TaxTMI 
TaxTMI 
2016 (11) TMI 465
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....lants could have cleared the resultant products manufactured out of duty free inputs in the domestic market before fulfillment of the export obligation. The parties referred to the facts in Customs Appeal No.23 of 2015 to be representative of all the appeals. We, therefore, take them seriatim. 2 The appellants are engaged in the manufacture and export of bulk drugs since 1996. In addition, the bulk drugs manufactured by the appellants are sold in the domestic market on payment of applicable excise duty. 3 For manufacture of bulk drugs, the appellants import various raw materials on payment of applicable customs duty. ; The appellants also import raw materials against advance licences (called as advance authorizations from April 2007) without payment of customs duty. The appellants also procure the raw materials indigenously on payment of applicable excise duty. 4 During the period in dispute, namely, April 2007, the appellants obtained proximately 252 advance licences for import of various products. Broadly, the following products were imported against advance licences. Sr.No. Input description Finished goods 1. Pen-Q 7 ACCA, Cefaclor, Cephalexin Monhy....
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....nt of duty against advance licences (advance authorizations as named from April, 2007). The case of the appellants is that they have been obtaining regularly, the above advance authorizations from the office of the Director General of Foreign Trade. The same have been obtained for import of duty free raw materials. All such advance authorizations have been issued to the appellants as "Manufacturer-Exporter" only. Prior to April, 2007, the appellants obtained various advance authorizations and imported raw materials without payment of duty. The goods were duly used in the manufacture of final products which were exported out of India towards fulfillment of export obligation. The appellants have fulfilled export obligations and obtained the Export Obligation Discharge Certificate (OBDC " for short) from the Director General of Foreign Trade (DGFT "for short) on some occasions. If this obligation is not fulfilled, then, the duty along with interest is paid on unutilized raw materials. The appellants claim to have a unblemished record in the fulfillment of export obligations. 10 As far as the period in dispute is concerned, namely, from April 2003 to August, 2007, the advance author....
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.... to the show cause notice gives the breakup of the demand on the basis of various issues raised in the body of the show cause notice. 16 During the course of investigation, an amount of Rs. 3 crores has been paid by the appellants, a fact mentioned in paras 4 and 18 of the show-cause notice. 17 The learned Commissioner of Customs (Adjudication) Mumbai-I vide order-in-original dated 31st January, 2011, confirmed the demand raised in the show-cause notice against the appellants and imposed penalty of Rs. 4,00,00,000/- each on directors / employees. 18 The appellants challenged the order-in-original by filing appeal before the CESTAT, however, vide impugned final order dated 23rd April, 2014, it dismissed the appeal filed by the appellants on the following grounds : a) Prior to fulfillment of export obligation, the finished goods manufactured out of duty free materials imported against advance licence cannot be cleared into domestic market. b) Actual consumption of the manufacturer is efficient than specified in Standard Input Output Norm (SION) is violation of the para 4.28(v) of Handbook. c) Goods are liable for confiscation under section 111(d) & (o). d) Even t....
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.... does not mean that the imported inputs should be actually used in the resultant product exported out of India. This legal position in the order of the CESTAT has been admitted and accepted. The view to the contrary of the Commissioner recorded in the Commissioner's order dated 31st January, 2011, has not been accepted by the CESTAT on this point. 21 After inviting our attention to para 4.1.3 of the Policy 2004-2009, Mr. Sridharan would submit that the term "physically incorporated" only means that capital goods or unrelated inputs shall not be allowed as raw materials under the Advance Licence Scheme. Similarly, unconnected products which are not capable of being used should not be imported. Mr. Sridharan submits that, for example, for export of fabrics or garments, the exporter cannot obtain advance licence for import of an IC engine or bulk drugs. Similarly, one cannot apply for capital goods required for manufacture of fabrics or garments. Therefore, where the advance licence is issued or inputs mentioned in SION, it is permissible to import the same, either before or after fulfillment of export obligation. Mr. Sridharan then submits that when para 4.1.3 of the Policy 200....
