TaxTMI 
TaxTMI 
2024 (4) TMI 41
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.... issued by the Assistant Commissioner of Customs, Import Bond Department, Office of the Commissioner of Customs (Import), New Custom House, Ballard Estate, Mumbai under Section 58 of the Customs Act, 1962 for the storage of warehousing the imported goods/ equipment/ parts/ components/ Spares/ raw materials/ consumables for Boats/Vessels without payment of customs duties/ import duty on the first importation thereof and the said license is duly renewed from time to time. Similarly, the appellants are also holding a private bonded warehouse for manufacturing of 'High-Speed FRP Boats' under Section 65 ibid, in terms of Manufacture and Other Operations in Warehouse Regulations, 1966, as amended which is valid till the license issued under Section 58 for the Premises is in effect. 2.2 On the basis of information received from the Commissioner of Customs (Import), New Custom House vide Reference dated 28.07.2021, that the appellants importer instead of filing ex-bond Bills of Entry (B/E) for the warehoused raw materials/goods at the port of import i.e., ACC, Sahar have filed manual ex-bond Bills of Entry for the clearance of Boats without paying the Customs Duty on the raw materials u....
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....extended period under section 28(4) ibid is not legally sustainable. In support of their stand he submitted the following decisions of the Hon'ble Supreme Court in the cases below: (i) Aban Loyd Chiles Offshore Ltd., Vs. Commissioner of Customs, Maharashtra reported in 2006 (200) E.L.T. 370 (S.C.) (ii) Anand Nishikawa Co. Ltd. Vs. Commissioner of Central Excise, Meerut reported in 2005 (188) E.L.T. 149 (S.C.) (iii) Fedders Lloyd Corporation Pvt. Ltd. Vs. Collector of Central Excise, New Delhi reported in 2002 (149) E.L.T. 1426 (S.C.) (iv) Uniworth Textiles Ltd. Vs. Commissioner of Central Excise, Raipur reported in 2013 (288) E.L.T. 161 (S.C.) 2.2 Learned Advocate further submits on the merits of the case, that the appellants have been importing the subject goods, for use in manufacture of Boats under the legal provisions of Section 65 of the Customs Act, 1962 without payment of duty, by filing the B/Es for into bond clearance duly following the prescribed procedure. These include submission of application to the Assistant Commissioner of Customs, Bond Department, ACC, Sahar for clearance of imported goods along with space availability certifi....
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....ugned order is not legally sustainable. 3.1 Learned Authorised Representative (AR) appearing for the Revenue reiterated the findings recorded by the learned Commissioner of Customs (Import), ACC in the impugned order dated 10.01.2023 and stated that the appellants have been importing inputs for manufacture of Boats by availing the procedure to be followed in the case of manufacturing operations undertaken in private bonded warehouse under section 65 of the Customs Act, 1962. However, they failed to fulfil the requirements of Manufacture and other Operations in Warehouse Regulations, 1966 and the Regulations 8 & 11 of Warehouse (Custody and Handling of Goods) Regulations, 2016 and the CBIC instructions issued by Circular No. 38/2018-Customs dated 18.10.2018, No. 22/2016-Customs dated 31.05.2016. Thus in respect of raw materials cleared duty-free used for manufacture final products contained in 10 B/Es, on which the customs duty have been confirmed along with interest, imposition of penalty and offering redemption fine on confiscation of goods, is sustainable. 3.2 It was further submitted by learned AR, that on limitation, the demand of duty under extended period is sustainable....
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....e of clearance of final products; (iv) whether such clearance of final products, without paying customs duty on the inputs, raw materials etc., makes it liable for confiscation under Section 111(m) ibid and consequently the appellants importer by their acts of omission and commission also become liable for penalty under Section 112 (a) and/or (b) ibid. 6.1 The learned Commissioner of Customs in the impugned order had given a finding on the issues at (i) to (iv) above, as follows: "22.2 The question whether there is a distinction between the clearances under Section 65 of the Customs Act, 1962 and those under Section 68 ibid needs to be examined. It is seen that importer has cleared his finished products from the warehouse. He has a license for warehouse too under Section 58. However, in terms of Board's circular No. 38/2018-Customs dated 18.10.2018 relating to "Procedure to be followed in cases of manufacturing or other operations undertaken in bonded warehouse under section 65 the Customs Act", it has been categorically mentioned at para 6 as under: "6. To the extent that the resultant product whether emerging out of manufacturing or other operations ....
