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TaxTMI 
2005 (9) TMI 625
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....tion? or (b) Whether the original licencee is to satisfy the condition of the Notification or the transferee of the licence? 3. The facts involved in the appeal in a nutshell may be stated as follows. (a) The appellants are a partnership firm, inter alia, engaged in the business of trading and import of various items, including Poly Propylene wide spec. They have acquired and/or purchased transferable Value Based Advance Licences (hereinafter referred to as "VBAL"), including Licence No. PK 2049579, dated 19-1-1993, which was originally issued in the name of M/s. Amar Tara Exports, New Delhi, and which was, inter alia, valid for import of Poly Propylene wide spec. The said Licence was purchased by the appellants vide transfer letter dated 20-4-1994. Accordingly, the appellants have imported a consignment of Polypropylene wide spec vide Bill of Entry No. 881, dated 30-3-1994 against the said Licence and the same was allowed duty free clearance in terms of Notification No. 203/92-Cus., dated 19-5-1992. (b) By a show cause notice dated 4-3-1999, the appellants were, inter alia, called upon to show cause why an amount of Rs. 16,74,702/-should not be demand....
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...., from the whole of the duty of Customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and from the whole of the additional duty leviable thereon under Section 3 of the said Customs Tariff Act, subject to the following conditions, namely :- (i) that the materials imported are covered by a Value based Duty Exemption Entitlement Certificate (hereinafter referred to as the said certificate), issued by the Licensing Authority in the form specified in the Schedule annexed to this Notification : (ii) that the importer at the time of clearance of the imported materials- (a) produce proof of having executed a bond or a legal undertaking before the Licensing Authority concerned, for complying with the conditions of this Notification, and (b) makes a declaration before the Assistant Commissioner of Customs being 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 n....
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....he factory of any other manufacturer indicated in the said certificate even after discharge of export obligation and realization of export proceeds; (vii) where benefit of this Notification is sought by a person other than licencee, such benefit shall be allowed against the said licence and the said certificate only if it bears endorsement of transferability by the Licensing Authority; Provided that benefit of this Notification shall not be allowed to a transferee of the licence for import of Acetic Anhydride except where licence is endorsed for transferability before 24th November, 1993, and is transferred to an actual user who undertakes to use the Acetic Anhydride in his own factory. (viii) Notwithstanding anything contained in conditions (vi) and (vii) above, the endorsement or 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. Explanation. - In this Notification - (i) "Export and Import Policy April, 1992 - March, 1997" ....
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....on, if the conditions of the Notification are not complied with. (b) The proviso to condition (ii) states that the requirement of execution of bond and LUT is not applicable if the imports are made after the discharge of export obligation. (c) Generally the goods are imported and thereafter the export obligation is discharged. In such a situation, Condition (ii) has to be complied with. (d) Condition (ii)(a) need not be satisfied if the goods are imported after the discharge of export obligation imposed by the advance licence. In other words, the moment the export obligation is discharged, by virtue of the proviso to condition (ii), condition (ii)(a) and (ii)(b) are dispensed with. 8. (a) Conditions (iii) of the Notification No. 203/92-Cus. requires the production of the DEEC at the time of import of the goods. The proviso to the said condition states that the benefit of the Notification shall be extended only after a debit entry in the said certificate. (b) Condition (iv) of the Notification states that the goods are to be imported through specified ports. 9. Condition (v) of the Notification requires the fulfilment of export obligation wi....
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....nce. (e) Hence, the satisfaction arrived at in the above manner is final and binding on the Customs Department. The Customs Department cannot compel the appellants-importer, who are the transferee, to once again prove that the export obligation has been fulfilled by the original licence-holder in accordance with the Notification and without availing input stage credit. (f) Thereafter, when the transferee imports the goods on the basis of the transferred licence/certificate, the condition (v) is deemed to be satisfied. 14. If the Customs Department alleges that the endorsement of transferability has been obtained by fraud or misrepresentation, then, it must be proved by them. It is a settled law that the onus is on the person who alleges fraud has been committed. 15. The principle that fraud vitiates everything is not applicable in respect of third party rights created by bona fide transaction". 16. Notification No. 203/92-Cus. grants complete exemption from payment of basic customs duty and additional duty of customs (CVP) in respect of goods imported against Value Based Advance Licence (VABAL) issued by the Director General of Foreign Trade (DGFT). 17....
