196/87-Cus dated 05/05/87. It was alleged that the inventory forwarding the scrap, dust and sweepings to the Government mint for conversion into gold bars showed a shortage of 16488.270 grams of gold valued at Rs. 73,86,744.96 on which duty of Rs. 53,55,390/- was payable Under Section 28 of the Customs Act. Accordingly, notice proposed confirmation of the above demand of duty as also imposition of penalty. The notice culminated into the impugned order passed by the Commissioner of Customs confirming demand of duty and imposing penalty of Rs. 7,38,000/-. Whiling passing the impugned order, the Commissioner observed that in terms of the Notification No. 177/94-Cus allowing of wastage on gold up to the prescribed limit is a variable factor and to claim the same, it is mandatory that the importer maintain proper account of wastage. The unit cannot claim maximum possible wastage without maintaining the records even if they have achieved the value addition.
3. Shri. S.P. Mathew, Ld. Advocate appearing for the appellant submits that the impugned order of the Commissioner is one of the bunch of identical cases which was passed by him. He draws our attention to the stay order dated 18/09/2002 wherein the appellant’s stay application was heard along with a number of other appellants similarly situates. He submits that the appeals of the other appellants were disposed of by the Tribunal vide its order No. C-II/1514-30/WZB/2003 dated 20/06/2003. The present appeal of the appellants could not be taken up along with other appeals, inasmuch as file was not locatable. He prays for following the above order of the Tribunal passed in the case of identically situated appellants and allow the appeal.
4. After going through the above order passed by the Tribunal, we find that the appeal of the similarly situates appellants have been allowed on limitation as also on merits. For better appreciation, we re-produce below para 17 of the said order:-
“17. “We have held that the confirmation of duty is barred by limitation. But however we are also obliged to give our views on Clause (5) and Clause (8) of the notification. Both of them we will again quote below:-
“(5) the importer shall maintain a proper account of import, consumption and utilization of the said goods and of the exports made by him, and shall submit such account periodically to the Assistant Commissioner of Customs;
(8) Gem and jewellery, including the rejects, manufactured in the said Zone, shall not be brought to any other place in India (that is to say the Domestic Tariff Area) for whatever purpose:
Provided that scrap, dust or sweepings of gold arising in the manufacturing process may be forwarded to the Government Mint by the importer for conversion into standard gold bars and return to the said Zone in accordance with the procedure specified by the collector of Customs in this regard.”
Both of them when we read together, it will show that under Clause (5), the importer is obliged to maintain proper accounts of the import, consumption and utilisation of the imported goods, namely raw materials and exported final products and the proper accounts should be submitted periodically to the Assistant Commissioner. Clause (8) of the notification specifically provides for that aspect of the manufacturing process, namely invisible rejects or waste arising during the manufacture of final product. Clause (5) of the notification clearly provides for accountal of the imported goods namely the raw material and the exports made by the importer i.e. raw material and final product exported. This specifically provides for what could be seen by the naked eye and which could be easily accounted. But one has to be practical that when the gem and jewellery are manufactured out of the raw material, namely a primary gold, Occasion may arise when the gold when it is converted from primary form to the end product, there may be certain dust which may fly from the place of manufacture or it may even be irrecoverable loss due to the process of manufacture of the final product. It can be invisible. The table to the notification also states how much is the percentage of gold which could be allowed for wastage. In fact the explanations contained under the table state clearly that mountings and findings and wastages arising there from are allowed The same has been explained in paragraphs 3.2 to 3.6 of the appeal which read as under :-
“3.2 The appellants further pointed out that as the Assistant Commissioner ought to be aware the seals were removed by the concerned Officers on 07.02. 1996 after which the appellants began the process of recovery of gold. In view of the large quantity of dust involved from which the gold was to be recovered and in view of the limited refining capacity available with the appellants, the appellants worked hard to recover the gold from the dust by the deadline of 29.02.1996, that was fixed by the Assistant Commissioner in his letter referred above.
3.3 The appellants further pointed out that the total recovery came to 15,272.40 grams about which the Bond Officer’ was orally informed. A letter dated 08.03.1996 (Annexure 3 hereof) was also addressed to the Assistant Commissioner in this regard In response to this letter the Bond preventive Officer came the same day and personally verified the recovery effected.
3.4 The appellants pointed out that the quantity of 19688.60 grams mentioned in the show cause notice was wrong and the correct figure of quantity available in dust and slurry at the time of physical verification on 11.11.95 was 17386.31 grams.
3.5 7he appellants pointed out that as a result of recovery the shortage in stock was reduced from 17386.31 grams to 2113.91 grams which should be treated as part of the manufacturing loss which together with the approximate claim of wastage at the time of making of jewellery was within the permitted wastage allowance as per the Notification. Hence it was clear that there was no shortage and hence demand of duty was unsustainable in law and on facts.
3.6 The appellants also requested for personal hearing as well as cross-examination of the witness by the appellants counsel.”
Paragraphs 90 of the Policy and paragraph 14 of the Procedure deal with the same and specifically state the wastages for jewellery is allowed as manufacturing loss recognizing such losses up to limits specified, practically not possible to recover.
18. In fact it has been specifically stated in the grounds of appeal that one of the provision in paragraph 88 part-E of the Policy that gold may be sent to the Government mint and may be returned to them in gold bars, i.e. by not using the term waste or wastage. The policy recognises that in the manufacture of gold and jewellery, there can be invisible wastage. In fact Clause (10) of the notification specifically provides that the Assistant Commissioner may allow the loss of percentage of gold in column 2 of the table. From the reading of Clause (10), it is clear to us that the Government recognises such invisible loss arising in the manufacture of jewellery out of the gold imported.
19. We are therefore of the view that on the merits also the department does not have good case. Therefore, imposition of penalty on the appellants is wrong in law: We are of the view that the words used in Clauses (5), 98) and (10) of the notification have not been appreciated by the adjudicating authority.
20. All the appeals are therefore allowed with consequential relief if any, according to law.”
5. Inasmuch as the issue stands decided by the above referred decision, we do not find any justifiable reason to take a contrary view. Accordingly we set aside the impugned order and allow the appeal with consequential relief to the appellants.
(Pronounced in Court on 17.12.2004)