TMI Blog2005 (9) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... given to the DGFT/or the licensing authority to exercise the same in public interest. The Customs officers, while implementing the Notification 203/92-Cus., cannot question or appear to question the decisions and actions of the competent authority in the said Directorate unless it is strictly permitted by the terms of the Notification. The plain reading of condition (vii) makes it abundantly clear that benefit of Notification is to be extended to a person other than a person to whom the licence has been issued, if there is an endorsement of transfer by the licensing authority both on the VBAL and the DEEC. Benefit of Notification, cannot, therefore, be denied to the transferee on the ground of breach of condition (va). The Customs Authorities cannot question the powers of the licensing authorities unless it is mentioned in the Notification. We are of the considered opinion that the principles evolved in the case of Goodluck Industries and upheld by Apex Court in GOODLUCK INDUSTRIES [ 1999 (12) TMI 858 - SC ORDER] and followed subsequently in other cases, is to be made applicable to the case on hand, since it is based on sound principle of law. Consequently, we uphold the contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation No. 203/92-Cus., dated 19-5-1992. (b) By a show cause notice dated 4-3-1999, the appellants were, inter alia, called upon to show cause why an amount of ₹ 16,74,702/-should not be demanded and recovered from them in terms of proviso to Section 28(1) of the Customs Act, 1962 on the ground that the appellants had allegedly contravened condition (v)(a) of the said Notification. Further, the Notice proposed to impose a penalty under Sections 112 and 114 of the said Act. (c) By a letter dated 20-10-2000, the appellants submitted their reply to the show cause notice, denying the allegations contained therein and submitted that they had not contravened the conditions of the said Notification. They have also submitted a copy of the Bill of Entry and debit note dated 20-4-1994 during the course of enquiry. (d) The Commissioner of Customs (Import), by an Order dated 1-5-2002, however, confirmed the demand of duty of ₹ 16,74,702/- along with interest @ 24% and further imposed penalty of ₹ 1,00,000/-. The amount of duty along with interest is directed to be paid jointly and severally by original licence holder and the transferee of the licence, who imported the goods. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication have not been complied with : Provided that a bond or a legal undertaking and the declaration shall not be necessary in respect of imports made after discharge of export obligation in full, as evidenced by endorsement of Licensing Authority in the said Certificate; (iii) that the said licence and the said certificate is produced before the proper officer of customs at the time of clearance of imported goods out of customs control; Provided that no such imported material shall be permitted clearance under this Notification unless a debit entry has been made, in the said licence and the said certificate, by the proper officer of Customs; (iv) that the imports and exports are undertaken from sea ports at Bombay, Calcutta, Cochin, Kandla, Mangalore, Marmgoa, Madras, Nhava Sheva, Paradeep, Tuticorin and Visakhapatnam, or through any of the airports at Ahmedabad, Bangalore, Bombay, Calcutta, Delhi, Jaipur, Varanasi, Srinagar, Trivandrum, Hyderabad and Madras or through any of the Inland Container Depots at Bangalore, Coimbatore, Delhi, New Gauhati Goods Shed, Moradabad, Ludhiana and Hyderabad; Provided that the Collector of Customs may be special under and subject to such condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Import Policy 1st April, 1992 - March, 1997, published vide Public Notice of the Government of India in the Ministry of Commerce No. 1-ITC (PN)/92-97, dated 31st March, 1992 as amended from time to time. (ii) Licensing Authority means an authority competent to grant a licence under Imports (Control) Order, 1955 made under the Imports and Exports (Control) Act, 1947 (18 of 1947). (iii) Materials means - (a) raw materials, components, intermediates, consumables and parts required for manufacture of export product; Provided that in the case of electronic goods and all kinds of writing instruments (including gift sets and refills/nibs), all export items covered by one serial number m the Standard Input Output and Value Addition norms as contained in Handbook of Procedures, 1992-97, Volume-II, published vide Public Notice No. 121(PN)/92-97, dated the 31st March, 1993 of the Government of India in the Ministry of Commerce, shall be deemed to be single export product; Provided further that nothing contained in this Notification shall apply to import of Acetic Anhydride against licences issued after 24th November, 1993, except where such licences together with the quantity required for ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the export obligation is undertaken without availing of the input credit under Rule 57A or 56A of the Central Excise Rules, 1944. 10. Condition (vi) of the Notification states that the exempt material shall not be used or disposed of in any manner except for utilization of export obligation. This condition is not applicable if the materials after the fulfilment of the export obligation by the original licence-holder. 11. Condition (vii) of the Notification No. 203/92-Cus. states that if the benefit of Notification is sought by a person other than a licencee, such benefit shall be allowed only if the licence bears the endorsement of transferability by the licensing authority. 