2001 (11) TMI 494 - AT - Customs

Summary

Issues Involved:
1. Violation of Customs Notification 159/90 by the importer.
2. Whether reversal of Modvat credit absolves the importer from the conditions of the notification.
3. Liability of the merchant-exporter for duty and penalties.
4. Interpretation of the roles and responsibilities of license holders and letter of authority holders under the Import Export Policy.
5. Applicability of Section 147 of the Customs Act.
6. Penalties on the supporting manufacturers for violations.

Detailed Analysis:

1. Violation of Customs Notification 159/90 by the Importer:
The central issue in the appeals was whether the importer violated the provisions of Customs Notification 159/90. The department alleged that the supporting manufacturers, who imported the goods, sold them in the open market and availed Modvat facilities on inputs purchased from the indigenous market, which was a violation of the notification. The adjudicating authority confirmed these violations and imposed duties and penalties accordingly.

2. Reversal of Modvat Credit:
The appellants argued that the reversal of Modvat credit prior to the issuance of the show cause notice should absolve them from the rigors of Notification 159/90. However, the adjudicating authority held that the reversal of Modvat credit after the fulfilment of export obligation did not amount to compliance with the notification. Therefore, the goods were liable for confiscation, and penalties were justified.

3. Liability of the Merchant-Exporter for Duty and Penalties:
The merchant-exporter, Usha Intercontinental, contended that they had no involvement in the importation of the materials and thus should not be held liable for duty or penalties. The adjudicating authority, however, held that the liabilities of the license holder could not be transferred to the letter of authority holder. The declarations made by the LOA holders were on behalf of the licensee, making the licensee responsible for ensuring compliance with the notification. The Tribunal found that the show cause notice and the evidence did not support the claim that Usha Intercontinental was the importer or that they had financial involvement in the importation. Therefore, the Tribunal ruled that Usha Intercontinental could not be held liable for the violations.

4. Interpretation of Roles and Responsibilities:
The Tribunal examined various provisions of the Import Export Policy and the Hand Book of Procedures. It was noted that the license holder could appoint another person as an agent for arranging imports, but the ownership of the license and the goods remained with the licensee. The Tribunal found that the supporting manufacturers, Mili Detergent and Jayantilal Bhogilal, acted as importers and were responsible for the violations, not Usha Intercontinental.

5. Applicability of Section 147 of the Customs Act:
The Tribunal concluded that Section 147 of the Customs Act, which pertains to the liability of agents and principals, was not applicable in this case. The relationship between the licensee and the letter of authority holder was not that of a principal and clearing agent, but rather of a licensee and an authorized representative. Therefore, the provisions of Section 147 could not be invoked to hold Usha Intercontinental liable.

6. Penalties on Supporting Manufacturers:
The Tribunal upheld the penalties imposed on Mili Detergent and Jayantilal Bhogilal for their violations of the Import Export Policy and the Customs Act. The supporting manufacturers admitted to selling the imported goods in the open market and availing Modvat credit, which constituted a violation of Section 111(o) of the Customs Act. The penalties were reduced to Rs. 25 lakhs each for Mili Detergent and Jayantilal Bhogilal.

Conclusion:
The appeals of Usha Intercontinental were allowed, as they were not found to be the owners of the goods or liable for the violations. The appeals of Mili Detergent and Jayantilal Bhogilal were dismissed, except for a reduction in the penalties imposed on them. The Tribunal emphasized the importance of compliance with the conditions of the Import Export Policy and the Customs Act by all parties involved in the importation process.