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....consumables, parts, spares including mandatory spares, packing materials and computer software." 26 A doubt was raised as to whether fuel, oil, energy and catalysts can also be imported duty free against advance licence as these are not physically incorporated under export product. Therefore, these items were specifically mentioned as allowed to be imported duty free against advance authorization as can be seen from para 4.1.3 of the Policy (August 2004) reproduced above. 27 In view of the above, provisions relating to advance licence under the FTP do not require that the export obligation should be completed out of imported duty free raw materials alone. In other words the licence holder is free to fulfill the export obligation out of indigenous raw materials. 28 The above submissions are supported by the decisions of the CESTAT in the case of CC (II) Vs. Zincollied (Ind.) Ltd. - 2014 (300) ELT 475 (T) (page Nos.1 to 3 of the Volume II compilation) 29 Even the CESTAT in the impugned order does not dispute this legal position. The CESTAT in paras 13 & 15 of impugned order refers to para 4.1.3 of the Policy and accepts the submissions of the appellants that the term "....
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....00, was amended to incorporate additional condition and set out in para A.21. Mr. Sridharan submits that according to the Tribunal, the above amendment introduced in the Policy brings about a drastic change. It reverts the position as prevailing prior to April 2000. Mr. Sridharan submits that when the policy was always liberal than the Customs Notification, then, the legal position as held by CESTAT, namely, an enabling provision cannot be converted into / or read as a bar or prohibition would come to the aid of the appellants. Mr. Sridharan submits that the interpretation by the Tribunal ignores the word "option" employed in the amendment introduced in the Policy in April, 2005. Mr. Sridharan submits that a doubt arose as to whether the duty-free materials imported against advance licences as replenishment of duty paid materials used in the exported resultant product, shall again, after being used in the manufacture of the result product, be exported. In other words, whether double exports are required to be done in case the materials are imported duty-free against advance licence as replenishment. Mr. Sridharan submits that the answer in this case is obviously no. The resultant p....
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....thorization is fulfilled. The customs department cannot question or go beyond the advance authorization issued by the DGFT, particularly the quantities mentioned in the advance authorizations. After taking us elaborately through the Notifications, Mr. Sridhran then submits that the reliance by the Tribunal on clause (v) of para 4.28 of the Handbook of Procedures to demand duty on the excess inputs is misplaced. Para 4.28 is applicable only in case of default by advance authorization holder. There is no default on the part of the appellants in utilizing the excess inputs imported as per SION in the manufacture of resultant product and cleared in the domestic market. The Handbook of Procedures cannot restrict the scope of the Policy or Customs Notification. In any event and alternatively, the demand based on para 4.28 (v) cannot be raised for licences issued prior to 13th May, 2005. Mr. Sridharan submits that alternate advance licence whose export obligation has been already fulfilled can be tendered for debiting the dutyfree imports made against any other advance licences. This submission is made with reference to Annexure D to the showcause notice and the demand raised in terms the....
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....nce for debiting. 35 This is a case of substitution of the advance authorization number as given in para C-4 above in place of the advance authorization numbers mentioned in Annexure-D in the show cause notice. 36 Customs Appraising Manual, Vol.-II, Chapter-5, Part- 1, Para 18 supports the view, as under : "18. Ordinarily requests for transfer of entries are not entertained. However, in bonafide cases of error the customs any grant relief on merits on individual cases of partially utilized licences as well as fully utilized licences. When any such request is received for transfer debits, the assessing officer should verify all the relative documents such as Intent Acceptance, Letter of Credit, Exchange control copy and customs copy of licences. If an examination of these documents it is noticed that the original debits were made in error, the request for transfer of debit from one licence to another should be allowed provided the latter covers the goods. Bonafide errors in debits should be corrected in such cases. This will be allowed even when the two licences produced were issued in two different period and were governed by two different policies." 37 This is the view....
