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TMI Blog2005 (9) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfy the condition of the Notification or the transferee of the licence? 3. The facts involved in the appeal in a nutshell may be stated as follows. (a) The appellants are a partnership firm, inter alia, engaged in the business of trading and import of various items, including Poly Propylene wide spec. They have acquired and/or purchased transferable Value Based Advance Licences (hereinafter referred to as "VBAL"), including Licence No. PK 2049579, dated 19-1-1993, which was originally issued in the name of M/s. Amar Tara Exports, New Delhi, and which was, inter alia, valid for import of Poly Propylene wide spec. The said Licence was purchased by the appellants vide transfer letter dated 20-4-1994. Accordingly, the appellants have imported a consignment of Polypropylene wide spec vide Bill of Entry No. 881, dated 30-3-1994 against the said Licence and the same was allowed duty free clearance in terms of Notification 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 Rs. 16,74,702/-should not be demanded and recovered from them in terms of proviso to Section 28(1) of the Cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tariff Act, 1975 (51 of 1975) and from the whole of the additional duty leviable thereon under Section 3 of the said Customs Tariff Act, subject to the following conditions, namely :- (i) that the materials imported are covered by a Value based Duty Exemption Entitlement Certificate (hereinafter referred to as the said certificate), issued by the Licensing Authority in the form specified in the Schedule annexed to this Notification : (ii) that the importer at the time of clearance of the imported materials- (a) produce proof of having executed a bond or a legal undertaking before the Licensing Authority concerned, for complying with the conditions of this Notification, and (b) makes a declaration before the Assistant Commissioner of Customs being himself to pay on demand an amount equal to the duty leviable but for the exemption, on the imported materials in respect of which the conditions specified in this Notification 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 Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er than licencee, such benefit shall be allowed against the said licence and the said certificate only if it bears endorsement of transferability by the Licensing Authority; Provided that benefit of this Notification shall not be allowed to a transferee of the licence for import of Acetic Anhydride except where licence is endorsed for transferability before 24th November, 1993, and is transferred to an actual user who undertakes to use the Acetic Anhydride in his own factory. (viii) Notwithstanding anything contained in conditions (vi) and (vii) above, the endorsement or transferability or disposal of materials shall be allowed in respect of licences issued for the export of all kinds of writing instruments (including gift sets and refills/nibs) on fulfilment of export obligation only in favour of manufacture of writing instruments. Explanation. - In this Notification - (i) "Export and Import Policy April, 1992 - March, 1997" means the export and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t obligation is discharged. In such a situation, Condition (ii) has to be complied with. (d) Condition (ii)(a) need not be satisfied if the goods are imported after the discharge of export obligation imposed by the advance licence. In other words, the moment the export obligation is discharged, by virtue of the proviso to condition (ii), condition (ii)(a) and (ii)(b) are dispensed with. 8. (a) Conditions (iii) of the Notification No. 203/92-Cus. requires the production of the DEEC at the time of import of the goods. The proviso to the said condition states that the benefit of the Notification shall be extended only after a debit entry in the said certificate. (b) Condition (iv) of the Notification states that the goods are to be imported through specified ports. 9. Condition (v) of the Notification requires the fulfilment of export obligation within the period specified in the DEEC or within the extended period as may be extended by the licensing authority. It also provides that 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 materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit. (f) Thereafter, when the transferee imports the goods on the basis of the transferred licence/certificate, the condition (v) is deemed to be satisfied. 14. If the Customs Department alleges that the endorsement of transferability has been obtained by fraud or misrepresentation, then, it must be proved by them. It is a settled law that the onus is on the person who alleges fraud has been committed. 15. The principle that fraud vitiates everything is not applicable in respect of third party rights created by bona fide transaction". 16. Notification No. 203/92-Cus. grants complete exemption from payment of basic customs duty and additional duty of customs (CVP) in respect of goods imported against Value Based Advance Licence (VABAL) issued by the Director General of Foreign Trade (DGFT). 17. The DGFT makes the licence transferable by endorsing on the licence, after the licence-holder discharges the export obligation as stipulated in the licence, by exporting the goods mentioned in the licence 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enied by the Department. 