Research › Search › Judgment

Gujarat High Court · body

2018 DIGILAW 54 (GUJ)

Rolex Rings Pvt. Ltd. v. Union of India

2018-01-10

A.Y.KOGJE, AKIL KURESHI

body2018
JUDGMENT : AKIL KURESHI, J. 1. These petitions arise in common background and involve similar facts. We may refer to the facts as arising in Special Civil Application No.2756/2017. 2. The petitioners have challenged an order dated 16.12.2016 passed by the Principal Commissioner of Customs, Mundra, by which he held that the product manufactured and exported by the petitioners would be correctly classifiable under item no.428 of DEPB Schedule as 'Bearing Races' and not under item no.68B of the DEPB Schedule as 'Alloy Steel Forging (Machined)'. Consequently, he confirmed the duty demand of 1,63,00,000/( rounded off) with interest and penalties. He also imposed personal penalties. This order the petitioners have challenged directly before the High Court primarily on the ground that this very product manufactured and exported by the petitioners was at the centre of dispute between the department and the petitioners in the context of Duty Drawback Scheme. The Customs, Excise & Service Tax Appellate Tribunal in such litigation ruled in favour of the petitioners holding that the product is not Bearing Races but is Alloy Steel Forging (Machined). The petitioners would point out that judgment of the Tribunal was confirmed by the Supreme Court in the appeal filed by the department. According to the petitioners, therefore, without there being any material change, the departmental authority cannot take a different view and drive the petitioners to further litigation. 3. Brief facts are as under. The petitioners are engaged in manufacturing and exporting of various goods. One of the items so manufactured and imported by the petitioners, ran into controversy with the department in the context of duty drawback benefits made available by the Government of India with effect from 1.10.2011. The petitioners contended that the product in question was Alloy Steel Forging (Machined) classifiable under entry no. 732616 of the Duty Drawback Schedule. This would enable the petitioners to claim drawback at the rate of 5%. Whereas, the department contended that the product in question was Bearing Races falling under entry no. 848221 of the same Schedule for which duty drawback prescribed was at 2%. The adjudicating authority having held against the petitioners, the issue was carried in appeal before the Tribunal. The Tribunal in case of Shri Rolex Rings Pvt. Ltd. v. Commissioner of Customs, Kandla reported in 2016 (335) E.L.T. 69 (Tri. Ahmd.) decided the issue in favour of the petitioners. The adjudicating authority having held against the petitioners, the issue was carried in appeal before the Tribunal. The Tribunal in case of Shri Rolex Rings Pvt. Ltd. v. Commissioner of Customs, Kandla reported in 2016 (335) E.L.T. 69 (Tri. Ahmd.) decided the issue in favour of the petitioners. The Tribunal referred to various documents including the certificate dated 25.7.2000 issued by the Chartered Engineer in which it was clarified as under : “On the basis of our inspection and verification of manufacturing facilities available at the factory of M/s. Rolex Industries, process flow chart being followed by the unit and other relevant information furnished by the unit, it is clarified that :” 1. M/s. Rolex Industries, Rajkot is capable to manufacture forged and machined rings for producing bearing races from alloy steel materials. 2. Rings supplied as forged and machined condition, require further process of heat treatment to impart required hardness to bearing races, further process of finishing by grinding and lapping on special machineries, so that bearing races can be assembled as to prepare the bearing complete. 3. Forged and machined rings exported by the unit, for producing bearing races, will require further process at buyers' end to make machined rings suitable for bearing assembly. 4. Forged and machined rings manufactured and, being exported by the unit cannot be assembled or used for producing bearings. All rings require further process like heat treatment, grinding, lapping, assembly etc. to make complete bearing. 5. Information furnished herewith is true and correct to the best of our knowledge and belief.” 4. The Tribunal also referred to the certificate issued by the Superintendent of Central Excise, Rajkot, dated 26.7.2000 certifying that the forged and machined rings manufactured and exported by the petitioners cannot be assembled or used for producing the bearings. All rings required further processing like heat treatment, grinding, lapping, assembling, etc. for making complete bearing. The Tribunal also referred to the certificate issued by the Superintendent of Central Excise, Rajkot, dated 26.7.2000 certifying that the forged and machined rings manufactured and exported by the petitioners cannot be assembled or used for producing the bearings. All rings required further processing like heat treatment, grinding, lapping, assembling, etc. for making complete bearing. The Tribunal also referred to the inquiry conducted by Mahindra SEZ in which the Superintendent of Customs Authorised Officer, after carrying out detailed inquiry, had concluded as under : “Summing up the alloy steel forging machined, supplied by the vendors require further operations, such as hardening, quenching, tempering, face/id/od/grinding, honing, laser marking, which are done at Timken making it as 'bearing race' fit for use as part of roller bearing and hence, the classification of alloy steel forging machined under product code 61/68B appears more appropriate rather than under product code 61/428 or 61/530A, WHICH IS MORE SPECIFIC inasmuch as the alloy steel forging machined are neither rough or attained the character bearing race or machine part fit for ready use. Regarding the classification of the components received, namely alloy steel rings machined and carburized, the appropriate classification appears under CT 7325.” 