TaxTMI 
TaxTMI 
2018 (12) TMI 957
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....on Ore at OMC's mines at Kurmitar Iron Ore Mines, Khandadhar, Dist. Sundargarh; Gandhamardan Iron Ore Mines, Dist. Keonjhar and Daitari Iron Ore Mines, Dist. Keonjhar in Odisha. Appellant required machines such as Cone Crushers, Screening Units, Excavators and Wheel Loaders etc., for raising/excavation/processing Iron ore. 2.1. Appellant obtained 12 nos. of Authorizations (9 from DGFT, Patna and 3 from DGFT, Cuttack), under the Export Promotion Capital Goods (EPCG, for short) scheme of the Foreign Trade Policy, 2004-09 and imported, 33 Nos. of capital goods by availing exemption under the corresponding Notification No.97/2004-Cus, as amended, by declaring the name of any one of the aforesaid mines of OMC as the place of installation of machines. Capital Goods were installed at the mines of OMC and Installation certificates obtained from the jurisdictional Assistant Commissioner of Central Excise/Chartered Engineers were submitted to the jurisdictional DDGFT. 2.2. The Kolkata Zonal Unit of the Directorate of Revenue Intelligence (DRI) investigated into the imports of the impugned capital goods made by the appellant under the aforesaid EPCG Licences. In the course of such i....
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....FT, Patna and DDGFT, Cuttack adjudicated their respective SCNs dated 10.7.2008 and 05.8.2008 whereby the DDGFT, Patna passed a 'Blacklisting Order' dated 03.8.2009 and the DDGFT, Cuttack passed a 'Refusal of Licence Order' dated 28.8.2009. 2.7. Meanwhile, Additional Director General of Foreign Trade vide Orders-in-Appeals dated 03.01.2011 and 20.04.2011 respectively set aside the 'Blacklisting Order' dated 03.8.2009 passed by the DDGFT, Patna and the 'Refusal of Licence Order' dated 28.8.2009 passed by the DDGFT, Cuttack. 3. Ld. Counsel for the appellants submitted that 3.1. By virtue of agreements entered into with OMC, the appellant was providing mining services in those mines; for providing such services, the Appellant was using its own labour and equipment; all the impugned capital goods are mobile equipment and were used by the appellant exclusively for providing mining services. 3.2. The impugned Capital Goods were imported under EPCG Licenses at a concessional rate of 5% import duty under Notification No.97/2004, supra, which grants such exemption subject, inter alia to the condition that the Capital goods are installed in the impo....
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....ed permissive possession to carry out manufacturing (i.e. mining) activities. Therefore, for all practical purposes such Mines are to be considered as the appellant's "own industrial unit", lest the whole purpose of granting duty exemption to Capital Goods used in 'Mining' and/or including 'Mining' under the definition of 'Manufacture' would be rendered redundant. Construction of a statute leading to absurd results manifestly contrary to express legislative intent must necessarily be avoided. Hon'ble Tribunal held in the cases of Tamil Trading v. CCE, Tuticorin [2006 (198) ELT 539 (T)J and FCI OEN Connectors Ltd, [2006-TIOL-1826-CESTAT-BANG], that in order to be manufacturer with reference to EPCG scheme the Appellant need not own the mines and the expression 'industrial unit' should be construed to mean as the mines where the Appellant utilised the impugned capital goods. The appellant satisfies the conditions attached to being an "actual user (industrial)". 3.7. Without prejudice to the submission heretofore, alternatively the Appellant begs to refer to the definition of 'Capital Goods' and 'Manufacture', wherein it is ev....
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.... Indeed, the impugned order, at page-67, categorically confirms that "the Appellant has not diverted, sold or otherwise parted with the capital goods and that the Appellant has used the goods for mining". This further fortifies the appellant's submission that it has satisfied the 'Actual User Condition' attached to the EPCG licenses in terms of the Policy. 3.10. In support of the above, the findings of the Additional Director of Foreign Trade, New Delhi in his Order-in-Appeal dated 03.01.2011 are relevant and are as under: "9(viii). But in any case, from their (The Deputy Director General of Foreign Trade, Cuttack) letters dated 06.09.2010 and 29.09.20 10 it is clear that the correctness of licenses, fulfillment of export obligation and utilization of licenses is not under dispute, there is no complaint by adjudicating authority in his correspondence regarding misutilisation of authorizations i.e. by way of transfer, sale or hiring to others. Dy. DGFJ, Cuttack has not in his Order showed any agreement with DRI or supported their stand with reference to appellant not being manufacturer exporter or appellant having obtained licenses fraudulently or by mis-declaratio....
