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2015 (8) TMI 56 - SUPREME COURT

2015 (8) TMI 56 - SUPREME COURT - 2015 (322) E.L.T. 402 (SC) - Exemption claim - import of goods against an advance licence - export obligation - Exemption under Notification No. 30/1997 - It is an admitted case that the raw material was used by the assessee itself for manufacturing the specified products. However, no exports were effected by exporting those goods so manufactured from the raw material that was imported duty-free. - Held that:- it is the case of the assessee that for certain bona .....

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le to pay the import duty which was payable, but for the benefit of exemption Notification No 30/1997, which was obtained by the assessee. - Decision in the case of Sheshank Sea Foods Pvt. Ltd. (1996 (11) TMI 67 - SUPREME COURT OF INDIA) followed. - Decided against the assessee.

It necessary to observe that the Government should bestow its consideration and make appropriate provision dealing with such situations. After all, the Exemption Notification No. 30/1997 has been issued to imp .....

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ate provisions to meet these types of eventualities. We are hopeful that the competent authority shall look into these aspects and cater for such situations as well so that unnecessary hardship is not caused to the bona fide assessees as well.

Insofar as charge of interest is concerned, we are conscious of the fact that as per the bond the assessee had agreed to pay interest @ 24% per annum. However, that would not take away our right to reduce the rate of interest if the ends of just .....

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r Arjun Krishnan, Adv. JUDGMENT A. K. Sikri, J. The respondent No.1 (hereinafter referred to as the 'assessee') had imported hot rolled non-alloy steel wide coils against an advance licence issued under the Duty Exemption Entitlement Certificate (DEEC) Scheme. The quantity of the said import was 2018.6 MTs. The imports were made on 03.03.1999 and 12.04.1999. At the time of imports, the assessee did not pay the import duty on the aforesaid materials taking umbrage under Notification No. 3 .....

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ps/coils totalling 2500 MTs. The value pertaining to these exports was also specified in the licences. The exports were to be effected within the time limits mentioned therein, which was 02.09.2001, but was extended up to 02.09.2004. 2) It is an admitted case that the raw material was used by the assessee itself for manufacturing the specified products. However, no exports were effected by exporting those goods so manufactured from the raw material that was imported duty-free. As per the assesse .....

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formance through their agents M/s. Shirdi Industries Ltd., Mumbai. M/s. Shirdi Industries Limited in turn arranged for third party exports of cold rolled non-alloy steel coils through M/s. Essar Steel Ltd., Hazira, Surat, a merchant manufacturer. A quantity of 58.865 MTs and 176.5 MTs were exported vide Shipping Bill Nos. 1000051316 dated 17.05.2000 and 1000048872 dated 10.05.2000. These exports were made to Bangladesh via Mumbai Port. Further a quantity of 510.515 MTs was exported to Nepal by M .....

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o be manufactured out of the imported raw material and, therefore, the exemption claimed under the aforesaid Notification was unjustified. The Revenue, thus, issued show-cause notice dated 30.03.2002 demanding the duty in the sum of 1,65,07,454 along with interest @ 24% from the date of clearance. The assessee submitted its reply bringing to the notice of the Revenue authorities the facts which have already been noted above. It was pleaded that the export through third party was as per Export-Im .....

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ESTAT has, vide order dated 11.03.2005, allowed the appeal by arriving at a conclusion that Director General of Foreign Trade (for short, 'DGFT') had passed an order making amendment in the licence issued under the DEEC Scheme which effectively changed the products. Amendment was also made in respect of nature of exports to be effected through third party exports. Therefore, when the DGFT had amended the licence permitting such an export through third party, it amounted to fulfilling the .....

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that the matter pertains to levy of import duty. The exemption from payment of export duty is provided by Notification No. 30/1997 dated 1.4.1997 where a specific condition is attached to the effect that 'exempt materials shall not be disposed of or utilized in any manner except for utilisation in discharge of export obligation or for replenishment of such materials and the materials so replenished shall not be sold or transferred to any other person'. He argued that when admittedly thi .....

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d since it was in terms of EXIM Policy, the assessee could not be fastened with any such liability. He also drew our attention to the proceedings which were taken out by the DGFT in this behalf. It was pointed out that DGFT had issued show-cause notice dated 20.10.2010 for initiating action for failure to complete the export obligation/failure to submit relevant information/documents. In this show-cause notice, the proceedings initiated by the appellant herein were also mentioned. The assessee h .....

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Ts. Therefore, only on this excess import, customs duty was payable, which was directed to be paid along with interest calculated @ 15% from the date of first import to the date on which last consignment of exports were effected by the assessee through third party. Predicated on this order, submission of Mr. Banerji was that since DGFT has also accepted the fulfillment of export obligation under the licences, there is no question of payment of any further import duties. 7) Another submission of .....

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Banerji argued that the said case pertains to the period prior to 1992 and there is a change in EXIM Policy now. On the other hand, he referred to another decision of this Court in Titan Medical Systems (P) Ltd. v. Collector of Customs, New Delhi (2003) 9 SCC 133 to submit that it should be treated as a case of sufficient compliance. 8) We have given our serious consideration to the respective submissions made by the learned counsel for the parties on either side. 9) Notification No. 30/1997 pr .....

