2012 (8) TMI 793 - HC - Customs

High Court rules in favor of appellant in duty payment dispute, quashes Tribunal's order for deposit.

The High Court found in favor of the appellant, a successor to a manufacturing company, in a dispute over duty payment for cleared billets sent to another ... Advance licence - job work - assessee has transferred the imported billets to MSRM thereby violating the condition (vii) of Notification No.51 of 2000 dated 27th April 2000 - Held that:- The argument of the Revenue is unacceptable as construing similar provisions contained in customs notification No.32 of 2005 dated 8th April 2005 issued under the Target Plus Scheme, the Directorate General of Foreign Trade has issued a public notice on 15th February 2008 stating therein that the beneficiary status holder whether a manufacturer exporter or merchant exporter can get the imported goods converted through a jobworker, thus prima facie it appears that sending the billets to a jobworker for conversion into angles by the manufacturer/exporters cannot be construed as transfer of billets especially when there is no bar for the manufacturer – exporter to get the raw materials imported under the advance licences get converted through a jobworker - the assessee has sold the goods after its conversion and not before its conversion. As DGFT has in the past admittedly granted advance licenses to assessee as a manufacturer exporter with the assessee as a supporting manufacturer for duty free imports under notification No.51 of 2000 dated 27th April 2000. Therefore, when according to the licensing authorities a manufacturer exporter can get the raw materials converted through a jobworker / supporting manufacturer, it would not be open to the Revenue to contend that the manufacturer / exporter cannot take assistance of a supporting manufacturer - it is a fit case for entertaining the appeal without any predeposit - in favour of assessee. Issues:Whether CESTAT was justified in directing the appellant to deposit Rs.1 crore for entertaining the appeal against the order in original dated 24th November 2009.Analysis:The appellant, a successor to M/s. Prakash Ispat Udyog, engaged in manufacturing, was granted advance licenses to import raw materials without duty under specific notifications. The dispute arose when the appellant cleared duty-free billets, later sent to another manufacturer for conversion, leading to a show-cause notice for duty payment. Despite denial, duty was imposed in an order dated 24th November 2009, prompting the appeal.Analysis:The Tribunal's order directing the appellant to deposit Rs.1 crore for the appeal was challenged. The Revenue's argument was based on the alleged violation of conditions by sending goods to a jobworker. However, a public notice under a similar scheme allowed such conversions through jobworkers, and the Tribunal found the sale to the jobworker post-conversion, not prior. The Revenue's contention against the manufacturer-exporter's use of a supporting manufacturer was also refuted based on past licensing practices.Analysis:Further analysis revealed that the Hand Book of Procedure allowed flexibility in endorsing supporting manufacturers on licenses, making it optional for license holders. The specific requirements for merchant exporters did not mandate the same for manufacturer-exporters. The appellant, having fulfilled export obligations, was not required to execute a bond, and the conversion through a jobworker post-fulfillment did not constitute a violation.Analysis:Conclusively, the High Court deemed it a fit case for entertaining the appeal without predeposit. The Tribunal's order was quashed, directing a hearing on merits without insisting on predeposit. The Court emphasized these observations were prima facie and instructed the Tribunal to decide the appeal based on its own merits, independent of this judgment. The appeal was disposed of with no order as to costs.