TaxTMI 
TaxTMI 
2003 (3) TMI 752
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....Chief Controller of Imports and Exports, New Delhi for importation of capital goods viz. machines forming cocoa beans processing line and chocolate making, finishing and packing line valued at Rs. 3,53,57,072/- under concessional rate of duty of 25% with an obligation to export Cocoa and Chocolate products valued at Rs. 10,60,76,215/- manufactured out of the said imported machinery within a period of four years from the date of first importation. The importation was in February, 1992 through the Madras port. In terms of para 197 of the Import & Export policy for the period 1990-93 read with Notification No. 169/90-Cus., dated 3-5-90, Registered manufacturers and Exporters are eligible to import capital goods at concessional rate of customs duty of 25% subject to the condition that the licence holder undertakes to fulfil the export obligation equal to three times the value of capital goods permitted for import within a periods of four years from the date of first import of capital goods by exporting the final products manufactured through the capital goods permitted to be imported. They have imported capital goods valued at Rs. 3,53,57,072/- and out of the this sum, the value of the....
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....rth Rs. 3,50,00,000 and Chocolates worth Rs. 7,21,00,000. The importers were making representation to DGFT for extension of export obligation from time to time and their request was rejected. However, after repeated requests DGFT agreed to consider their request provided they agreed to increase the value of export obligation by 10% and extend the validity period of Bank Guarantee by one year i.e. till 30-11-1997. 4. The assessee-respondents had made some further export of Cocoa butter and powder but not even a Kg. of Chocolate manufactured out of the imported chocolate making machinery valued at Rs. 2,42,97,582/- was exported. The Importers were required to export Chocolate to the tune of Rs. 7,21,00,000/- i.e. three times the value of the Chocolate making machinery imported worth Rs. 2,42,97,582/-. It is in these circumstances that show cause notice was issued to the Respondents calling upon them to show cause : (i) as to why the benefit of Notification No. 169/90-Cus., dated 3-5-90 in respect of Chocolate making machinery imported by them should not be denied to them and why duty short levied by reason of wilful misstatement and suppressio....
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....ucts worth Rs. 7.21 crores whereas they have exported only cocoa powder. 6. Shri GS Menon, learned SDR appeared for the Revenue while reiterating the above grounds, submitted that the clarification given by the DGFT cannot be construed as interpretation placed by him on the words of the policy and his clarification overrides the policy provisions and enlarge the scope of the licence. He has invited our attention to page No. 9 of the paper book wherein under para 13, the respondents under heading "PROJECT ACCOUNTING" clearly stated that the Company's plant facilities consist of two separately identifiable plants, one for the manufacture of Cocoa derivatives and the other for the manufacture of Chocolate products. He has also invited our attention to para 1 of the Show cause notice wherein details regarding importation of two types of machineries have been adverted to. He has also referred to page 14 of the paper book wherein para 197 of the policy regarding import of capital goods at concessional rates of Customs duty has been reproduced. He has also referred to para 5 of the impugned order dealing with import of capital goods for the manufacture and export of specified prod....
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.... are for an integrated plant. The two lines of machines that Cocoa Plant and Chocolate plant are not two separate entities. The two lines of machines located in adjoining buildings are due to technical and operational requirements. (b) Extended period is not invocable as there was no suppression. However, the impugned order has dropped the entire proceedings against the Respondents. (c) The bond executed by the respondents clearly shows that heading as "Cocoa and Chocolate products". This established that the products are not entirely two separate lines of production. The cocoa powder and liquid chocolate produced by one set of machines are also the feed stock for manufacture of chocolates. (d) The EPCG licence itself is issued for the total value and also for the total export obligation as a combined figure. (e) licence issued by the competent authority shows the total value of the machine as Rs. 3,53,57,072/- and it has not separated a value of Rs. 2,42,97,852/- as mentioned in the show cause notice. (f) If the intention of the licensi....
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....nt Chief Controller of Imports and Exports cannot be challenged by the Customs authority. (4) 1989 (41) E.L.T. 104 (T) = 1989 (22) ECR 444 in the case of CC v. M/s. Oswal Agro Mills Ltd. wherein it was held that the binding nature of the clarification given by CCIE cannot be brushed aside. In holding so, the CEGAT has relied upon the decision of the Bombay High Court reported in 1988 (37) E.L.T. 496 (Bom.) wherein it was held that the interpretation given by CCIE is final and in case of doubt regarding these matters, the Customs authorities should consult the Import Trade Control authorities before clearance of the goods. (5) 1992 (58) E.L.T. 248 in the case of Overseas Cycle Co. v. CC, wherein it was held that ...... if a licence is granted in respect of a particular item by the licensing authority, the Customs authorities have no jurisdiction to shift over the licence so granted by the licensing authority and they have no power to go beyond the licence and determine as to whether the said licence related to prohibited item. (6) 2002 (140) E.L.T. 131 (T) = 2001 (75) ECC 874, in the case of M/s. U-Foam....
