ORDER
Shri S.S. SEKHON, MEMBER (T)
1. Appellants are a 100% EOU engaged in the manufacture and export of Copper Clad Laminates and Prepreg Sheets, who after obtaining the permission from the Assistant Development Commissioner on 11.7.97, to sell onehalf of the items being manufactured in the Domestic Market in terms of para 9.9 (f) of EXIM Policy, requested the Assistant Commissioner of Central Excise incharge the rates of duty applicable and removed the goods on AR 1A filed, after payment of duty,l and under & after assessment by the Superintendent and Supervision of the jurisdictional officers, under that is called as ‘Physical Control System’ in Central Excise. No objection as regards the rate of duty, value, etc. were taken during such removals.
2. The rates of duty paid were as per the Ministry of Finance Department of Revenue (FTT Section) F No 305/160/97-FTT Circular No 42/97 dated 19.9.97.
3. They received a show cause notice from the Deputy Commissioner, in-charge demanding less charge of duty paid by them; who confirmed the demand for the period 1.2.98 to 30.6.98 by holding them not eligible for the benefit of notification 2/95 dt 4.1.95, as he found that the show cause notice dt. 30.6.99 covering the clearance from Dec 98 to Jun 99 was within time. As regards penalty, he observed on the appellant (SIC) & “there was no justification for imposing penalty in this case, since there is no mens-era and the issue arose due to the dispute with regard to eligibility of the exemption”. This order was issued on 22.9.99.
4. The Commissioner, on 16.02.2000, issued another notice, alleging that the appellant filed rule 173 B declaration and claimed the benefit of notification 2/95-CE dt. 4.1.95 and clearing the goods; on audit of records it came to light that the permission granted by the Development Commissioner was in terms of para 9.9 (f) of Excise Policy 1997-2002, and this fact was not brought to the notice of the department by an amendment to declaration rule 173 B or by filing a fresh declaration and clean(SIC) 2 the goods continued at the exempted rates; which they were not entitled, which would be a wilful mis-declaration. Therefore, evasion of duty for the period July 1997 to March 1999 took place; a demand for duty for the period July 1997 to November 1998 was made under proviso to Section 11A (1) and penalty under section 11 AC and interest under section 11 AB was demanded read with rule 173Q (1) and penalties were proposed to be imposed on Sh. Subramaniam, General Manager (Works) and Sh. N. Lakshman, Company Secretary under rule 209A.
5. The Commissioner confirmed the duty with interest under Rule 11 AB, imposed the penalty under Section 11 AC and imposed a penalty of Rs 25,000/- each on Sh. Subramaniam and Shri N. Lakshmanan. The present appeals are against this order.
6. We have heard both sides and considered the submissions and find –
(a) 100% EOU’s are covered by Chapter VA and Rule 100H therein, prescribes that certain rules General Chapter V (Manufactured goods, other than Salt), Chapter VII on Ware housing, VIII on Requirements of Registration, will not apply to a manufacturer who produces or manufactures in a free trade zone while certain Provision of General Chapter V on Manufactured Goods, Warehousing chapter, will not apply to goods produced or manufactured in 100% EOU. However, the provision of Chapter III would apply. Rule 100A (2) stipulates that the Provisions of the Chapter VA prevail over the other provisions. Rule 100D & 100E provide the procedure for clearance. The stipulated form to be filled in, is AR 1A and his own invoice as per rule 100E. Thereafter, under Rule 100F, a monthly return in form RT 13 shall be filed. The officers who come to assess the AR-1A form filled under 100D have to assess the same, and only thereafter allow the clearance. The Inspector of Central Excise has to verify the particulars on RT 13 form and certify the same to be in order. We find that the rule 100D, 100E & 100F cast on onerous duty on the officers to verify, assess and allow (SIC) only if they find in order all such clearance.