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....nd hence the demand cannot be raised in the absence of any evidence or material on record to show that the licencee did not avail the Modvat credit. 6. The burden to show that the Modvat credit was availed by the licencee is on the Department, particularly when the Department initially at the time of assessment of the Bill of Entry, had extended the benefit of the said Notification, which benefit is subsequently sought to be denied by the Department. 7. The proviso to Section 28(1) of the Customs Act is applicable only when there is a suppression of facts or wilful mis-statement by the importer or his agent. So long as there is no suppression of facts or wilful mis-statement, the proviso to Section 28(1) cannot be invoked against the transferee. Hence, the demand is barred by limitation where notices have been served beyond six months from the relevant date. 18. The following are the contentions raised by the Customs Department : (a) the benefit of the exemption is available only on fulfilment of the conditions stipulated in the Notification; (b) the conditions have to be fulfilled by the importer who is claiming the benefit of the exemption; ....
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....ter discharge of export obligation in full, as evidenced by endorsement of Licensing Authority in the said certificate". (b) granting of extension to the export obligation period, by specifying in condition (v) of the Notification No. 203/92-Cus. (c) The Schedule to the Notification No. 203/92-Cus. contains the Duty Exemption Entitlement Certificate issued by the DGFT. Part-2 (Export) of the Certificate provides that the endorsement of the licensing authority is required for waiving the requirement of executing the bond if the licence-holder has completed the export obligation. Part-2 is re-produced below : PART - 2 (EXPORT) (This consists of........ pages) Sl. No. ... (EXP) Date of issue, Port of Registration ... Issued to ........ .......................................... (name and full address of the licencee) .......................................... Materials imported against Licence No. ............. dated ............ issued by............... to the above importer and covered by the list of materials specified under part 'C' of this certificate would be eligible for exemption fr....
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....before the Settlement Commission, against a notice of demand issued by the DGFT directing payment of customs duty on unutilized raw material imported under the advance licence. The department contended before the High Court that the requirement of Section 127B of the Customs Act, 1962 are not fulfilled by the assessee as there was no show cause notice issued by the proper officer of Customs demanding Customs duty from the assessee. Rejecting the contention of the Revenue, the High Court held as under : It is in view of the aforesaid statutory provisions and the conditions of the licence that the Joint Director General of Foreign Trade issued the demand notices dated 12-10-2001 advising the petitioners to pay to the Customs Department customs duty on the unutilized imported materials along with interest thereon. If the Joint Direct General of Foreign Trade is not treated as the proper officer for the levy, assessment and collection of customs duty and if the letters dated 14-2-2001 (Annexure "B" colly.) written by the Deputy Commissioner of Customs calling upon the Bank for encashment of the bank guarantee are not treated as show cause notices or demand notices from the pro....
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....n behalf of the dealer that he was not liable to pay sales tax as he had fulfilled all the conditions laid down under the provisions of Section 3-AA of the Act read with Rule 12-A of the U.P. Sales Tax Rules (hereinafter called the "Rules) inasmuch as he had sold the cotton yarn to registered dealers and had also obtained from them the certificates of resale on Form III-A and it was not possible nor was it his business to find out what the purchasers of the cotton yarn subsequently did. (c) The contention of the assessee was rejected by the High Court, in the following words, as recorded in para 2 of the decision. 2. The Division Bench of the Allahabad High Court was of the opinion that the controversy raised in the reference was covered by the decision of the Full Bench of the said High Court in CST v. Shankar Lal Chandra Prakash where it was held that the certificate in Form III-A was only a prima facie evidence of the fact that the goods had not been sold to a consumer. The Division Bench of the Allahabad High Court was further of the opinion that certificate was not conclusive evidence and the department could go behind the certificate and if it found that the....
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....igations have been discharged by the licence-holder in terms of the DEEC Scheme/Notification i.e. the exporter did not avail credit of duty paid on the inputs used in the goods exported. However, the Customs Department cannot go into the correctness or otherwise and sit in judgment of the certification or satisfaction arrived at by the DGFT when the certificate or endorsement creates an irrebuttable presumption that the exporter has not availed input credit. The exemption, consequently, cannot be denied to the importer. This principle was once again reiterated by the Supreme Court in a recent decision of Ashok Leyland Ltd. v. State of Tamil Nadu - 2004 (3) SCC 1, in Paras 59 and 61, the Supreme Court held as under : "59. In the case at hand, a statutory authority that had jurisdiction to pass such an order has passed the order. In addition there is no provision for appeal, which goes to show that this is part of the substantive law and now procedural law. This order is conclusive for all purposes, as the above two stated elements clearly go out to show. No appeal has been provided for depicting the will of the legislature to make the order of such authority final.....
