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MMTC Ltd. Versus Commissioner of Customs, Central Excise Service Tax And Customs, Visakhapatnam-II

2015 (12) TMI 1298 - CESTAT BANGALORE

Denial of the benefit of the exemption Notification No.32/2005-Cus. Dt. 08/04/2005 - nexus between the imported and exported goods - Difference of opinion - In view of the difference of views between the two Members, the following points emerge for consideration by a Third Member: - (i) Whether the appellants are covered by the Target Plus Scheme, read with the provisions of Handbook of Procedure, in respect of the imports of RBD Palmolein oil made by them as against the export of Rice and W .....

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s held by Member(Technical). - C/1750/2010-DB - Final Order No. 20188/2016 - Dated:- 4-2-2016 - Archana Wadhwa, Member (J) And Ashok Kumar Arya, Member (T) For the Appellant : Mr G Shivadass, Adv For the Respondent : Mr S K Singh, Commissioner (AR) ORDER Per Archana Wadhwa After hearing both the sides duly represented by Shri G. Shivadass, Advocate for the appellant and Shri S.K. Singh, Commissioner(AR) for the Revenue for a number of days, we find that the appellant is a public sector undertaki .....

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f penalty to the extent of 100% of the duty involved. 2. Before we go into the facts involved in the present case, we would like to refer to the Target Plus Scheme as also the notification in question, whose interpretation is involved in the present case. The said Target Plus scheme was introduced in the Foreign Trade Policy (FTP) in the year 2005. The said scheme is available to all Star Export Houses, which have achieved a minimum export turn over in free foreign exchange of ₹ 10 crores .....

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n by the Director General of Foreign Trade (DGFT) for import of any inputs, capital goods including spares, office requirements, professional equipment and office furniture provided the same is freely importable under ITC(HC) Classification of Export and Import items, as also for import of agricultural products listed in Chapter 1 to 24 of ITC(HS) Classification of Export and Import items except the items excluded therefrom. It is also important to mention that import of all edible oils classifi .....

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The said conditions are that the benefit of exemption is available only in respect of duty credit certificate issued under the said Scheme to a Star Export House on the basis of incremental growth in FOB value of exports made during the financial year 2004-05 over the exports made during the financial year 2003-04. Subsequently the said notification was being amended from time to time increasing the period of applicability of the same. The said duty credit certificate so issued to a Star Export .....

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tached to the said notification, "goods" means any inputs, capital goods including … .... ……. ...... and agricultural products listed in Chapters 1 to 24 of the First Schedule to said Customs Tariff Act. In furtherance to the implementation of the said Target Plus Scheme, consequential measures were made in the HBP (HBP for short) for the relevant period. In terms of the Chapter 3 Para 3.2.5 which relates to the Target Plus Scheme, goods allowed to be imported unde .....

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would mean goods imported with reference to any of the product groups of the exported goods within the overall value of the entitlement certificate" were deleted. As a result of the said amendment, the goods allowed to be imported were required to have a broad nexus with the products exported. For better appreciation of the said clauses, we reproduce the same:- Before amendment: 3.2.5. Target Plus Scheme I …… ……. II Goods allowed to be imported under this scheme .....

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he exported goods within the overall value of the entitlement certificate." Inserted in Handbook of Procedures (Vol.1)RE-2005 [HBPV1 (RE-2005)] is hereby deleted. 3. We also may refer to DGFT Policy Circular No.10(RE-2008)/2004-09 dt 05/06/2008 wherein it stands clarified that in terms of Para 3.7.6 of the FTP what all stands to be allowed for free imports - 1. Any inputs (having nexus with the exported products - Para 3.2.5 ofHBPV1), 2. … … 3. … … 4. … &h .....

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E-2005)/2004-2009, dated 5-10-2005 read with Policy Para 87.6 and Handbook of Procedure (Vol.1) Para 3.2.5 (II) broad nexus is to be maintained with Product Group in your case, your export products are covered under the Food category, you are required to maintain nexus with Food group of SION book, wherein you have the flexibilityto import any input listed in the relevant product group category of the SION Book. As dry fruits (including almonds, as in your case) are listed as one of the inputs u .....

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nt of the utilization of imported goods and abide bythe Actual Condition. Moreover there is no requirement of endorsing the name(s) of soon processor(s) in the DFCE/IPS scripts and you are at liberty to choose any processor to convert your goods into value added resultant product(s). Thus it is clarified that in your case, you are permitted to import Almonds (dry fruits) under the Target Plus Scheme and get the same processed/converted from any processor of your choice into possible resultant pr .....

