TaxTMI 
TaxTMI 
TaxTMI 
2010 (8) TMI 345
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.... 3 of the show cause notice were permitted to be imported duty free under each Advance licence against export of 6000 MT of "Processed, Preserved and Frozen Fish and Fish Products" in each licence. 2. In the present case, the dispute is in respect of two Advance Licences numbers viz. Advance Licence No. 01000837 dt.11-3-97and P/L/0027174, dt.27-3-97(hereinafter referred to as "the Advance Licences"). 3. AEL imported inputs without payment of import duty under the provisions of Notification No. 80/95-Cus., dt.31-3-95against the said Advance Licences. AEL sold the exempted imported goods against the said two advance licences in the domestic market. 4. Directorate of Revenue Intelligence, Ahmedabad Unit initiated investigations against AEL relating to misuse of the said Advance Licences issued for export and corresponding duty free import of various inputs. The investigation culminated in a show cause notice whereby it was alleged that the goods imported duty free under the said Advance Licences were not used in the manufacture of export products thereby violating the conditions of Notification No. 80/95 and were sold in the domestic market even though no endorsement of t....
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....rials in the market without obtaining endorsement of transferability on the said Advance Licences from the Licensing Authority; (v) The learned Commissioner erred in holding that neither the said Notification nor the EXIM Policy debarred the manufacturer exporter M/s. AEL to procure or source export goods for discharging their export obligations. 8. He 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. The appellant had declared that they have a factory in Survey No. 185 to 188 inMotupallyVillage, Chinnaganjam Mandal, Prakasham Dist., Andhra Pradesh. On verification, no factory was found in the said survey numbers. The department also obtained confirmation from Vice Sarpanch, Member, Mandal Praja Parishad, Gram Panchayat of Motupally Village that no firm ever existed in the name of M/s. Adani Exports Ltd. within Motupally village or in any of its surrounding villages. The Village Administrative Officer vide his letter dt.24-8-98also confirmed that there was no factory in the s....
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....n, they are not entitled to use licences. Such licences obtained by adopting fraudulent method do not confer any right and importer cannot plead equity. In view of the clear cut observations of the Hon'ble High Court, the Commissioner has clearly erred in holding that because the appellant had fulfilled the export obligations, (even though it is the department's contention that export obligation was not fulfilled), the appellant would be not eligible for exemption. He also submitted that SLP filed by importer was dismissed by Hon'ble Supreme Court reported in 2010 (249) E.L.T. A28. 10. He relies upon the decision of the Tribunal in the case of Omega Enterprises - 2001 (137) E.L.T. 1120 (Tri.-Del.) upheld by Hon'ble Supreme Court by dismissing the appeal filed on merit to support his contention that duty demand is sustainable when contrary to the declaration made by the importer that material imported shall be utilized for manufacture of goods specified in the licence are sold in the market. 11. He also submitted that in this case, the appellant had disposed of the goods contrary to the condition (vi) of the notification. In fact, according to this condition imported goo....
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....e details of the Advance Licences were stated. The goods covered by each shipping bills were examined in respect of the description, value, quantity etc. and thereafter allowed to be exported. Each shipping bill contained the relevant details of the Advance Lincence under which the goods were being exported. Thus, the department was well aware of the fact that the respondents had exported frozen, processed and preserved marine products, under the respective shipping bills as Merchant Exporter. It is pertinent to mention that no objection at all was raised by the department at any point of time, until the investigations by the DRI in respect of the alleged mis-declaration. 14.3 All exports made by AEL as merchant exporter have been duly logged in by the department in the DEEC books. Post the logging while Advance Lincence No. 0027174 dt.27-3-97could not be submitted to the DGFT authorities on account of loss of the original DEEC book No. 233595 Part II, the respondents did submit Advance Lincence No. 0027937 dt.29-3-97along with its DEEC book, shipping bills etc. for redemption. The DGFT authorities accepted the export obligation fulfillment in respect of the said Advance Linc....