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....otification for imports against advance authorization. Payment of customs duty and interest amounts to compliance with the conditions of the customs notification. Hence, section 111(o) cannot apply. Hence, penalty on other co-appellants is not possible. 43 Section 111(d) is not applicable as the import was valid at the time of its making. Vide Union Of India vs. Sampat Raj Dugar - 1992 (58) ELT 163 (SC), the Hon'ble Supreme Court has held that section 111(d) is not applicable as the import was valid at the time of its making and was covered by a valid import licence, the subsequent cancellation of licence is of no relevance nor does it retrospectively render the import illegal. 44 In the case of the present appellants, the imports were valid and covered by the valid advance licence. Subsequent nonfulfillment or short fulfillment of export obligation or clearance of resultant product manufactured from imported duty free materials before fulfillment of export obligation, is of no relevance nor does it retrospectively render the advance licence illegal. Thus, section 111(o) is not applicable in the present case for non-fulfillment or short fulfillment of export obligation. 45....
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....vs. Commissioner of Customs, Vishakhapatnam, 2015 (322) ELT 561. (xvi) Sonia Fisheries vs. Union of India, 1997 (90) ELT 22. (xvii) S. B. International Ltd. vs. Assistant Director General of F. T., 1996 (82) ELT 164. (xviii)Commissioner of Customs, New Delhi vs. C. T. Scan Research Centra (P) Ltd., 2003 (155) ELT 3. (xix) Union of India vs. Sampat Raj Dugar, 1991 (56) ELT 739. (xx) Union of India vs. Sampat Raj Dugar, 1992 (58) ELT 163. (xxi) Union of India and Ors. vs. Glaxo Laboratories (India) Ltd., 1984 (17) ELT 284. 49 On the other hand, Mr. Jetly appearing for the Revenue would submit that the appeal as also the writ petition have no merit and they must be dismissed. He emphasises that the appeal before us was claiming certain benefits and which arise out of a rule or provision enabling the relaxation or exemption from the obligation to pay duty. Therefore, there is no vested right in the appellant and availment of the benefit is conditional upon fulfillment of all the conditions or stipulations for such relaxation. 50 Mr. Jetly, therefore, supports the impugned order in its entirety. He would submit that the appeal raises no substantial question of la....
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....The appellant did not pay any customs duty on the excess import, but utilised them in manufacture of finished products, which were eventually sold in the domestic market. That sale is before complying with the export obligation. Therefore, once the imports are far in excess and the desire of the appellant was to cash on and take advantage of the authorisation, then, their act of not fulfilling the terms and conditions of the authorisation would render them liable to all consequences in law. It is, therefore, the submission of Mr. Jetly that the present appeals do not raise any substantial questions of law. Assuming and having admitted them on the substantial questions of law as above, each one of them should be answered against the appellant and in favour of the Revenue. The appeal, be, therefore, dismissed. 52 Mr. Jetly relied upon the following judgments. (i) Sheshank Sea Foods Pvt. Ltd. vs. Union of India, 1996 (88) ELT 626. (ii) Weston components Ltd. vs. Commissioner of Customs, New Delhi, 2000 (115) ELT 278. 53 For properly appreciating the rival contentions, we must note some basic facts. The period in dispute is April, 2003 to August, 2007. The case is that the ....
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....use notice. Thereafter, the duty liability, which was provisionally worked out, is referred. From para 5 onwards, the show cause notice refers to the gist of the statements recorded and then, what has been set out in the show cause notice is that the scrutiny reveals that the company obtained a large number of advance licences for various products and imported raw materials duty free as permitted under these licences. Though these licences were registered at Jawaharlal Nehru Customs House and some of the major inputs were imported through Nhava-Sheva Port and Mundra Port also. Then, endorsements made on the copies of the licenses have been referred in para 6.1 of the show cause notice and it is stated that the details of duty free imports made under each licences were verified from the endorsements made by the respective customs port on the copies of the advance licences. As regards the exports made against the export obligation, the same was verified from the copies of the shipping bills and the computer printout obtained from the said company. On verification of the duty free imports made by the company from 1st April, 2003 onwards, it is alleged that it appears that though under....