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quot; and,therefore, the same cannot be dissociated from the words "input" and "use" mentioned in the Policy. The MOL has categorically stated that the addition in Para 3.2.5 (II) of the HBP is to facilitate the search for "inputs" and "use" and anyinterpretation so as to dissociate the import from the "inputs" and "use" in the export goods would make it ultra vires the FTP. The MOL has further stated that the words "inputs" a .....

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ot debarred from satisfying the authorities that there is a broad nexus between the intended import item as an input with the export product, both falling within the same product group. Ignoring to give effect to the words "inputs" in the beginning and "own use" towards the end in Para 3.7.6 of the FTP would mean to render a part of it redundant and would not be in keeping with the objective and framework of the scheme. 4. In the light of this, the Ministry of Law clarified t .....

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nputs" and "own use" in Para 3.7.6 of the Scheme. 5. The Ministry has accepted the aforesaid opinion of the Ministry of Law. Accordingly, import ofgoods against TPS certificates may be allowed keeping in view the said opinion discussed in paragraphs 3 and 4 above." 5. Further a circular was issued by the Customs being Circular No. 45/2007-Cus. Dt. 19/12/2007 clarifying on the scope of coverage of goods to be imported under Target Plus Scheme. Para 3 of the said circular is re .....

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se, the intended Input must have a relationship with the export product. Whereas SION will act as a prima facie evidence of'Inputs', the exporter is not debarred from satisfying the authorities that there is a 'broad nexus' between the intended import item as an 'input' with the export product, both falling within the same product group, it was also clarified that the holder of TPS certificate is permitted to Import an Item under the TPS and get the same processed into po .....

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scope of the expression "broad nexus" of the imports which are made against the exports. 7. Now, we can advert to the facts of the present case, which are undisputed. The appellant made exports of rice and wheat and procured the duty credit certificates from DGFT. Subsequently they imported Palmolein oil and claimed the benefit of the said Scheme and produced the duty credit certificates before the Customs authorities for the purpose of debiting the leviable duty of customs. The Reven .....

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have heard both the sides. The Commissioner has denied the benefit of the exemption Notification No.32/2005-Cus. Dt. 08/04/2005 on the following two grounds:- (i) Palmolien oil imported by the appellant does not fall under the category of "inputs" and hence the appellant has failed to fulfil the condition of broad nexus prescribed in terms of Para 3.2.5 of the HBP; (ii) The appellant has not satisfied the actual user condition in terms of Para 3.7.6 of the FTP since the imported goods .....

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gh the said notificationas also the Target Plus Scheme contained in the FTP does not prescribe any condition of nexus but the same is contained in Para 3.2.5 of the HBP. As such, he submits that issue of nexus cannot be held to be a mandatory condition for availing the benefit of the said scheme but in any case even if the broad nexus has to be established, the appellant is covered by the said Para 3.2.5 of the HBP. By drawing our attention to the said paragraph as it stood before the amendment, .....

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nd imported items fall under the same product group, they have to be held as having broad nexus, thus satisfying the condition as contained in Para 3.2.5 of the HBP. He further submits that the said para, prior to its amendment in the year 2007, specifically clarified and laid down a definition of broad nexus as both the items being falling under the same product group but even after the deletion of the said definition, the broad nexus element condition has to be established and the same can be .....

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t was held that the condition of broad nexus of imports with exports can be held to be satisfied if both the goods fall under the same product group. The Hon'ble High Court further held that there is no condition in the FTP that import goods must be inputs for export products and there is no stipulation of said inputs being physically present in the exported goods. The subsequent Circular dt 08/05/2007 issued by the DGFT emphasising on the said condition was held to be ultra vires. 9.3. He a .....

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issued by the DGFT. He submits that the said decision of the Hon'ble Delhi High Court was appealed against by the Revenue before the Division Bench and as per the decision of the Division Bench reported as UOI Vs. Indian Exporters Grievance Forum [2013(290) ELT 481 (Del.)], the condition of broad nexus has to be satisfied with reference to the product group available in Input and Output Norms. Accordingly, the Hon'ble Delhi High Court upheld the first Circular of the DGFT and struck dow .....

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f actual user, he submits that the goods have actually been used by them for getting the same manufactured from the supporting manufacturers, as job worker. As such, he submits that the said condition stands satisfied by them and in fact the adjudicating authority has also not adopted the said condition as a reason for rejecting their claim of exemption. The adjudicating authority has observed that even in terms of the notification in question, the merchant exporter is entitled to get the import .....

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to the said condition further expands the scope by laying down that where the goods are imported by a merchant exporter having supporting manufacturers, whose name and address is specified on the said certificate, the said goods may be utilised by the said supporting manufacturers. From this, he draws that there is no condition of manufacture prescribed in the notification. It simplisitor says that if the imported goods are to be further manufactured through the supporting manufacturers, even th .....