12. Condition No. (viii) Irrespective of fact as to what is contained in condition (vi) and (vii), the endorsement of transferability or disposal of materials shall be allowed in respect of licences issued for the export of all kinds of writing instruments on fulfilment of export obligation only in favour of manufacture of writing instruments. l3. (a) The certificate to be issued by the licensing authority in the form appended in the Schedule to the Notification is in 2 parts. Part-1 deals with imports and Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e within the time specified in the licence or within the time limit extended by the DGFT and without availing the input credit. The appellants have raised the following propositions for consideration by the Larger Bench:- 1. The rights of the transferee are governed by clause (vii) of Notification No. 203/92 or clause (viii) of Notification 204/92, both of which read as under:- Where the benefit of the Notification is sought by a person other than the licencee, such benefit shall be allowed against the said licensee and the said certificate only if it bears endorsement or transferability of the Licensing Authority . 2. Where the Notification applies to more than one person, which, in this case, means the original licencee end the transferee thereof, the conditions of the Notification must be read independently. Accordingly, clauses (ii), (v), (vi) and (vii) would not apply to transferee. As such, clause (v) of these two Notifications would apply only to the original licencee and not to the transferee. 3. Special conditions prevail over general conditions and since clause (vii)/clause (viii) (as the case may be), are special clauses applicable only to the transferee, the same shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mporter (who is not the exporter of the goods mentioned in the licence) is not eligible for the benefit of Notification No. 203/92-Cus; (e) the exemption is available to the present importer only when the importer produces evidence that no credit was taken on the inputs used in the goods exported by the original licence-holder; (f) the importer cannot be given the exemption if the endorsement of transferability is obtained by the original licence-holder from DGFT by mis-representation, even if importer is not party to the said mis-representation. 19. It is not the argument of the importer that customs authorities, cannot go into the aspect whether the condition (v)(a) of the Notification No. 203/92-Cus. is satisfied or not as the importer is not the exporter of the goods mentioned in the licence. The arguments/submissions of the importer is entirely different, as explained in the following paragraphs : Customs Notification itself specifies different authorities for conferring the benefit under the Notification. DGFT is designated or specified by the Notification as the authority for satisfying the condition relating to discharge of export obligation in terms of the Notification. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity), before clearances of the goods from the Customs. Signature Seal of licensing authority Date Bond/Legal undertaking executed on ........... ... for Rs. ....... (Rs. ........................) and registered under Sl. No. ..................... with this office. It has been verified that the export obligation has been discharged in full. Therefore requirement of Bond/Legal undertaking is waived. (Strike off inapplicable portion) Signature Seal of licensing authority Date (d) Similarly, Parts F, H and I of the DEEC relating to discharge of export obligation and endorsement of transferability by the DGFT. It is well settled that Schedule appended to a statute is part of the statute as per para 24 of the Constitution Bench decision of the Supreme Court in Ujagar Prints - 1988 (38) E.L.T. 535 (S.C.). Thus, reading of the Notification (including the Schedule) as a whole, makes it clear that the conditions upon which the exemption is granted are to be satisfied at various points of time and subject to the satisfaction of authorities specified in the Notification itself namely DGFT (licensing authority) and Dy. Commissioner or Assistant Commissioner of Customs. 20. For the purposes of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs duty on import of materials to be used as raw materials for manufacturing finished products to be exported, it has to be held that the officer under the Foreign Trade Act is also a proper officer concerned with the collection of Customs duty. Once DGFT arrives at the satisfaction that the export obligation is discharged by the licence-holder and consequently certifies in Part-F, H and I of Part-II of the DEEC, the satisfaction of the DGFT is binding and cannot be reviewed by the Customs Department. 21. It is submitted that after the DGFT certifies that the export obligation is discharged by the original licence-holder and makes the licence transferable, the satisfaction or certification of the DGFT that the export obligation has been discharged by the exporter cannot be reviewed by the Customs Department. This is for the reason that the satisfaction arrived at by the DGFT in certifying that the original licence-holder has discharged the export obligation by exporting the goods mentioned in the licence without availing the credit, is an irrebuttable presumption to the effect that exporter has not availed the benefit of Modvat credit on the inputs used in the goods exported. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the same condition and not to be consumed by the purchasing dealer. 29. ...But the question is whether it raises an irrebuttable presumption i.e. presumption which cannot be rebutted by the relevant assessing authority. In other words, even if the assessee had furnished a certificate in Form III-A, and the details as stipulated in Form IV, can the selling dealer be called upon to prove further show the purchasing dealer has dealt with the goods after purchasing the goods. 