TaxTMI 
TaxTMI 
1997 (2) TMI 537
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....ued to M/s. Visakhapatnam Steel Plants in terms of Notification 203/92-Cus. Declared value per unit of the goods was at US $ 1680 per metric tonne CIF Calcutta and the goods were declared as of CIS origin. Port of shipment of the goods as evident from the Bills of Entry was Rotterdam. 1.2 Acting on information that the value of the goods was under declared and that benefit of Notification 203/92-Cus. is not liable to be extended to the goods inasmuch as the original licence holder-VSP-has availed of Modvat credit of duty on inputs used for manufacture of the export product, investigations were carried out by Customs officers which resulted in show cause notice dated 17-4-1995. 1.3 Salient allegations made in the show cause notice are that - (a) VSP has availed of credit of duty paid on inputs under Rule 57A of the Central Excise Rules, 1944 used in manufacture of the Export products mentioned in the VBAL but they mis-represented this fact before the competent authority. As a result condition No. (v) of the Notification 203/92-Cus., dated 19-5-1992 is breached. Benefit of the said Notification cannot be extended. (b) &nb....
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....ime in September, 1994. It is, therefore, inferred that the goods could not be shipped earlier than middle of September, 1994 whereas the licence was due to expire in August, 1994. Thus these goods covered by these two Bills of Entry have been imported against a licence which has already expired. Therefore, importation of goods against these two Bills of Entry is unauthorised. Goods of the said two Bills of Entry are liable to confiscation. 1.4 It was therefore, proposed in the said show cause as to why - (a) The value of the goods as imported should not be fixed at U.S. $ 2675/m.t. CIF for the purpose of levy of Customs duty, (b) the goods valued at Rs. 8,09,79,467.81 should not be confiscated under Sections 111(m), 111(d) & 111(o) of the Customs Act, 1962, (c) duty amounting to Rs. 5,92,97,215.29 should not be realised from the appellant; and (d) penal action should not be taken against the appellant under Section 112(a) ibid. 1.5 Commissioner of Customs, on the basis of his understanding of an interim order passed in January, 1995 by the High Court of....
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....odvat credit of Rs. 3 crores on 19-5-1994, being the credit relatable to exports made during the years 1992-93 and 1993-94. We consider it necessary to record this fact since the appellant in its appeal memo and during the course of hearing had made a plea that it was learnt that VSP had since reversed the Modvat credit and, therefore, there was no violation of condition No. (v) of the Notification 203/92-Cus., dated 19-5-1992 by VSP as alleged. [Paras 13.1 to 13.17 in the Addl. D.G.F.T.'s order point out the circumstances of bona fide belief, and the reasons why availment of Modvat credit at the stage of receipt of inputs and subsequent reversal was a necessary, on the part of VSP]. Fact of reversal of Modvat credit by VSP has been found by Addl. D.G.F.T. in his said order dated 28-9-1995 in para 66.13 thereof : "It is clear from the records submitted by the party that reversal has been done with consultation and approval of Central Excise." 1.9 It is also appropriate to put on record here the strong objections taken by the ld. Advocate, Shri Kapoor on behalf of the appellant hat despite the knowledge of the Commissioner about the passing of this order cancelling the im....
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..... 2.2 (i) Realising the said situation, ld. Advocate, Shri Kapoor has assailed the order of Addl. D.G.F.T. by submitting that it was passed without affording any opportunity to the appellant, particularly when the Addl. D.G.F.T. has admitted in para 1 of the said order that the proceedings started as a result of complaint by the appellant herein to the Revenue Department regarding delay in clearance of goods against the impugned licence from Calcutta Customs. He has submitted that since the Addl. D.G.F.T. did not issue show cause notice to the appellant herein despite his knowledge that the appellant was now the holder of the licence, Order-in-Original passed by him does not affect the appellant. The Addl. D.G.F.T.'s order cannot be relied upon in present proceedings. For this proposition, he relies on AIR 1974 SC 1471. (ii) Ld. Advocates Shri Kapoor further submits that since Addl. D.G.F.T. passed his order without affording an opportunity of hearing to the appellant, this order is a nullity in the eyes of law. For this proposition, he relies upon a judgment reported in 1985 (22) E.L.T. 27 (Mad.) = 1986 (7) ECC 51 - para 4 [Gemini Metal v. Union of India (Mad.)]. ....
