2003 (7) TMI 236 - AT - Customs

Tribunal Upholds Appeal: No Duty, Penalties, or Confiscation; Compliance with Exemption Notifications Affirmed.

The Tribunal set aside the impugned order, allowing the appeal. It rejected the demand for duty, penalties, and confiscation of goods, concluding that the ... Import - Advance licence - Misuse of imported Aluminium Alloy under Advance Licence - Demand - Limitation - Confiscation - EXIM Policy - Compliance with conditions of the exemption notifications - HELD THAT:- Once an export obligation has been fulfilled, then neither the policy nor the notification places any restriction on the disposal of the imported raw materials, at least till 1997. On and after 1997, the disposal of the raw materials imported under the advance licence is subject to actual user condition. A comparison of the wordings in the notification and the Policy indicates that both the Policy and the Notification placed a restriction on the disposal of the raw materials imported under the Advance Licence only till the fulfilment of the export obligation. In other words, once an export obligation is fulfilled, then both the policy and the notification permit disposal of the raw materials. On and from 97-98, the disposal of the raw materials was subject to the actual user condition i.e., the manufacturer-importer was required to use the imported raw materials in his factory. Such a use can also be for the manufacture of the finished goods which need not be exported but which could be sold in the local market. In this case, it is the contention of the Revenue that the licences have been obtained on prior export basis and that the imported raw material has been utilized for manufacture of fans locally sold. Once it is accepted that the licences are for replenishment and that the export obligations have been fulfilled, then the appellants are permitted to use the said imported materials for manufacture of their other goods, cleared in the domestic market. The CBEC has also issued a Circular No. 108/95-Cus., dated 13-10-1995 in which it has been stressed that in the case of goods imported as replenishment, the spirit of the scheme and the intention of the wordings is that the imported goods shall be subjected to the actual user condition. Therefore, following the same, there is no cause to uphold the impugned order. In the present case, the Show Cause Notice does not even allege suppression of facts at the time of import. Thus, proviso to Sec. 28(1) cannot be invoked for this reason also. The Commissioner invoking the larger period of limitation under Sec. 28(1) on the ground that the appellants had wilfully misdeclared the consumption of the Aluminium Alloy even though the same were never used or intended to be used in the manufacture of the export product, cannot be a cause to be upheld since, the appellants had applied for the issue of an Advance Licence on the basis of the Standard Input-Output Norms, which recognizes a class, of inputs as required for the manufacture of an export product. The appellants were under the bona fide belief that in view of the fact that the Advance Licence has been granted to them based on an application made by them; as such an Advance Licence was based on Standard Input-Output Norms, the physical incorporation of the input in the export product was not required. Therefore, that there was no mis-declaration of the consumption of the Aluminium Alloy since the said Aluminium Alloy was used, infact in few of the models, which the appellants exported and in respect of the three models in combination with the other parts, the bar of limitation will operate in favour of appellants. Consequently, Sec. 111 (o) is not at all attracted in this case. The confiscation of the goods is, therefore, not correct. Since all the conditions are fulfilled, there cannot be any confiscation of goods u/s 111 (o) of the Customs Act, 1962. Sec. 114A dealing with mandatory penalty is attracted only in cases where the non-levy or short-levy of duty is by reason of collusion or wilful mis-statement or suppression of facts. The appellants had demonstrated very clearly that there is no mis-declaration at all and hence, the proviso to Sec. 28(1) is not attracted. Consequently, the levy of penalty u/s 114A fails. Further and in any case, for the imports effected prior to 28-9-96, penalty cannot be imposed u/s. 114A. The same therefore, as imposed, cannot be upheld. In view of the findings, the order is required to be set aside and appeal allowed. Issues Involved:1. Alleged misuse of imported Aluminium Alloy under Advance Licence.2. Interpretation of EXIM Policy and Customs Notifications.3. Validity of the demand for duty and imposition of penalties.4. Applicability of Sec. 28(1) and Sec. 114A of the Customs Act, 1962.5. Compliance with conditions of the exemption notifications.Summary:1. Alleged misuse of imported Aluminium Alloy under Advance Licence:The appellants were accused of not using the LM-24 Aluminium Alloy imported under the Advance Licence in the manufacture of export products, as required by the scheme. The Commissioner concluded that the imported Aluminium Alloy was diverted for other uses, specifically for manufacturing table fans and ceiling fans sold in the domestic market, thus violating the conditions of the Advance Licence.2. Interpretation of EXIM Policy and Customs Notifications:The Tribunal found that the EXIM Policy and corresponding Customs Notifications during the relevant period (1994-98) did not mandate the actual use of imported materials in the manufacture of export products. The term 'required for manufacture of export product' was interpreted to mean intended use, not actual use. The Tribunal noted that the Standard Input/Output Norms and the issued licences permitted the import of Aluminium Alloy, which was deemed necessary for the manufacture of ceiling fans.3. Validity of the demand for duty and imposition of penalties:The Tribunal held that the Commissioner misinterpreted the EXIM Policy and notification provisions. The evidence showed that Aluminium Alloy was used in the manufacture of components for fans, including those exported. The Tribunal emphasized that the Customs authorities are bound by the licences issued by the licensing authorities, and the appellants fulfilled their export obligations. Therefore, the demand for duty and penalties was not justified.4. Applicability of Sec. 28(1) and Sec. 114A of the Customs Act, 1962:The Tribunal found no evidence of wilful mis-declaration or suppression of facts by the appellants. The extended period of limitation under Sec. 28(1) was not applicable as there was no mis-declaration. Consequently, the imposition of penalties under Sec. 114A was also not justified, especially for imports made before 28-9-96.5. Compliance with conditions of the exemption notifications:The Tribunal concluded that the appellants complied with all the conditions specified in the exemption notifications. The imported Aluminium Alloy was covered by the DEEC issued by the licensing authority, and the appellants fulfilled their export obligations. Therefore, Sec. 111(o) of the Customs Act, 1962, was not attracted, and the confiscation of goods was incorrect.Conclusion:The Tribunal set aside the impugned order, allowing the appeal and rejecting the demand for duty, penalties, and confiscation of goods.