32. But it was contended by counsel for the dealer that in order to make the provisions of the Act operative and effective, this was the intention in the instant case and though the rule did not say so that it raised an irrebuttable presumption, we are of the opinion that this submission has to be accepted. After all the purpose of the rule was to make the object of the provisions of the Act workable i.e. realization of tax at one single point, at the point of sale to the consumer. The provisions of rule should be so read as to facilitate the working out of the object of the rule. 33. ....The genuineness of the certificate and declaration may be examined by the taxing authority but not the correctness of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out as to in what manner the latter utilizes the goods which it has purchased on the strength of the declaration forms in order to be entitled to the deduction. Such a requirement would fasten an impossible burden on the selling dealer . (c) Premier Electro-Mechanical Fabricators v. The State of Madras - 1968 (22) STC 269 (Mad.) (d) State of Tamil Nadu v. Madras Petro Chem Ltd. - 1993 (89) STC 438 (Mad.) (e) CST v. General Electric Co. of India Ltd. - 1992 (84) STC 78 (MP) (f) The Dy. CST v. Bharat Refineries Ltd. - 1978 (42) STC 225 (Ker.) (g) Star Paper Mills Ltd. v. CST - 2005 (139) STC 245 (All) 23. The submission of the importer in the present case, based on the ratio of the above decision of the Supreme Court and High Court is that no review procedure is laid down under the Customs Act or under the Foreign Trade (Development Regulation) Act, 1992 to challenge the satisfaction arrived at by the DGFT that the licence-holder or the exporter has discharged the export obligation in terms of the Notification by not availing the input credit. Similarly, no machinery is provided to challenge the endorsement of transferability granted by the DGFT after his satisfaction about the disch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld as under : ......... Similarly, in terms of the Notification we are called upon to construe, the Excise Authority is required to act on the basis of the printed MRP. The Notification does not envisage an inquiry into the correctness of the MRP printed on the packages by the Excise Officer. As far as he is concerned, he is limited to satisfying himself that there is a declaration in the prescribed form. To hold otherwise would not only defeat the object with which the Notification was introduced but lead to a reversion to the earlier mode of assessing the value of the manufactured commodity, the uncertainty associated therewith and an impossibly chaotic situation as we shall subsequently indicate. The reliance on the Rules and forms by the Revenue appertaining to assessments does not therefore carry its case any further. The Supreme Court in CCE v. Maruti Udyog Ltd. - 2001 (127) E.L.T. A169 affirmed a similar view taken by the Tribunal in Maruti Udyog Ltd. v. CCE - 2000 (124) E.L.T. 1175 (T). Sl. No. 6 of Notification No. 162/86 granted partial exemption to saloon cars subject to the condition that the Assistant Collector is satisfied that such saloon cars are required for use so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance upon what was stated by the petitioners in their advertisement. The Customs authorities were bound to accept the certificate issued by the Directorate General and it is not permissible to go behind it merely because the Customs authorities feel that the contents of the certificate were disproved by some other material. There is a great danger in accepting the submission of the Department that the authorities can brush aside the certificate and determine whether the assessee is entitled to the exemption or not. In case this principle is accepted, then it would open floodgates of false and frivolous claim by the assessee who have been denied the certificate by the Directorate General by claiming that the Directorate General has ignored certain facts and the Customs authorities should independently consider whether the requirement or the conditions of the Notification are complied with. Surely that could not have been the intention of the Government of India and it is clear that the Government desired that the exemption should be granted once the conditions of the Notification including the condition of a certificate from the Directorate General are complied with. In my judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue came before the Supreme Court whether the assessee is entitled to exemption under Notification No. 125/75-C.E. granting exemption to textured yarn made out of duty paid based yarn. The department denied the exemption to textured yarn on the ground that the assessee has to prove that the base yarn which he purchased from the market is duty paid. The Tribunal held that any goods purchased from the market is deemed to be duty paid since no excisable goods can be removed from the factory without payment of duty. The Supreme Court approved the decision of the Tribunal in CCE v. Decent Dyeing - 1990 (45) E.L.T. 201 (S.C.). While holding so, the Supreme Court also approved the decision of Delhi High Court in Sulekh Ram Sons - 1978 E.L.T. J525 and held as under : 5. ....Reference was also made before the Tribunal and our attention was also drawn to the decision of the Delhi High Court in Sulekh Ram Sons v. Union of India Ors. [1978 E.L.T. (J 525)], where under Rule 9 of the Central Excise Rules, it was held by the Delhi High Court that under excise system, no goods can be removed from the place of manufacturer without first-paying the excise duty, therefore, a purchaser can presume, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principles enunciated under the law of contract are applied and the licence is treated as a contract between the Government and the licence-holder, the licence is voidable at the instance of the licensing authority and the licence does net become void ab initio. Therefore, the transferred licence and transferee has the option and they do not hold a licence which is void. 31.