TaxTMI 
TaxTMI 
2026 (9) TMI 752
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....CESTAT, however consequent to the revised litigation policy adopted by the Central Board of Excise and Customs, except for the present batch of appeals, all other appeals have been withdrawn. 3. Heard Ms. B. Sapna Reddy, learned Senior Standing Counsel for Central Board of Indirect Taxes and Customs (C.B.I.C.), for the appellant; and Mr. B. Satish Sundar, learned counsel appearing on behalf of Mr. Parikshith Kutur, for the respondent. 4. For convenience, the facts in Central Excise Appeal No.2 of 2013 are discussed hereunder. 5. The respondent M/s. Gimpex Ltd. (for short 'GL') was engaged in the export of industrial minerals such as iron ore, bentonite, feldspar, and granite slabs, for which purpose the raw material and machinery required for export packing materials such as PP bags, and machinery such as dozers, dumpers, generators, excavators, tippers, and crushing and screening systems were utilised. During the period from 01.04.2004 to 31.03.2005, GL exported iron ore fines valued at Rs.142.3 crores and other minerals valued at Rs.31 crores, aggregating to Rs.173.3 crores which enabled GL to record sufficient incremental growth over its exports in the preceding year (2....
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....ase of 'c.c. copper rods' by GL from MMTC under the High Sea Sale Agreements, the import documents relating to duty-free clearance of the goods under the TPS, documents relating to export of iron ore fines and other goods, and correspondence exchanged between GL, MMTC and others, came to be recovered and scrutinised. 8. Statements were recorded under Section 108 of the Customs Act, from functionaries of M/s. Gimpex Ltd., M/s. Mangalchand Alloys and Refineries Pvt. Ltd. ('MARPL'), M/s. Shah International Travels (the Customs House Agent) and others, and the relevant provisions of the FTP 2004-09, the Handbook of Procedures (Volume-I), and Customs Notification No.32/2005 dated 08.04.2005, were examined in the course of the said investigation. 9. On the basis of the results of the investigation, the Department issued a show-cause notice to GL and others, whereunder it was proposed: (a) To deny the exemption claimed under the said Notification in respect of the imported copper rods and to demand duty thereon under the proviso to Section 28(1) of the Customs Act; (b) To hold the said goods liable to confiscation under Section 111(o) of the Customs Act and GL liab....
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....ht to be imported by availing the benefit of the TPS were required to bear a nexus or relation, as inputs, capital goods or other equipment useful for the processing, manufacture or packing of the exported goods, with the goods actually exported by the claimant during the year 2004-05. The relevant provisions of the Paragraphs 3.7.1 and 3.7.6 of the Foreign Trade Policy (FTP) (2004-09), is reproduced below for ready reference: "3.7 TARGET PLUS SCHEME Objective 3.7.1 The objective of the scheme is to accelerate growth in exports by rewarding Star Export Houses who have achieved a quantum growth in exports. High performing Star Export Houses shall be entitled for a duty credit based on incremental exports, substantially higher than the general annual export target fixed (Since the target fixed for 2005-06 is 17%, the lower limit of performance for qualifying for rewards is pegged at 20% for the current year). Imports allowed 3.7.6 The Duty Credit may be used for import of any inputs, capital goods including spares, office equipment, professional equipment and office furniture provided the same is freely importable under ITC (HS) Classifica....
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....for debiting the duties leviable on the goods, but for this exemption;" 13. It was also argued by the learned Senior Standing Counsel for C.B.I.C. that although the expression 'broad nexus' did not find place in the FTP itself but appeared only in the Handbook of Procedures and the said expression could not be dissociated from the words 'input and use' occurring in the FTP, the intended import necessarily having to bear a relationship with the export product. That the condition of broad nexus under paragraph 3.2.5(II) of the Handbook of Procedures was merely clarificatory of the expressions 'Inputs and use' employed in the FTP, and that any interpretation dissociating 'inputs from use' in the exported goods would run contrary to the provisions of the FTP itself, there being required, in substance, a one-to-one nexus between the export product and the imported inputs and that GL had failed to declare the requisite information regarding the goods exported by it at the time of importation, so as to enable verification of compliance with the conditions of the Customs Notification, thereby keeping the Customs Officers unaware of the products actually exported by it during the year 20....
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....mported and the goods exported. That it was only by a subsequent Circular No.21/2007, dated 08.05.2007, and Public Notice No.9/2007 dated 21.06.2007, that the scope of 'broad nexus' came to be narrowed by the DGFT. That the said Circular had itself been later struck down by the Hon'ble High Court of Bombay in the case of Essel Mining Industries vs. UOI [2011 (270) ELT 308 (Bom.)] following the decision of the Hon'ble High Court of Delhi in the case of Indian Exporters' Grievance Forum vs. UOI [2010 SCC OnLine Del 2605]. 16. Since the GL's imports predated the said Public Notice and Circular, it was submitted that the GL reasonably believed that the goods imported under the (unrevoked, uncancelled, unmodified) TPS certificates were validly importable under the Notification, a belief reinforced by the fact that the duty credit certificates had been accepted 12011 (270) ELT 308 (Bom.), 22010 SCC OnLine Del 2605 at the time of assessment and the copper rods cleared extending the benefit of the Notification. On this basis, it was contended that the extended period of limitation under the proviso to Section 28(1) of the Customs Act could not be invoked, and that the demand of differen....
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....the statements recorded under Section 108 of the Customs Act, reinforced the bona fides of the GL's imports, and that, in any event, even applying the normal period under Section 28(1) as it then stood, the demand ought to have been confined to six months from the dates of the Bills of Entry; the Show Cause Notice, having been issued only on 13.11.2007, was thus barred by limitation even on this alternative computation, and the demand raised under the order dated 19.02.2009 was rightly set aside by the CESTAT on this ground as well. 18. Having heard the contentions put forth on either side and on perusal of records, including the impugned order of the CESTAT, the questions of law that fall for consideration in this Appeal are: (i) Whether for claiming the benefit of exemption under Notification No.32/2005-Cus dated 08.04.2005 issued under the TPS, it was necessary for the GL to establish a strict, product-to-product nexus between the goods imported and the very goods exported by them, or whether establishment of a 'broad nexus' as contemplated under paragraph 3.2.5 of the Handbook of Procedures (Volume-I), 2004-09, with reference to the product group of the exported goo....
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....ms adverse to GL, that the argument advanced on GL's behalf that establishment of nexus with any one product group sufficed to justify duty-free import to the extent of the entire value of the TPS certificate, regardless of the certificate having been issued with reference to exports spanning multiple product groups was a specious argument liable to be rejected, and consequently held that GL could not resist the demand of duty on merits. However, as regards M/s. Sree Enterprises, the CESTAT found, and it is not disputed before us that both the goods exported (articles of mild steel and alloy steel) and the goods imported (c.c. copper rods) fell within the very same product group namely 'Engineering Products' and that the requisite broad nexus therefore stood duly established. 21. We are, therefore, unable to accept the appellant's contention that the CESTAT erred in holding that a strict nexus between the imported goods and each individual item exported was unnecessary. That finding, being a benefit extended to the GL in interpretation of an admittedly ambiguous Policy, and being consistent with the view taken by the Hon'ble High Courts of Delhi and Bombay, calls for no interfer....