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....Hence, the importer by removing the raw materials for manufacturing boats, without clearing the same for home consumption, under Section 68 of the Customs Act, 1962 has violated the aforesaid provisions. xx xx xx xx 25. 2 .....In view of the established Regulations it is clear that the importer is liable for payment of import duty on raw materials used for the manufacture of the finished product. xx xx xx xx 28. In the instant case, it is evident that the vital facts have been mis-stated with respect to the particulars of the impugned goods and therefore, I find that the importer has violated the provisions of Customs Act, 1962 and has failed to ensure that his declaration I relation to the impugned goods is true and correct. Having violated the relevant provisions, the importer has rendered the impugned goods liable for confiscation under Section 111(m) of the Customs Act, 1962. Therefore, I hold that the importer by his act of mis-declaration/mis-classification have rendered the impugned goods valued at Rs. 23,09,22,239/- (as per Annexure-B to the SCN) liable for confiscation in terms of the provisions of Section 111(m) of the Customs Act, 1962....
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.... not feasible to make entry by presenting electronically 1[on the customs automated system], allow an entry to be presented in any other manner: Provided further that if the importer makes and subscribes to a declaration before the proper officer, to the effect that he is unable for want of full information to furnish all the particulars of the goods required under this sub-section, the proper officer may, pending the production of such information, permit him, previous to the entry thereof (a) to examine the goods in the presence of an officer of customs, or (b) to deposit the goods in a public warehouse appointed under section 57 without warehousing the same. (2) Save as otherwise permitted by the proper officer, a bill of entry shall include all the goods mentioned in the bill of lading or other receipt given by the carrier to the consignor. (3) The importer shall present the bill of entry under sub-section (1) before the end of the day (including holidays) preceding the day on which the aircraft or vessel or vehicle carrying the goods arrives at a customs station at which such goods are to be cleared for home consumption or warehousing: xx xx....
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....e imported by him within a specified period. (3) The importer shall, in addition to the execution of a bond under sub-section (1) or sub-section (2), furnish such security as may be prescribed (4) Any bond executed under this section by an importer in respect of any goods shall continue to be in force notwithstanding the transfer of the goods to another warehouse. (5) Where the whole of the goods or any part thereof are transferred to another person, the transferee shall execute a bond in the manner specified in sub-section (1) or sub-section (2) and furnish security as specified under sub-section (3). Section 60. Permission for removal of goods for deposit in warehouse. (1) When the provisions of section 59 have been complied with in respect of any goods, the proper officer may make an order permitting removal of the goods from a customs station for the purpose of deposit in a warehouse. ^1[Provided that such order may also be made electronically through the customs automated system on the basis of risk evaluation through appropriate selection criteria.] (2) Where an order is made under sub-section (1), the goods shall....
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....consumption in respect of such goods has been presented in the prescribed form; (b) the import duty, interest, fine and penalties payable in respect of such goods have been paid; and] (c) an order for clearance of such goods for home consumption has been made by the proper officer : Provided that the order referred to in clause (c) may also be made electronically through the customs automated system on the basis of risk evaluation through appropriate selection criteria: Provided further that] the owner of any warehoused goods may, at any time before an order for clearance of goods for home consumption has been made in respect of such goods, relinquish his title to the goods upon payment of penalties that may be payable in respect of the goods and upon such relinquishment, he shall not be liable to pay duty thereon: Provided also that the owner of any such warehoused goods shall not be allowed to relinquish his title to such goods regarding which an offence appears to have been committed under this Act or any other law for the time being in force." xxx xxx xxx xxx (3) in column (3), the standard unit of quantity is speci....
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....oms, as the case may be; (c) furnishes a solvency certificate from a scheduled bank for an amount to be specified by the Principal Commissioner of Customs or Commissioner of Customs, as the case may be: Provided that the condition of furnishing a solvency certificate shall not be applicable to an undertaking of the Central Government or State Government or Union territory. (2) The Principal Commissioner of Customs or the Commissioner of Customs, as the case may be, shall not issue a licence to an applicant if, - (a) he has been declared an insolvent or bankrupt by a Court or Tribunal; (b) he has been convicted for an offence under any law for the time being in force; (c) he has been penalised for an offence under the Act, the Central Excise Act, 1944 (1 of 1944) or Chapter V of the Finance Act, 1994 (32 of 1994 ); (d) he is of unsound mind and stands so declared by a competent Court; or (e) the Principal Commissioner of Customs or the Commissioner of Customs, as the case may be, is satisfied that- (i) the site or building of the proposed private warehouse is not suitable for secure storage of dutiable ....