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.... by the Licensing Authority. If any misrepresentation in obtaining the licence is allged, it is for the Licensing Authority to take steps in that behalf. (a) Autolite (India) Ltd. v. UOI - 2003 (157) E.L.T. 13 (Bom.) (b) UOI v. Tamil Nadu Pharmaceuticals Ltd. - 2008 (226) E.L.T. 490 (Mad.) (c) Rexello Castors (P) Ltd. v. CC - 2009 (246) E.L.T. 371 (T) (d) PTC Industries Ltd. v. UOI - 2010 (252) E.L.T. 42 (All.) 14.6 It is submitted that AEL were issued Advance Licences in question on the basis of the decision of the Advance Lincencing Committee (ALC) taken at the meeting held on 4-3-97; that the said licences were in force at all relevant times and have not been either suspended or cancelled; that it is well settled legal position that the Customs Authorities cannot sit in appeal or judgment over the decisions of the Licensing Authorities and that the Customs Authorities cannot go behind the licences; that they placed reliance on the following decisions : (a) Sanwah Micro System Pvt. Ltd. v. Collr. of Customs,Madras- 2000 (118) E.L.T. 294 (LB) (b) S. Chandrasekhar....
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....rters through whom the inputs were said to have been delivered to the job workers were not in existence at the addresses given on the consignment notes. Most importantly no exports at all were made by the assessee therein. The Licensing Authority had initiated action against the assessee for cancellation of the licences issued. Also the Hon'ble Madras High Court considered the past conduct of the assessees. As is further evident from Paragraph 31 of the decision the mis-representation made by the assessee therein had not been denied while submitting the explanation to the show cause notice. In the present case, respondents had at the very first instance declared the address of the factory as "Aqua Culture Pond", Survey No. 185 to 188,MotupallyVillage, Chinnaganjam Mandal, Prakasham Dist., Andhra Pradesh. The said Aqua Culture Pond was very much in existence during the course of visit by the officers of DRI. The respondents further provided copies of invoices issued by the various manufacturer suppliers. The said suppliers were in existence and the department obtained statement from them regarding the exports of frozen, processed and preserved fish and fish products by them on behal....
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....ial parlance and as per trade understanding are synonymous. In the AEL's own case 2006 (199) E.L.T. 613 (T), the Hon'ble Tribunal held that if the Customs authorities are of the view that the description given in the shipping bill, does not conform to what is found during examination, it is for the Customs authorities to inform the DGFT and later, it is for the DGFT to take appropriate action. 14.12 As already submitted hereinabove the shipping bills for export of "Processed, Preserved and Frozen Marine Products" were filed before the Customs authorities which were assessed by the proper officer after due examination and no charge for mis-declaration was made at the relevant time. 14.13 The enquiries initiated by the investigating agency and the Village Administrative Officer or the Mandal Praja Parishad or the Vice Sarpanch are of no meaning whatsoever. AEL had leased the Ponds and these Ponds were actual and existing and further Ponds were for aqua culture show that the allegations are misleading and mis-conceived and made with prejudicial, pre-determined and bias mind. Disposal of the imported materials in the domestic market : 14.13A Evidence on record as wel....
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.... in full and there is no dispute and thus AEL satisfied both the conditions as per the condition No. (vii) of the said Notification and therefore AEL are fully entitled in law to dispose the exempt material. 14.16 There is no condition or requirement in the said Notification that for sale or disposal of the exempt material, the said licences must be endorsed as "transferable" or that the Licensing Authority must issue redemption certificates before the exempt materials are disposed of. Reliance is placed upon the judgment of the Hon'ble Supreme Court in case of Hansraj Gordhandas v. H.M. Mehta [AIR 1970 S.C. 751]. The allegation that the Licensing Authority has not accepted discharge of the export obligation and has neither allowed redemption of the LUTs or endorsed transferability of the said Licence is wholly mis-conceived and baseless as there is no such requirement in the said Notification. 14.17 It is submitted that once export obligation has been fulfilled, there is no impediment to the disposal of the material imported for the purpose of usage in the exported goods, which materials have identical specification and technical characteristics as those used in the ma....
