2010 (8) TMI 345 - AT - Customs

Revenue appeal upheld, Customs duty confirmed, penalties imposed for violations.

COMMISSIONER OF CUSTOMS, KANDLA Versus ADANI EXPORTS LTD.

The appeal filed by the Revenue against the decision of the Commissioner in dropping the proposal for demand of Customs duty, confiscation of the imported ... Advance license- Confiscation of the imported goods under Section 111(m), 111(o) and 111(d) of the Customs Act, 1962 (hereinafter referred to as “the Act”) and imposition of penalties on all the respondents and also for demand of duty – Due to AEL was not compiled the certain conditions mentioned in the said Notification No 80/95-Cus – It was submitted that right from obtaining advance licences till the disposal of the imported goods and throughout the process of completion of export obligations, the respondent have adopted the course of mis-declaration and mis-representation of facts - Since the lincence was obtained as manufacturer exporter, the respondent should have manufactured goods themselves whereas they did not even have a factory - Under these circumstances, the contention of the Revenue that the Commissioner mis-interpreted the condition (vi) of Notification No. 80/95 regarding disposal of imported materials has to be upheldNeither the notification nor EXIM Policy debar manufacturer exporter to procure or source export goods for discharging their export obligation - The licensing authority have not claimed that there was any misrepresentation - Once an advance licence was issued and not questioned by the licensing authority, the Customs authorities cannot refuse exemption on an allegation that there was misrepresentation. If there was any misrepresentation, it was for the licensing authority to take steps in that behalf. Issues Involved:1. Misrepresentation and misdeclaration for obtaining Advance Licences.2. Non-existence of the factory.3. Disposal of the imported materials in the domestic market before fulfilling export obligations.Detailed Analysis:1. Misrepresentation and Misdeclaration for Obtaining Advance Licences:The respondents, M/s. Adani Exports Ltd. (AEL), obtained Advance Licences as a manufacturer exporter by declaring a non-existent factory at Survey No. 185 to 188, Motupally Village, Chinnaganjam Mandal, Prakasham Dist., Andhra Pradesh. Investigations by the Directorate of Revenue Intelligence (DRI) revealed that there was no factory at the declared address. The Vice Sarpanch and Village Administrative Officer confirmed the non-existence of the factory. AEL claimed to have leased an aqua culture pond, but this claim was not substantiated. The respondents failed to amend the licences or surrender them despite not undertaking any manufacturing activities. They also declared that no Standard Input Output Norms (SION) existed for their products, whereas SION norms were available under Sr. No. 21. The respondents could not explain the rationale for the inputs declared in their application, indicating deliberate misrepresentation to obtain the licences.2. Non-Existence of the Factory:The factory address mentioned in the application was found to be non-existent. The respondents claimed to have leased an aqua culture pond, but there was no evidence to support this claim. The investigation confirmed that no factory or pond existed at the declared address. The respondents did not undertake any manufacturing activities and instead sourced products from other manufacturers, which was against the conditions of the Advance Licences and the EXIM Policy. The respondents failed to maintain proper accounts of the imported goods and their utilization, as required by the Hand Book of Procedures.3. Disposal of the Imported Materials in the Domestic Market:The respondents disposed of the imported materials in the domestic market before fulfilling their export obligations, in violation of Condition No. (vi) of Notification No. 80/95-Cus., which stipulated that exempt materials should not be disposed of before the export obligation was discharged in full. The respondents failed to produce the Export Obligation Discharge Certificate (EODC) from the Licensing Authority. The Commissioner erred in holding that the respondents were free to dispose of the imported materials in the market. The respondents' claim that they fulfilled the export obligations and realized export proceeds was incorrect, as the export obligations were not fulfilled in accordance with the law and the conditions of the Advance Licences.Conclusion:The appeal filed by the Revenue against the decision of the Commissioner in dropping the proposal for demand of Customs duty, confiscation of the imported goods, and imposition of penalties was upheld. The Customs duty amounting to Rs. 86,85,363/- was confirmed, along with applicable interest. Penalties were imposed on the respondents and the involved individuals under Section 114A and Section 112(a) of the Customs Act, 1962. The respondents were found to have resorted to suppression of facts and mis-declaration at various stages, leading to the violation of the conditions of the Advance Licences and the exemption notification.