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toms leviable thereon, including the additional duty leviable thereon under the Customs Tariff Act, subject to certain conditions mentioned in this Notification. In this behalf, we are concerned with condition Nos. (v) to (viii) as there is no dispute that other conditions have been satisfied. These conditions are reproduced below: "(v) that the export obligation is discharged within the period specified in the said certificate or within such extended period as may be granted by the Licensi .....

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within a period of 30 days of the expiry of period allowed for fulfillment of export obligation, or within such extended period as the said Assistant Commissioner of Customs may allow; (vii) exempt materials shall not be disposed of or utilized in any manner except for utilization in discharge of export obligation or for replenishment of such materials and the materials so replenished shall not be sold or transferred to any other person; (viii) that in relation to an Advance Licence issued to a .....

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) This Notification also contains definition of 'materials', which reads as under: "(i) "Materials" means - (a) raw materials components, intermediates, consumables, computer software and parts required for manufacture of resultant product specified in Part-E of the said certificate: Provided that the benefit of this notification shall apply to import of Acetic Anhydride, Ephedrine and Pseudoephedrine only against licences issued with the approval of Advance Licensing Comm .....

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ion in terms of para 7.4 of the EXIM Policy 1997-2000. It is not in dispute that the assessee was in possession of such an advance licence issued by DGFT and this licence was with actual user condition, namely, the material so imported was to be used by the assessee itself in its factory for manufacturing the items specified therein. As per Condition No. (ii), the assessee was required to execute a bond at the time of clearance of the imported materials to pay on demand an amount equal to the du .....

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ssee was supposed to produce evidence of discharge of export obligation to the satisfaction of the Assistant Commissioner of Customs within a period of 30 days of the expiry of the period allowed for fulfillment of the export obligation or within extended period as allowed. Stringent stipulation is contained in Condition (vii), which is very significant and relevant for our purposes. The respondent was not supposed to dispose of or utilize the exempt materials in any manner except for utilizatio .....

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product manufactured from that very raw material which is imported. This condition is admittedly not fulfilled by the assessee as there is no export of the goods from the raw material so utilised. Instead, export is of the product manufactured from other material, that too through third party. Therefore, in stricto senso, the mandate of the said Notification has not been fulfilled by the assessee. 13) In such a scenario, whether amendment of the licence by the DGFT allowing export obligation to .....

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e is obligated to meet the export obligation as contained in the licence issued by the DGFT. No doubt, this obligation in the export licence, read with conditions contained in Notification No. 30/1997, puts the onus upon the assessee to make the exports of the products produced from the material so imported. However, it is the case of the assessee that for certain bona fide reasons (as the bona fides of the assessee have been accepted by the DGFT), as the assessee was not able to export same ver .....

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d licences, worked to 2123.1538 MTs and the assessee had imported 2712.41 MTs, it resulted in excess import of 589.26 MTs. Therefore, only on this excess import, customs duty was payable, which was directed to be paid along with interest calculated @ 15% from the date of first import to the date on which last consignment of exports were effected by the assessee through third party. The DGFT, in its order, also mentioned that there was no misutilization of the raw material imported by the assesse .....

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note of the concerned provisions of the Act as well is reproduced below: "6. Learned counsel placed reliance upon a communication to all Collectors of Central Excise issued by the Central Board of Excise and Customs on 13-5-1969, on the subject of whether, in the event of the contravention of a post-importation condition of an import licence, it was open to the Customs authorities to confiscate imported goods under Section 111(o) of the Customs Act. The said communication stated that before .....

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itions of the licence relating to the use of goods after they are cleared from the customs charge. 7. Section 111(o) is the sheet-anchor of the respondents' case. It reads thus: "111. Confiscation of improperly imported goods, etc. - The following goods brought from a place outside India shall be liable to confiscation - xx xx xx (o) any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time be .....

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ed or disposed of in any other manner, had been disposed of by the appellants. The Customs authorities, therefore, clearly had the power to take action under the provisions of Section 111(o). 9. We do not find in the provisions of the Import and Export Policy or the Handbook of Procedures issued by the Ministry of Commerce, Government of India, anything that even remotely suggests that the aforesaid power of the Customs authorities had been taken away or abridged or that an investigation into su .....

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on were made part of the appellants' licences and, in that sense, a breach of the terms of the said exemption notification is also a breach of the terms of the licence, entitling the licensing authority to investigate. But the breach is not only of the terms of the licence; it is also a breach of the condition in the exemption notification upon which the appellants obtained exemption from payment of customs duty and, therefore, the terms of Section 111(o) enable the Customs authorities to in .....

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ture' and held that assembly of various components into finished machines (ultrasound scanners in that case) amounted to substantial manufacture and it was not necessary that manufacturing of substantial amount of component is required. Obviously, the issue was altogether different which has no bearing on the controversy involved in the present case. 19) Since the conditions of the exemption notification are not fulfilled and the law requires strict compliance of the exemption notification, .....

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