TaxTMI 
TaxTMI 
2007 (3) TMI 74
X X X X Extracts X X X X
X X X X Extracts X X X X
....the licenses who have imported the goods etc. 2. The brief facts of the case are that the main appellant MIs. BOFL is a manufacturer and exporter of de-oiled Soyabean cake (DOC) also described as Soyabean Meal/Toasted Soyabean Extracted Meal/Khali etc. obtained from solvent extraction of soyabean oil from soyabean. The main raw materials used in the manufacture of soyabean oil and De-Oiled Cake are seeds of soyabean, hexane and coal. Coal is used to make steam and hexane is used for oil extraction.Towards the end of 1998 and early 1999 M/s. BOFL applied for certain quantity based advance licenses to the DGFT, Pune and DGFT, Mumbai initially against determination of ad-hoc norms by Regional Advance Licence Committee (RALC) or Zonal Advance Licence Committee (ZALC) in respect of export of Indian Toasted Soyabean Meal (ITSM), Indian Toasted Soyabean Extract (ITSE), Pure Yellow Flaker type and subsequently against SION. A1814 of the 1-0 Norms (Input-Output) of product group "Chemicals and Allied Products" for export of Lecithinised High Protein Oil Seed Based Meal (LHOSBM) containing minimum O.075% of Vitamin B, C & E. In the applications made to the DGFT, it had declared that in addi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as Lecithinised High Protein Oil Seed Based Meal (LHOSBM) (Indian Toasted Sôyabean Meal). BOFL in consultation with VPL de cided to apply advance license for LHOSBM (ITSM) not under SION-E42 which indicated Soyabean extraction as export product and hexane as import product but for determination of ad-hoc norms listing out various materials in addition to hexane (solvent) as inputs and later as a product of chemical and allied industry under SION-A1814 which indicated LHOSBM as the export product and import items as under: (1) Hexane (2) Amino Acids (3) Lecithin (4) Antioxidants (5) Binders (6) Vitamin B, C & E (7) Minerals. M/s. BOFL (Shri Shreyans Daga) and M/s. VPL (Shri Devendra Mehta and Shri Viral Mehta) collaborated for making an application for advance li censes through VPL employees (A.K. Shroff & Kumar) pursued with DGFT for grant of licences and obtaining endorsement of transferability on fulfillment of export requirement. M/s. VPL and M/s. BOFL had a mutual understanding for the sale of transferred licence to VPL. The licenses were obtained on the basis of applications containing mis-declaration and mis-representation as the description of export item was given ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d not be denied and duty foregone amounting to Rs.81,13,380/- on the goods already exported should not be recovered and the goods seized from the various premises of the transferees should not be confiscated and penalties imposed on the various noticees. The show cause notice was adjudicated by the Commissioner who held export goods totally valued at Rs. 80,20,58,389/- as liable to confiscation and imposed a penalty of Rs. 5 Crores on M/s. BOFL, 1 Crore on Shri Vinod Daga, Managing Director of M/s. BOFL, Rs. 2 Crores on Shri Shreyans Daga, Executive Director of M/s. BOFL, Rs. 50 Lakhs on Shri Niraj Pavri, Director of M/s. BOFL, Rs. 50,000/- on Shri D.N. Murli of M/s. BOFL, Rs. 50,000/- on Shri Surendran of M/s. BOFL penalty of Rs. 3 Crore on M/s. VPL, Rs. 1.5 Crores on Shri Devendra Mehta and Rs. 50 Laths on Shri Viral Mehta, Rs. 50,000/- on Shri A.K. Shroff and Shri Kumar of M/s. VPL were also imposed under Section 114(i) of the Customs Act, 1962. Similarly penalties of Rs. 50 Lakhs on M/s. Apar Ltd., Rs. 4 Lakhs on M/s. Ballarpur Industries Ltd., Rs. 1 Lath on M/s. Vision Millenium Export, Rs. 10,000/- on Shri Durgadatta Mishra, employee of M/s. VMIL, Rs. 4 Lakhs on M/s. Producin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ontent less than 1%) and there has been no mis- declaration whatsoever. In support thereof they referred to the test report of the Chief Chemist Shri Badriprasad and that of Ex. Joint Director (Chemical Labora tory) Shri Khadim Hussain. Shri Khadim Hussain has in his cross examination clearly stated that soyabean meals are highly lecithinised in comparison to other oil cakes. It is highly protein contained and vitamin such as vitamin B-Complex and others. In reply to a specific query as to whether LHOSBM is nothing else but high protein soyabean meal or not, Shri Khadim Hussain stated that yes it is an abbreviation of high protein soyabean meal. Similarly, Dr. Badriprasad, former Director CRCL (Central Revenue Chemical Laboratory) has confirmed that high protein soyabean oil seed based meal will be covered in the entry relating to SION A1814 mainly LHOSBM containingminimum 0.075% of Vitamin B, C & E. It was submitted that Dr. Badriprasad was not aware of any technical literature regarding LHOSBM but still gave an opinion that the product was not LHOSBM. In addition while applying for advance licence when no norms were fixed, their product was considered by the RALC/ZALC of DGFT as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r Bench decision of the Tribunal in the case of Hico Enterprises v. Commissioner of Customs, Mumbai - 2005 (189) E.L.T. 135. 14. The learned consultant for the revenue submitted that broadly two issues are involved in this group of appeals. These are: (i) Whether the exporters have mis-declared the goods exported attracting the provisions of Section 113(d) of the Customs Act, 1962 and inconsequence thereof, whether they are liable to penalty under Section 114(i) of the said Act; and (ii) Whether the behalf of exemption under NotificationNo. 