7. The proviso to Section 28(1) of the Customs Act is applicable only when there is a suppression of facts or wilful mis-statement by the importer or his agent. So long as there is no suppression of facts or wilful mis-statement, the proviso to Section 28(1) cannot be invoked against the transferee. Hence, the demand is barred by limitation where notices have been served beyond six months from the relevant date. 18. The following are the contentions raised by the Customs Department : (a) the benefit of the exemption is available only on fulfilment of the conditions stipulated in the Notification; (b) the conditions have to be fulfilled by the importer who is claiming the benefit of the exemption; (c) the condition (v)(a) of the Notification No. 203/92-Cus. is not fulfilled. (d) the exporter (i.e. the original licence-holder, to whom the licence has been issued by the DGFT) has availed the Modvat credit on the inputs used in the manufacture of goods exported. Hence, the imports effected by the present importer (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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uting the bond if the licence-holder has completed the export obligation. Part-2 is re-produced below : PART - 2 (EXPORT) (This consists of........ pages) Sl. No. ... (EXP) Date of issue, Port of Registration ... Issued to ........ .......................................... (name and full address of the licencee) .......................................... Materials imported against Licence No. ............. dated ............ issued by............... to the above importer and covered by the list of materials specified under part 'C' of this certificate would be eligible for exemption from Customs duties subject to the conditions specified in the Notification of the Government of India, Ministry of Finance, Department of Revenue No. 203/92-Customs, dated 19th May, 1992. The importer shall make the exports in terms of the said Notification within ............. months from the date of clearances of the first consignment of import. A Bond/Legal Undertaking, in terms of the said Notification, for Rs. ............ shall be executed with ............... (licensing authority), before clearances of the goods from the Customs. Signature Seal of licensing authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ign Trade issued the demand notices dated 12-10-2001 advising the petitioners to pay to the Customs Department customs duty on the unutilized imported materials along with interest thereon. If the Joint Direct General of Foreign Trade is not treated as the proper officer for the levy, assessment and collection of customs duty and if the letters dated 14-2-2001 (Annexure "B" colly.) written by the Deputy Commissioner of Customs calling upon the Bank for encashment of the bank guarantee are not treated as show cause notices or demand notices from the proper officer for the purpose of levy, assessment and collection of Customs duty, there would be no outstanding demand from the Customs Department to the petitioner, which is not the case of the respondent authorities. The term "proper officer" has to be read in conjunction with the definition of "case" which includes proceeding under the Customs Act as well as under any other Act. Since the Import Policy framed under Section 5 of the Foreign Trade Act and Sections 7 to 9 of the Said Act also provide for issuance of licence, which enables the licence holder to avail of exemption from payment of Customs duty on import of materials to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the opinion that the controversy raised in the reference was covered by the decision of the Full Bench of the said High Court in CST v. Shankar Lal Chandra Prakash where it was held that the certificate in Form III-A was only a prima facie evidence of the fact that the goods had not been sold to a consumer. The Division Bench of the Allahabad High Court was further of the opinion that certificate was not conclusive evidence and the department could go behind the certificate and if it found that the goods had not been resold in accordance with the certificate given in Form III-A and had been consumed, in such a case the department could ignore the certificate and levy tax on the selling dealer. (d) Accepting the contention of the assessee and setting aside the decision of the High Court, the Supreme Court held as under : "25. The questions involved in this case are whether by furnishing certificate in Form III-A and the details of such certificate given in Form IV, the selling dealer got exemption and Rule 12A created an irrebuttable presumption i.e. that no further evidence is required in this matter to prove that the goods were sold to a dealer for resale in the same conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the case at hand, a statutory authority that had jurisdiction to pass such an order has passed the order. In addition there is no provision for appeal, which goes to show that this is part of the substantive law and now procedural law. This order is conclusive for all purposes, as the above two stated elements clearly go out to show. No appeal has been provided for depicting the will of the legislature to make the order of such authority final. 