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....may be, and produce the same to the bond officer, as and when required; (ii) keep a record of each activity, operation or action taken in relation to the warehoused goods; (iii) keep a record of drawal of samples from the warehoused goods under the Act or any other law for the time being in force; and (iv) keep copies of the bills of entry, transport documents, Forms for transfer of goods from a warehouse, shipping bills or bills of export or any other documents evidencing the receipt or removal of goods into or from the warehouse and copies of the bonds executed under section 59. (2) The records and accounts required to be maintained under sub-regulation (1) shall be kept updated and accurate and preserved for a minimum period of five years from the date of removal of goods from the warehouse and shall be made available for inspection by the bond officer or any other officer authorized under the Act. (3) A licensee shall also preserve updated digital copies of the records specified under sub-regulation (1) at a place other than the warehouse to prevent loss of records due to natural calamities, fire, theft, skillful pilferage or compute....
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....lfilled by the appellants as required under Section 58 and 65 of the Customs Act, 1962. 8.3 The gist of the details in respect of imported raw materials and the resultant final products manufactured under the private bonded license under various Bills of entry in this case are tabulated in the SCN and extract of the same, for ease of reference are given below: Sl.No. Into Bond B/E Nos. & Date of raw materials consumed Ex-bond B/E No. & date of final product cleared Duty demanded in raw materials contained therein Rs. (1) (2) (3) (4) 1 2214193 23.06.2017 103330 04.04.2018 10,41,250 2347321 07.07.2017 2480179 17.07.2017 2544481 21.07.2017 2644769 29.07.2017 2 8176351 13.01.2017 103346 04.05.2018 63,04,268 8191528 16.01.2017 8350720 28.01.2017 8343366 27.01.2017 5409064 26.05.2016 7441934 14.01.2016 8564952 15.02.2017 8610969 20.02.2017 8658958 23.02.2017 9277043 12.04.2017 9273169 12.04.2017 9311017 15.04.2017 9340609 17.04.2017 9526098 02.05.2017 9939005 02.06.2017 9984376 06.06.2017 2142208 19.06.2017 ....
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....e bonded warehouse of the appellants by using the raw materials, inputs, etc., imported through ACC and Nhava sheva ports vide various B/Es indicated in column (2). Further, the said final products have been cleared in total 10 B/Es as indicated in column (3) from the said private bonded warehouse of the appellants. The department had demanded the total import duty on raw materials etc. consumed in the said final products as detailed in column (4) and the same had been confirmed in the impugned order. 8.4. In this context, we find that in an illustrative case of B/E No. 5443436 dated 05.03.2018 under which the inputs/raw materials have been received into the private bonded warehouse and used in the manufacture of boats have been shown in the SCN to have demanded a duty of Rs. 4,79,250/- out of the total duty of Rs. 39,58,158 in that entry at serial No. 3 of the above table. We have perused the records of the case with respect to this particular illustrative transaction. The 'marine air conditioning parts' for manufacture of ship classifiable under Customs tariff item 8415 9000 have been imported under B/E No. 5443436 dated 05.03.2018 for warehousing for a total value of Rs. 11,3....
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....ivate bonded warehouse. Thus, we find that the entire procedure in respect of granting permission for removal of goods for deposit in warehouse under Section 60 ibid, removal of goods from port of import to warehouse under Section 67 and the requirement of Regulations for properly complying with the provisions for transfer, removal of goods and its proper accounting in the manufacturing process warehousing bond have been duly followed by the appellants. Further, we also find that it is not the case of Revenue that the appellants importer have not complied with the proper receipt, accounting of the imported goods in their private bonded warehouse. It is only the issue of demand of duty on the raw materials etc. consumed in the final products cleared from the private bonded warehouse, which is in dispute in the present case. Furthermore, we also find that the finished goods manufactured out of such raw materials/ inputs imported as explained above, have also been removed from the private bonded warehouse by the appellants on payment of applicable import duties on the date of presentation of Bill of Entry in terms of Section 15(1)(b) ibid, by claiming exemption from basic customs duty....