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....ons conducted by the DRI revealed that there was no factory for processing, preservation of marine products at all. This has been confirmed by Vice Sarpanch, Member, Mandal Praja Parishad ofMotupallyVillageand Shri Rama Rao, Village Administrative Officer. All the three have stated that there was no factory at all. However, investigation is silent as to whether there was a pond in the place. AEL has claimed that they had obtained aqua culture pond on lease and they also submitted that this fact was not in dispute. But, DRI has proved this claim wrong with the help of evidence from Village official and people's representatives that they had not heard of AEL at all. In any case, according to the submissions after pond was leased, the respondents were contacted by various manufacturers of marine products and since there was nothing in the notification debarring the manufacturer exporter to source export goods, they went ahead and carried out the exports. It is surprising to note that the respondents failed to get the licences amended which were issued to them as manufacturer exporter even though they never undertook aqua culture, nor they had a factory. Further, according to the Para ....
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....is-representation of the facts to Licensing authority. Even before issue of licences as manufacturer exporter, respondents had already started process of purchasing shipping bills of exports of marine products against advance licences. They fully knew that they were not going to manufacture or produce any of the export products even before applying for the licences. The fact that no data is available with the respondents regarding inputs required for the manufacture and the process of manufacture would clearly show that the respondents did not have any intention to manufacture and therefore deliberately declared that the items were not covered under SION and imported one of the restricted items viz. Tetracycline Hydrochloride. 15.4 It was submitted on behalf of AEL that while exporting the goods, shipping bills along with invoices of the manufacturer or suppliers were also filed and the same were examined and allowed to be exported. Shipping bills contain details of advance licences under which the goods were being exported. Therefore, the department was aware of the fact that the respondents had exported marine products as merchant exporter and no objection was raised. We ha....
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....nt has submitted that till date the licences have not been cancelled or suspended and hence the order of the Commissioner treating the export obligations as fulfilled is in accordance with the law, which is not pertinent at all. 15.6 We are really surprised that the Commissioner has chosen to accept the exports made by several other suppliers after receiving 2% as commission of export value to treat exports as fulfillment of export obligations in the face of the documentary evidence and other evidences brought out by the department in the show cause notice. All the suppliers of export goods have stated that none of them have received any of the imported goods. Further, they also categorically stated that the subject import goods had never been used by them in the processing or manufacture of products manufactured and exported by them. These statements by the suppliers of the goods and exporters, who allowed the respondent to claim the export benefits against advance licences, has not been countered or rebutted in any manner by the respondent. Not only the respondent failed to fulfill their obligations as exporter manufacturer, but even the exporters whose exports were conside....
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....ial in the market is wrong. We find that the Commissioner completely failed to take note of the details inPara3.2.2 of the show cause notice and Condition (vi) of the exemption notification. 15.9 Imports were made on the basis of advance licences obtained by the appellant and exemption for imported goods was claimed under Notification No. 80/95-Cus, dt. 31-3-95. The appellant also executed a bond with LUT in respect of both the advance licences undertaking to fulfill the export obligations within the period specified in the duty exemption scheme/licences, to fulfill all the conditions of duty exemption scheme under which the said licences had been issued and fulfill all the terms and conditions of licences and the conditions subject to which the goods have been cleared by the Customs authorities. "Condition No. (vi) of Notification No. 80/95-Cus, dt.31-3-95as amended and as it stood at the material time stipulated that : "(vi) exempt materials shall not be disposed of or utilized in any manner, except for utilization in discharge of export obligation, before the export obligation under the said licence has been discharged in full." Also, the condition sheet attached t....
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....urer exporter, the respondent should have manufactured goods themselves whereas they did not even have a factory. Admittedly, no aqua culture was carried out in the pond leased by them. It was submitted that there is no condition in the notification that for sale or disposal of exempted materials, licence should be endorsed as "transferable". Admittedly, this condition does not specifically find mention nevertheless the meaning of condition (vi) is nothing but this. If the licence is transferable, the licence holder can sell the licence and some body else can import the goods by stepping into the shoes of the licence holder. Selling the goods without condition of transferability in the domestic market, becomes contrary to the condition of notification if the licence is not transferable in the first place. In fact, the licences are endorsed as transferable only when the Licensing authority is satisfied that the export obligations is fulfilled. Therefore, both the interpretations viz. unless the licence is transferable, imported material cannot be sold and if the export obligations have not been fulfilled and EODC has not been obtained, the goods cannot be sold, are valid. In any cas....