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....1962 by the Apex Court in the case of East India Commercial reported in 1983 (13) E.L.T. 1342 (S.C.) - para 35, which rules as follows : "35. Nor is there any legal basis for the contention that licenses obtained by misrepresentation makes the licence non-est, with the result that the goods should be deemed to have been imported without licence in contravention of the order issued u/s 3 of the Act....... Assuming that the principles of contract apply to the issue of a licence under the Act, a licence obtained by fraud is only voidable : it is good till avoided in the manner prescribed law ........." On a query from the Bench that East India's foregoing ratio applies to the validity of licence till it is cancelled, but it does not follow from it that an exemption Notification would be applicable, assuming that condition (v)(a) of Notification 203/92-Cus. is breached. Ld. Advocate, Shri Kapoor submits that in the instant scheme of duty exemption based on VBAL, grant of a licence gives exemption to goods subject to certain condition. On the assumption that VSP has taken Modvat credit at input stage and, therefore, licence has been cancelled with effect from 28-9-1995, an exempti....
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....sion by the Division Bench of Calcutta High Court, as aforesaid, the appellant East India filed an application before the Magistrate for making over the sale proceeds. But the Assistant Collector of Customs kept on seeking adjournments. Against an order of adjournment, the appellant filed a revision before Calcutta High Court. Meanwhile, Assistant Collector of Customs initiated proceedings for confiscating the sale proceeds under Section 167 (8) of the Sea Customs Act. Against these proceedings the appellant filed a writ petition seeking a writ of prohibition. Ld. Single Judge dismissed the petition as premature. Ld. Judge agreed with the earlier Division Bench but he observed that the Division Bench did not decide the question as to what was permitted to be imported. He drew a distinction between a licensee who imported goods perfectly bona fide for his own consumption but who later changed his mind and a licensee who, even from inception, knew that he did not require the goods for his own use, but entered into transaction fraudulently. In the second situation, the ld. Judge proceeded to state, the goods imported were never goods required for the petitioner's Company for its own u....
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.... E.L.T. 163 (S.C.). The Court has reiterated its ruling in East India (supra) that on the date of the import the goods were covered by a valid licence. The subsequent cancellation of the licence is of no relevance nor does it retrospectively render the import illegal. (iv) We, therefore, hold that cancellation of the impugned licence by the Addl. D.G.F.T.'s order dated 28-9-1995 does not render the present imports by the appellant illegal. For that reason, benefit of exemption Notification 203/92-Cus. would also be available to the imports provided the relevant condition(s) of the Notification is/are fulfilled. 4.1 (i) Shri Kapoor, with regard to availability of exemption Notification 203/92-Cus., points out that the benefit of the said Notification is available to materials imported into India against a VBAL issued in terms of para 49 of the EXIM Policy 1992-97 subject to certain conditions mentioned therein. There is no dispute about fulfilment of conditions (i) to (iv) and (vi). Allegation is that condition No. (v)(a) has been breached by VSP, the original licensee inasmuch as it has taken input stage credit under Rule 57A of the Central Excise Rules, 1944. There....
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....page 216 of the said order : "(e) Therefore, I find sufficient force in the argument that a transferee or a person other than a licence holder is only required to satisfy clause (vii) of the Notification 203/92 of obtaining a transfer of licence in his favour." In arriving at the above finding, C.C., Mumbai-I, has relied on Tribunal's judgment in the case of Nitco Marble & Granite (P) Ltd. v. C.C., Nhavasheva reported in 1999 (112) E.L.T. 193 (Tri.) = 1996 (63) ECR 111 (Tribunal) which has observed in para 4 as follows : "Irrespective of whether further examination or formation of opinion is permissible in ordinary course, the importer cannot be required to prove once again the eligibility for duty free import of the permitted goods." (ii) As regards breach of condition (v)(a) of the Notification, he firstly submits that the appellant being a person other than the licensee in not concerned with that condition. Nevertheless, he submits that input stage credit, though initially taken by VSP, has since been reversed by it as admitted in Addl. D.G.F.T.'s order mentioned earlier. In the face of this fact, there is no breach of condition (v)(a) by VSP and therefore, enti....
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....l of Modvat credit by VSP, benefit of the said Notification cannot be extended. This is the ratio of Orissa High Court's judgment in the case of Raj Export v. NALCO reported in 1996 (87) E.L.T. 349 = 1996 (66) ECR 437 (Orissa). This finding has been given despite the fact that Transferee (Raj Exports) claimed the benefit of the said Notification on the basis of endorsement of transferability on the VBAL and the DEEC. In this connection, he draws attention to paras 9, 43 and 46 of the said report. This finding cannot be questioned, in view of there being no contrary judgment of any other High Court or of the Supreme Court. (ii) He submits that for breach of condition (v)(a), export obligation remains unfulfilled and consequently transferability endorsement becomes bad in law. Therefore, condition (vii) does not help the appellant. As regards use of copper wire bars (electrolytic grade), ld. Advocate submits that input-output standard norm, DGFT's letter dated 29-3-1994 and circular dated 27-4-1994 may help the appellant from the angle of admissibility of the VBAL, but these do not help the appellant for benefit of Notification 203/92-Cus., being a statutory in character, the....
