West Coast Paper Mills Ltd. vs Deputy Commissioner of Customs

Heard Ms. Rukmani Menon for the Petitioner and Mr. Pradeep Jetley for Respondent Nos. 1 and 3. Rule. Heard on the question of grant of interim relief.

The petitioner has approached this Court with a prayer for directing the respondents not to insist upon renewal of bank guarantees and also for refund of cash deposit of Rs. 50 lacs to the Petitioner.

The petitioner has also prayed for direction to respondent Nos. 1 and 2, restraining them from encashing the bank guarantees till the finalization of the project.

The petitioner has approached this Court in peculiar facts. The contract of the petitioner for expansion of its existing unit was registered in the Customs House at Mumbai on 30th May, 2008. Two bank guarantees in the sum of Rs. 7,82,19,000/- were issued by respondent No. 2 in favour of respondent No. 1 at the request of the petitioner. The petitioner has filed 52 Bills of Entry in respect of import of machineries under project import between June 2008 to April 2011. The last of such imports was on 28th April, 2011. On June, 2011 the last machinery was installed by the petitioner. These facts were informed by the petitioner to the respondent authorities by communication on 20th June, 2011 and 4th July, 2011. The Assistant Commissioner of Central Excise, Udupi who is having jurisdiction over the factory of the petitioner informed respondent No. 1 on 20th July, 2011 regarding verification of the machineries received under project import and also regarding installation of the same in the Central Excise premises. On 17th August, 2011 the petitioner addressed a letter to respondent No. 1 submitting copies of Bills of Entry, bank attested invoices, challan copy of security deposit, bank debit advices, installation certificate, reconciliation statement and letter dated 20th July, 2011 addressed by the Assistant Commissioner, Udupi. As such, request was made for finalization of the contract and releasing the bank guarantees and cash deposit.

On 26th November, 2012 respondent No. 1 informed the Assistant Commissioner of Central Excise, Udupi asking for a certification whether substantial expansion in the production capacity of the petitioner had taken place after installation of the imported machinery and also requested for site verification certificate. On 20th December, 2012 the Assistant Commissioner of Central Excise submitted plant site verification report regarding installation of imported machinery and verifying that the same had been put into operation. On 7th February, 2014 respondent No. 1 approached respondent No. 2 - ICICI Bank Ltd. for extension of bank guarantees. On 21st February, 2014 the petitioner addressed a letter to respondent No. 1 stating therein that since everything at the petitioner''s end was complied with, the assessment was required to be completed within sixty days and as such, requested for finalization of the contract and further requested that the renewal of the bank guarantees may not be insisted upon. In pursuance to the public notice issued by the respondents on 26th September, 2014 the petitioner re-submitted reconciliation statement as per the prescribed format and again requested for finalization of the contract and release of the bank guarantees and cash deposit. However, again a letter was addressed by respondent No. 1 to respondent No. 2 for renewal of the bank guarantees. In this premise, the Petitioner has approached this Court.

The learned counsel for the petitioner submits that the Petitioner having done everything at its end, it is for the Respondents to finalize the assessment under Project Import Regulations within a period of sixty days. The learned counsel relying on the circular issued by the Central Board of Excise and Customs dated 4th May, 2011, submits that upon submission of the necessary documents so also upon inspection/verification by the jurisdictional Central Excise authority, as proof of utilization/installation of goods, the authorities cannot insist upon renewal of the bank guarantees. The learned counsel relies on the judgments of the Apex Court in the case of Steel Authority of India Ltd. Vs. Collector of Customs, (2001) 75 ECC 709 : (2001) 96 ECR 418 : (2001) 129 ELT 294 : (2001) 3 JT 546 and in the case of Collector of Central Excise, Vadodara Vs. Dhiren Chemical Industries, (2002) ECR 800 : (2002) 143 ELT 19 : (2002) 10 SCC 64 .

Mr. Jetley on the contrary submits that the petitioner claiming to be a small scale industry has submitted a recommendation letter of the Joint Director, Department of Industries and Commerce, Bangalore. It is submitted that since the project cost is more than Rs. 30 Crores, the Petitioner cannot be termed as a small scale industry and the recommendation letter has to be issued by the Central Government. It is further submitted that the Bills of Entry have been forwarded to concerned ports and it will take around six months to scrutinize all the reports vis-a-vis recommendation letters.