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....rted duty free materials. They had fulfilled part of their export obligation by exporting finished goods purchased from local manufacturers. That is how in many of the finished products, they used common raw materials for adjusting the short fall and the modus operandi has been detailed in the show cause notice. In this lengthy show cause notice concerning each product and thereafter referring to the specific terms and conditions of the relevant notifications, the statutory provisions, it is alleged that there is a failure to discharge the duty liability rendering the company and its officers in-charge of the affairs and concerning the above, liable to penalty. The show cause notice runs into 92 pages and has several annexures. 57 The company replied to such a show cause notice and in its reply, firstly, a reference is made to the endorsement and remarks of the Foreign Trade Department Officer (Enforcement Division) recorded for and on behalf of the Zonal Joint Director General of Foreign Trade that no evidence of diversion of imported goods has emerged and the party has deposited/ will deposit customs duty on unutilised imported raw materials, therefore, no action as per the FT....
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....pondence is then referred to by the appellants. This entire material has been referred by the appellants and thereafter, they forwarded their reply to the show cause notice through their advocate on 3rd November, 2009. Copy of this reply is from page 272 of the paper book and the detailed reply ends at page 315 with a request to drop the proceedings. 58 It is in the backdrop of the allegations and the reply that a reference is required to be made to the relevant documents. 59 Apart from the documents which are forming part of the paper book and the summary of which is contained in the show cause notice and the reply, what we have to essentially focus our attention to are the two notifications. 60 The notifications are to be found in a compilation, of two volumes placed on our record. Customs Notification No. 43 of 2002 dated 19th April, 2002 is at page 55 of Volume I of this compilation. That reads as under:- "Notification No. 48/99-Cus, dated 29-04- 1999 as amended by Notification No. 90/99- Cus., dated 6-7-1999; No. 121/99-Cus., dated 4- 11-1999; No. 47/2000-Cus., dated 25-4-2000 and No. 120/2000-Cus., dated 15-9-2000. Corrected by Corrigendum F. No. 30/2001-Cus., ....
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.... quantity of materials imported are covered by the said licence and the said licence is produced before the proper officer of customs at the time of clearance for debit: (ii) that where import takes place after fulfilment of export obligation, the shipping bill number(s) and date(s) and quantity and FOB value of the resultant product exported are endorsed on the said licence: Provided that where import takes place before fulfilment of export obligation, the quantity or FOB of the resultant product to be exported are endorsed on the said licence; (iii) that the importer at the time of clearance of the imported materials executes a bond with such surety or security and in such form and for such sum as maybe specified by the Assistant Commissioner of Customs or Deputy 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, together with interest at the rate of fifteen per cent per annum from the date of clearance of the said materials : Provided that bond shall not be necessary ....
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....of Customs may allow; (vii) that the said licence and the materials shall not be transferred or sold; (viii) that in relation to the said Licence issued to a Merchant Exporter; - (a) the name and address of the supporting manufacturer is specified in the said licence and the bond required to be executed by the importer in terms of condition (ii) shall be executed jointly by the Merchant Exporter and the supporting manufacturer binding themselves jointly and severally to comply with the conditions specified in this notification; and (b) exempt materials are utilised in the factory of such supporting manufacturer for discharge of export obligation and the same shall not be transferred or sold or used for any other purpose by the said Merchant Exporter. 2. Where the materials are found defective or unfit for use, the said materials may be re-exported back to the foreign supplier within three years from the date of payment of duty on the importation thereof: Provided that at the time of re-export the materials are identified to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs as the materials which wer....
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.... (ii) that where import takes place after fulfilment of export obligation, the shipping numbers(s) and date(s) and quantity and FOB value of the resultant product are endorsed on the said licence: Provided that where import takes place before fulfilment of export obligation, the quantity or FOB value of the resultant product to be exported are endorsed on the said licence; (iii) that the importer at the time of clearance of the imported materials executes a bond with such surety or security and in such form and for such sum as may be specified by the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, binding himself to pay on demand an amount equal to the duty leviable, but for the exemption contained herein, on the imported materials in respect of which the conditions specified in this notification have not been complied with together with interest at the rate of fifteen per cent per annum from the date of clearance of the said materials: Provided that bond shall not be necessary in respect of imports made and the discharge of export obligation in full; (iv) that the imports and exports are undertaken thr....