61. In State of Madras v. Radio and Electricals, it has been held that satisfaction once reached in absence of any provision, review of such an order is not permissible". The above legal position laid down by the Supreme Court has been consistently followed by the various High Courts as in the following judgments :- (a) Bangalore Motor Accessories v. DCCT - 1981 (47) STC 54 (Kar.) (b) Tilakraj Mediratta v. State of Orissa - 1992 (86) STC 543 (Ori.) "6. ...According to the department, if the goods have not been utilized for the purpose indicated in the declarations, deductions to the selling dealer is not to be allowed. In our view, the stand is fallacious. It is not for the selling dealer to go after the purchasing dealer to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal in ITC is reported in 1998 (104) E.L.T. 151. The Tribunal in paras 31 and 34 held as under : "31. ....it would be open to the Department to go behind the printed prices and find out the effective prices at which the retailers may sell the packages to consumers and treat such prices as the printed prices for the purpose of determining the slab applicable for the purpose of determining the rate of duty applicable. 34. This interpretation, according to the Learned Counsel for the appellant, involves substitution of words of the Notification. We have already indicated that there is no substitution of words as alleged. It is only a question of fully comprehending the language of the Notification in the light of the scheme of the Notification. The view we have taken of the intendment and import of the Notifications is in accordance with the prima facie view expressed by the High Court of Calcutta in the Writ Petition filed by ITC challenging the show cause notice." The view taken by the Tribunal was reversed by the Supreme Court in ITC v. CCE - 2004 (171) E.L.T. 433 (S.C.). After referring to the decisions of Radio & Electricals and Chunni Lal Parshadi Lal in para 45, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department can proceed under Section 132 of the Customs Act, 1962 against the exporter for misrepresentation, but cannot demand duty from the importer/transferee. 27. At this stage, the following observation of the decision of Bombay High Court in Bombay Chemicals Pvt. Ltd. v. Union of India - 1982 (10) E.L.T. 171 is relevant and reproduced below : "17. ...The Directorate General is a high powered Officer familiar with the production of various articles in the country and has issued the certificate after ascertaining the requisite facts. The certificate cannot be brushed aside merely because the petitioners have made a tall claim in their advertisement. In the elucidation supplied by the Directorate General, it is made crystal clear that the pyrethrum flowers are grown on the small scale in the country on the hill slopes of Kashmir and Nilgiri and that production is for the purpose of research and is not commercially used. In view of the clarification, it is impossible to accept that the claim made by the petitioners in their advertisement was correct and, therefore, the certificate given by the Directorate General was vitiated. In my judgment, it was not open for the authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 206/63-C.E. This Notification granted exemption to iron and steel products falling under 26AA(ia) of the old tariff, if such items are made from re-rollable scrap on which appropriate amount of excise duty has been paid. The excise department contended that the assessee is not entitled for the exemption since the re-rollable scrap has been purchased by the assessee from Hindustan Steel Ltd., who has not paid excise duty on the re-rollable scrap. The High Court while holding that assessee is entitled to the exemption, held as under : "13. It would be intolerable if the purchasers of manufactured goods were to be required to ascertain whether Excise Duty on the manufactured goods had already been paid by the manufacturer before the sale of such goods or not. Purchaser would have no means of knowing it. Hundreds and thousands of purchasers of such goods are made and in no case can any attempt be made by the purchaser to know this fact from the manufacturer........." 14. ...... The exemption was, therefore, available to the petitioner even if by the mistake of the Hindustan Steel and/or of the Excise Officer, the duty on re-rollable scrap had not actually been paid by the Hindus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resume that the export obligation had been fulfilled without availing of input credit and consequently the condition (v)(a) of Notification No. 203/92-Cus. has been fulfilled and therefore he is entitled for the exemption. 