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TMI Blog2001 (11) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... e export product was synthetic detergent powder. The advance licence holder, the appellants in three appeals did not have manufacturing facility. Therefore it had contacted the other appellants, namely Mili Detergents and Jayantilal Bhogilal as supporting manufacturers. The names of these two persons were indicated in the application for advance licence as supporting manufacturers. The names were found in the advance licence and DEEC books along with the names and addresses of the factories of the supporting manufacturers. The ultimate product namely detergent powder was manufactured by the appellants Mili Detergents and Jayantilal Bhogilal and handed over to Usha Intercontinental who in turn exported it. Export obligation was fulfilled by the licence holder. This is undisputed. The licence holder gave letter of authority to the supporting manufacturers. It is an admitted fact that no permission from the licensing authority was obtained for issuing such a letter of authority in favour of the supporting manufacturers. On the strength of the letters of authority Mili Detergent and Jayantilal Bhogilal imported the goods and filed bill of entry in their names. It was assessed to duty a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntercontinental and imposed penalty of Rs. 20 lakhs on Usha Intercontinental, Rs. 16 lakhs on Mili Detergent and Rs. 6 lakhs on Jayantilal Bhogilal. Order-in-Original 9/98 demanded duty of Rs. 40,83,800/- (LAB) and Rs. 72,96,196/- automatic chemicals) total Rs. 1,13,85,986/- on Usha Intercontinental and imposed penalty of Rs. 50 lakhs on Usha Intercontinental. Further penalty of Rs. 25 lakhs on Mili Detergent and Rs. 25 lakhs on Jayantilal Bhogilal. Hence the present nine appeals. 5. Shri V. Sridharan, learned Advocate along with Shri Srinath lyengar, Advocate, appeared for the appellant. Usha Intercontinental, and Shri K.M. Mondal, learned Consultant, appeared for the appellants Mili Detergent and Jayantilal Bhogilal. Shri B.K. Choubey, learned DR, appeared for the department. 6. It is submitted by Shri Sridharan that the show cause notices proposed to recover duty from the appellant only if the said duty could not be recovered from the two supporting manufacturers who are the other appellants before us. It is stated with emphasis by the learned Counsel that the notice accordingly indicated the duty of demand against each of the supporting manufacturers. Shri Sridharan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is not imposable on the appellant under Section 112(a). Admittedly in the present case the imports have taken place prior to the introduction of Section 28AB of the Customs Act w.e.f. 28-9-1996. Hence recourse to the said section by the adjudicating authority is wrong in law. Shri Sridharan read through paragraphs 108, 109, 249, 250 of the Policy and paragraph 352 of the Hand Book of Procedures, 1990-93. He also referred to paragraps 244(1) & (2) of the Export Import Policy, 1988-91 to show the liberalisation of the Policy in respect of import, replenishment of the material and disposal of the same. He also took us through Public Notice No. 194, dated 28-11-1989 etc. in support. He states that the appellant, Usha Intercontinental cannot be charged with duty and penalty at all. 7. Shri K.M. Mondal, learned Consultant arguing for the appellants stated as follows. He slated that the two appellants. Mili Detergent Inds. (Appeals C/584, 585 and 592/98) and Jayantilal Bhogilal (Appeals C/442 to 444/98) have procured letter of authority from Usha Intercontinental, the appellants in Appeals C/560 to 562/98, for import of raw materials which they had used in the manufacture of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the appellants. It is an admitted fact, he says, that in terms of the bills of entry the goods were imported from April, 1992 to December, 1992. It is also admitted during the course of investigation the appellants Mili Detergent and Jayantilal Bhogilal have disposed of the material in the open market in violation of the various provisions of the Import Policy. The licence for which letters of authority have been issued is not a transfer. The letters of authority only enabled the appellants Mili Detergent and Jayantilal Bhogilal to act as agents. Action of agents will bind the principal. Being the licence holder therefore Usha Intercontinental can only be treated as the owner of the goods. He also tries to draw support from a definition of importer as defined in Section 2(26) of the Customs Act which includes any owner. He also emphasizes like Shri Mondal in terms of condition 5(3)(ii) of the Import Control Order the goods should be the property of the licensee only up to the time of clearance. He practically went along with the line of the arguments made by the appellants Mili Detergent and Jayantilal Bhogilal. He also stated that the Supreme Court judgment