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....oduction and to prevent idling of the machines during lean period at work sites. There is no infringement of licensing condition as these machines were and are in possession of appellant at all times have not been disposed off, loaned or otherwise transferred to any other person. This can be verified by any means. Verification has been done by the FTDOECA on... and found the requisite machine has been installed there. 3.13. It is evident from the above Orders-in-Appeals read with the above letters of the Regional Licensing Authority that the appellant has not violated the 'Actual User Condition' with regard to the impugned Capital Goods. Such findings/opinions of Authorities in the DGFT Organization are binding on the Customs Authorities and thus the findings in the impugned Order regarding violation of 'Actual User Condition' cannot be sustained. The appellant relies upon (i). Bharath Steel Corporation Vs. CC, Chennai [2004-TIOL-1036-CESTAT-MAD], wherein it was held that adjudication Order of JDGFT is binding on the Customs Authorities. (ii). Jumbo Bags Ltd Vs. CCE, Chennai [2005 (184) ELT 214 (Tn.-Chennai)], wherein it was held that "in a three-legged rac....
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....ble capital assets cannot be installed at one particular location and therefore, the requirement of 'Installation Certificate' cannot be insisted upon, for such movable capital assets/goods. 3.15. In the instant case, OMC never supplied to the appellant any raw material or semi-finished goods to complete a part of the processes resulting in the manufacture (i.e. mining). Instead the appellant was only granted permissive possession of the premises to carry out manufacturing (i.e. mining) activities by using their own men and machine and other resources. Thus, the appellant is bound to be treated as a Manufacturer and, not as a job worker as per the provisions of the Foreign Trade Policy. 3.16. Needless to reiterate that the EPCG Scheme under the Foreign Trade Policy is a beneficial scheme, intended to permit import of Capital Goods, under concessional rate of duty, with a view to augment export from the country for earning precious foreign exchange. Thus, denying the appellant the benefit by alleging frivolous procedural violation, tantamount to defeating the object and purpose of said scheme. Such an attempt in the impugned Order is contrary to the doctrine of substan....
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....never been adjudicated by the DGFT, Patna. Therefore, none of the EPCG licenses issued by the DGFT, Patna and/or Cuttack has been cancelled as on date. 3.19. In any view of the matter, in the present case the SCN was issued by the Additional Director General, DRI, Kolkata, on 08.05.2009 without authority and in terms of the decision of the Hon'ble Supreme Court in the case of CC Vs. Sayed All [2011 (265) ELT 17 (S.C), it is not legal and valid. In view of the above, the impugned Order is wholly unsustainable and liable to be set aside with consequential relief to the appellant. 3.20. During the course of hearing on 7-9-2018 the counsel reiterated the above submissions and further stated that the Ld Commissioner has erred in coming to conclusion on the basis of pending SCN by DGFT. Commissioner erred in finding that they are Actual user (industrial). Mining is deemed to be manufacture only for the sake of Policy and not for Central Excise purposes. Commissioner based his finding on policy provisions rather than the conditions of Customs Notification, which were never violated. Commissioner found fault with the installation certificates holding that Central Excise authoriti....
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.... distinguished on the following grounds. (i). the ingredients necessary for deciding whether the appellant is a manufacturer or not for EPCG purposes was not before the Tribunal. The distinction between a job worker manufacturer and service provider was not discussed. (ii). Concept of nexus under EPCG has changed over the years, 1992-2004, from requirement of physical use of machinery in the manufacture of export of goods to export of goods being capable of being manufactured by imported machines. (iii). Third party exports are permitted in terms of Notification 97/2004. (iv). Along with M/s Sushant Minerals (P) Ltd, one more contractor i.e. M/s Thriveni Earth movers were also working as contractors of M/s KJS Ahluwalia. But they were not proceeded against even after the decision of Tribunal in M/s Sushant Minerals (P) Ltd. In fact, largest contractors like M/s Thriveni Earth movers (41 Licenses) and M/s. Taurian Resources Ltd (37 Licenses) were not proceeded against as per information received by them under RTI. 5. Heard both sides and perused the records of the case. 6. The Ld. Commissioner has decided the case against the appellants on the grounds that: (i).....
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.... Customs Tariff Act, when specifically claimed by the importer. 2. The exemption under this notification shall be subject to the fallowing conditions, namely:- (1) that the goods imported are covered by a valid licence issued under the Export Promotion Capital Goods Scheme in terms of Chapter 5 of the Foreign Trade Policy permitting import of goods at the rate of five percent duty and the said licence is produced for debit by the proper officer of customs at the time of clearance : Provided that for import of spare parts specified at S. No. 4 of the said Table, the validity period of the licence shall be deemed to be the period permitted for fulfilment of the export obligation in full; (2) that the importer executes a bond in such form and for such sum and with such surety or security as may be specified by the Deputy Commissioner of Customs or Assistant Commissioner of Customs binding himself to fulfil export obligation on FOB basis equivalent to eight times the duty saved on the goods imported as may be specified on the licence, or for such higher sum as may be fixed by the Licensing Authority, within a period of eight years from the date of issue of licence, in the f....