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....ntry. The relevant paragraphs of the said order is extracted below: "4. The submissions made by both the sides have been carefully considered. The referring Bench had found that they were unable to agree with the earlier decision of the Tribunal in the case of Ferro Alloys Corporation Ltd. (supra) as regards jurisdiction to raise demand of duty on exempted goods found to be not utilised as per terms of exemption by an E.O.U. The Ferro Alloys Corporation decision has held that where original assessment into bond had been done at the Custom House through which the goods were imported, then any reassessment in respect of the warehoused goods can be done only by the same Custom House and the officers having jurisdiction over the warehouse cannot disturb the classification adopted by the Custom House of origin but can only apply the rate of duty prevalent on the date of actual removal of the goods from the warehouse as per Section 15 of Customs Act, 1962. During the arguments before the Larger Bench, it was pointed out that a subsequent decision on the same notification in the case of Collector of Central Excise, Chandigarh v. Delta Hamlin Ltd. (supra) had also followed the rat....
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....s of warehousing as contained in Chapter IX of the Customs Act, 1962 in working out the exemption notification No. 13/81. The goods imported herein are cleared for being warehoused on an into bond Bill of Entry and not Home Consumption Bill of Entry at the Custom House of origin, and in bond manufacture of the export product takes place at appellants' E.O.U. which is licensed under Section 58 of Customs Act, 1962 as a private bonded warehouse from where ex-bond clearances will have to take place. The decisions of the Tribunal in the case of Collector of Customs v. Instrumentation Ltd., reported in 1990 (45) E.L.T. 570 (Tribunal) and Sandeep Woollen Mills cited therein, relied upon by learned Senior Departmental Representative, on the other hand, more aptly covered such a situation. Para-6 of the Instrumentation Ltd. decision runs as follows: - * * * * * * * * * * * The Tribunal has held in these two decisions that in a situation of clearance of warehoused goods, the jurisdiction for raising demand for short levy or refund on reassessment will be with the proper officer granting ex-bond clearance. This view of the Tribunal finds support in the Madras High Court dec....
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....y payments have taken place only at the time of clearance from the warehouses, the question of demanding differential duty on such clearances by the officers at the port of import does not arise." 8.8 In view of the above discussion at paragraphs 8.1 to 8.7 above, we are of the considered view that the appellants importer have duly complied with the requirements of legal provisions for making an entry of the imported goods under Section 46 of the Customs Act, 1962, and for clearance of goods under warehousing provisions contained under Chapter IX of the Customs Act, 1962. 9.1 On second issue, that is whether the appellants importer is eligible for availing benefit of Notification No. 50/2017-Customs dated 30.06.2017 under serial No. 558 or 559 in respect of imported raw materials/inputs etc. at the time of ex-bond clearance of final products manufactured in their private bonded warehouse, we have perused the relevant exemption entries in the said notification along with relevant conditions. For ease of reference the same are extracted and given below: "G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 19....
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.... 559. Any Chapter Raw materials and parts, for use in the manufacture of goods falling under heading/tariff item 8901, 8902, 8904 00 00, 8905 (except tariff item 8905 20 00) or 8906 Explanation.- For the purposes of this entry, it is clarified that in the case of raw materials and parts already imported under S.No. 558 above and lying unutilized,- (i) the unit will furnish a separate bond to the jurisdictional Deputy Commissioner of Central tax or the Assistant Commissioner of Central tax or the Deputy Commissioner of State tax or the Assistant Commissioner of State tax, as the case may be, giving details of such goods and also undertake to utilize the same for manufacture of goods falling under heading/tariff item 8901, 8902, 8904 00 00, 8905 (except tariff item 8905 20 00) or 8906; and (ii) In the event of failure to use such goods for the specified purpose, the unit shall pay on demand, an amount equal to the duty payable on such goods but for the exemption under this notification Nil - 9 xx xxxxxxxx" The said explanation in the entry at S. No. 559 was later amended which is also captured below for the sake of clarity, even though such chang....