30. (a) Assuming that the original licence-holder has committed fraud and obtained the transferability by mis-representation, even then the rights created by the licence in favour of the present importer is valid. (b) Generally there is a finality attached to every transaction - whether under a contract or otherwise. The general principle is 'fraud vitiates everything' affects the finality attached to a transaction. However, such a transaction is voidable and not void ab initio. In other words, the person on whom fraud is committed i.e. the person who is defrauded has the option of treating the transaction as binding or disown the same. (c) In East India Commercial Co. Ltd. v. CC - 1983 (13) E.L.T. 1342 (S.C.), the contention of the Revenue was that the licence has been obtained by the importer by mis-representation and hence, the licence issued to him was non est in the eyes of law. This contention of the Revenue was rejected by the Supreme Court. It was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Bombay High Court in Taparia Overseas - (a) The very issue has been decided by the Bombay High Court in Taparia Overseas (P) Ltd. - 2003 (161) E.L.T. 47 (Bom). After referring to various decisions and the book titled 'Keer on Law of Fraud and Mistake', it is held as under :- "It is thus no doubt true that as a general rule, if a transaction has been originally founded on fraud, the original vice will continue to taint it, and not only is the person who has committed fraud is precluded from deriving any benefit under it, but an innocent person is so likewise, unless there has been some consideration moving from himself. In the cases at hand, it is not in dispute that all the petitioners had obtained licences for valuable consideration without any notice of the fraud alleged to have been committed by the original licence holders while obtaining licences. If that be so, the concept that fraud vitiates everything would not be applicable to the cases where the transaction of transfer of licence is for value without notice arising out of mercantile transactions, governed by common law and not by provisions of any statute." (b) This decision was followed by the Bombay High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was answered in favour of the Revenue holding that the property belonging to the assessee for the purpose of inclusion in his net wealth. In the instant case, the transfer of licence has been effected for valid consideration and following the procedure laid down under the Notification. This is not a case of transfer of immovable property so as to apply the aforesaid decision relied upon by the Department. The decision would not help Revenue. 35. It is already noted in the preceding paragraph that a licence is to be treated as goods as held by the Hon'ble Supreme Court in the case of M/s. Vikas Sales Corpn. Nothing remains there to be performed by the transferor in effecting the transfer in favour of the transferee since it bears the endorsement of transferability by the Licensing Authority. 36. The ld. JDR further relied upon the following decisions :- (a) Air Control & Chem Engg. v. CCE [1994 (72) E.L.T. A73 (S.C.)] (b) Creative Cosmetics v. CCE [1993 (63) E.L.T. 348)] To stress on the point that fresh evidence is known to the Department only after detailed enquiry and investigation, as such, the claim is not time barred. The proposition laid down in the two rulings r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in Bharat Pulverzing case. The case in Bharat Pulverizing Ltd. has been stayed by Mumbai High Court. 39. In Goodluck Industries v. Commissioner of Customs, Calcutta, reported in 1999 (108) E.L.T. 818 (Tri.), a similar issue as in the case on hand confronted the Bench and the same has been resolved by construction of the words in the Notification as well as in the conditions by giving effect of the literal meaning. The observations of the Bench with regard to the Notification No. 203/92 and its conditions are extracted hereunder :- "Bond/Legal undertaking of the declaration has to be executed by the person (importer) who is to discharge the export obligation i.e. it has to be a person in whose name the licence stands i.e. before the licence is made transferable to another person. In other words, condition No. (ii) of the Notification does not concern a transferee i.e. the appellant herein. Condition Nos. (iii) & (iv) are purely procedural and not in controversy as well. Condition No. (v) is to be fulfilled by original licence holder in whose name the licence stands because he has to fulfil the export obligation and he alone is in a position to know whether Modvat credit/proform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered and the finality reached, the same is enforceable. 40. The similar issue came before the Supreme Court once again in the case of M/s. Titan Medical Systems Pvt. Ltd. v. Collector of Customs, New Delhi [2003 (151) E.L.T. 254 (S.C.)]. It is observed that "once an advance licence was issued and not questioned by the Licensing Authority, the Customs Authorities cannot refuse exemption on an allegation that there was any misrepresentation. If there was any mis-representation, it was for the Licensing Authority to take steps in the behalf". 41. In the case of M/s. Marmo Classics v. Commissioner of Customs [2002 (143) E.L.T. 153 (Tri.-Mumbai)], the Tribunal, while examining the scope of DEEC Scheme under the EXIM Policy in respect of advance licence, has held that the Commissioner has no right to go beyond the licence and sit in judgment over the Licencing Authority. Further, it is observed that a licence issued is valid till it is cancelled. It is confirmed by the Supreme Court vide its judgment reported in 2003 (152) E.L.T. A85 (S.C.). 42. As seen from the material on record, the Duty Exemption Scheme, which is part of the EXIM Policy 1992-97, is administrated by the Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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