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es not amount to manufacture has referred to the provisions of Central Excise and the decisions of the Tribunal in respect of excise. He submits that in terms of Chapter Note 5 of Chapter 15, an artificial definition of manufacture stands provided when the goods are repacked from bulk packs. It was in this context the Tribunal in the case of Ammonia Supply Company [2001 (131) ELT 626 (Tri.)] held that when the goods are packed directly from the tankers, it cannot be considered to be a repacking .....

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xpanded by including certain process. As such, he submits that the definition given under the FTP is an inclusive definition and is required to be adopted. Inasmuch as admittedly 1 kg. packs have been manufactured by them through their supporting manufacturers and which have been further supplied to the Government of Andhra Pradesh for public distribution system, they have satisfied the said condition of actual user in the notification. Accordingly he prays for setting aside the impugned order a .....

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liquid form was pumped directly from the vessels to the storage points of their supporting manufacturers M/s. Ruchi Infrastructure Ltd., M/s. Acalmar Oils and Fats Ltd. and their other job workers for further packing of the same in 1 litre pouches. He submits that in terms of the Target Plus Scheme, the importer can import items for THEIR OWN USE OR THAT OF SUPPORTING MANUFACTURERS as declared in Aayaat Niryaat Form. By drawing our attention to the provisions of Para 3.2.5 of HBP Vol.I, he subm .....

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either an input nor is related to the exported goods, which was rice, wheat etc., the same should be held as having no nexus with the exported goods. As such, he submits that the imported goods is in no way related to any of the exported products and more specifically is not an input for the exported product, the condition of having nexus cannot be said to have been fulfilled. As regards the decisions of the Hon'ble Bombay and Delhi High Courts relied upon by the learned advocate, he submits .....

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d as under:- (a) In the first case the goods imported and exported have broad nexus in as much as the goods exported was Iron ore and the imported item was Roasted molybdenum concentrate which is the principal raw material and input in the manufacture of Ferro molybdenum. (b) In case of Essel Mining & Industries Limited in paragraph 29 of Union of India v/s Indian Exporters Grievance Forum, the observation of Single judge which was the matter of dispute in the said judgement has classifying .....

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expression broad nexus undertaken by the learned Single Judge." It implies that the word nexus has been taken as referred to a larger group of similar goods and not from exported goods itself only. Meaning thereby, that even if the goods imported is not directly relatable to exported goods it should be relatable to similar goods which has been exported. The product group as discussed in the Judgement of High court is mentioned in Hand Book of procedure Standard input output norms (duty exe .....

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which are used / required in the export product. The items allowed for the import in the licence shall be co-related with the description of the export product in the Shipping Bill by the exporter. Forexample,if the input allowed in the norms is relevant fabrics, only the specific types of fabrics i.e polyester or nylon used in the export product shall be allowed. Wherever a specific norm has been provided the same will prevail over the generic norm laid down, if any. If the application is base .....

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ut dry fruits) Maida/Atta/Flour Sugar/Liquid Sugar Veg. Cream/Fat Skimmed milk powder additive/Bakery ingredients Invert sugar/liquid glucose Emulsifier dry fruits Packing materials(BOPP/HDP/PP/LDPE) Paper and paper boards Relevant dry fruits E-107 Choco supreme(COCOA butter) Crude palm oil Palm made fractions E-122 Refined palm oil Crude palm oil Phosphoric acid Citric acid TONSIL bleaching earth E-127 Refined mustard oil Crude mustard oil Caustic lye Phosphoric acid Citric acid Coal/coke TONSI .....

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ed Palmolein Edible oil, FFA content 25% refers to import item Crude oil Phosphoric acid, Citric acid, Tonsil, bleaching earth . From the analysis of food products group wherein export goods and relevant import items are listed, it is categorically established that the broad nexus is between the food item exported in the above mentioned sub group exists with the item referred for importation in the particular sub-group. (c) E-5 has export item as biscuits with or without dry fruits, it refers to .....

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s there is separate heading for food items to be exported and separate heading for items to be imported which has broad nexus with the food items exported in their relevant sub headings. The interpretation of the two Hon'ble High Court judgements can not lead to an interpretation to import diesel coal/coke mustard oil phosphoric acid etc against export of biscuits which belong to E-5 of export product group and the items of import belonging to E-127 of the product group. Similarly the import .....

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submits that the appellant has no case and accordingly prays for upholding the impugned order of the Commissioner. 10.2. As regards the second condition of the goods being used by the importer himself, he submits as under:- In the present case M/s.MMTC have not used imported goods but received the goods, stored and got packed into 1 litre pouches of their job workers namely M/s.Ruchi Infrastructure Ltd, Kakinada and M/s.Acalmar Oil and Fats Limited, Kakinada, M/s.Cargil Private Ltd, Paradeep. In .....

