TMI Blog2014 (9) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... decided by the Customs Department under Section 111(o) of the Customs Department. This aspect was not considered by the CESTAT. - Matter remanded back - Decided in favor of revenue. - C.M.A. No. 2945 of 2005 - - - Dated:- 20-10-2011 - D. Murugesan and K.K. Sasidharan, JJ. Shri K. Ravi Anantha Padmanabhan, SCCG, for the Appellant. Shri Habibullah Basha, Senior Counsel for S. Dhayaleswaran, for the Respondent. JUDGMENT This civil miscellaneous appeal at the instance of the Commissioner of Customs, Chennai, challenges the Final Order dated 24 November, 2004 [2005 (186) E.L.T. 497 (Tribunal)] on the file of Customs, Excise and Service Tax Appellate Tribunal, South Zonal Branch at Chennai, setting aside the order denying the benefits of Customs Notification to the respondent and imposing duty on S.S. Coils/Sheets imported under Advance License Scheme. The facts : 2. The respondent [hereinafter referred to as the assessee ] obtained Advance License from the Joint Director General of Foreign Trade, Chennai, declaring themselves as a manufacturing exporter, having factory at No. 183, Walltax Road, Chennai-600 003. The Directorate of Foreign Trade, on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as such, they are not entitled to the benefits of the relevant Customs Notification. The Commissioner while arriving at such a finding considered the proceedings initiated by the Joint Director General of Foreign Trade and the final order passed by the said authority dropping further proceedings against the assessee. According to the Commissioner, the findings recorded by the Director General of Foreign Trade has nothing to do with the proceedings initiated by the Customs Department and as such, there is nothing wrong in passing an independent order by the Department. Accordingly, the Commissioner, denied the benefits of Customs Notifications Nos. 30/97, dated 1 April, 1997 and 48/99, dated 29 April, 1999 for the entire import of S.S. Sheets/Coils imported duty free, availing four advance licenses. The Commissioner demanded duty on the said import besides interest and penalty. 6. The order dated 31 March 2004, on the file of Commissioner of Customs was challenged before CESTAT. The CESTAT found that the very same issue was earlier decided in the matter of Navjyothi International v. C.C., Chennai [2004 (177) E.L.T. 875 (Tri.-Chennai)], [which is the subject matter in C.M.A. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CESTAT would contend thus :- (i) The dispute relates to rate of duty and as such, the appeal before this Court is not maintainable; (ii) The Joint Director of Foreign Trade initiated proceedings on the basis of the reference made by the Customs Department. The Joint Director General of Foreign Trade found that the assessee has not misused the Advance Licenses and in fact, the duty free imported raw materials were used for manufacture of resultant export products. In view of the categorical findings given by the said authority and dropping further proceedings against the assessee, it was not open to the Customs Department to proceed and impose levy of duty on the imported raw materials; (iii) The assessee has claimed exemption from payment of Customs duty on the strength of the Advance License. The Customs Department on the basis of the original order, claimed duty and as such, the matter involves determination of a question having a relation to the rate of duty. Therefore, the appeal would lie only to the Supreme Court under Section 130E(b) of the Customs Act, 1962. (iv) The Customs Department has not produced any materials to show that the assessee has mis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sharing of profit or loss of M/s. Sri Krishna Polishing Works and functioning in the said concern, that he sold the imported goods in the local market and that he purchased utensils of grade AISI 304 and exported the same under DEEC Scheme. The investigation found that the assessee has not manufactured the products at the declared address. Since there was no declaration given by the assessee with regard to job workers as supporting manufacturers, it was found to be a case of misuse of license. Therefore, the Customs Department initiated proceedings for collection of customs duty and to impose penalty. The Joint Director General of Foreign Trade initiated separate proceedings against the assessee. The Licensing Authority, ultimately dropped the proceedings holding that there was no violation of the conditions governing the advance licenses. 11. The CESTAT considered the order passed by the Joint Director General of Foreign Trade as a binding precedent and quashed the proceedings initiated by the Commissioner of Customs. The CESTAT proceeded on the wrong premise that the findings given by the Joint Director General of Foreign Trade is binding on the Customs Department and as such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly used in the manufacture of final products and it was ultimately exported. 16. The inspection conducted by the officials of the Customs Department found that there was no such factory manufacturing SS Utensils as indicated in the license issued to the assessee. Even according to the assessee, he purchased utensils of grade AISI 304 and exported the same under DEEC Scheme. Hence the Department produced prima facie materials that the imported materials were not subjected to manufacturing activities in the factory shown in the license. It is for the importer to produce contra materials to prove their case of usage of imported materials for manufacturing utensils and the ultimate export. 17. The issue herein relates to the claim of exemption. The party who makes a claim for exemption should prove his case by producing positive materials that they are entitled to exemption. It is not for the Department to prove otherwise. It is trite that exemption notification should be construed strictly. 18. The customs authorities exercise jurisdiction under the Customs Act. Section 111 empowers the Customs Department to confiscate the goods improperly imported from the place outside Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and observed that the breach is not only of the terms of the license, it is also a breach of the conditions incorporated in the Exemption Notification, upon which the assessee obtained exemption from payment of Customs Duty and therefore, the terms of Section 111(o) enable the Customs authorities to investigate the matter. 22. A Division Bench of this Court had an occasion to consider a similar matter in M/s. South India Exports v. Joint Director of Foreign Trade and Another in (W.A. No. 1884 of 2003 etc. batch) [2004 (177) E.L.T. 57 (Mad.)]. In the said case, the assessee contended that the violation of the license could be dealt with only under the Foreign Trade (Development and Regulation) Act, 1992 and that too by Licensing Officer and the Customs Department has no authority to take up the matter. The Division Bench considered the authorities on the point and observed thus :- 23 The basic issued in the proposed enquiry by the Customs authorities appears to be as to whether there at all was a manufacturing factory or manufacturing unit for utilizing the imported stainless steel sheets and if such manufacturing unit was not there, how the imported stainless steel sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue regarding utilization of the imported materials would fall under Section 111(o) of the Customs Act, When the Customs Department is given independent authority to decide the question regarding the claim of exemption and as to whether the assessee has complied with the conditions so as to enable them to claim exemption, it cannot be said that they are not entitled to proceed in case the Joint Director General of Foreign Trade decides the matter in favour of the assessee. 25. The CESTAT simply followed the order passed by the Joint Director General of Foreign Trade. In fact, no attempt was made by the CESTAT to verify as to whether the impugned proceedings would fall under Section 111(o) of the Customs Act and as to whether, the Commissioner of Customs was having the jurisdiction to decide the matter. 26. The claim of the assessee was on the basis of exemption notifications. Therefore, it is for the assessee to prove that they are entitled to the exemption. 27. In Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal, 2010 (260) E.L.T. 3 (S.C.), the Supreme Court observed that the exemption clause should receive strict construction. The Supreme Court said : ..... X X X X Extracts X X X X X X X X Extracts X X X X
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