5. The Tribunal also referred to the certificates of the customers produced by the petitioners in which it was stated as under : “This is to inform that, We, SKF India Ltd., Chinchwad, Pune, procure Alloy Steel Forgings (Machined) rings from ROLEX RINGS PRIVATE LIMITED, RAJKOTINDIA. These “Alloy Steel Forgings (Machined) Rings” supplied by ROLEX are further processed to produce a Bearing Race. Following processes are required to be performed on Forgings (Machined) Rings supplied by ROLEX RINGS PRIVATE LIMITED, RAJKOTINDIA (1) Heat Treatment (2) Grinding (3) Finishing (4) Assembly Further to state that these rings procured from ROLEX RINGS PRIVATE LIMITED, RAJKOTINDIA cannot be used directly in as supplied condition for assembly of bearings or cannot be considered as Bearing Races and fitted as Bearing Races.” 6. On the basis of such materials produced by the petitioners, the Tribunal concluded as under : “14. On perusal of the certificates of the customers and the customs authorities and SEZ, as mentioned above, we are unable to accept the findings of the Adjudicating authority. The customers categorically certified that the alloy steel forging (machined) for use rings supplied by the Appellant were further processed to produce Bearing Races. On perusal of the certificates of the customers and the customs authorities and SEZ, as mentioned above, we are unable to accept the findings of the Adjudicating authority. The customers categorically certified that the alloy steel forging (machined) for use rings supplied by the Appellant were further processed to produce Bearing Races. The processes undertaken by the customer are heat treatment, grinding, super finishing process like honing, lapping, assembling etc. It is submitted by the learned Advocate that these processes are essential to produce the bearing races. The customers also certified that without these processes, the Bearing rings/blanks cannot be produced. The findings of the Adjudicating authority that the produce is finished nature are without any substance.” 7. Having said so, the Tribunal also referred to the classification presented by the petitioners and accepted by the department for the same product for claiming DEPB benefits. The Tribunal referred to the clarificatory circular issued by CBEC under which for products previously classified under DEPB, corresponding products in the Duty Drawback Scheme were provided. The Tribunal noted that under the DEPB Scheme, the petitioners were claiming benefit of the product classifying it under Serial No.68B to the Schedule, claiming the same to be Alloy Steel Forging (Machined) which corresponded to entry no.732616 under Chapter 73 of the Duty Drawback Schedule. The Tribunal also recorded that there was no proposal in the show cause notice giving rise to the said proceedings for reopening the classification under DEPB Scheme nor independently any such proceedings were initiated. The Tribunal once again referred to the detailed inquiry carried out by the Customs authorities at Mahindra SEZ for examination of the issue in which it was ruled in favour of the petitioner. 8. On behalf of the department, it was contended before the Tribunal that the petitioners had classified the same product for its local clearances under Chapter 84 of the Schedule to the Central Excise Tariff Act as Bearing Races. To this the Tribunal, observed that while filing the shipping bill, this issue was examined by the Assistant Commissioner of Customs, Pipava. The petitioners had replied to the queries raised by the authorities and after being satisfied with the explanation, the exports were permitted. 9. The department carried the matter in appeal before the Supreme Court. SLP was dismissed in the following terms : “Delay condoned. We have heard learned counsel for the appellant. The petitioners had replied to the queries raised by the authorities and after being satisfied with the explanation, the exports were permitted. 9. The department carried the matter in appeal before the Supreme Court. SLP was dismissed in the following terms : “Delay condoned. We have heard learned counsel for the appellant. We find no reason to interfere with the impugned judgment. The appeals are accordingly dismissed.” 10. It is stated and not disputed before us that after the said judgment of the Tribunal, as confirmed by the Supreme Court, the petitioners got and continues to get the benefit of duty drawback as per the classification of the product as Alloy Steel Forging (Machined). The Commissioner of Customs, however, issued a show cause notice dated 28.8.2015 to raise the dispute about the classification of the same product for the purpose of DEPB benefits which was prevailing prior to 1.10.2011. Once again, the stand of the authority was that the product manufactured and exported by the petitioners was Bearing Races and not Alloy Steel Forging (Machined). Heavy reliance was placed in the show cause notice on the petitioners classifying the said product as Bearing Races for the purpose of domestic clearances. The petitioners opposed the proceedings and relied heavily on the judgment of