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.... makes a declaration before the Assistant Commissioner of Customs binding himself to pay on demand an amount equal to the duty leviable but for the exemption, on the imported materials in respect of which the conditions specified in this notification have not been complied with : Provided that a bond or a legal undertaking and the declaration shall not be necessary in respect of imports made after discharge of export obligation in full, as evidenced by endorsement of Licensing Authority in the said certificate : (iii) that the said licence and the said certificate are produced before the proper officer of customs at the time of clearance of imported goods out of customs control : Provided that no such imported materials shall be permitted clearance under this notification unless a debit entry has been made, in the said licence and the said certificate, by the proper officer of customs; (iv) that the imports and exports are undertaken from sea ports at Bombay, Calcutta, Cochin, Kandla, Mangalore, Marmagoa, Madras, Nhava Sheva, Paradeep, Tuticorin and Visakhapatnam, or through any of the airports at Ahmedab....
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....nhydride in his own factory; (viii) Notwithstanding anything contained in conditions (vi) and (vii) above, the endorsement of transferability or disposal of materials shall be allowed in respect of licences issued for the export of all kinds of writing instruments (including gift sets and refills/nibs) on fulfilment of export obligation only in favour of manufacture of writing instruments. Explanations. - In this notification, - (i) "Export and Import Policy April, 1992 - March, 1997" means the Export and Import Policy April, 1992 - March, 1997 published vide Public Notice of the Government of India in the Ministry of Commerce No. 1-ITC (PN)/92-97, dated the 31st March, 1992 as amended from time to time. (ii) "Licensing Authority" means an authority competent to grant a licence under Imports (Control) Order, 1955 made under the Imports and Exports (Control) Act, 1947 (18 of 1947). (iii) "Materials" means - (a) raw materials, components, intermediates, consumables, computer software and parts required for manufacture of export product : Provided that in the....
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.... (24) "Manufacture Exporter" means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and small include processes, such as, refrigeration, repacking, polishing, labelling and segregation. Manufacture, for the purpose of this Policy, shall also include agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry and sericulture." CHAPTER IV "19. Compliance with Laws : Every exporter or importer shall comply with the provisions of the Foreign Trade (Development and Regulation) Act, 1992, the Rules and Orders made thereunder, the provisions of this Policy and the terms and conditions of any licence granted to him, as well as provisions of any other law for the time being in force." CHAPTER VII DUTY EXEMPTION SCHEME Duty Exemption Scheme. 47. Under the Duty Exemption Scheme, Import of raw materials, intermediates, components, consumables, parts, accessories, packing materials and computer software (hereinafter referred to as "inputs") required for direct use i....
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....value addition norms. 51. The standard input-output norms for the imports and exports for the grant of both value based and quantity based advance licences and value addition norms for value based licences shall be in accordance with the norms published by the Director General of Foreign Trade by means of a Public Notice. However, in respect of quantity based Advance Licences for which such standard input-output norms have not been published, the quantitative norms will be as specified by the competent authority. Exports in anticipation of licence. 66. Exports/supplies made from the date of receipt of an application under this scheme by the licensing authority may be accepted towards discharge of export obligation. If the application is approved, the licence shall be issued in accordance with the policy and procedures in force on the date of its issue. The conversion of duty free shipping bills to drawback shipping bills may also be permitted by the Customs authorities in case the application is rejected or modified by the licensing authority. Transferability of Advance Licence. 67. A value or qantity based Advance Licence (except Intermediate Advance Licenc....
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....ermitted by the terms of the Notification. (ii) Appellant herein is a much later transferee of the impugned order. Right of a transferee of VBAL, to avail of the benefit of Notification 203/92-Cus., is specifically set out in condition (vii). All other conditions in the said Notification on plain reading thereof have to be fulfilled by the licencee namely the person to whom the licence has been issued. Plain reading of condition (vii) makes it abundantly clear that benefit of the Notification is to be extended to a person other than a person to whom the licence has been issued if there is an endorsement of transferability by the Licensing Authority both on the VBAL and the DEEC. Such an endorsement is not denied in the instant case. Benefit of Notification 203/92-Cus. cannot, therefore, be denied to the appellant on the ground (assuming it to be correct at this stage) of breach of condition (v)(a). If this is allowed to be done, it would mean allowing the Customs authorities to question the exercise of authority by the Licensing Authority. This is nowhere permitted either under Notification 203/92-Cus. or under the provisions of the Customs Act, 1962 or the Rules made there....
