TMI Blog2011 (1) TMI 1005X X X X Extracts X X X X X X X X Extracts X X X X ..... . 159/90-Cus and No. 204/92-Cus is liable to be granted to M/s Fresh Laboratories in respect of the raw materials imported by them under the six advance licences during the material period. Held that:- The show-cause notice has succinctly brought out the chemical, physical and other differences between Glycerine and Sorbitol. These differences were not disputed by the importer in their reply to the show-cause notice, nor even in the memorandum of appeal before us. If tinplates of thickness of 0.19 mm could be recognized as a commodity different from tinplates of 0.22 mm, in the case of Zenith Tin Works [1994 (4) TMI 183 - CEGAT, NEW DELHI] no hesitation to hold that Glycerine can come nowhere near Sorbitol in material characteristics/specifications. The contention raised by the learned counsel that, as both these materials were covered by the advance licences, duty-free import of any of them should be allowed where the other one was found to have been used in the manufacture of the resultant product, is not supported by any judicial authority and hence cannot be accepted. In relation to Notification No. 204/92-Cus also a firm case for the Revenue. In the instant case, the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 57/02, 1359/02, 1360/02, 1360/02 and 1361/02/02 - - - Dated:- 14-1-2011 - Mr. P.G. Chacko, Mr. Sahab Singh, JJ. Appellant : Represented by: Mr V.S. Nankani, M. Anil Balani, and Mr J.C. Patel, Advocates) Respondent : (Represented by: Mr. K.M. Mondal, Special Consultant) Per: P.G. Chacko 1. These appeals are directed against the Commissioner s order, the operative part which reads as follows: ORDER i) 528.486 MTs. of Glycerine Valued at Rs. 1,71,24,361/- out of 588.486 MTs valued at Rs. 1,92,27,185/-, 59.61 MTs of Sodium Lauryl Sulphate valued at Rs. 34,43,256/-, 21.813 MTs of Irish Moss/Viscarene/Carragenam valued at Rs. 86,75,961/-, One M.T. of Sodium Mono Flouro Phosphate valued at Rs. 92,736/-, 1.2 MTs of Flavoring compound valued at Rs. 2,67,781/- and 5.040 MTs of Glycerine valued at Rs. 1,64,695/-, 1.260 MTs of SLS valued at Rs. 63,228/-, 18.9 MTs of Stearic Acid valued at Rs. 3,62,395/- and 570 kgs of Aromatic chemicals valued at Rs.3,15,644/- imported and cleared against advance licences as detailed in the Show Cause Notice are held liable to confiscation under Section lll(d) and lll(o) of the Customs Act 1962. However, as all these goods ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00,000/-(Rupees Ten lakhs only.) 5. M/s. Nikita Packaging P.Ltd. Rs. 10,00,000/-(Rupees Ten lakhs only.) 6. M/s.Prakshal Exports Rs. 10,00,000/-(Rupees Ten lakhs only.) 7. M/s. D.G. Gore Co. Rs. 10,00,000/-(Rupees Ten lakhs only.) 8. M/s. Orbit International Rs. 10,00,000/-(Rupees Ten lakhs only.) 9. M/s.Alpine Chemicals Rs. 10,00,000/-(Rupees Ten lakhs only.) 10. M/s. Amee Agency Rs. 10,00,000/-(Rupees Ten lakhs only.) 11. M/s. Patel Exports Rs. 10,00,000/-(Rupees Ten lakhs only.) 12. M/s. Ratilal Hemraj Rs. 10,00,000/-(Rupees Ten lakhs only.) 2. M/s Fresh Laboratories had imported certain raw materials under six advance licences, one of which belonged to them and the rest belonged to three merchant-exporters viz M/s U.K. Paints, M/s VAM International Ltd and M/s Dolphin International. Some of the licences specified toothpaste as the export product, while others mentioned both toothpaste and shaving cream as export products. During the tenure of Exim Policy 1990-93, M/s Fresh Labo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity and technical characteristics specified in the DEEC, apart from the requirement of the importer having to discharge his export obligation. One of the main conditions attached to this notification was condition No. (vi) which reads thus: (vi) that where export goods are manufactured availing credit of Central Excise Duty or Additional Customs duty, in respect of any of the materials permitted import under the said licence, under rule 56A or 57A of Central Excise Rules, 1944, the facility of sale or transfer of materials or the said licence shall not be available. 5. M/s Fresh Laboratories had used the following materials (inputs) in the manufacture of toothpaste (resultant product) exported by them: (i) Sorbitol (ii) Sodium Lauryl Sulphate (iii) Gum (iv) Sodium Saccharine (v) Sodium Mono Fluoro Phosphate(SMFP) (vi) Flavouring Compound. 6. On the basis of results of certain investigations conducted by the department, the following allegations were mainly raised in the relevant show-cause notice viz: (i) Glycerine imported by M/s Fresh Laboratories was not liable to be exempted from payment of duty under any of the above notifications inasm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods imported for replenishment purpose were covered by relevant advance licences; (b) The exemption scheme under this notification is different from that covered by Notification No. 159/90-Cus but the adjudicating authority did not make any differentiation; (c) No MODVAT credit had been taken on many of the inputs used in the export product and, therefore, the learned Commissioner s order demanding duty on all the imported goods by denying the benefit of Notification No. 204/92-Cus on the premise that MODVAT credit had been taken on all the inputs contained in the export goods is not sustainable. In this connection, the learned counsel has named five inputs viz Irish Moss, SMFP, Flavouring compound, Stearic Acid and Aromatic Chemicals; (d) MODVAT credit on other inputs contained in the exported product was actually reversed with interest, and, therefore, M/s Fresh Laboratories are entitled to the benefit of the Amnesty Scheme covered by Circulars dated 3/1/97 and dated 10.1.97; (e) As per Public Notice No. 191 dated 14.8. 