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....exporter by mis-representation, then DGFT may, perhaps, take appropriate action against the exporter for the misrepresentation, under the FTDR Act or the Rules framed thereunder. 25. The ratio of sales tax decisions will apply even while construing exemption Notification under the Central Excise or Customs. In Central Excise, effective rate of duty for cigarettes is prescribed by exemption Notification. The effective rate of duty is prescribed with reference to the MRP declared on the cigarette packs. The excise department demanded differential excise duty from ITC on the ground that a higher price than indicated in the pack has been charged by the retailer. The argument of the ITC was that sale of cigarettes by the retailer at a higher price cannot make the manufacturer (ITC) liable. The decision of the Tribunal in ITC is reported in 1998 (104) E.L.T. 151. The Tribunal in paras 31 and 34 held as under : "31. ....it would be open to the Department to go behind the printed prices and find out the effective prices at which the retailers may sell the packages to consumers and treat such prices as the printed prices for the purpose of determining the slab applicable for the....
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....les after some time and in some cases on the very same day. The Tribunal in its order reported at 2000 (124) E.L.T. 1175 (T) concluded that once the manufacturer has produced a certificate from the State Transport Authority and that certificate is not a forged document or produced by collusion, demand cannot be raised on the manufacturer on the ground that the vehicle has not been found to be used as taxi. While holding so, the Tribunal applied the principle laid down by the Supreme Court in Radio & Electricals. In view of the above decisions, it is to be held that the Customs Department cannot raise an alibi if the condition (v)(a) is not fulfilled by the exporter. 26. As observed by the Supreme Court, the Department can resort to any remedy ordinarily available under the law and proceed against the exporter, e.g., the Customs Department can proceed under Section 132 of the Customs Act, 1962 against the exporter for misrepresentation, but cannot demand duty from the importer/transferee. 27. At this stage, the following observation of the decision of Bombay High Court in Bombay Chemicals Pvt. Ltd. v. Union of India - 1982 (10) E.L.T. 171 is relevant and reproduced below : ....
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....ied upon the decision of the Supreme Court in the case of M.G. Abrol, Additional Collector of Customs, Bombay and another v. M/s. Shantilal Chhotelal and Company reported in A.I.R. 1966 Supreme Court 197. In support of the submission that the certificate given by D.G.T.D. cannot be challenged by the Customs authorities and, in my judgment, the reliance on this decision is very appropriate. The importer importing the goods against the transferred licence cannot be asked to prove whether the export obligation has been discharged by the original licence-holder without availing the Modvat credit since the importer has no means to verify the same and he has to rely on the certification of the DGFT." 28. In Sulekh Ram and Sons v. UOI - 1978 (2) E.L.T. 525 (Del.) the issue was whether the assessee was entitled to the exemption under Notification No. 206/63-C.E. This Notification granted exemption to iron and steel products falling under 26AA(ia) of the old tariff, if such items are made from re-rollable scrap on which appropriate amount of excise duty has been paid. The excise department contended that the assessee is not entitled for the exemption since the re-rollable scrap ....
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....ed on a manufacturer or a producer in respect of the commodity manufactured or produced. See the observations of Lord Simonds in Governor General in Council v. Province of Madras [72 Indian Appeals 91]. In a situation of this nature, the Delhi High Court held that the processor was in the similar position as a purchaser of the goods. In that view of the matter, we are of the opinion that the Tribunal was right in the view it took." The ratio of the above decision will apply to the present case also inasmuch as the transferability is granted by the DGFT only after the export obligation is discharged by the licence-holder in terms of the DEEC Scheme/Notification i.e. including that exporter/licence-holder has not availed the Modvat credit on inputs. Therefore, the appellants who had purchased the licence from the market and got the transfer endorsements from DGFT, can legally presume that the export obligation had been fulfilled without availing of input credit and consequently the condition (v)(a) of Notification No. 203/92-Cus. has been fulfilled and therefore he is entitled for the exemption. 30. (a) Assuming that the original licence-holder has committed fraud and obtained ....
