AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (11) TMI 465
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....ducts 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 Monhydrate, 7 AVCA, 7 ADCA, 7ANCA 2. GCLE CEFIXIME 3. Pyridine....
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....se 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 authorization, whose illustrative copies are annexed as Annexure B-2 to Annexure B-4, would demonstrat....
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....y 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 though the goods are not available, fine is imposable. Relied upon in Weston Components Ltd. Vs. CC - 2000 (1) (115) EL....
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....osition 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 2004-2009 refers to the inputs which are physically incorporated in the export product, it only refers to the description, quality ....
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....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 "physically incorporated" only implies that such items are required for the manufacture of the resultant product and have been used so. The CESTAT find....
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....troduced 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 product manufactured from the duty-free materials imported against advance licence as replenishment of duty paid materials used in export resultant product....
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.... 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 thereof. Mr. Sridharan, therefore, has taken us through Annexure-wise demands and submitted as under: 27 Demand raised in Annexure D to the above showcause notice per....
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....ure-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 taken by the CESTAT in Gitanjali Gems Ltd. vs. Commissioner of Customs - Final Order No. A/508- 511/08/CSTB/C-II dated 14th August, 2008 (pages 43-53 of Volume II compilation). 38 Mr. Sr....
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.... 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 The Hon'ble Supreme Court in the case of Jaswal Neco Ltd. Vs. Commissioner of Customs -2015 (322) ELT 561 (SC) has held that penalty is not imposable in the case of non-fulfillment of export obligation a....
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....toms, 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 law and should be dismissed. Mr. Jetly has taken us through the impugned order of the CESTAT and particularly the findings at para 11 page 91 of the paper book. He submit that the goods have been imported. However, such imported goods are not available in the fact....
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....cess 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 appellants obtained permissible advance authorisation for import of various products. The show cause notice and copy of which is to be found at Annexure 'C' to the paper book came to be issued on investigation by the officials of the Directorate of Revenue Intelligence....
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....y 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 each advance licences various inputs as per SION were allowed to be imported, the said company had generally imported only some of them though in huge quantities. The major items imported were Penicillin G. Potassium, D Alpha Salt and D Alpha Base and Pyridine through JNCH, GCLE t....
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....n 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 FTP and the Foreign Trade Act is warranted. The endorsement is that the enforcement action against the appellant and M/s. KDL Biotech Limited is dropped by the officer of the Foreign Trade. This is an endorsement and remark, which has been recorded in a letter dated 4/5th June, 2009. Prior to....
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....ply 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., dated 12-3-2001; No. 59/2001-Cus., dated 30-5- 2001; No. 122/2001-Cus., dated 3-12-2001; No. 9/2000-Cus., dated 21-1-2002; No. 113/2002- Cus., dated 16-10-2002 and No. 125/2002-Cus., dated 12-11-2002. GENERAL EXEMPTION NO. 89 Exemption from anti-dumping duty to imports against Annual advance licence ....
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....sultant 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 in respect of imports made after the discharge of export obligation in full; (iv) that the imports and exports are undertaken through seaports at Mumbai, Kolkata, Cochin, Magdalla, Kakinada, Kandla, Mangalore, Marmagoa, Madras, Nhava Sheva, Paradeep, Pipavav, Sikka, Tuticorin, Visakhapatnam, Dahej, Mundhra, Nagapattinam and Okha or through....
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....y 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 were imported. Explanation. - In this notification, - (i) "Export Import Policy" means the Export and Import Policy 2002-2007, published vide notification of the Government of India in the Ministry of Commerce No. 1/2002-2007, dated the 31st March, 2002; (ii) "Licensing Authority" means the Director General of Foreign Trade appointed under Section 6 of the Foreign Trade (Development and Regulation) Act, 1....
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.... 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 through seaports at Mumbai, Kolkata, Cochin, Magdalla, Kakinada, Kandla, Mangalore, Marmagoa, Chennai, Nhava Sheva, Paradeep, Pipavav, Sikka, Tuticorin, Visakhapatnam, Dahej, Mundhra, Nagapattinam and Okha, Jamnagar and Muldawarka or through any of the airports as Ahmedabad, Bangalore, Bhubaneswar, Mumbai, Kolkata, Coimbatore, Delhi, Hyderabad, Jaipur, Chennai, Srinagar, Trivandrum, Varanasi, Nagpur and Cochin or through any of the Inland Container Depots at Agra, Bangalore, Coimbatore, Delhi, Faridabad, Gauh....
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....g 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 Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, as the materials which were imported. Explanation. - for the purposes of this notification, - (i) "Foreign Trade Policy" means the Foreign Trade Policy 2004-2009 published vide notification of the government of India in the Ministry of Commerce and Industry, No. 1/2004 dated the 31st August, 2004; (ii) "Licensing Authority" means the Director General of Foreign Trade appointed under Section 6 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) or an officer....