91, M/s Fresh Laboratories were entitled to sell the raw materials imported for replenishment purpose once the MODVAT credit availed on inputs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uts used in the manufacture of the exported product and also paid interest thereon long before the Amnesty Scheme was introduced. With regard to the penalty imposed on the importer, the learned counsel has claimed support from one of the decisions cited by the Special Consultant for the Revenue and the same is M/s Fresh Laboratories vs CC, Mumbai 2000 (39) ELT 881 (CEGAT), wherein the penalty imposed on the party (who happens to be the importer in the instant case also) in connection with denial of the benefit of Notification No. 159/90-Cus was reduced from Rs 20 lakhs to Rs 15 lakhs. The learned counsel has urged that the precedent be followed in the instant case as well. 9. The learned Special Consultant for the Revenue has countered the counsel s submissions in the following manner: (i) Any exemption notification should be strictly construed and, therefore, the relevant condition attached to Notification No. 159/90-Cus or Notification No. 204/92-Cus cannot be relaxed. Replenishment per se means import of material of the same specifications and characteristics as those of the input used in the manufacture of the exported product. Indisputably, Sorbitol is different from G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee against the Tribunal s decision was dismissed by the apex court vide 1997 (93) ELT A 176 (SC). (b) Another decision cited by the learned Special Consultant is Usha Intercontinental (India) vs Collector of Customs 2001 (129) ELT 794 (Tri-Del), wherein the same notification was involved. The appellant in that case was a merchant-exporter who imported certain raw materials under the DEEC Scheme and cleared the same without payment of Customs duty by claiming the benefit of Notification No. 159/90-Cus. The goods were imported as replenishment for inputs used in the exported goods. It was found that the party had availed MODVAT credit on the inputs used in the production of the export goods. Under para 250 (2) of the relevant Exim Policy, the goods imported by way of replenishment could not be sold if MODVAT credit had been taken on the inputs used in the exported goods. Thus the breach of a condition of the above notification was found and the duty foregone was demanded. The learned Special Consultant has also relied on Raj Exports vs National Aluminium Co Ltd 1996 (87) ELT 349 (Ori), wherein certain imports made under DEEC Scheme claiming the benefit of Notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de 2002 (139) ELT A 188 (SC). (d) One case involving Notification No. 204/92-Cus cited by the learned Special Consultant is Commissioner of Customs vs Bharat Pulvarising Mills Ltd 1999 111) ELT 193 (Tri-Mum), wherein the benefit of the said notification was denied to the party on the ground that condition (vi) thereof was violated by them by availing MODVAT Credit under Rule 57A on the inputs used in the manufacture of the exported goods. It is pointed out that, in the case of Bharat Pulvarising Mills case, the Orissa High Court s judgment was followed in preference to the Supreme Court s judgment in Chandrapur Magnet Wires Pvt Ltd vs Collector 1996 (81) ELT 3 (SC). The learned Special Consultant has also distinguished the case of Chandrapur Magnet Wires by submitting that, in that case, the benefit of exemption notification was allowed by the apex court to the assessee by holding that the relevant condition (which required the assessee not to avail MODVAT Credit on any input used in the manufacture of the exempted final product) stood complied with inasmuch as the credit so availed had been reversed prior to clearance of the exempted final product. It is submitted that this ruling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point sought to be made by the learned counsel is that the material imported under an advance licence in the DEEC Scheme, with an obligation for discharge of export obligation, need not be identical with the input used in the exported final product. According to him, it is enough if the imported raw material is commercially usable in the export product. 12. The learned Special Consultant has opposed the counsel s submissions relating to penalty. It is submitted that there was a prior understanding between the Chief Executive Officer of M/s Fresh Laboratories and Mr Yogesh Korani with regard to the import and sale of raw material. He has referred, in this connection, to paragraphs 7 to 9, 11 and 13 of the show-cause notice as also to para 7 of the impugned order. It is submitted that Mr. Yogesh Korani cannot claim innocence and was rightly penalized by the adjudicating authority. 13. We have given careful consideration to the submissions. The main issue arising for consideration is whether the benefit of Notification No. 159/90-Cus and No. 204/92-Cus is liable to be granted to M/s Fresh Laboratories in respect of the raw materials imported by them under the six advance lice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed synthetic rubber although not of the Butyl rubber variety in the manufacture of exported articles has not been contradicted or found to be wrong, the importation of synthetic rubber of Butyl variety could amount to a material which could be imported for purpose of replenishment in terms of the language of the Notification. It would thus appear that, in the case of Metro Tyres, the department had not found fault with the importer having used one variety of synthetic rubber in the resultant product and importing another variety