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....party acquires a good title." (b) The principle contained in Section 29 of the Sale of Goods Act will apply to the present case since licence has been held to be goods by Supreme Court in Vikas Sales Corporation v. CCT - 1996 (4) SCC 433. The Supreme Court held that transferable REP licence is 'goods', for the purposes of Section 2(7) of the Sale of Goods Act. Though Section 29 of the Sales of Goods Act refers to the buyer acquiring a title under a voidable contract, this principle has been applied by the Supreme Court in 1968 (2) SCR 797 in the case of Ningawwa v. Byrappa Shiddappa Hireknrabar. Therefore, it is to be reiterated that the transferee-importer has attained a good title to the licence and the endorsement of transferability cannot be held to be not valid in the hands of the importer, who is a bona fide purchaser of the licence. 32. The issue referred to the Larger Bench is covered by the decision of Bombay High Court in Taparia Overseas - (a) The very issue has been decided by the Bombay High Court in Taparia Overseas (P) Ltd. - 2003 (161) E.L.T. 47 (Bom). After referring to various decisions and the book titled 'Keer on Law of Fraud and Mista....
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....assessee for the purpose of inclusion in his net wealth within the meaning of Section 2(m) of the Wealth Tax Act, 1957? (ii) Whether, on the facts and in the circumstances of the case, the assessee's right to receive the sum of Rs. 25 lakhs O.S. from the State Government was an asset for the purposes of inclusion in his net wealth under the Wealth Tax Act, 1957?". In respect of first question, the Court made the following observation :- "The position is that though all statutes including the statute in question should be equitably interpreted, there is no place for equity as such in taxation laws. The concept of reality in implementing a fiscal provision is relevant and the Legislature in this case has not significantly used the expression "owner" but used the expression "belonging to". The property in question legally, however, cannot be said to belong to the vendee. The vendee is in rightful possession only against the vendor". Ultimately, the question was answered in favour of the Revenue holding that the property belonging to the assessee for the purpose of inclusion in his net wealth. In the instant case, the transfer of licence has been effected for va....
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....transferee where fraud is subsequently detected by the authorities concerned. Therefore, the phrase cannot be used with reference to the Notification, which do not compel either of the original licence holder or subsequent purchaser to come under the scheme. Even if the scheme is not compulsory as held in the above decision and it is optional, it cannot compel the transferee to do an act, which is not in his limit. 38. The Bench in the case of M/s. Special Steel Ltd. relied upon the decision of Commissioner of Customs v. M/s. Bharat Pulverizing Limited reported in 1999 (111) E.L.T. 193 (Tri.), wherein it is held that once licence has been transferred by the Licensing Authority, the importability of goods cannot be questioned by the Customs Authorities, but as far as levy of duty is concerned, it is for the Customs Authorities to look into it. The decision in the case of M/s. Goodluck Industries, which is earlier to Bharat Pulverizing Ltd.'s case, has not been referred either in the Special Steel Limited or in Bharat Pulverzing case. The case in Bharat Pulverizing Ltd. has been stayed by Mumbai High Court. 39. In Goodluck Industries v. Commissioner of Customs, Calcutta, report....
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....Avni Dyechem Industries [2001 (137) E.L.T. 1316 (Tribunal)]. The ld. Commissioner, however, did not consider the Order of the Hon'ble Supreme Court on the ground that it is a non-speaking order and non-declaratory in nature while relying on other judgment of the Supreme Court. In the above case, Department went in appeal against the Order passed by the Tribunal and after hearing the counsel for the appellants, the order made is as follows : "We find no merits in the appeal and they are dismissed. No order as to costs". The ld. Commissioner apparently erred in his view in not considering the same. There is no other issue involved in the above appeal except extending the benefit to the transferee of licence under conditions (v) and (vii) of the said Notification. Mere non-discussion of the Notification and its conditions at the cost of repetition or elaboration, where the point is understood and consequently an operative order is made by the Apex Court, it is deemed that all the issues involved in the case have been considered and the finality reached, the same is enforceable. 40. The similar issue came before the Supreme Court once again in the case of M/s. Titan M....