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....ce. 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 this clause provides that the Commissioner of Customs may, by special order and subject to such conditions, as may be specified by him, permit import and export from any other seaport/airport/inland container depot through any land customs station. Condition (v) says that the export obligation as specified in the said licence (both, value and quantity terms) is discharged within the period specified in the said licence or within such extended period as may be granted by the licensing authority by exporting resultant products, manufactured in India, which are specified in the said licence and in respect of which facility under rule....
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....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 7 and which enables issuance of advance licence for duty free import of inputs as described in para 7.2 are subject to actual user condition. These licencees other than advance licence for deemed exports are exempted from payment of the basic customs duty, surcharge etc. The licences are issued and to the categories of persons mentioned in para 7.3(i) and (ii). They shall and/or materials imported thereunder shall not be transferable even after completion of export obligation. However, in exceptional cases, the materials may be allowed to be transferred on merits by ALC. 66 Chapter 7 of a prior Exemption Policy 1997-2002 speaks of tr....
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...., 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 licencee has, of disposing of the product manufactured out of duty free inputs, once export obligation is completed. According to the appellant, this amendment in the policy was to put the above aspect of the matter beyond doubt. That aspect of the matter is highlighted in the written submissions and then it is submitted that this amendment does not apply to advance licences issued prior to April, 2005. 69 The tribunal has discussed all these aspects and from para 11 of the impugned order. The tribunal notes that the dispute is that the appellant imported Pencillin-G free of Customs duty. During visit to the said unit, no Pencillin-G or goods m....
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....tached 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 in view of this condition sheet attached to the licence/authorisation that exempted material is required to be utilised in accordance with the Export Import Policy and relevant customs notifications would mean that the exemption available is to materials imported in to India against an advance licence issued in terms of subparas (a) and (b) of para 4.1.1 of the Export Import Policy. Hence, all the conditions of the export import policy/FTP are applicable for grant of exemption. We do not think that this conclusion of the tribunal is perverse or vitiated by an error apparent on the face of the record. However, we agree with Mr. Shridharan that the amendme....
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.... 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. He relied upon it to submit that if the authorisation holder has consumed lesser quantity of inputs than imported, he shall be liable to pay customs duty on the un-utilised value of imported material, along with interest thereon as notified or effect additional exports within the export obligation period. The argument was that the assessee failed to comply with the said provision. It neither paid duty on the un-utilised value of the imported material nor has it effected any additional exports. The detailed arguments of the special counsel appearing for the Revenue, on this point, are noted in paras 23 and 24. Thereafter, in para 25, the tribunal found that it is u....
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....gainst 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, reported in 2005 (185) ELT 209. 77 Mr. Sridharan's arguments are summarised in paras C.1 to C.11 of the written submissions. 78 The Revenue's arguments and which have been reiterated before us are that there is an admission that the imported duty free raw-materials were not used in the manufacture of export product Nimesulide. It was also argued that the request to debit as noted above against some other licences cannot be accepted, as the advance authorisations/licences were granted for specific export orders and namely of Nimesulide. For a particular advance licence, one has to see what inputs were used to execute the export order. Therefore, when the object of the a....
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.... 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 error in rejecting the appellant/assessee's contention. 79 Before us, the argument is that the demand is highly inflated. It does not take into account the actual exports and also ignores the issue of clubbing of advance licences, which is pending before the DGFT. To our mind, the calculations as made in para D.3 of the written submissions by the assessee cannot be accepted. We also do not find that such a plea was raised before the tribunal. If the customs duty payable is Rs. 3,97,65,602/-, according to the assessee, then, we do not find any warrant for now urging that since the request before the DGFT noted above is pending, there is an element or component of non cenvatable custo....
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....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 are interlinked. The assessee cannot be permitted to avail the benefit and when it comes to obligation, restriction and prohibition, to rely on the free importability of the goods. 86 Before us, it was argued that the case of the present appellant is covered by the judgment and order of this court in the case of Commissioner of Customs vs. National Leather Cloth Manufacturing, reported in 2015 (321) ELT 135. 87 In the case of Weston Components Ltd. (supra), it was held by the Hon'ble Supreme Court that the argument that redemption fine could not be imposed because the goods were no longer in the custody of the respondent authority cannot be accepted. Admittedly, the goods were released on an ap....
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....ing 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 right or power to go into the questions relating to the utilisation of the raw-materials that had been imported by the appellant Sheshank Sea Foods Pvt. Ltd. under advance licences granted to them under the duty exemption scheme. The argument of the Customs was that the raw-materials had been imported without payment of duty by availing of benefit of Exemption Notification No. 116 of 1988 dated 30th April, 1988. The terms and conditions thereof have been violated by the appellants. The search and seizure operation in this behalf was, therefore, within their powers. 93 The Hon'ble Supreme Court of India, in dealing with such a controversy, held thus:- "..... 3. The said Exemption Notification was issued in exe....
