2009 (5) TMI 434 - AT - Customs

Tribunal rules in favor of appellant on customs dispute, emphasizing license compliance and export obligations

ADITYA BIRLA NUVO LTD. Versus COMMISSIONER OF CUS., BANGALORE

The Tribunal ruled in favor of the appellant, finding that the imported goods were legally imported and properly cleared under advance licenses. It held ... Confiscation- DEEC Scheme- the appellant was the holder of two DEEC Advance Licence bearing No. 07002638 dated 21-8-1998 and No. 0710000070 dated 13-5-1999, incorporating the actual user condition and issued under EXIM Policy under 1997-2002 by the licensing authority. This appeal is directed against impugned Order-in-Original No. 3/2008 Commr. dated 28-2-2008 passed by the Commissioner of Customs, Bangalore confirming a demand of duty which has been foregone of Rs.99,20,281/- with appropriate interest in terms of Notification No. 30/97-Cus., dated 1-4-1997, confiscating the goods under Section 111(o) of the Customs Act. Though, the goods are not available for confiscation, imposing redemption fine of Rs.45,00,000/- under Section 125 of Customs Act, 1962 and imposing penalty of Rs.60,00,000/- under Section 112 of the Customs Act, 1962 on the appellant. Held that- We find that the Adjudicating Authority has ignored the above binding precedence and relied by the appellant without any justifiable reason. The endeavour in the impugned order appears to be doubting the scope and content of advance license in the question. Though the settled position of law has enunciated by several binding precedents, was in particular clear in the instant case, if at all the revenue had any doubts on the scope and contents of the license, the proper course would have been reference to DGFT. The Chapter 4 of EXIM Policy 1997-2002 which applies to the present case deals with the general position of exports and imports. Therefore, the entire proceedings against the appellant in the present case are liable to be set aside being premature in so far as they have been initiated contrary to the mandate of the above Para 4.13 of the EXIM Policy. In view of the above reasonings, the impugned order therefore, cannot sustain and is hereby set aside with consequential relief, to the appellant. Issues Involved:1. Proper clearance of exempted goods under advance licenses.2. Post-clearance assessment of imported goods' requirement for manufacture.3. Disposal of manufactured goods from replenished inputs.4. Duty demand sustainability after export obligation completion.5. Customs authority's power to go beyond the license.6. Applicability of constructive res judicata.7. Establishment of nexus between imported materials and export products.8. Legality and propriety of the proceedings and the impugned order.Issue-wise Detailed Analysis:1. Proper Clearance of Exempted Goods Under Advance Licenses:The Tribunal found no dispute that the imported 'polyester/cotton blended fabrics' conformed to the description in the advance licenses. The goods were cleared for home consumption under Section 47 of the Customs Act, 1962, after the Customs officer was satisfied with the nexus between the imported goods and the export products. The Tribunal held that the imported goods were legally imported and properly cleared under the advance licenses.2. Post-clearance Assessment of Imported Goods' Requirement for Manufacture:The Tribunal held that once the goods were cleared for home consumption under the advance licenses, the Customs authorities could not subsequently claim that the goods were not required for manufacture. The Board's Circular No. 36/1997-Cus. clarified that 'required for' does not necessarily mean actual usage in the export product. The Tribunal concluded that Section 111(o) of the Customs Act, 1962, had no application in this case.3. Disposal of Manufactured Goods from Replenished Inputs:The Tribunal noted that the export obligation was discharged, and the imported goods were replenished and used in manufacturing trousers. There was no restriction on disposing of the manufactured goods made from replenished materials. The Tribunal held that the appellant was not at fault in replenishing the inputs and disposing of the manufactured goods, and the Customs authorities could not question the manner of disposal to deny exemptions.4. Duty Demand Sustainability After Export Obligation Completion:The Tribunal emphasized that the proviso to condition (ii) of Notification No. 30/97-Cus. meant no bond was necessary after the discharge of export obligation. Since the export obligation was fulfilled, the Tribunal held that the duty demand and penalty were not sustainable.5. Customs Authority's Power to Go Beyond the License:The Tribunal cited several precedents, including Titan Medical Systems Pvt. Ltd. v. CCE, to assert that Customs authorities are bound by the licenses issued by the licensing authority. The Customs authorities cannot refuse exemption based on allegations of misrepresentation without action from the licensing authority. The Tribunal concluded that the Customs authorities could not go beyond the license.6. Applicability of Constructive Res Judicata:The Tribunal found that the principles of constructive res judicata applied, as the issues had already been adjudicated, and no new facts justified reopening the case. The Tribunal referenced CCE Kanpur v. Kothari Products Ltd., where the Supreme Court dismissed the Revenue's appeal on the ground of res judicata.7. Establishment of Nexus Between Imported Materials and Export Products:The Tribunal noted that in cases of transferable licenses, the nexus between imported materials and export products need not be proved afresh once covered by the advance license. The Tribunal held that the appellant had established the required nexus as envisaged by the advance licensing scheme.8. Legality and Propriety of the Proceedings and the Impugned Order:The Tribunal found that the Adjudicating Authority ignored binding precedents and did not provide justifiable reasons for its conclusions. The Tribunal emphasized the need to refer any doubts regarding the scope and content of the license to the DGFT, as mandated by Paragraph 4.13 of the EXIM Policy. The Tribunal concluded that the proceedings were premature and the impugned order was set aside.Conclusion:The Tribunal set aside the impugned order and provided consequential relief to the appellant. The Tribunal also suggested that the Board issue clarificatory instructions regarding the jurisdiction of licensing and customs authorities in matters concerning duty exemption/remission/credit schemes.