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....efore the Court in respect of transferees was on the basis of bona fide transferees for value and one of equity. Therefore, Court declined to give any ruling on the said plea and left the matter to be decided in appropriate forum (Para 36). The other ld. Judge comprising the Division Bench exhorted the Customs authorities or the licensing authorities (vide para 54 of the said report) to sort out the matter regarding leviability of duty or to release the goods without payment of duty. We are, therefore, of the view that the Court's decision on Raj Exports (supra) regarding payment of duty on imports by transferee is sub silentio vis-a-vis condition (vii) of the Notification 203/92-Cus. It is a settled law that a decision rendered sub silentio on an issue is not of binding nature with reference to that issue. (iv) Strictly speaking, after our finding in sub-para (ii) above, it is not necessary to consider whether condition No. (v)(a) has been violated or not by VSP. Nevertheless, we would proceed to deal with it because of the allegations made by the Authority below and therefore, a controversy before us. We may mention at the out-set that VSP has not been made a party to the....
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....be used in the manufacture of the final product for export or final product meant for domestic sale. (f) Notification No. 203/92, dated 19-5-1992 proceeds on the assumption that the manufacturer is aware of his export order even before he sources any raw material. It again further proceeds on the impractical presumption that the manufacturer exporters are having separate production schedule for domestic market and exports. Further the notification proceeds on the assumption that all export goods are made in batches and not on continuous basis. These are impractical presumptions which do not happen in reality. (g) The Central Excise Rules, 1944 on the other hand stipulate that the assessee should take Modvat credit at the time of receipt of the inputs in the factory. The CEGAT in Mahindra & Mahindra Ltd. v. CCE, 1990 (50) E.L.T. 55 (Tribunal) vide para 9 thereof has taken a view that taking of the credit in Modvat is to be simultaneous with the receipt of inputs in the factory. (h) Further, in terms of Para 67 of the Policy as originally introduced, the stipulation regarding non-....
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....dit is not being taken in respect of imported materials, condition No. (V)(a) of Notification No. 203/92 is satisfied. The question is not as to whether this interpretation and belief entertained by the officials of VSP is correct or not. The relevant point is that such a bona fide and genuine belief was in fact entertained by VSP. 13.6 Para 67 of the Policy and Para 126 of the Handbook of Procedures were amended on or around 8-2-1994 to bring them in line with Notification No. 203/92. These notifications were received by the Marketing Department of VSP on or around 15-2-1994. Accordingly, on 19-2-1994 the Marketing Department addressed a note to the Finance Department to the effect that by above notification conditions regarding transferability/utilisation of both QBAL and VBAL have been modified and accordingly declaration to be submitted by VSP has undergone some change. The Dy. General Manager (Finance) was, therefore, requested to examine the amendment from VSP's point of view so as to submit revised declaration to the concerned officer of DGFT. 13.7 The views of the Dy. Chief Finance Manager in relation to the above as recorded in his note dated 24-2-1994 in t....
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....was time consuming and needed detailed calculation and study. Ultimately, on 19-5-1994, Modvat credit to the extent of Rs. 3 crores was reversed being the credit relatable to the exports made during the years 1992-93 and 1993-94. Thus, VSP voluntarily reversed the Modvat credit relating to the export product for the past period. 13.12 The procedure was also in conformity with the letter dated 3-3-1994 received from the Assistant Collector of Central Excise, Visakhapatnam, relevant extract whereof is reproduced below :- "It is mandatory obligation under law that the Modvat credit availed on inputs that have gone into the manufacture of the goods exported should be reversed so as to comply with the condition laid down in the relevant Customs Notification No. 203/92-Cus., dated 19-5-1992 that no Modvat credit should have been availed." 13.13 A separate list of dates enclosing the relevant correspondence exchanged with Central Excise Deptt. which showed that the procedure and modality regarding quantification of Modvat credit to be reversed was arrived at in consultation with the Central Excise Deptt. and was enclosed as Annexure II with the reply to the SCN. 13.1....