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....sorted to suppression of facts and mis-declaration at various stages. 16. Several decisions were cited by both sides and it will be necessary to consider these decisions also. 16.1 The decision of the Hon'ble High Court of Madras in the case of CC v. CESTAT, Chennai - 2009 (240) E.L.T. 166 (Chennai) and the decision of the Tribunal in the case of Omega Enterprises - 2001 (137) E.L.T. 1120 (Tri.-Del.) clearly support the case of the Department fully. Similarities in the cases before the Hon'ble Madras High Court are that in both the cases, advance licence was obtained by declaring non-existing factory; in both cases imported goods were sold before fulfilling export obligation. Additional poins in support of Revenue in this case are that inputs which were never meant to be used were declared as required in this case and a wrong declaration was made about SION to facilitate importation of a restricted item. We are not impressed with the distinctions made by the respondents at all since we find omissions in this case are equally serious if not more. 16.2 In the case of Shashank Sea Foods Pvt. Ltd. - 1996 (88) E.L.T. 626 (S.C.), Hon'ble Supreme Court observed that the provi....
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.... not used. The only case is that the value which had been indicated in the application was very large whereas what was actually spent was a paltry amount. To be noted that the licensing authority having taken no steps to cancel the licence. 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." As can be seen, the dispute was only relating to the quantity and value and not use of components or materials. In this case, the respondent totally failed to use the imported materials for manufacture of export goods and instead sold them in domestic market. Therefore, this decision is not applicable. 16.4 In the case of Autolite (India) Ltd. - 2003 (157) E.L.T. 13 (Bom.), the department had contended that the dies steel was not directly used in export goods and therefore this decision is also of no help. 16.5 In the case of Tamil Nadu Dadha Pharmaceuticals - 2008 (226) E.L.T.....
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....emsp;In the case of Aditya Birla Nuvo Ltd. - 2010 (249) E.L.T. 273 (Tri.-Bang.), according to the facts, the imported goods were found to be incapable of being used in goods exported and exported goods manufactured were diverted in local market and export goods were manufactured from non-declared exporting manufacturers. Even though, this decision appears to be relevant, on going through the cases cited it is found that the Tribunal has not taken note of the decision of the Hon'ble High Court of Madras in the case of CC v. CESTAT Chennai. The decision of Hon'ble High Court which was appealed against and the appeal was rejected is clearly against this decision. Therefore, this decision is not applicable. Further, in that case, the Tribunal has observed that Customs officer permitting clearance was satisfied with broad nexus of imported goods with export products. In one of the shipping bills in this case, it has been mentioned that usage has to be verified. 16.13 In the case of Jindal Drugs Ltd. - 2007 (214) E.L.T. 37 (Tri.-Mum.), the goods were sold after fulfilling export obligations. In this case, we have already held that the goods were sold before completion of export obl....
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....he imported goods, thereby rendering the same liable to confiscation under Section 111(o) of the Act. Therefore, he is also liable to penalty under Section 112(a) of the Customs Act, 1962. 20. In view of the above discussion, the Customs duty amounting to Rs. 86,85,363/- as detailed in Annexure 3 of the show cause notice is confirmed and ordered to be recovered from the respondent under proviso to Section 28(1) of Customs Act, 1962. It is made clear that the respondents would be liable to pay interest as applicable as per the provisions of Section 28AB of Customs Act, 1962. The amount of interest payable and interest per day will be intimated by the department within fifteen days from the date of this order. 21. Further, penalty of Rs. 86,85,363/- under Section 114A of Customs Act, 1962 is imposed on the respondent. However, if the respondent pays duty demanded with interest and penalty to the extent of 25% of the duty within 30 days from the date of receipt of this order, it would be sufficient if the respondent pays 25% of the duty towards penalty. It is made clear that failure to pay either duty, interest and penalty within 30 days, would render the respondent liable....