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....eriod as the said Deputy Commissioner of customs or Assistant Commissioner of Customs, as the case maybe, may allow; (vii) that the said licence and the materials shall not be transferred or sold; (viii) that in relation to the said licence issued to a merchant exporter; - (a) the name and address of the supporting manufacturer is specified in the said licence and the bond required to be executed by the importer in terms of condition (iii) shall be executed jointly by the merchant exporter and the supporting manufacturer binding themselves jointly and severally to comply with the conditions specified in this notification; and (b) exempt materials are utilised in the factory of such supporting manufacturer for discharge of export obligation and the same shall not be transferred or sold or used for any other purpose by the said merchant exporter. 2. Where the materials are found defective or unfit for use, the said materials may be reported back to the foreign supplier within three years from the date of payment of duty on the portion thereof: Provided that at the time of re-export the materials are identified to the satisfaction of the Deput....
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.... find that firstly, there is an obligation to produce, before the proper officer of Customs, at the time of clearance or debit, the licence and secondly, the proof that the description, value and quantity of materials imported are covered by this licence. Another condition is that whether import takes place after fulfillment of export obligation, then, Condition No. (ii) of this notification has to be complied with and the proviso to this condition would indicate that whether import takes place before fulfillment of export obligation, the quantity or the FOB of the resultant product to be exported are endorsed on the said licence. Condition No. (iii) provides for execution of a bond and which would bind to pay on demand an amount equal to duty levaible, but for the exemption on the imported materials in respect of which the conditions specified in this notification have not been complied with. The proviso to the same indicates that the bond shall not be necessary in respect of imports made after discharging all export obligations in full. Then, the exemption is on the condition that the imports and exports are undertaken through seaports specified in clause (iv) and proviso to t....
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....states that advance licence and/or materials imported thereunder shall not be transferable even after completion of export obligation. However, the licencee will have the option to dispose of the product manufactured out of the duty free inputs once the export obligation is completed. That, what is relevant for our purpose is the duty exemption claimed and Exim Policy. That is to be found in Exim Policy and Handbook of Procedures. Chapter 7 deals with Duty Exemption/Remission Scheme and what it speaks of is issuance of advance licence under the Duty Exemption Scheme for allowing import of inputs which are physically incorporated in the export product and that also speaks of issuance of such licence for its physical exports, intermediate supplies and deemed exports. For physical exports, advance licence can also be issued on the basis of annual requirement in respect of export products, for which SIONs have been notified. Duty Remission Scheme consists of a Duty Free Replenishment Certificate and Duty Entitlement Passbook Scheme. The abbreviations of these terms are stated above and are to be found in the investigation reports of DRI. It is stated that the stipulations in Chapter....
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....d the materials shall not be transferred or sold. There is no condition that the resultant product manufactured from the materials imported against advance licence cannot be disposed of before export obligation under the said licence has been discharged. Thus, there is no violation of any of the conditions of the Customs notifications. The understanding is that after April, 2000, if the resultant product manufactured from the materials imported against advance licence have been disposed of in the domestic market before export obligation under the said licence is discharged, there is no violation of any condition of the Customs notifications, provided the export obligation is thereafter discharged by export of resultant product manufactured from any such materials procured indigenously or imported. Thus, the regime after 1st April, 2000 is practicable and workable. The tribunal, however, has relied upon para 4.1.5 of the FTP, which para came in by amendment in April, 2005. The tribunal relied upon this to hold that the pre-April, 2000 position is brought back. In that also, according to the appellant, the tribunal failed to note that para 4.1.5 speaks of an option, which the l....