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....h of condition (v)(a) of the Notification. Ld. Advocate, Shri Kapoor relies upon a judgment of Commissioner of Customs, Mumbai-I in the case of VSP and many other transferees of similar VBAL with endorsement of transferability. Although ld. Advocate concedes that while the judgment of C.C. Mumbai may not be binding on the Tribunal, it has nevertheless persuasive value. Ld. Advocate Shri Pranab Dutta on the other hand submits that this question is no longer res integra in view of Orissa High Court's unambiguous judgment on this issue in Raj Exports (supra). He points out to Paras 45 and 46 (sic) of the said Report : "46. It is needless for us to dwell at length to discuss about the ratio of a number of reported decisions cited from the Bar in respect of the stands taken by the respective parties. It is a settled principle of law that to interpret fiscal laws, each and every word expressed in the statute has to be construed strictly and there cannot be any liberal interpretation with greater flexibility. The text and the context, are very important. The canons of law as to the interpretation of revenue statute are well guided and we find that if the conditions to avail the ex....
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....ble by the party liable preferably within a period of three months from the date of judgment. With these observations I concur with the main judgment delivered by my learned brother."  (emphasis applied by the ld. Advocate) Shri Kapoor, therefore, submits that the judgment as a whole leaves the matter of leviability of duty on the goods under detention as also of the person who incurs the liability to pay in a state of flux to be sorted out by Customs and Licensing authorities. (b) After reading para 54 of the judgment as quoted above, we are inclined to agree with the ld. Counsel for the appellant. (c) Not only that, we notice another feature referred to in paras 50 to 52 which are also reproduced below : "50. Opposite party No. 3, the Director General, Foreign Trade, in his counter has admitted the authority of the Customs officials to check and detain the goods in question if there has been any violation of the conditions of the licences under the Export and Import policy. The Joint Director of Foreign Trade under Annexure-7 on 30-3-1995 addressed to the opposite party NALCO stated that since the latter had reversed the credit availed under S....
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....orts reported in 1988 (38) E.L.T. 741, the Apex Court ruled that in interpreting an exemption Notification, language employed therein should be looked at "bearing in mind the context in which the expressions occur......" "While interpreting an exemption clause, liberal interpretation should be imparted to the language provided no violence is done to the language employed....." (Para 12). Another judgment of the Apex Court in 1989 (43) E.L.T. 183 (S.C.) (para 6) [Tata Oil Mills Co. Ltd. v. Collector of Central Excise] Ruled that : "in trying to understand the language used by an exemption Notification, one should keep in mind two important aspects : (a) the object and purpose of the exemption; and (b) the nature of the actual process involved in the manufacture of the commodity in relation to which exemption is granted." In Rohit Pulp and Paper Mills Ltd. v. Collector of Central Excise [1990 (47) E.L.T. 491 (S.C.) - Para 11], after relying on Parle Exports and Tata Oil Mills (supra), the Court held that : " in interpreting the scope of any Notification, the Court has first to keep in mind the object and purpo....
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..... Advocate, Shri P.K. Dutta urges that Customs have their separate jurisdiction. They are not guided by the action of the licensing authority. We are not impressed by this plea of the ld. Advocate for the respondent Commissioner. Exemption Notification is a part of a composite scheme in Chapter VII of the Exim Policy. Notification 203/92-Cus., itself in the opening para gives exemption to materials covered by the VBAL. Licensing Authorities in prescribed standard input-output norm allows the goods copper wire bars - as an input. It would obviously cover all grades of copper wire bars in the absence of any qualifying words. We, therefore, do not find any substance in this objection of the Commissioner of Customs in the impugned order. We, therefore, hold the appellant's goods - copper wire bars (electrolytic grade) are entitled to the benefit of Notification 203/92-Cus. 4.6 (a) We now come to the next issue regarding valuation of the imported goods. Revenue has discarded the contract dated 1-12-1993 entered into by the appellant with M/s. Indo-Asian (P) Ltd. on the ground that it cannot be genuine because the date of establishment of the appellant firm itself is August 1994,....
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....nuine. In this connection we reproduce para 12 of the said Report, which in our view squarely apply to the facts of this case : "12. When the contract had already been entered into between the parties and such contract was at the prevailing international market price on the date of contract, there can be no question of the foreign supplier being treated as imprudent when he acted in terms of such contract and supplied the materials even though at the time of shipment the prices had gone up. Similarly, the period of supply under the contract is agreed between the parties and the contract itself can never be treated as not genuine on the ground that the supply period is long. Insofar as the payment is concerned, sometimes the payment terms provide for opening of irrevocable Letter of Credit and some-times the payment terms may provide for "payment against documents" and/or after a certain period. These are purely contractual matters and are decided and agreed upon by the parties and the same cannot invalidate a contract in any way. The purported findings to the contrary in the said order of the Collector cannot be sustained being perverse. The Collector has not taken into account ....