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....fulfilled in terms of the preceding condition, the importer shall within three months from the expiry of the said block pay duties of customs of on equal amount equal to that portion of duties leviable on the goods, but for the exemption contained herein which bears the same proportion as the unfulfilled portion of the export obligation bears to the total export obligation together with interest at the rate of 15 per cent per annum from the date of clearance of the goods; (5) that the capital goods imported, assembled or manufactured are installed in the importer's factory or premises and a certificate from the jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be, is produced confirming installation and use of capital goods in the importer's factory or premises, within six months from the date of completion of imports or within such extended period as the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, may allow : Provided that if the importer is a service provider, he may produce said certificate of installation and usage issued by an independent chartered engineer: Pr....
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....a (Sonauli), Petrapole and Mahadipur. (7) notwithstanding anything contained in condition (4), where the Licensing Authority grants extension of block-wise period for any block(s) or overall period of fulfilment of export obligation upto a period of two years or regularization of shortfall in export obligation, not exceeding five per cent of such export obligation, the said block-wise period or overall period of export obligation shall be extended or condoned by the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be : Provided that in respect of sick unit referred to in the second proviso to condition (2), extension of overall period of export obligation shall not be allowed. 3. Where the goods specified in the said Table are found defective or unfit for use, the said goods may be re-exported back to the foreign supplier within 3 years from the date of payment of duty on the importation thereof; Provided that at the time of re-export, the goods are identified to the satisfaction of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, as the goods which were imported. TABLE S. No. Descr....
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....spect of units holding licence both as manufacturer-exporter and service provider, the export obligation may be fulfilled either by export of products specified in sub-clause (i) or by receiving payments in freely convertible foreign currency for services rendered through the use of such capital goods. Provided further that in respect of Group Company as defined in paragraph 9.28 of the Foreign Trade policy where licence has been issued to any one of such Group Company, the export obligation may also be fulfilled by export of manufactured goods by any other company(s) belonging to such Group Company: Provided also that in respect of service providers in the Port Handling sector, the export obligation may be fulfilled by earning service charges in Indian rupees which are otherwise considered as free foreign exchange by the Reserve Bank of India: Provided also that in respect for hotels the export obligation may also be fulfilled by Managed Hotels as defined in paragraph 9.36 of the Foreign Trade Policy. 6.2.2. A plain reading of the above notification reveals that the primary conditions for the claiming the exemption benefit under the notification are as under. â....
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....nded from time to time". Condition No. 14: The licensee should submit Installation certificate to the Licensing Authority within 6 months from the date of import. 6.4. It is pertinent to note here that as per the agreement the scope of the work undertaken by M/s KCC is Excavation / raising of iron ore and associated rejects/spoils/spurious/sub-grade materials, segregation, sizing of iron ore into calibrated ore (10-30/10-40/5-18 mm) and 10mm fines size) by crusher, stacking thereof, cleaning of quarry faces, loading to tippers/dumpers, transporting of the above materials to the specified yards. The proposed work shall have a preparatory period of six months during which the agency shall revive total haulage road from quarry to proposed crusher site and stockyard. The agency during such period shall excavate and transport subgrade ore to the designated point at hill top within a distance of 2.5 km. The agency has to install adequate capacity of crushing and screening plant within the period of 1^st six months during the year 2006-07 as per the specifications and subject to the terms and conditions enumerated in this agreement. 6.4.1. At Para 4.1, the agreement specifies tha....
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....rs. The appellant's case doesn't fall under either of these categories. Even if one accepts the argument of the appellants that mining is an activity that amounts to manufacture for the purposes of FTP, the essential condition should be that they are owners of the product even if they get the same manufactured with the help of a job worker. As observed rightly by the commissioner, they have not even got the name of M/s OMC endorsed in any of the licences obtained from DGFT or in documents submitted to Customs. M/s KCC and their job workers if any have not given any joint Bond obligating them individually or severally. We find that in the case of Commissioner of Customs vs. CESTAT in 2009(240) ELT 166 (Mad) renders such contention invalid as the Hon'ble High Court held that 33. It is to be noted that the Division Bench of this Court in a case of South India Exports as referred above held that even the discharge of the export obligation per se cannot put an end to the whole matter. The facts in the present case is worse, in the sense that the importer made a false statement for the purpose of securing an advance Licence with Actual User Condition The fact that the time within whic....