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....s/orders brought to its notice on the ground that in none of these orders it was held that the appellant therein can sell the goods manufactured out of duty free material before fulfilling the export obligation. 70 Then, the tribunal found that the condition that imported inputs alone should be used for manufacture of products to be exported or the inputs should not be used for domestic market prior to completion of export obligation is not the condition in the notification. Therefore, necessarily the export obligation should be completed using the imported inputs alone is not sustainable. In that regard, the tribunal relied upon the condition sheet attached to the authorisation and particularly that the export obligation shall be fulfilled by the licencee as per the terms and conditions specified in the FTP and Handbook of Procedures and other guidelines issued by the DGFT from time to time. This is a condition sheet attached to one of the licence issued to the appellant dated 22nd February, 2006. The tribunal referred to the terms and conditions after reproducing both notifications in its order. It relies on Condition No. (vii), which we have referred above and concludes that ....
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....ation is fulfilled. Mr. Sridharan then tries to urge that materials have been defined in the notification itself, as raw materials required for manufacture of resultant products. In the context of Advance Licence Scheme, the words "required for" means "can be of use in the manufacture of resultant products". The imported raw materials need not be contained in the resultant products exported out of India. 73 Mr. Sridharan relied upon the written submissions and particularly paras B.11 to B.15 to submit that customs duty is not payable and the inputs imported as per SION exceed the inputs actually consumed. The arguments, once again, revolve around para 4.8 of the Handbook of Procedures. It is submitted that it is applicable only in case of default. There is no default of the appellants in utilising the excess inputs imported as per SION in the manufacture of resultant product and clearing it in domestic market. 74 The tribunal considered this aspect of the matter and from paras 21 onwards, noted the contentions of the assessee. In para 23, the tribunal noted the argument of the special counsel appearing for the Revenue. He relied upon para 4.28(v) of the Handbook of Procedures....
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....r, the investigation revealed that the two raw-materials, namely Pyridine and Methylene Chloride were not utilised to manufacture the export goods. The export product was manufactured from some other items/raw-materials, which were procured domestically. The imported duty free raw-materials Pyridine and Methylene chloride were used in the manufacture of other goods. These goods were, then, cleared in domestic area. The argument of the assessee was that this export product can be manufactured by using alternate inputs. These alternate inputs are also referred by SION. The assessee, therefore, contended that the import of the raw-materials ideally should have been debited against other licences where the resultant products exported were made using these inputs. The argument further was that in respect other licences, the assessee has completed the export obligation and they have not effected any inputs. Therefore, during investigation, a request was made to transfer the debited amounts in these 13 advance licences to another set of licences/advance authorisations. Reliance was placed upon an order passed by the tribunal in the case of Ajay Kalsi vs. Commissioner of Customs, rep....
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....at the tribunal's reliance on the judgment of the Madras High Court in the case of South India Export vs. Joint Director of Foreign Trade, reported in 2004 (177) ELT 57 is misplaced. The view taken by the tribunal is in consonance with that of the Madras High Court. Pertinently, the Madras High Court relies upon the view taken by the Hon'ble Supreme Court of India in the case of Sheshank Sea Foods Pvt. Ltd. vs. Union of India, reported in 1996 (88) ELT 626. Even with regard to the demand of duty of Rs. 4,01,80,481/-, as per Annexures F-1 to F-12, F-13 to F-22, F-41 and F-43 and also demand of Rs. 1,69,63,689/- covered by Annexures F-23 to F-40, the tribunal assigned the same reasons. The excess raw-materials imported duty free having not been utilised as above, the tribunal found that the export obligation discharge certificate is yet to be obtained. The investigation started in 2007 and seven years are over. The items of export are bulk drugs, which have limited shelf life. Condition No. (v) of Notification No. 43 of 2002 and 93 of 2004 is not satisfied. The substantial liability was admitted and part of it is also paid. The tribunal, to our mind, did not commit any err....