the Tribunal in their own case. The Principal Commissioner by the impugned order rejected such defences. The petitioners' contention that the product sold by them require further processes at the buyers' end before it can be used as bearings was repelled in the following manner : “3.5.10 The Notice has contended that the impugned goods supplied by the Noticee No.1 undergo certain process at buyer's end. In this regard, I find that the said impugned goods may be semi finished goods for the buyer but the said impugned goods attained the properties of Bearing Races already at the Notice's end. Buyer has to carry out only minor work on finished rings such as grinding, to place the ball in the rings. Physical/metallurgical property in the metal as well as the characteristic for it's uses does not change at the buyer's end. Buyer has to carry out only minor work on finished rings such as grinding, to place the ball in the rings. Physical/metallurgical property in the metal as well as the characteristic for it's uses does not change at the buyer's end. It is undisputed fact that the Notice offer the product for export as bearing rings/races by classifying the same under CTH 84829900 of the Customs Tariff Act, 1975, as part of the bearing, therefore, in view of above, discussion the product exported by the notice was bearing rings/races falling under CTH 84829900 of the Customs Tariff Act, 1975.” 11. The petitioners' contention that the Tribunal already having concluded the issue, the Commissioner cannot take a different view, was also not accepted. The Commissioner heavily relied on the petitioners' description of the goods for the purpose of domestic clearances and eventually, passed the orders confirming the duty demand with interest and penalties. These orders the petitioners have challenged in the present petitions. 12. Appearing for the petitioners, learned counsel Shri Dave submitted that the Commissioner has reopened the issue which was concluded by the Tribunal and which judgment was confirmed by the Supreme Court. Under identical facts, it was not open for the department to reagitate the question. The Commissioner was bound by the judgment of the Tribunal and could not have taken a different view. Merely because the issue in the present case arises in the context of DEPB benefits, as against the one decided by the Tribunal concerning the Duty Drawback Scheme, would not enable the Commissioner to take a different view. The relevant entries and description of goods in both sets of export benefits being identical and the product being common, the Commissioner was bound to follow the judgment of the Tribunal. He therefore, urged the Court to exercise writ jurisdiction instead of driving the petitioners to the requirement of filing statutory appeals which would in turn, require the petitioners to make mandatory pre-deposit. He submitted that the alternative remedy is therefore, not efficacious since it casts an onerous duty on the petitioners. 13. On the other hand, learned advocate Shri Lodha for the department opposed the petition contending that against the order of the adjudicating authority, appeal lies before the Tribunal. Being a question of classification of goods, appeal against the judgment of the Tribunal would lie before the Supreme Court. 13. On the other hand, learned advocate Shri Lodha for the department opposed the petition contending that against the order of the adjudicating authority, appeal lies before the Tribunal. Being a question of classification of goods, appeal against the judgment of the Tribunal would lie before the Supreme Court. This Court therefore, should not exercise the writ jurisdiction bypassing the appeal route. He further submitted that the Tribunal in the case of the petitioners had proceeded on the basis of the circular of CBEC and further on the basis that the classification for the purpose of DEPB benefits was not reopened by the department. In the present case, the department has sought to reclassify the product for DEPB benefits. Judgment of the Tribunal would therefore, not apply. 14. Two questions of overlapping nature arise for our consideration. These questions are, whether the Tribunal in the earlier round of litigation has concluded the issue so far as the classification of goods for export benefits is concerned, there being no material change in the circumstances and whether in facts of the present case, writ jurisdiction should be exercised without relegating the petitioners to the appellate forum. 15. The question of relegating the petitioners to appeal before the Tribunal, in the present case, would necessarily depend on the nature of the petitioners' grievances before us. It was for this reason that we had described the two questions as of overlapping nature. A common discussion for both the issues would therefore, be necessary. 