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....e on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the noncompliance of which would not affect the essence or substance of the notification granting exemption. In Novopan Indian Ltd. (supra), this Court held that a person, invoking an exception or exemption provisions, to relieve him of tax liability must establish clearly that he is covered hi the said provisions and, in case of doubt or ambiguity, the benefit of it must go to the State. A Constitution Bench of this Court in Hansraj Gordhandas v. H.H. Dave (1996) 2 SCR 253 (2002-TJQL-351-SC-CX), held that such a notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification, i.e., in plain terms of the ....
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....not belong KCC and the said capital goods were not utilized for the own use of KCC. Instead, the capital goods were found in the mines of OMC who engaged the services of KCC for rising of the iron ore. The person who has issued the certificates has stated that he has not physically verified the installation. Some of the certificates are not even dated. The certificates proceeded on a wrong premise that the machines were installed in the premises of M/s KCC. Therefore, such certificates cannot be treated as valid for the purposes of satisfying the conditions of the Notification. The appellants argued that the machinery being mobile in nature, the installation was not required. Installation per say, may not be of any significance in respect of machinery that is mobile. However, installation in that case has to be understood as use. As use of the machinery was not used in the premises of appellants who procured them as merchant exporter, the same is to be treated as not installed. There was nothing to stop the appellants in truly disclosing their status vis a vis the OMC mines and to endorse their name as supporting manufacturer. However, from the agreement it is seen that they had no....
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.... obligation as these third parties are not declared. It is to be held that necessary conditions as per Notification No. 97/2004 are not fulfilled. In view of the facts of the case, we find that case law cited by the appellants in their defence are not appropriate. 6.10. We find that Mumbai Bench of the Tribunal has decided a case with identical situation wherein the appellant was a job worker, like M/s KCC, of the mine owners. In the case of Sushant Minerals vs. CC 2015 (327) E.L.T. 260 (Tri. - Mumbai). Tribunal held that: Para 5.3 In the instant case, the appellant has not used the machinery as a manufacturer-exporter but he has used the same in the mines of M/s. KJS Ahluwalia. The appellant is not a lessee of the said mines. What he has done is, he has rented out the machinery to M/s. KJS Ahluwalia for a consideration of Rs. 180/- per MT. In other words, the appellant has not utilised the machinery for his own purposes but merely rented out the machinery to somebody else. Secondly, the appellant could not be to be the 'actual user (non-industrial)' as defined under the EXIM Policy. 5.7 From the above it is clear that condition relating to manufacture-exporter cannot be a....
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.....) held that 43. There is abundant jurisprudential justification for this. In the Governance of rule of law by a written Constitution, there is no implied power of taxation. The tax power must be specifically conferred and it should be strictly in accordance with the power so endowed by the Constitution itself. It is for this reason that the Courts insist upon strict compliance before a State demands and extracts money from its citizens towards various taxes. Any ambiguity in a taxation provision, therefore, is interpreted in favour of the subject/assessee. The statement of law that ambiguity in a taxation statute should be interpreted strictly and in the event of ambiguity the benefit should go to the subject/assessee may warrant visualizing different situations. For instance, if there is ambiguity in the subject of tax, that is to say, who are the persons or things liable to pay tax, and whether the revenue has established conditions before raising and justifying a demand. Similar is the case in roping all persons within the tax net, in which event the State is to prove the liability of the persons, as may arise within the strict language of the law. There cannot be any implie....
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....ble. Moreover, we find that the Notification provides for recovery of duty along with interest in case the appellants default, on any of the conditions contained in the Notification, in terms of the bond submitted by them at the time of import. Notification does not provide for levy of penalty. When confiscation and demand of duty is on account of violations of conditions of the Notification, one need not traverse beyond the Notification for the purpose of demand of duty and imposition of penalty. Therefore, we find that the penalty imposed on the main appellants i.e., M/s. KCC is not maintainable on the above counts. 6.15. Two other appellants i.e., Shri P. K. Bhattacharya and Shri S. K. Mall have also filed appeals No. C/1818/2011 and C/1933/2011 seeking to set aside the penalties levied on them. We find that Commissioner has given a finding that Shri P. K. Bhattacharya connived with Soumya Ranjan Samal and issued a false certificate without any authority, has disclosed the secret documents to M/s. KCC and acted against the interest of investigation. Regarding the role of Shri S. K. Mall, learned Commissioner has given a finding that Shri S. K. Mall represented M/s. KCC before....