(b) In the above view of the law, we cannot appreciate the following findings of the Commissioner on the Show Cause Notice, based on 173 B declaration, and the order confirming the demand and penalties as arrived at para 08 of the order impugned herein which is extracted herein below-
“08. …. As regards DTA clearance by a hundred percent EOU, they were covered by Rule 100-A to 100-H of the Central Excise Rule and accordingly such a unit is not exempted from the provisions of Rules 173-B, 173-F and 173-G (1) etc. of the Central Excise Rules for the purpose of taking clearance for some consumption/Moreover, Rules 100-D and 100-E provide that such invoices shall be signed by the manufacturer or his authorised agent. They do not stipulate any verification and countersignature on the invoice for clearance to DTA which was countersigned by Inspector. Even when I accept that such clearances to DTA were counter-signed, the same does not detract from the fact that the assessee did not disclose the true facts in terms of sub rules (1) & (2) of Rule 173-B with a view to availing of the in admissible concessional rate even after amendment of Notification 2/95-CE by notification 23/97-CE dated 29.04.97. The Central Excise Rules do not lay down any responsibility of assessment or charging of appropriate rate of duty in respect of DTA clearances of 100% EOU’s on the Central Excise Officer and therefore, if he counter-signed the invoices he did so only in good faith by comparing to with party’s declaration under Rule 173-B. …..”
as we have found by a plain reading of the provision of rules 100D, 100E & 100F, applicable for clearances of all kinds from 100% EOU; we have found that the signatures on the assessment memorandum of AR-1A, the clearance document prescribed under the rule has to be arrived at, has been arrived at and only thereafter clearances have been allowed. The Commissioner’s findings of ‘good faith conduct’ the officers are arrived at after disregarding the statutory duty as prescribed by the Rules. There is no self assessment as under clearances from 100% EOU, the clearances are not under SRP procedure of Chapter VII-A of the rules; as per rule 173 A(2), nothing under Chapter VII-A i.e. Rule 173A to 173-F shall apply to a manufacturer under Chapter VA that is an 100% EOU. Therefore, we cannot uphold these further findings of the Commissioner in para 8 of the impugned order –
…..It is also significant that in terms of Rule 173-B the unit was required to assess the duty due on the excisable goods intended to be removed. Hence when the party failed to make a true and correct declaration under rule 173-B and uncommitantly suppressed the relevant facts, he cannot at the same time pass on the blame on Central Excise Officers who may have counter signed the invoices. ….”
as we do not find any applicability of Rule 173-B, 173-F, 173-G to an E.O.U. Clearances of an E.O.U. are (SIC) generis, covered only by rules 100A to 100-H; SRP rules 173A to 173-P are not applicable to an E.O.U., ie is our reading, we arrive at, by reading rule 100A (2) & 173A (2).
(c) In view of the letter dated 14.07.97 of the appellant, seeking clarification on rate of duty, action initiated earlier by the jurisdictional Assistant Commissioner and his findings as regards penalty on the very same issue and the clearance made after assessments by proper officers; we do not uphold the invocation of the longer period by the Commissioner under Section 11A (1) proviso to be justified in the facts of this case.
(d) In view of these findings, the entire demand is barred by limitation, therefore, there is no cause or case for invoking any penalty clause. Penalties under section 11AC are set aside since no demand of duty is being determined the order of interest under Section 11 AB a nullify.
(e) The penalty on the other two appellants under rule 209 a has been arrived at on a finding that from the statements, it appears they as well as the EOU were aware regarding the provisions of filling a complete and correct declaration under Rule 173B and that rule was applicable to EOU’s and that such a declaration was the sole basis for the department to extend the benefit. When we have after considering the provisions of Rule 100A to 100H and the forms prescribed and on facts that a rate of duty was classification/sought, clearances were effected after following the procedure established by law and done assessments and rule 173B or and 173F or any of the rules under Chapter VIIA i.e. 173A to 173P are not applicable and no duty could be determined, therefore, no goods could be determined is liable to confiscation. We cannot uphold the invocation of penalty under Rule 209A as arrived at in the impugned order.
7. In view of our findings, the order is set aside and appeals allowed.
(Pronounced in Court on 26/02/2001