2007 (3) TMI 74 - AT - Customs

Exporters win case on mis-declaration & duty exemption dispute.

The Tribunal ruled in favor of the appellants, M/s. BOFL, in a case involving mis-declaration of export goods and denial of exemption under Notification ... Demand, penalty and confiscation – Alleged that licenses were obtained on the basis of mis-declaration and mis-representation as the description of export item(Indian toasted soyabeen extraction) with list of item required for manufacture of export item – Held that allegation was not correct Issues Involved:1. Mis-declaration of export goods.2. Denial of exemption under Notification No. 31/97-Cus.Detailed Analysis:Mis-declaration of Export Goods:The primary issue revolves around whether the exporters mis-declared the goods exported, thereby attracting the provisions of Section 113(d) of the Customs Act, 1962, and whether they are liable to penalty under Section 114(i) of the said Act. The appellants, M/s. BOFL, exported de-oiled Soyabean cake (DOC) under the description 'Lecithinised High Protein Oil Seed Based Meal (LHOSBM) containing Minimum 0.075% of Vitamins B, C & E (Indian Toasted Soyabean Meal Pure Yellow Flaker Type).' The investigation revealed that the exported goods were merely Soyabean Extraction, covered under Sr. No. E42 of the I-O Norms, which only allows Hexane as an import item. The Customs authorities argued that the exporters mis-declared the description of the export goods and falsely declared the use of various materials to obtain Advance Licenses for duty-free imports.The Tribunal noted that the DGFT had clarified that the product exported should conform to the description of the resultant product at the relevant SION, and the quantity of each item allowed for import should be physically present in the export product. However, the Additional DGFT, after reviewing the evidence, concluded that there was no mis-representation or mis-declaration by M/s. BOFL and dropped all proceedings against them. It was emphasized that the interpretation of the policy by the DGFT, which stated that inputs may be required for use and not necessarily used, supported the appellants' case. The Tribunal held that there was no mis-declaration or mis-representation in obtaining the advance licenses and that the product description was accurate as per the technical experts' testimonies.Denial of Exemption under Notification No. 31/97-Cus:The second issue concerns whether the benefit of exemption under Notification No. 31/97-Cus. can be denied to the input materials imported duty-free by various transferees of the Advance Licences. The Customs authorities argued that the benefit of exemption should not be granted as the inputs specified under Sr. No. A1814 of the I-O Norms were not required for the manufacture of Soyabean Extraction. The Tribunal, however, noted that the DGFT's clarification and the CBEC circular indicated that inputs required for use, even if not physically incorporated, were permissible under the policy. The Tribunal also referred to the Larger Bench decision in Hico Enterprises and the Supreme Court's judgment in Titan Medical Systems Pvt. Ltd., which held that the Customs authorities cannot refuse exemption on the allegation of mis-representation once an Advance Licence is issued and not questioned by the licensing authority.The Tribunal concluded that the imports under the licenses were correctly made, and the goods were covered by the licenses and entitled to exemption under Notification No. 31/97. Consequently, the demand for duty and the penalties imposed on the appellants for importing and exporting the products or aiding M/s. BOFL in procuring advance licenses were set aside.Conclusion:The Tribunal set aside the Commissioner's order, holding that there was no mis-declaration or mis-representation by the appellants. The imports and exports were deemed to be in compliance with the advance licenses, and the appellants were entitled to the exemption under Notification No. 31/97. All appeals were allowed, and the penalties and duty demands were nullified.