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king, polishing, labelling, Re-conditioning repair, remaking, refurbishing, testing, calibration, re-engineering. Manufacture, for the purpose of FTP, shall also include agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining. Further Commissioner has relied on the Tribunal's decision in the case of Ammonia Supply Co. (2001 (131) ELT 626(T) wherein it was held that "the assessee was of getting ammonia in bulk pac .....

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ermed as manufacture. Further the above matter has been examined vide CBEC Circular No. 910/30/2009-CX dated 16.12.2009 wherein it was clarified that activity of transferring the goods from tankers to smaller packs cannot be said to be manufacture. 11. We have considered the submissions made by both the sides and have gone through the impugned order of the Commissioner. 12. After considering the submissions made by both the sides and after going through the impugned order passed by the Commissio .....

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Plus Scheme was formulated in Para 3.7.1. of the FTP for the year 2004-09 with an intention to accelerate the growth of exports, by rewarding the various star export houses. Such reward to the export houses was in the nature of the duty credit certificates to be issued by DGFT in the light of the incremental growths of exports. It is no doubt and admitted fact in the present case that the appellant is a star export house exporter and such duty credit certificates were given to them by the DGFT. .....

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imports are permissible as long as they have a broad nexus with the exported goods. 14. We find that Para 3.7.6. allows import of any inputs and capital goods including spares, office equipment, professional equipment and office furniture etc. and though the inputs enumerated therein which were freely importable could also be imported. In terms of the said policy paragraph, there is no condition laid down as far as the issue of nexus is concerned. Para 3.7.6 of the FTP provides for import of the .....

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t; with the export items. 15. We have seen the said paras in the HBP (reproduced in previous paras) which have undergone changes. As per the paragraph prior to 21/06/2007, apart from laying the condition of imported goodsshould have broad nexus with the exported items, also defined the expression "broad nexus". It stands clearly laid down that what is the meaning of broad nexus and how such a broad nexus has to be established between the imported items and the exported items. In terms .....

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said scheme has any broad nexus with the goods exported by them. The question remains as to how to arrive at the said broad nexus. Before we move further, we have to keep in mind that the expression used in the said paragraph is not only nexus but the same stands qualified by the expression 'broad'. As such, it is the broad nexus between the imported and the exported item which is to be looked into. After the amendment in Para 3.2.5 of the HBP, which explains that how the broad nexus ha .....

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changed and replaced by a circular dt. 05/06/2008 wherein the DGFT laid down a list of goods which may be imported under the said scheme. As regards the inputs, it was said that the same are importable if having any nexus with the export products - (Para 3.2.5 of HBP). Subsequently the CBEC issued a circular being Circular No.21/2007-Cus. dt. 08/05/2007 laying down that the expression "broad nexus" appearing in para 3.2.5 of the HBP cannot be disassociated from the words "inputs& .....

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input with the export item, both falling under the same product group. In the further paragraph of the said circular, it stands concluded that the import item will have broad nexus with the export item where the same is used as input in the export product and is required to be used as an input in the product exported for which Target Plus Scheme benefit is sought. The subsequent circular issued by the Ministry being Circular No.45/2007-Cus dt. 19/12/2007 further reiterated on the concept of bro .....

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ble High Court considered clause 3.7.6 of the FTP as also Para 3.2.5 of the HBP. It came to the conclusion that the Circular dt. 08/05/2007 issued by the Board restricting the imports only to the inputs to be used in the manufacture of the exports is ultra vires the policy and as such the same was quashed. For better appreciation of the High Court's decision, we reproduce paras 9 & 10 of the said judgment. 9. Now, it is notdisputed before the Court that the goods which have been imported .....

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tificate. There is no dispute before the Court that this requirement under the Handbook of Procedures has been dulyfulfilled. No submission to the contrary has been urgedbyCounsel for the Respondents. The fact that the goods imported were required by the Petitioner for its own use has not been disputed before the Court by Counsel for the Respondents. But the case of the Respondents is that the requirement which is stipulated in the circular dated 8 May 2007 is that there should not only be a bro .....

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ate that the goods which are imported must be inputs for the manufacture of the export product in relation to which the benefit of the Target Plus Scheme is claimed. What paragraph 3.7.6 requires is that the goods which are imported by the eligible exporter must be inputs and the inputs must be imported "for their own use", meaning thereby the use of the importer himself.This is also amplifiedby the requirement of the exemption notification dated 8 April 2005which stipulates that the g .....

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nt is sought to be introduced for the first time by the circular dated 8 May 2007. 10. The Foreign Trade Policy, it is well settled, is referable to the provisions of Sections 4 and 5 of the Foreign Trade Development and Regulation Act, 1992. The policy cannot be amended by an administrative circular. The circular does not in this case supplement the policy or fill up an interstitial space. The circular imposes a substantive condition at variance with the policy. Where the Central Government has .....