31 /97-Cus. can be denied to the input materials imported duty free by various transferees of the Advance Licences for the reason that the same are not required for manufacture of the export product. Submissions on the 1st Issue: 1.1 In the Shipping Bills filed by M/s. BOFL and third party exporters, the export goods have been described as follows: "Lecithinised High Protein Oil Seed Based Meal (LHOSBM) containing Minimum 0.075% of Vitamins B, C & E (Indian Toasted Soyabean Meal Pure Yellow Flaker Type)". At the foot of the Shipping Bills, the exporters have declared that particulars given herein are true & correct. They have also attach....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s regarding the use of the raw materials in the manufacture of the export goods under the relevant shipment. A copy of the aforesaid Regulations is submitted herewith for favour of perusal and ready reference. 1.8 From the above, it is quite clear that declaration as to the use of raw-materials in the export goods is a part & parcel of the DEEC Ship ping Bill. Viewed from this angle, it has to be held that the contents of the Shipping Bills have been mis-declared in contravention of the provisions of Section 50(2) of the Customs Act, 1962. 1.9 As regards the plea that mis-declaration of description of the export goods does not make it prohibited and hence Section 113(d) of the Customs Act will not be attracted as per Hon'ble Supreme Court in the case of Prayag Exporters reported in 2000 (121) E.L.T. 819 (S.C.). It was submitted that is not acceptable for the reasons that - (a) There is a clear prohibition against any incorrect declaration of import or export goods with respect to their value, quantity and description under Rule 11 of the Foreign Trade (Regulation) Rules, 1993. Rule 11 is reproduced below for the sake of proper appreciation and judicious consideration: "Rule 11.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....imposition of penalties on the exporters is required to be upheld. 11.13 He thereafter referred to the plea of appellant that the Customs authorities cannot question the action of the DGFT Authorities in matters of grant of licenses and endorsement of the transferability thereon. It was pointed out that on a reference from the Commissioner of Customs, DGFT has clarified the position by its letter dtd. 14-12-99 (at page 67 of the Paper Book) that the licenses issued prior to 15-10-99 were issued on the basis of SION or on the recommendation of SALC or concerned ZALC/RALC and fulfillment of the following conditions have to be ensured before bond waiver and transferability is granted by the licensing authority: (a) the product actually exported should strictly conform to the description of the resultant product at the relevant SION under which the licence has been issued; 2007 1 DURGADATFA MISHRA v. COMMISSIONER OF CUSTOMS (EXPORT), MUMBAI 365 (b) if the licence has been issued on the basis of ad-hoc norms fixed by the SALC or the concerned ZALC/RALC the quantity of each item allowed for import (minus the wastage allowed) which is required to be physically present in the export p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion. In the present case, admittedly except for hexane, no other inputs items as specified against Sr. No. A1814 of the I-U Norms are required for use in the manufacture of Soyabean Ex traction. In the circumstances, the Customs authorities cannot extend the benefit of exemption to other input items such as, Vitamins, Mineral, Amino Acids, etc. Merely because the import items are covered by and Advance Licence, exemption will not be automatic. The Customs au thorities will still have the jurisdiction to question as to whether the benefit of exemption is available to the claimant. In this connection, the judgment of the Hon'ble Supreme Court in the case of Sheshank Sen Foods Pvt. Ltd. v. Union of India - 1996 (88) E.L.T. 626 (S.C) which still remains a good law can be usefully referred to and relied upon. In this judgment, it has been held by the Apex Court that while the Licensing authorities are empowered to conduct investigation into the breach of terms of the licence, the Customs authorities can conduct investigation into the breach of condition of the exemption notification. In this connection, provisions of the existing policy vide Para 7.26 of the Handbook of Procedures Vol.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aken note of the fact that initially the appellant has applied for some of the licence under no norms category showing the product as Indian Toasted Extracted Soyabean Meal Pure Yellow Flaker type showing minimum 0.075% of vitamins. ZALC after consideration of the case in consultation with the technical expert and the representative of the custom authorities came to the conclusion that the export product to be exported is covered under the norms and description of export product as mentioned under SION A1814 and therefore allowed to issue the advance licence on the basis of lower of the applied quantity and the quantity allowed under SION A1814. Had there been any misdeclaration or mis-representation it would have been noticed by the technical authorities as well as customs representative and the applications would have been rejected. It has been further held by him that, as per para 7.2 of Export-Import Policy for the year 1997-2002 i.e. date of issue of advance licence there was no requirement of imported inputs being physically incorporated in the export product and that as per general note for all export product group in the Hand-Book Procedure-Volume II it has been stated that....