16. We have referred to the disputes in the first round of litigation between the petitioners and the department which arose in the context of the petitioners' export goods being classified for the purpose of duty drawback benefits. We have referred to the judgment of the Tribunal in this respect at some length. The whole purpose of this exercise was to demonstrate that before the Tribunal, three issues came up for consideration. First was the stand of the petitioners with respect to the precise nature of product. In this respect, the Tribunal relied on various certificates produced by the petitioners which suggested that the product required further elaborate and extensive processes before it can be used as bearings. The Tribunal also referred to the inquiries conducted by the authorities at Mahindra SEZ who also came to the same conclusion. In this respect, the Tribunal relied on various certificates produced by the petitioners which suggested that the product required further elaborate and extensive processes before it can be used as bearings. The Tribunal also referred to the inquiries conducted by the authorities at Mahindra SEZ who also came to the same conclusion. The Tribunal therefore, accepted the stand of the petitioners that the product was not Bearing Races but Alloy Steel Forging (Machined). This finding of the Tribunal was independent and based on its acceptance of the various certificates and conclusions of the inquiries produced by the petitioners. In the present case, the product has remained the same. The description of the rival entries in the Schedule to the DEPB Scheme has remained the same. Logically, therefore, classification of the goods must also remain the same. 17. The second aspect which the Tribunal examined and on which the Commissioner has placed much reliance was the classification of the product presented by the petitioners for DEPB Scheme and the circular of CBEC providing corresponding entries for the purpose of Duty Drawback Scheme. The Tribunal was of the opinion that when for the purpose of DEPB Scheme, the product is accepted as one of Alloy Steel Forging (Machined), as per the circular of CBEC, for the purpose of Duty Drawback Scheme also it will carry the same classification. The Tribunal observed that there is no proposal to reopen this classification. 18. Had this been the standalone argument to accept the petitioners' classification, the department would have been perhaps justified in contending that this would not prevent the department from reopening the issue for the purpose of DEPB Scheme. However, this reference and discussion of the Tribunal is completely severable from its conclusion of the first point of the product not being Bearing Races but Alloy Steel Forging (Machined) which was based on independent material and independent reasonings of the Tribunal. Even without the aid of the previous classification under DEPB Scheme and the CBEC circular, the Tribunal's finding that the product was Alloy Steel Forging (Machined) and not Bearing Races, would remain unshaken. 19. The third element discussed by the Tribunal was the department's contention that the product being classified by the petitioners as Bearing Races for domestic clearances, the petitioners cannot change the stand for the purpose of export incentives. 19. The third element discussed by the Tribunal was the department's contention that the product being classified by the petitioners as Bearing Races for domestic clearances, the petitioners cannot change the stand for the purpose of export incentives. The Tribunal had dealt with this issue and opined that this issue was examined by the Customs authorities even prior to 1.10.2011 for DEPB benefits where a query was raised at the time of export of the goods. The petitioners had filed a reply. After being satisfied with the explanation, the export was permitted. 20. It can thus be seen that the entire issue was examined threadbare by the Tribunal in case of this very petitioners in the context of Duty Drawback Scheme. There being no material change in the situation, in the present case, the Commissioner could not have taken a different view. To summarise, the product remains the same, the description of various entries in the Schedule to the DEPB Scheme as compared to the Duty Drawback Schedule also remains the same. The conclusions of the Tribunal are not based merely on the fact that previously for DEPB Scheme, a certain classification claimed by the petitioners was accepted by the department. The Tribunal has come to independent findings based on voluminous evidence produced by the petitioners. Reference of the Commissioner in the present case that the petitioners had described the goods as Bearing Races for domestic clearances was also at issue before the Tribunal in the earlier round. In plain terms, therefore, the Commissioner was bound by the judgment of the Tribunal as confirmed by the Supreme Court. Relegating the petitioners to the appellate remedy would therefore, be futile. Further, the statute now requires a mandatory predeposit before filing any appeal. The petitioners would therefore, have to deposit a sizeable amount with the department. This appeal thus comes with an onerous condition. In facts of the case, therefore, appeal cannot be stated to be an efficacious remedy. Even otherwise, we find that the Commissioner failed to apply the binding rule and when facts are undisputable, we would not drive the petitioners to file such an appeal. We are conscious that against the judgment of the Tribunal, the appeal would lie before the Supreme Court. The jurisdiction of the High Court against such judgment of the Tribunal is excluded. The Court would therefore, be more circumspect in exercising the writ jurisdiction. We are conscious that against the judgment of the Tribunal, the appeal would lie before the Supreme Court. The jurisdiction of the High Court against such judgment of the Tribunal is excluded. The Court would therefore, be more circumspect in exercising the writ jurisdiction. However, the writ jurisdiction is not ousted and remains a matter of discretion and self imposed restrain. 21. In the result, impugned orders dated 16.12.2016 and 30.11.2016 in respective petitions are set aside. Petitions are allowed and disposed of.