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tion notification in relation to imports covered by advance licences, the Union Governmentin its notification dated 10 September 2004 (Notification 93/04) has specifically defined materials to mean raw materials, components intermediates, consumables, catalysts and parts which the required for manufacture of resultant products. No such requirement was incorporated in paragraph 3.7.6 of the Foreign TradePolicy. In otherwords, thecondition that the inputs which are imported must be used in the exp .....

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icy and Customs notification dated 8 April 2005 (Customs Notification 32/05). 19. The facts of the case before the Hon'ble High Court have to be considered for the purpose of taking a decision in the present case. It is seen that the assessee in that case exported iron ore and obtained the duty credit certificates from DGFT. The same were sought to be used by the assessee for payment of duty of customs in respect of imports of Molybdenum concentrates. Admittedly, imports of Molybdenum concen .....

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d to be established between the exported goods and the imported goods. Whether the imported goods are further used in a product which might be having some element of nexus with the exported product is irrelevant. This becomes clear in the observations made by the Hon'ble High Court, who only dealt with the subject of exported goods vis-a-vis imported items and never took into consideration the fact of use of imported items into further manufacture of any other final product. The issue before .....

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down by the Hon'ble Bombay High Court that as long as the two products fall under the same product group, they have to be considered as broad nexus with each other. Admittedly in the present case, rice and wheat which were exported and the palmolein oil which was imported fall under the same product group of Food Products-E. Inasmuch as both the items fall under the same product group, we hold, by following the Hon'ble Bombay High Court's decision, that it would be entitled to the b .....

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stified keeping in view the overall objectives of the FTP, the further changes made by Circular dt. 21/06/2007 to restrict the import to only those goods that constituted an input in the exported product is indeedimpermissible. The condition is unduly restrictive and has the effect of negating the accrued benefit. The Court further observed that the subsequent Circular dt. 08/05/2007 issued by the CBEC and Public Notice dt. 21/06/2007 issued by the DGFT, in the garb of clarifying the term 'b .....

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ed to require an exporter to show that the goods imported should have a "broad nexus" with reference to any product group of the exportedgoods within the overall value of the entitlement certificate. The word "nexus" obviously refers to a largergroup of similar goods and not the very exported goods itself. Consequently the impugned circulars and notice that purported to "clarify" the term "broad nexus", i.e. the impugned circular dated 8 th May 2007, the P .....

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be viewed as unreasonable in the context. The impugned circular dated 8 th May 2007, the Public Notice dated 21 st June 2007, the further circular dated 19 th December 2007 and the amended para 3.2.5 of the HBP are accordingly quashed" 28. The writ petition is allowed to the above limited extent. The duty entitlement of the members of the Petitioner Society will be computed onthe above basis and the corresponding duty credit will be given to them by the Respondents within a period of twelv .....

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e goods exported is not following from the scheme.It observed that the expression broad nexus used in HBP, which has the word broad prefixed with nexus, has to be assigned the meaning given by DGFT itself in their letter dt. 01/08/2006. Accordingly the Court held that the nexus has to be maintained in terms of "product group" viz. the category of the products which is exported. If the import falls in the same category/group, it would be allowable. In relation to the exports of food ite .....

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items would have broad nexus with the exported goods as long as the same fall under the same product group. No contra decisions stand shown to us by the Revenue, in support of their plea that the imported items must be inputs for exported goods. 22. We also may deal with the contention of the learned AR drawing our attention to the Delhi High Court's decision wherein it stand observed that -"The word 'nexus' obviously refers to a larger group of similar goods and not the very e .....

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s would refer to larger group of similar groups. This obviously means that the goods of one product group. In a simple language, it can be observed that food items are allowed to be imported against the exported food items, though they may be different food items of different varieties. This seems to be the intent of the legislation, as reflected in the relevant laws enumerated above. The said two decisions of Hon'ble High Courts were taken note by the Tribunal in the case of Gimpex Ltd. Vs. .....

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he two items fall under the same product group, they have to be held as broad nexus. 23. It is well settled law that while interpreting a particular provision of law, the legislative intent has to be taken into account. The interpretation which furthers the legislative intent has to be adopted rather than an interpretation which defeats the same. The intent behind introduction of the Target Plus Scheme is clear from the objectives as contained in Para 3.7.1 of the FTP. The same stands introduced .....

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inputs which they would use in the exported products. In the absence of any such indication in the objective of the Target Plus Scheme, which is meant for promoting the exports, restrictive views cannot be adopted and obstacles cannot be raised, which would defeat the said objective of the scheme. 24. In view of the above discussion, we hold that inasmuch as the rice and wheat i.e. exported products and the palmolein oil i.e. imported item fall under the same product group i.e. E-Food products, .....