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....the licence and hence the said clarification cannot be construed as an interpretation placed by him on the policy and inasmuch as the impugned order proceeded on the basis of the said clarification, given by the DGFT, the same is not binding on the department. In order to have a better appreciation of the case, it is necessary to examine the policy provisions, the terms of the licence and the clarification issued by the DGFT. The policy provisions under para 197(1) reads as under : "Import of Capital Goods at concessional rate of duty against rate of Customs duty. 197.(1) With a view to reduce the incidence of high capital cost on export prices and thereby making exports competitive in the international market, import of capital goods up to a maximum cif value of Rs. 10 crores will be permitted at concessional rate of Customs Duty of 25% of CIF value of the Capital Goods imported. The applications for this purpose shall be considered by an inter-ministerial Committee headed by the CCI & E. The above facility will be available to registered manufacturer, exporters who have been regularly exporting for a period of not less than three years. The applicant will have to underta....
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....port obligation cannot be taken to have been fulfilled. The respondents have taken the plea that the competent authority to interpret the Exim policy is the CCI&E (now DGFT) and the said authority has clarified to the assessee that the assessee has completed the export obligation cast on them in respect of the licence issued. It is this clarification which the Revenue is challenging. The assessee has relied upon a number of judgments including the judgment of the Hon'ble Supreme Court in the case of U.O.I. v. Oswal Agro Mills Ltd. The Hon'ble Apex Court while dismissing the appeal filed against the decision of the CEGAT reported in 1989 (41) E.L.T. 104 has held that the Collector of Customs cannot ignore the clarification received from the licensing authority and take a view of his own. The question posed before the Hon'ble Apex Court was whether the Collector is justified in ignoring the clarification given by the CCI&E and whether the department's grievance on that ground is justified. We observe that all the case laws cited by the Respondents-importers are centered on one issue i.e. whether the clarification given by the DGFT is binding on the Customs authorities and the view ta....
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.... that in the cross-objection filed by the Respondents, under Heading "Project Accounting" what is stated is : "The company's plant facilities consist of two separate identifiable plants, one for manufacture of Cocoa derivatives and the other for manufacture of Finished Chocolates". 12. From the above it is clear that two types of capital goods were imported for manufacture and export of Cocoa Powder and Chocolate. The above factual position is also supported by the statement of Shri S. Raghu, Manager-Materials of the respondents who vide his statement dated 5-7-96 given under Section 108 of the Customs Act clearly stated that the manufacturing divisions were broadly categorised into two distinct separate divisions namely cocoa plant and chocolate plant; that in respect of these two plants, the company had approached the CCI&E, New Delhi (now DGFT) for allowing concessional rate of duty under EPCG scheme vide their application dated 27-9-90 enclosing two separate lists of capital goods for chocolate making plant and cocoa beans processing plant and accordingly the CCI&E granted them the licence. He has also stated that initially Chocolate plant was commissioned and later ....
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.... solely in the local market and not even a Kg of Chocolate was exported out of the Country, is not disputed by the Respondents. The value of the product viz. chocolate which should have been exported by them is not disputed by them either. The Revenue has pressed into service the decision of the Tribunal in the case of General Traders v. CC., Cochin reported in 2000 (124) E.L.T. 971 wherein it has been held that any clarification issued by the DGFT, when found by a Court or Tribunal to be in conflict with a clear provisions of the Import Policy is not binding on that Court or Tribunal. As noted above, in the present case, the licence has been endorsed for import of two items viz. Cocoa & Chocolate and not repeat not for Cocoa or Chocolate whereas only Cocoa has been exported. While we agree that clarification issued by the DGFT is binding on the Customs Department, such clarification has to be within the frame-work of the policy and the licence and the DGFT cannot override the policy provisions and the terms of the licence as the power of the DGFT is not unfettered. As rightly contended by the learned SDR, it is not the case of the respondents-assessee that the licence which provid....