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....ms (I) Mumbai vs. Finesse Creation Inc, reported in 2009 (248) ELT 122 is noted. 84 Equally, the Revenue relied upon two judgments, one in the case of Sheshank Sea Foods (supra) and Weston Components Ltd. vs. Commissioner of Customs, reported in 2000 (115) ELT 278, Where, the Hon'ble Supreme Court held that redemption fine is imposable even after release of goods on execution of bond. The Revenue urged that the assessee had executed the bond at the time of clearance of goods. Further, there is a clear violation because the assessee had deliberately disposed of finished goods in the domestic market before fulfillment of export obligation. The assessee obtained raw materials more than their requirement on the basis of ad-hoc or self declared norms. Therefore, everything that is imposed is justifiable. 85 The tribunal considered these arguments in para 39 and held that the assessee in this case has not imported goods under free importability. They have imported the goods under advance licences/authorisations which have their own benefits and obligations, restrictions and prohibitions. Thus, the benefit comes with the obligation, restriction and prohibition and all of them ar....
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....essarily referred to section 111(d) when even the Revenue relied upon section 111(o). To the extent that section 111(o) is concerned, the tribunal relies upon judgment in the case of Weston Components Ltd. (supra). Mr. Sridharan submits that the said judgment is clearly distinguishable. In Weston Components Ltd. (supra), there was a seizure and provisional release against the bond undertaking to produce the goods. That is how the redemption fine could have been imposed. 91 Mr. Shridharan would urge that in the present case, redemption fine was imposed even though there was no seizure and the goods were already cleared. 92 In the case of Sheshank Sea Foods (supra), the facts were that one M/s. Kamath Packaging Limited filed a writ petition in the High Court of Karnataka. The principal judgment was delivered in that case. That writ petition sought a writ of prohibition restraining the customs authorities from proceeding with search and seizure operation in their premises. That writ petition was dismissed by a learned Single Judge and an appeal therefrom was also dismissed by a Division Bench. The writ petition was also filed on the basis that the customs authorities had no righ....
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....initiated by the Customs authorities for recovery of Customs duty or other duties and interest thereon under Section 142 of the customs Act, 1962." Learned Counsel drew attention to the Hand Book of Procedures, April 1988 - March 1991, issued by the Ministry of Commerce, Government of India, Chapter XIX whereof also dealt with the Duty Exemption Scheme. Paragraph 374 dealt with the consequences of a licence holder failing to discharge the prescribed export obligation, either in full or in part. If this happened in such circumstances that "the licensing authority, is satisfied that the exempt material has not been sold or misutilised for domestic production" the action that could be taken was set out. In learned Counsel's submission, these provisions of the Import & Export Policy and the Hand Book of Procedures showed that it was only the licensing authority which could investigate alleged cases of domestic sale of exempt material and the jurisdiction of the Customs authorities to do so was ousted. 6. Learned Counsel placed reliance upon a communication to all Collectors of Centrral Excise issued by the Central Board of Excise & Customs on 13th May, 1969, on the subject of....
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....on does not by itself preclude the Customs authorities from doing so. 11. The communication of the central Board of Excise and Customs, dated 13th May, 1969 refers to the breach of the condition of a license and suggests that it may not be possible to take action under Section 111(o) in respect thereof. It is true that the terms of the said Exemption Notification were made part of the appellants' licences and, in that sense, a breach of the terms of the said Exemption Notification is also a breach of the terms of the license, entitling the licensing authority to investigate. But the breach is not only of the terms of the license; it is also a breach of the condition in the Exemption Notification upon which the appellants obtained exemption from payment of Customs duty and, therefore, the terms of Section 111(o) enable the Customs authorities to investigate. 12. For these reasons, we find no merit in the appeals and dismiss them with costs." 94 To our mind, this judgment is a complete answer to the submissions of Mr. Sridharan. The goods are liable to confiscation when they are imported relying on exemption notification, but that exemption is subject to a condition. ....
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...., the duty or interest as reduced or increased, as the case may be, shall be taken into account: Provided also that where the duty or interest determined to be payable is increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, the benefit of reduced penalty under the first proviso shall be available if the amount of the duty or the interest so increased, along with the interest payable thereon under section 28AA, and twenty-five per cent of the consequential increase in penalty have also been paid within thirty days of the communication of the order by which such increase in the duty or interest takes effect : Provided also that where any penalty has been levied under this section, no penalty shall be levied under section 112 or section 114. Explanation.- For the removal of doubts, it is hereby declared that- (i) the provisions of this section shall also apply to cases in which the order determining the duty or interest under sub-section (2) of section 28 relates to notices issued prior to the date on which the Finance Act 2000 receives the assent of the President; (ii) any amount paid to the credit of the Central Gove....