(a) The general principle is that no one can give what he has not got. However there are exceptions to this principle. This general principle and the exceptions are provided in Section 29 of the Sale of Goods Act, 1930. Section 29 of the Sale of Goods Act reads as under : 29. Sale by person in possession under voidable contract. - When the seller of goods has obtained possession thereof under a contract voidable under Section 19 or Section 19A of the Indian Contract Act, 1872 (9 of 1972), but the contract has not been rescinded at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith and without notice of the seller s defect of title. Reference may also be made to the commentary on Sale of Goods by P.S. Atiyah, 8th Edition wherein it has been stated as under : T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held in respect of advance licence under EXIM Policy. The licence of the transferee was suspended by the Licensing Authority on the ground of initiation of enquiry by Customs authorities against the transferor and imported goods of the transferee were seized. The licence was transferred on completion of export obligation and after audit of DEC books by Customs authorities. In such circumstances, it is observed that the Customs authorities were wrong in not accepting the licence and goods were not liable to duty entitling the petitioner to claim refund of duty paid under protest. 33. Where transfer has been effected without notice to the transferee of alleged fraud, the concept of fraud vitiate everything is not applicable as licence was transferred for value arising out of importable transaction governed by any law. 34. The ld. DR. has relied upon a decision in the case of Nawab Sir Mir Osman Ali Khan v. Commissioner of Wealth Tax, Hyderabad, reported in 1986 (162) ITR 888 (S.C.). That appeal was filed by the assessee under Wealth Tax Act, 1957 before the Hon ble Supreme Court, which called for answers on two questions - (i) Whether, on the facts and in the circumstances, the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Referral Bench. This question may be agitated before the concerned Division Bench. 37. The Referral Bench has raised the question about the availability of benefit of legal maxim LEX NON COGIT AD IMPOSSIBILIA to the transferee of advance licence. This maxim means - the law does not compel a man to do that, which he cannot possibly perform . It is noted in the book written on legal maxim that a general rule, which admits an ample practical illustration that an impotentia excusat legem, where the law creates a duty or charge, and the party is disallowed to perform it, without any default in law, and has no remedy over there the law will in general excuse him. In the case of M/s. Special Steel Ltd. [2004 (163) E.L.T. 242 (Tri.-Mumbai)], it is noted that the quantity based advance licence scheme under Notification No. 204/92 is either a compulsory scheme or that it compels anyone to do the impossible. This maxim is to be read from the point of view of performance of an act by the transferee of licence to fulfil the condition, which is allegedly not discharged by the transferor but certainly not from the point of view of the applicability of Notification. Therefore, from that poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BAL, as the appellant is, in no position to that. Therefore, it is not correct to hold that the appellant has not been able to discharge the burden of proof case on him to claim the benefit of the Notification. Here in this exemption Notification the expression importer applies, to two persons - One is a licencee in whose name the VBAL has been originally issued and the other is a transferee of the licence. Various conditions of the Notifications may be required to be fulfilled by one, or other person or both. Condition No. (vii) alone governs the import made by a transferee licencee which is not disputed by Revenue to have been satisfied. Similarly, the nexus between the imported material and export produce is not required to be proved afresh by a transferee licencee, once the material is otherwise covered by VBAL/or DEEC. There is no doubt about it inasmuch as PS granules/moulding powder are covered by VBAL. Therefore, benefit of Notification is available [1996 (63) ECR, 111 (Tribunal) relied on (para 5.3.1)]. The aforesaid decision of the Tribunal has also been confirmed later by the Hon ble Supreme Court [2000 (120) E.L.T. A66)] and followed in several decisions viz. Plastchem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M Policy. For this reason, issuing VBAL or QBAL, DEEC, execution of bond, legal undertaking, monitoring of import and export item, fulfilment of export obligation, realization of export proceeds, discharge of bond and legal undertaking have all been vested with the licensing authority. Certain special powers have been given to the DGFT/or the licensing authority to exercise the same in public interest. The Customs officers, while implementing the Notification 203/92-Cus., cannot question or appear to question the decisions and actions of the competent authority in the said Directorate unless it is strictly permitted by the terms of the Notification. The plain reading of condition (vii) makes it abundantly clear that benefit of Notification is to be extended to a person other than a person to whom the licence has been issued, if there is an endorsement of transfer by the licensing authority both on the VBAL and the DEEC. Benefit of Notification, cannot, therefore, be denied to the transferee on the ground of breach of condition (va). The Customs Authorities cannot question the powers of the licensing authorities unless it is mentioned in the Notification. 43. Thus, in view of the af ..... X X X X Extracts X X X X X X X X Extracts X X X X
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