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....bmission, 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 whether, in the event of the contravention of a post-importation condition of an import licence, it was open to the Customs authorities to confiscate imported goods under Section 111(o) of the Customs Act. The said communication stated that before Section 111(o) could be attracted there had "to be an exemption, subject to a condition, from a prohibition. Where a valid licence has been issued, it is not a case of an exemption from the prohibition. Therefore, if a pos-timportation condition of a licence is contravened, it cannot be said that any condition of exemption is contravened. 7. For the reasons stated above, the Ministry of Law have advised that it may not be possible to take action under Section 111(o) with respect to the ....
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....nt 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. If that condition is not observed, the Hon'ble Supreme Court held that the goods are liable to confiscation. The power of the customs authorities is held to be absolute. In these circumstances, we do not find that the appellants can escape from the judgment in the case of Sheshank Sea Foods Pvt. Ltd. (supra). 95 We do not think that the judgment in the case of National Leather Cloth (supra) can assist the appellants any further. We, therefore, set aside the tribunal's order in part, but uphold the confiscation of the goods to the extent the customs resorted to section 111(o) of the Customs Act, 1962. 96 Then remains the issue of penalty. Two provisions have been invoked for imposition of penalty following confiscation. We are not concerned with section 11....
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....12 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 Government prior to the date of communication of the order referred to in the first proviso or the fourth proviso shall be adjusted against the total amount due from such person." 97 The argument is that no penalty under section 114A is imposable for non fulfillment of export obligation under the advance authorisation. 98 In dealing with the said contention, the tribunal held that penalty is imposed on the main appellant, namely, the company. The violation and breach of law is highlighted once again in that regard. In para 39 of the tribunal's order, this fact has been dealt with. It is evident that without adverting to section 114A and interpreting it, imposition of penalty has been upheld. Section 114A deals with the penalty for short levy or non levy of duty in certain cases. Wh....
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....nal, 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 imposed under section 114A of the Customs Act, 1962. That is upheld. 100 We are of the view that the tribunal has mixed up these issues. Once the penalty under section 114A is for short levy or non levy of duty in certain cases and a determination thereof is contemplated by section 28, then, unless and until the tribunal came to a conclusion that in the present case the determination followed a finding that there was collusion or wilful misstatement or suppression of facts and the determination is therefore traceable to sub-section (4) of section 28 and not subsection (1) of section 28, it could not have proceeded to uphold the penalty as imposed. 101 We are not taking a hyper-technical view. We do not agree that non-fulfillment of export obligation under advance authorisation is the only reason ....
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....der 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 confiscation under section 111 or abetment in the doing or omission for such act. 102 The only argument canvassed is failure to fulfill export obligation will not attract the penalty under section 112 of the Customs Act, 1962. We do not find this argument to be sound for it is not some business forecast which had gone haywire or is upset, but is a clear act attributable within the meaning of clause (a) of section 112 of the Customs Act, 1962. That in the present case has been amply clarified. There was a confiscation of goods and which confiscation is traceable to clause (o) of section 111 of the Customs Act, 1962. That attracts the penalty under clause (a) of section 112 of the Customs Act, 1962. In the present case, we have upheld the act of confiscation of goods traceable to the above clause. Therefore, in....
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....ribunal 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 duty free material for purposes other than discharge of the export obligation while for a manufacturer exporter there is no such stipulation. The only stipulation qua a manufacturer exporter is that the said licence and materials should not be transferred or sold. The tribunal itself clarified that this is not the case of the Revenue. That condition has not been violated. We do not think that these observations and the one heavily relied upon in para 11.3 can carry the case further. The tribunal may not have agreed with the order passed by it in the case of Unimark Remedies Ltd. (in the subject appeal) and for reasons assigned by it in para 11.3, yet, once we have rendered our independent opinion and by analysing all the relevant documents, including the notification, then, this disagreement or divergence in the tribuna....
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....ailure 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 the Hon'ble Supreme Court of India was partially allowed by the tribunal. The concession noted in para 8 of the' order of the Hon'ble Supreme Court of India reveals that there was never any dispute raised about failure to fulfill the export obligation. Therefore, the exemption could not have been claimed. Thus, the liability to pay duty was conceded. The concession was that basic customs duty and special customs duty as well as special additional duty was payable. The argument was that anti-dumping duty was not payable, no interest is chargeable, inasmuch as the bond that was furnished under Notification No. 30 of 1997 did not stipulate that in the event of default, interest would become payable. The further reasons for questioning that part of the findings of the tribunal are found in the submissions of the....