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....on payment of interest or its part payment or erroneous refund, by reason of collusion or any wilful misstatement or suppression of facts by the importer or exporter or agent or employee of the importer or exporter would arise within the meaning of sub-section (4) of section 28. 99 The impugned order does not indicate as to what is the act and deliberately committed attributable to the Assessee. It is only stated that the assessee suppressed the actual consumption of raw-materials and undeclared consumption norms while applying for licences on ad-hoc norm basis. The allegation is of diversion of raw-materials imported duty free for the manufacture of finished goods in domestic market before fulfillment of export obligation. This is one violation or breach alleged or attributed. The tribunal, in para 39 also holds that in some cases, raw-materials imported were not utilised or physically incorporated in the production of goods exported. The declarations given for obtaining the licences were false. It is also held that export obligation in large number of licences is yet to be completely fulfilled even though the period is over long back. That is why the penalty has been imp....
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....giving a false declaration while obtaining the licences. It has also justified the imposition of penalty for non-fulfillment of the export obligation under large number of licences, though the period for that is over long back. When such are the reasons assigned, then, which of it can be traceable to the statutory provisions referred above having not been clarified and explained, the tribunal's order in that regard cannot be upheld. We do not lay down any general principle, but confine our findings to the facts and circumstances of the present case. In the facts and circumstances of the case, clarity was required and consistent with the deliberate or intentional act attributable to the assessee, the penalty should have been imposed. That having not been done, we set aside the penalty imposed under section 114A of the Customs Act, 1962. We also set aside the same for we have not agreed with the tribunal when it upheld the action of confiscation on the touchstone of clause (d) of section 111 of the Customs Act, 1962. The individual penalties are referable to section 112(a). That are imposed on the ground that there is an act or omission rendering the goods liable for confiscat....
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....raw-materials for consumption thereof for manufacturing of final products for export purpose. On an intelligence gathered, the Revenue was of an impression that the company has imported Palm Fatty Acid Oil, which attracts duty and is not covered under the licences granted to the appellant. The finding was also arrived at that this is distinct from Acid Oil. It is technically and commercially a different product. Therefore, further steps were taken and the goods seized were confiscated, the bills of entry were assessed and the product considered as palm Fatty Acid Oil as against declared description of Acid Oil was, therefore, not within the exemption under the notification. That is how the demand of duty along with interest and penalty was confirmed. 105 Such an action led to the filing of appeal before the tribunal and the learned senior counsel appearing for the assessee relied upon paras 11.1 and 11.2 of this order. 106 The finding in para 11 is consistent with the view taken by the CESTAT in this case and upheld by us. The argument based on para 11.1 is that a merchant exporter, who gets his goods manufactured from a supporting manufacturer is barred from using the dut....
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.... the judgment of the Hon'ble Supreme Court of India in the case of Jaswal Neco Ltd. vs. Commissioner of Customs, Vishakhapatnam, reported in 2015 (322) ELT 561. The Hon'ble Supreme Court of India, in para 37 of this judgment came to the conclusion that the appellant before it, namely, Jaswal Neco Ltd. did not divert the goods meant for export to the domestic tariff area. The court was satisfied that the market considerations made it difficult, if not impossible, for the appellant to fulfill its export obligations. Therefore, the penalty imposed was set aside. That was in peculiar facts. The facts are that the appellant before the Hon'ble Supreme Court of India had furnished a bond containing an undertaking to pay duty on imported goods cleared under certain notification referred to in para 2 in the event of failure to fulfill export obligation. The admitted position was that the appellant failed to fulfill its export obligation in terms of notification. The entire Low Ash Metallurgical Coke so imported had been used by the appellant in its factory for the manufacture of Pig Iron. It is in these circumstances that the controversy arose. The appeal of the appellant before....