in Chandrapur Magnet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified in this notification have not been complied with." 9.3 Para 250 of Policy for years 1990-93 regarding disposal of materials is extracted below : 250(2) In respect of other products, the replenished exempt materials can either be used for further production or disposed of to any person, with the permission of the Licensing Authority concerned. This permission will be given only after the submission of satisfactory evidence of fulfilment of export obligation and realisation of foreign exchange or payment certificate, as the case may be. This will further be subject to the condition that on the materials originally used in the manufacture of the resultant product against which disposal of replenished materials is sought for, the licensee or his supporting manufacturer, as the case may be, has not availed of the relief : (i) Under the Modvat/Proforma Credit Scheme : or (ii) Under Rule 191B of Central Excise Rules; and undertakes not to claim the same subsequently. A certificate to this effect shall be produced by the licensee from the concerned Central Excise Authority. (3) Notwithstanding the provisions contained in sub-para (2) above, the facility of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, it will be clear that the show cause notice proceeds on the basis that both parties are liable for duty in terms of earlier portions of the order. 12. But in the impugned order (i.e. Order-in-Original 7/98, in paragraph 32 pertaining to import of LAB weighing 218.211 MT under the DEEC Scheme by Mili Detergent and Jayantilal Bhogilal as letter of authority holders of Usha Intercontinental), the adjudicating authority has held in paragraph 32.6, after holding that the Bombay High Court judgment in the case of M. Shashikant & Co. v. U.O.I. - 1987 (30) E.L.T. 868, is not applicable to the facts of the case, that "In the present case, the liabilities of the licence holder as per Notification No. 159/90-Cus. and para 250 of the import policy read with para 108(1) of the Handbook, could not be transferred to someone who is given a Letter of Authority under the said para 108(1)." In paragraph 32.7 he has held - "The declarations given by LOA holder to Customs etc. were on behalf of the licensee. Therefore, it was the responsibility of the licensee to ensure that proper and correct declarations were made at the time of export as well as import. However, it was falsely declared that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lal and not Usha Intercontinental. It is an admitted fact that in the show cause notice it has been specifically stated that the appellants Mili Detergent and Jayantilal Bhogilal were the importers. Having admitted the same in the show cause notice, how could the adjudicating authority go beyond the show cause notice in making the appellant Usha Intercontinental as he importer. 14. This leads us to take up the interesting arguments made by Shri Mondal and Shri Choubey regarding Clause 5(3)(ii) of the Import Control Order. The said clause reads as under :- "It shall be deemed to be a condition of every such licence that :- the goods for the import of which a licence is granted shall be the property of the licensee at the time of import and thereafter up to the time of clearance through Customs. It is true that a condition may be mentioned in the licence that the property of the goods shall be the licence at the time of import and thereafter up to the time of clearance through Customs. Here the violation is regarding the sale of the material in the open market and claiming of the Modvat. Modvat could be claimed at the input stage only by the manufacturer which is after the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wner of the goods and they did not file bill of entry there cannot be any violation of Section 111(m), namely false declaration. No doubt both Shri Mondal and Shri Choubey took plea of Section 2(26) of the Customs Act. Section 2 starts with the prefix unless context otherwise requires and sub-clause (26) states importer in relation to any goods at any time between their importation and at the time their clearance for home consumption includes any owner held to be importer. When we look into the definition clause we have to give meaning to the words "unless otherwise requires". The words are very important. The show cause notice does not charge Usha Intercontinental as to payment of money by them and the act played by them in the importation. The show cause notice specifically admits on the basis of the statements that the appellants Mili Detergents and Jayantilal Bhogilal were the importers. Viewed from these facts of the case, we cannot agree with the able arguments put by Shri Mondal and Shri Choubey. 18. That takes us to the case law which Shri Choubey and Shri Mondal relied, namely Usha Rectifier Corporation (India) Ltd. v. CC - 1997 (93) E.L.T. 71 (Tribunal). In the said ..... 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