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pter 15, which provided a deemed manufacture concept by laying down that the repacking of goods from bulk packs to retail packs would amount to manufacture. By relying upon the Tribunal's decision in the case of Ammonia Supply Co. (supra) which laid down that packing of 1 kg. packs directly from the tankers would not be covered by the deemed definition of manufacture as appearing in Chapter Note 5 of Chapter 15, the Commissioner in the present case has held that inasmuch as the supporting ma .....

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at there is a definition of manufacture appearing in the FTP itself and it was not justifiable for the Commissioner to ignore the said definition and to examine the concept of manufacture in the light of the definition appearing in altogether different act i.e. Central Excise Act. He submits that if we go by the definition as it appears in the FTP, the activity of converting the liquid oil into 1 kg. pack would be covered by the said definition. 27. We have examined the definition in question. T .....

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not be transferred or sold as such. The same can be used by supporting manufacturers of the merchant exporter. It nowhere stands provided in the said condition that the use of the goods by the supporting manufacturers "must amount to manufacture". The processes carried out by the supporting manufacturers may or may not be covered by the definition of manufacture and as long as supporting manufacturers had undertaken some processes on the goods imported and such processed goods are sol .....

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adjudicating authority, on his own, is beyond the accepted legal position. Though no support of any decisions to hold that the legal provisions should be interpreted in the light of the language used therein and no extraneous condition can be introduced for the same is required but one such reference can be made to Hon'ble Supreme Court's decision in the case of Hemraj Gordhandas Vs. H.H. Dave [1978(2) ELT J 350 (SC)]. 28. We also find favour in the appellant's alternative submission .....

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ing, calibration, re-engineering. Manufacture, for the purpose of FTP,shall also include agriculture, aquaculture, animal husbandry,floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining. 29. The adjudicating authority has not considered the manufacture definition as appearing in the policy and after ignoring the same, has adopted the definition of manufacture as appearing in the Central ExciseAct. It is again well settled proposition of law that when the definiti .....

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arious judicial as also quasi-judicial authorities. 30. With this we proceed to examine the definition of manufacture as is appearing under the FTP. In terms of the said definition, manufacture means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name character or use and shall include … ... ... There cannot be any dispute that the subsequent portion of the definition is inclusive portion by referring to so .....

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the liquid cargo available in the tankers. As such, we hold that even if the aspect of the manufacture has to be examined, the appellant seems to have satisfied the said test. 31. In view of the above, we hold that inasmuch as the appellant has established the broad nexus between the imported item and the exported item and has also satisfied the condition of the Notification No.32/2005, they are entitled to avail the benefit of the Target Plus Scheme. Accordingly we set aside the impugned order .....

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are: a. that the goods imported have to satisfy the definition(meaning) of the wording 'goods' as given in the Explanation clause (i) to this notification; whether the subject goods qualify what the 'goods' means here; and b. that the goods are not to be transferred or sold. In case of the goods imported, the Explanation (i) to the said Notification says as below: Explanation (i) "goods" means any inputs, capital goods including spares, office equipment, professional eq .....

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rade Policy (FTP)'s Input-Output Norms (Duty Exemption Schemes) under the category 'E'. 35. The history of this case or the similar cases tell us that DGFT / Govt. of India tried to restrict importation of these inputs by issuing various circulars / public notice(s) No 9(RE-2007)2004-09 dt. 21/06/2007, DGFT Policy Circular No.10(RE-2008)2004-09 dt. 05/06/2008, CBEC Circulars No.21/2007-Cus dt. 08/05/2007 and No.45/2007-Cus. dt. 19/12/2007. The main conclusion of the decisions given b .....

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s a pre-condition of importation. In other words, the goods which are being imported under the Target Plus Scheme(TPS) by the importers, in this case the appellants viz. M/s. MMTC Ltd., have to qualify and pass the test of 'broad nexus' in respect of their imports with reference to the exports they had made earlier with reference to the 'broad nexus requirement' of paragraph 3.2.5 of the Handbook of Procedures - HBP. The Hon'ble Delhi High Court (decided on 24/02/2012) in the .....

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TP can reasonably be interpreted to require an exporter to show that the goods imported should have a "broad nexus"with reference to any product group of the exported goodswithin the overall value of the entitlement certificate. The word "nexus" obviously refers to a larger group of similar goods (emphasis supplied) and not the very exported goods itself. Consequently the impugned circulars and notice that purported to "clarify" the term "broad nexus", i.e .....

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t that had accrued to the exporters which cannot but be viewed as unreasonable in the context.The impugned circular dated 8 th May 2007, the Public Notice dated 21 st June 2007, the further circular dated 19 th December 2007 and the amended para 3.2.5 of the HBP are accordingly quashed." 35.1. Here I would like to draw attention where the learned Single Judge in above quote refers to the word 'nexus' and says that the word 'nexus' obviously refers to a larger group of simila .....