In so far as the first contention raised by the department is concerned, we have examined Project Import Regulations, 1986. Perusal of Regulation 4 read with Regulation 3(b), does not, in our opinion, provide that in all cases wherein the project cost is more than Rs. 5 Crores, the recommendation letter has to be given by the Central Government. No doubt, Clause 1 provides that all plants and projects under SSI Units, the sponsoring authority would be Director of Industries of the concerned State. However, it must be noted that under Clause 2 which deals with all power plants and transmission projects, various sponsoring authorities have been notified in respect of various types of projects. It is to be noted that in some type of projects, not only the Secretary to the State Government or Union Territory concerned has been notified as the sponsoring authority, but in some projects even the Collector/District Magistrate/Deputy Commissioner have been notified as the sponsoring authority. Clause 4 is a residuary clause which deals with any other plant and project and concerned Administrative Ministry or Department has been notified as the sponsoring authority. A perusal of the communication dated 26th March, 2008 (page No. 61) which is annexed to the affidavit in reply of the Respondents would itself reveal that the Joint Director, Department of Industries and Commerce, Bangalore has stated that the project has been approved by the Government of Karnataka and necessary recommendation letter has also been issued. It is further to be noted that not only that but the Assistant Commissioner, Central Excise, Udupi, has himself vide communication dated 24th December, 2012 has informed that the Jurisdictional Range Officer, Dandeli had visited the plant site of the Petitioner and has verified the imported machines under reference with that of Bills of Entry. It has further been stated in the said letter that the machines listed in annexure enclosed to the said letter have actually been installed in the registered premises of the assessee and the same have also been put into operation. He has further informed that the expansion was completed in all respects on 10th May, 2010 when the new paper machine came into operation. He has also given details regarding the production figures.

In so far as the second contention regarding the Bills of Entry being sent to various ports is concerned, if the Respondent authorities sit over the said Bills of Entry for years together, it cannot thereafter be heard to say that the verification of the Bills of Entry would take time and therefore, assessment cannot be completed.

It will be relevant to refer to the following portion of the Circular No. 22/2011-Cus. : , dated 4th May, 2011 issued by the Central Board of Excise and Customs:

"3.1 The matter has been examined and the recommendations made by C & AG have been carefully gone through by the Board. One of the recommendations made by C & AG is that the Government should fix a realistic time frame for finalization of assessments of project import cases after submission of the requisite documents by the importers to ensure that there is no loss of revenue. In this regard, it has been decided by the Board that finalization of assessments under Project imports should be completed within a period of 60 days from the date of submission of required documents by the importer. However, in exceptional circumstances where it is not possible to complete the finalization within the time limit for justifiable reasons, the time limit may be extended by the jurisdictional Commissioner of Customs for such further period as may be decided by him and for the reasons to be recorded in writing.

3.2 It may also be recalled that as per Board''s Circular No. 12/2001-Cus. : , dated 1-3-2011 issued from File No. 334/3/2011-TRU, the field formations were advised not to renew the bank guarantee in respect of project imports, on completion of a period of six months from the date of submission of necessary documents from the jurisdictional Central Excise authority or any other specified authority, as proof of utilization/installation of goods for the finalization of the contract. It is hereby clarified that the above said relaxation is applicable, only if all the required documents including certificate for installation of imported goods at the Plant/Project site, utilization of imported goods in the manufacture of declared goods etc. are submitted up to the satisfaction of proper officer for finalization of contract. The Commissioner shall therefore ensure that the aforesaid time limit for finalization of Project Imports under PIR, 1986 is adhered to in all cases, so that such finalization is completed within the validity period of the bank guarantee in order to ensure that the government revenue is safeguarded. However, in cases where the importers have not submitted the requisite documents in time, it may be ensured that the bank guarantees are kept alive until finalization of project imports so that resultant delay does not adversely affect the interests of revenue."

The Constitutional Bench of the Apex Court in the case of Collector of Central Excise, Vadodra Vs. Dhiren Chemical Industries, AIR 2002 SC 453 : (2001) 79 ECC 1 : (2002) 139 ELT 3 : (2002) 254 ITR 554 : (2001) 10 JT 456 : (2001) 8 SCALE 479 : (2002) 2 SCC 127 : (2002) 126 STC 122 : (2001) AIRSCW 5073 : (2001) 8 Supreme 624 and the Apex Court in the case of Steel Authority of India Ltd. Vs. Collector of Customs, (2001) 75 ECC 709 : (2001) 96 ECR 418 : (2001) 129 ELT 294 : (2001) 3 JT 546 had in unequivocal terms held that the circulars issued by the Central Board of Excise and Customs are binding on all the subordinate authorities. The aforesaid circular clearly provides that if everything which is required to be done at the end of the concerned party is done and in spite of that if the assessment is not completed within a period of six months, the authorities will not insist upon renewal of the bank guarantees. The aforesaid narration clearly shows that in so far as the petitioner is concerned, not only everything which is required to be done at the end of the Petitioner is completed way back in 2011, but even the Jurisdictional Assistant Commissioner who is having jurisdiction over the factory of the Petitioner, way back on 24th December, 2012 has sent a report regarding all the machineries being installed and even production being started. Even after that Respondent No. 1 has not taken any steps for completing the assessment.

We are therefore of the considered view that the petitioner cannot be penalized for non-compliance of the direction issued by the Central Board of Excise and Customs dated 4th May, 2011. In the present case, we find that though the petitioner has done all that it was required to be done and not only that but the officer of the Department itself has found that the petitioner had completed everything that is required to be done, for no reasons the assessment has been delayed by respondent No. 1. We are therefore of the considered view that the petitioner is entitled to the benefit of the circular issued by the Central Board of Excise and Customs dated 4th May, 2011.

In that view of the matter, by way of interim order, we direct respondent Nos. 1 and 2 not to encash the bank guarantees till finalization of the project and also not to insist upon renewal of the bank guarantees. Parties would be at liberty to apply before this Court for disposal of the Petition after the assessment is finalized by respondent No. 1.