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....te about the applicability of exemption from payment of customs duty to the imported goods for its use in manufacture of ships/vessels in the present case. The only dispute in the present case is that the exemption under S. No. 558 is available upto 24.11.2015; and thereafter the exemption entry at S. No.559 is applicable, provided any person claiming such exemption should follow the prescribed conditions. 9.3 We find that there is a specific explanation added to the entry at S. No. 559, enabling its applicability in respect of goods originally imported by availing of the concession/exemption under S. No. 558, if they are still lying in stock in the unit functioning under bonded warehouse for providing separate bond to the jurisdictional authorities, in respect of such goods. The said explanation also specify that it is only in the event of failure to use such goods for the specified purpose, then the unit shall be required to pay on demand, an amount equal to the duty payable on such goods but for the exemption under this notification. The condition for availing the said exemption is also to follow the procedure prescribed in respect of Customs (Import of Goods at Concessional ....
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....ifications were applicable and gave to the assessee the benefit of that notification which was more beneficial to it. Having read the judgment and order and heard learned counsel, we see no good reason to interfere with the judgment and order under appeal. The appeal is dismissed. No order as to costs." 9.5 We also find that the legal provisions contained in sub-sections 7 to 10A of Section 3 of the Customs Tariff Act, 1975 provide the legal basis for charge of GST on the imported goods, including warehoused goods under specified circumstances therein. The extract of these provisions are given below: "(7) Any article which is imported into India shall, in addition, be liable to integrated tax at such rate, not exceeding forty per cent. as is leviable under section 5 of the Integrated Goods and Services Tax Act, 2017 on a like article on its supply in India, on the value of the imported article as determined under sub-section (8) or sub-section (8A), as the case may be. (8) For the purposes of calculating the integrated tax under sub-section (7) on any imported article where such tax is leviable at any percentage of its value, the value of the imported article s....
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....e of the imported article as determined under sub-section (10) or sub-section (10A), as the case may be. (10) For the purposes of calculating the goods and services tax compensation cess under sub-section (9) on any imported article where such cess is leviable at any percentage of its value, the value of the imported article shall, notwithstanding anything contained in section 14 of the Customs Act, 1962 (52 of 1962), be the aggregate of- (a) the value of the imported article determined under sub-section (1) of section 14 of the Customs Act, 1962 or the tariff value of such article fixed under sub-section (2) of that section, as the case may be; and (b) any duty of customs chargeable on that article under section 12 of the Customs Act, 1962, and any sum chargeable on that article under any law for the time being in force as an addition to, and in the same manner as, a duty of customs, but does not include the tax referred to in sub-section (7) or the cess referred to in sub-section (9). (10A) Where the goods deposited in a warehouse under the provisions of the Customs Act, 1962 (52 of 1962) are sold to any person before clearance for home consump....
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....o clearance for home consumption by person by sale, we find that there is no situation arising for the levy of GST under the provisions of Section 8A ibid. 9.6 As regards payment of IGST on the imported raw materials/inputs taken into the private bonded warehouse of the appellants importer, it is claimed by the Revenue that the same being in the nature of supply of warehoused goods (i.e., to say that goods deposited in a warehouse) to any person before clearance for home consumption GST is payable. In this regard, we find that in terms of Schedule-III entry at 8(a) to Section 7 of CGST Act, 2017 it has been specifically provided that the same shall not be treated as 'supply' of goods. Thus, no IGST would be leviable on such imported raw materials consumed in the manufacture of the final products. 9.7 However, we find that the learned Commissioner in the impugned order had confirmed the adjudged demands on the basis of CBIC Circular No. 34/2019-Customs dated 01.10.2019 wherein on payment of IGST/CGST on the finished goods it has been clarified by the CBIC in Para 8 and 9 of the said Circular No. 34/2019-Customs as follows: "8. To the extent that the resultant product ....
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....arehouse, duly licensed by jurisdictional Customs authorities. 9.8 Upon further examination of the facts, we find that it is only in respect of the final products manufactured from the private bonded warehouse, at the time of its clearance, the appellants are required to pay the applicable duties, under Section 68 ibid. In other words, appellants importer as a unit licensed under Sections 58 and 65 ibid was permitted to import capital goods, raw materials etc. and warehoused them without payment of duty. Manufacture and other operations in a bonded warehouse is only a duty deferment scheme and the applicable duties is payable at time of clearance of final products. Thus both BCD and IGST on imports stand deferred during the period the goods remains in the bonded warehouse. The duty deferment is without any time limitation. In the case of capital goods, the import duties (both BCD and IGST) stand deferred till they are cleared from the warehouse for home consumption or are exported. The capital goods can be cleared for home consumption as per Section 68 read with Section 61 of the Customs Act on payment of applicable duty without interest. The capital goods can also be exported a....