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s the meaning of nexus as 'a connection; a bond, a link'. The learned advocate of the appellant has impressed upon that this link is sourced from Foreign Trade Policy (FTP): Input-Output Norms [Duty Exemption Schemes] - 2004-09 (Vol.2) - where FOOD PRODUCTS have been mentioned in its Section E. He says the imported item i.e. RBD Palmolein appears at E-122 in the column of Export items and they have exported rice, wheat and other things; rice and wheat are at the Sl.No.E-38 in the column .....

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tem Import item Name Quantity Name Quantity allowed E-38 Rice / Wheat / Chicken Biryani / Vegetable Biryani / Vegetable Pulao / Zeera Rice 1. Canvas / Jute 2. LDPE / HDPE / PP Granules 3. Printing Ink 4. Art Paper E-122 Refined Palmolein Oil (Edible grade) FFA content 0.25% 1. Crude Palmolein oil 2. Phosphoric acid 3. Citric acid 4. TONSIL Bleaching earth Above reproduction gives an indication that what could be the item(s) of import having a 'nexus' with the item(s) of export as per For .....

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d that against export of Rice / Wheat, one can import 1. Canvas / Jute 2. LDPE / HDPE / PP Granules 3. Printing Ink 4. Art Paper and against export of Refined Palmolein Oil (Edible grade) FFA content 0.25%, one can import 1. Crude Palmolein oil 2. Phosphoric acid 3. Citric acid 4. TONSIL Bleaching earth However for present purposes, we need to only see if between the items of export (Rice / Wheat and item of import (RBD Palmolein Oil) broad connection / nexus could be found / established. It is .....

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ce / Wheat), could have some kind of direct or indirect nexus / link / connection for production or manufacture or presentation, preparation, marketing, packing, sale and so on . 36.2. When we see para 3.2.5 of HBP [Handbook of Procedures (Foreign Trade Procedures)], a part of Foreign Trade Policy (FTP), at Clause II, it says broad nexus would mean goods imported with reference to any of the "product groups of the exported goods" within the overall value of the entitlement certificate. .....

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I. … … … IV. … … … V. … … … VI. … … … VII. … … … VIII … … … It uses the wordings 'product groups' . It is pointed out that the 'product groups' is a plural indication of the items, within the category of 'Food Products', there are many product groups. One cannot say that for the purpose of imports against an export item under TPS (Target Plus Schem .....

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-69) - Instant Food Mixes (E-2) - Pulses (Urad dal) (E-3) - Fresh fruits / vegetables (E-109) - Fruit slices / pickles/ fruit drinks / fruit jams / fruit juices / pulps / concentrates (E-11, E-16, E-17, E-18) - Different kinds of oils - Refined- Rice Bran Oil, Soyabean Oil, Palmolein Oil, Sunflower Oil, Mustard Oil, Rapeseed Oil, (E-116, E-121, E-122, E-124 E-127, E-128) - Dry fruits - Cashews walnuts, apricot ( E-8, E-51) - Varieties of Coffee / tea (E-10, E-27, E-28 etc.) - Different kinds of .....

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emp seeds / safflower seeds / sesbenia seeds / sorbitol (E-93, E-102) Considering such a wide variety of items in the above list, one can certainly say that there are more than one product groups in this list of FOOD ITEMS which have been named under Foreign Trade Policy's Input-Output Norms in Section E as "FOOD PRODUCTS". Further by exporting one or two food items one cannot claim that he/she is eligible to import any item of import or export from this whole list of items [E-1 to .....

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ly what is the direct or indirect relation or the link between the exported item and the imported item. When both the exported item(s) (rice & wheat) and the imported item (RBD Palmolein) happen to be just 'food items', one cannot conclusively say that, that is why, they have broad nexus with each other. Using the words quoted by Hon'ble Delhi High Court in the case of UOI Vs. Indian Exporters' Grievance Forum (supra), we can say that to claim the benefit of the Notification .....

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us cannot be so liberally construed as to mean that where two or more goods of different product groups are exported by an exporter for obtaining TPS certificate from licensing authority, he need not establish any nexus between some of exported goods and inputs imported under the Target Plus Scheme and that it is enough for him to establish a broad nexus between imported goods and any one of different products exported by him. It is pointed out that CESTAT, Bangalore have in the case of M/s. GIM .....

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inter alia held as below:- 16. What emerges from the above findings of the Hon'ble High Courts is that the Policy provisions as interpreted by the Hon'ble High Courts did not restrictively require the assessees, (for exemption under Notification No. 32/2005-Cus.) to prove that the goods imported by them were usable in the very products which were exported by them for obtaining the TPS certificates. It was enough for them to show that the c.c. copper rods imported by them could be used as .....