of synthetic rubber for duty-free clearance under the notification. The facts of the present case are different. In the present case, it has been the consistent case of the Revenue that the benefit of Notification No. 159/90-Cus is not admissible to the importer who used Sorbitol in the manufacture of toothpaste and imported Glycerine as replenishment claiming duty-free clearance under the Notification and further that they used gum in the manufacture of the resultant product and imported Irish Moss/Viscarine as replenishment. It is not in dispute that Glycerine is different from Sorbitol in material characteristics including chemical composition, physical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Works, by this Tribunal and the apex court, we have no hesitation to hold that Glycerine can come nowhere near Sorbitol in material characteristics/specifications. The contention raised by the learned counsel that, as both these materials were covered by the advance licences, duty-free import of any of them should be allowed where the other one was found to have been used in the manufacture of the resultant product, is not supported by any judicial authority and hence cannot be accepted. 15. In relation to Notification No. 204/92-Cus also, we have found a firm case for the Revenue. Condition (vi) of this notification is relevant to this case. This condition stipulates that one who imports raw materials covered by an advance licence cannot, after its clearance duty-free under the notification, cannot sell or transfer the material if he has availed MODVAT credit of Central Excise duty or Additional Customs duty paid on any indigenous or imported input contained in the exported goods. It would mean that any sale or transfer of raw material imported duty-free under the above Notification would be a breach of condition no. (vi), if MODVT credit has been taken on the input which wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was Notification No. 203/92-Cus. We, therefore, hold that nothing contained in the Amnesty Scheme can be applied to the present case. The Hon ble Supreme Court s judgment in Bharati Telecom case also related to the Amnesty Scheme as applicable to importers/exporters who committed breach of condition (v) (a) of Notification No. 203/92-Cus by availing input-stage credit on inputs used in the manufacture of the exported product. The adjudicating authority, in this case, has taken the right decision on this issue. 16. Some of the decisions cited by the learned Special Consultant are apposite to this context. In the case of Usha Intercontinental (supra), merchant-exporters had imported certain raw materials under the DEEC Scheme claiming the benefit of Notification No. 159/90-Cus. Those goods were imported as replenishment for the use in exported product. It was found that the party had availed MODVAT credit on the input used in the production of the resultant product. Under para 250- (2) of the relevant Exim Policy, there was a bar against sale of the imported goods if MODVAT credit had been taken on the inputs used in the exported product. As the party had sold the raw material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 112 (a) and (b) of the Customs Act on certain grounds stated in paras 31 and 35 of the impugned order. It has been held that M/s Fresh Laboratories and Mr. Bhupendra J. Shah rendered the goods (imported by them) liable for confiscation under Section 111 (d) and (o) of the Customs Act by violating the conditions of Notifications No. 159/90-Cus and No. 204/92-Cus. They have also been found to have rendered themselves liable to penalty under Section 112 of the Act. We have already found, against M/s Fresh Laboratories, violation of certain conditions of the two Notifications, which would attract Section 111 (o) of the Customs Act. It goes without saying that M/s Fresh Laboratories, by their commissions and omissions in relation to the imports in question, rendered the goods liable to confiscation, thereby attracting penalty under Section 112 (a) and (b) of the Act. However, nothing contained in para 35 of the impugned order brings forth any penal liability of these parties. This para says that most of the imported materials were sold by M/s Fresh Laboratories but does not specifically state that this activity amounted to breach of any particular condition of any Notification. On the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Laboratories after obtaining Letter of Credit; that M/s Fresh Laboratories sent him debit note for CIF value + profit margin and that accordingly he sent the bank drafts; that intents for import of 60 MT of Glycerine vide Bill of Entry No. 5057 dated 15.7.93 had been obtained by him in the name of M/s Fresh Laboratories who opened Letter of Credit; that M/s Fresh Laboratories sent him the documents only after he sent bank draft, etc. His statement relating to import of 60 MT of Glycerine by M/s Fresh Laboratories was corroborated by the clearing agent. This evidence, considered by the adjudicating authority, is yet to be rebutted. Therefore, the involvement of Mr. Yogesh Korani in the import of 60 MT of Glycerine in the name of M/s Fresh Laboratories has been established. Under Section 112 (a) of the Act, any person abetting the offence of the importer can also be penalized. Mr. Yogesh Korani appears to have abetted the offence committed by M/s Fresh Laboratories in relation to the import of 60 MT of Glycerine. Under Section 112 (b) of the Act, any person who acquired possession of, or otherwise physically dealt with, any imported goods with the knowledge or belief that such goods ..... X X X X Extracts X X X X X X X X Extracts X X X X
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