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ertificates to GL and SE specified therein groups of export products, such as "Engineering Products" and "Chemical & Allied Products", each being a "larger group of similar goods". The Hon'ble High Court's judgments cannot be understood as having so interpreted the Policy provisions as to place any fetter on this power of the licensing authority (DGFT). In the para 21 of the said order, the Tribunal, inter-alia, concludes as below:- 21. For the reasons s .....

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ive Export Product Groups; (iii) .. … … (iv) .. … … (v) .. … … (vi) .. … … (vii) .. … … It is pointed out here that above order of this Tribunal did take note of the Hon'ble Delhi High Court's decision in case of UOI Vs. Indian Exporters Grievance Forum (decided on 24/02/2012) quoted earlier, where 'broad nexus'criteria used in the Handbook of Procedures (HBP) was found meaningful and also stated therein that t .....

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ort items from Sl.No.E-1 to E-128 does not mean that exporter of any food item can import any of the import items mentioned therein completely ignoring the wordings "broad nexus" and thus making these wordings 'broad nexus' superfluous as if they carry no meaning and use for the Foreign Trade Policy makers and other stake holders. The importer has to honour his/her responsibilities and his/her items of import therefore need to undergo and pass the test of 'broad nexus'. .....

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who is registered under Target Plus Scheme(TPS). There may be certain food items which are exported and there could be some food items which are imported by a person registered under Target Plus Scheme, but both these items (of export and import) have to establish 'broad nexus' with each other in terms of the orders of High Courts of Delhi and Mumbai referred in this order. One cannot indiscriminately allow an importer under TPS (Target Plus Scheme) to import any kind of food item, when .....

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9; of FTP; Input-Output Norms. 37. The learned Commissioner(AR) appearing for the respondent namely Commissioner of Customs, Visakhapatnam vehemently argues that the wordings 'broad nexus' must not be allowed to stretch so much that one imports under TPS (Target Plus Scheme) anything under the sun from a small needle to a big ship. Learned Commissioner(AR) argues that the appellant has exported items like iron ore, chrome ore, Manganese ore, rice, wheat, Pig iron, blast furnace, granulat .....

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of Notification No.35/2005-Cus saying that there has been a broad nexus with the imports and exports in the said case. In the present case, the appellant exported rice /wheat and have imported RBD Palmolein. The learned advocate for the appellant says that both are under the category of food. But by describing and categorizing these two as just member of wide 'food group', one cannot say that these two have judiciously passed the test of 'broad nexus'. What is this 'broad nex .....

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. rice and wheat. As quoted earlier in para 35, in terms of the decision of the Hon'ble Delhi High Court in case of UOI Vs. India Exporters' Grievance Forum (supra), the goods imported at least need to have a broad nexus with the larger group of goods similar to the exports made. In this case, the required broad nexus of the import item (RBD Palmolein) has not been found established with even the larger group of goods similar to the export items (Rice & Wheat). In order to fulfill th .....

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eat on one hand (export item) and RBD Palmolien (import item) on other hand, though are member of wide 'Food Groups', cannot be called to have 'broad nexus'. 39. It has been mentioned earlier that in the Section E of FTP: Input-Output Norms, "Food Products" are mentioned. It is again to be noted that in Section E, there are totally 128 serial numbers E1 to E128; we can also call them sub-groups. But they (E1 to E128) being a large number of categories mentioning 128 exp .....

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ould be entitled to import under the Target Plus Scheme(TPS) any of the import items mentioned against the export items in the Sl.Nos.E1 to E128 of 'Food Products' even without bothering about and without following the yardstick and condition of the wordings "broad nexus". The said importer cannot say that he/she has qualified 'broad nexus' unless he/she is able to clearly establish the said 'broad nexus' byproducing the necessary facts that there is certainly a .....

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er it is agreed that whatever imports the appellant made, they have made the required use, they were supposed to use as per the requirement of the Policy to claim benefit of Notification No.32/2005-Cus. The import item namely RBD Palmolien, the appellant imported in bulk; they converted the same with the help of supporting manufacturers into the retail packings which they supplied to Andhra Pradesh Government Corporation for distribution under the Public Distribution Scheme. In other words, with .....

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e provisions of the Foreign Trade Policy [Para 3.2.5. - Target Plus Scheme of Handbook of Procedures] and the decisions of the Hon'ble Delhi High Court, Hon'ble Bombay High Court and this Tribunal quoted above and to cover their imports under the meaning and definition of "goods" (as 'imports') to become eligible for the benefit of Notification No.32/2005-Cus. dt. 08/04/2005. 41.In the light of the above observations, considering the decisions of Hon'ble Delhi High .....

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