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2016 (2) TMI 246 - DELHI HIGH COURT

2016 (2) TMI 246 - DELHI HIGH COURT - 2016 (336) E.L.T. 630 (Del.) - Import of duty free goods for manufacture and export - Non fulfilment of the export obligations under the Import Export Pass Book Scheme - Notification No.117/88 - Held that:- the Court is of the view that the show cause notice dated 24th August, 1991 alleging violation of non-fulfilment of the export obligation by the Petitioner as per Notification No. 117/88-Cus., dated 29th March, 1988 was misconceived as there was no obliga .....

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ion seeking the quashing of an order dated 19th May, 1998 passed by the Customs Excise & Gold (Control) Appellate Tribunal, West Block-II, R.K. Puram ( CEGAT ) dismissing the Petitioner s Appeal No. C/446/92-B2. By the said order, the CEGAT upheld the orderin- original dated 24th January, 1992 passed by the Additional Collector of Customs holding that the Petitioner had not fulfilled the norms in terms of the Notification No.117/88-Customs dated 29th March, 1988 in respect of fulfilment of t .....

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rt product. Para 257 (2) of the Import & Export Policy stated that the exemption under the Import Export Passbook issued under the Scheme would be governed by the Department of Revenue Notifications as reproduced in Appendix 14-B and 13-B. In terms of the Scheme, if an exporter had a firm contract, it could approach the licensing authority for grant for benefit of import of raw materials free of duty which would then be required to be put to use to produce the resultant product for export. 3 .....

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he preceding three licensing periods plus 25 per cent thereof, or (ii) the best years exports of those products, in any of the preceding three licensing periods plus 10 per cent thereof, whichever is more. These exports will be stepped upto 1-1/2 times to arrive at a figure which may be termed as the base exports. The maximum import entitlement would be worked out by applying the relevant import entitlement rate of Appendix-14-A, on this base exports. The exports referred to in this sub-para wil .....

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9(3) above. Where the Pass Books are to be issued on the basis of past domestic turnover, the export obligation will be fixed in the inverse ratio by applying the import entitlement rate of the relevant export product given in Appendix 14-A to the c.i.f. value of the licence in question. In cases where an eligible manufacturer-exporter desires to obtain a Pass Book licence for the related product in accordance with the provisions laid down in Para 260 above, the export obligation against such li .....

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ining 100% natural silk by weight. O.4(i) 50% (ii) Natural silk ready-made garments, hosiery and knitwear containing less than 100% but not less than 85% natural silk by weight O.4(ii) 40% (iii) Natural silk ready-made garments, hosiery and knitwear containing less than 85% but not less than 50% natural silk by weight. O.4(iii) 30% (iv) Natural silk ready-made garments, hosiery and knitwear containing less than 50% but not less than 20% natural silk by weight. O.4(iv) 20% 6. The Petitioner state .....

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ed on record. The licence dated 13th December, 1988 mentions at the outset that the FOB value of the export had to be ₹ 20 lakhs. The description of the goods permitted to be imported reads 1500 kgs. of Mulberry raw silk of any Grade other than Dupion Yarn and the approximate value C.I.F. of the import is indicated as ₹ 10 lakhs. The licence was valid for 18 months from date of issue. The limiting factor for the purposes of clearance for customs was indicated as quantity and value bo .....

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ue, total customs duty and the endorsement of the customs officials thereon. The quantity of the raw mulberry silk imported was indicated as 1424.82 kgs and the CIF value of the goods imported was shown as ₹ 998997+ landing charges ₹ 9990 = ₹ 10,08,987. 9. Part F of the licence spelt out the export obligations. There were four columns. The first one showed the serial number; the second one was titled Description under which was stated: natural silk pure silk embroidered readyma .....

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uld have been exported in the form of natural readymade garments utilising such imported goods. That, in fact, is the crux of the dispute in the present case. 10. The Respondents took the stand that the Petitioner had failed to satisfy the obligation in terms of Notification No. 117/88-Cus. dated 29th March, 1988 since the weight of the consignment of embroidery silk garment exported by the Petitioner was 557.147 kgs only. It was, therefore, concluded that the balance quantity (1424.82 kgs-557.1 .....

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he Assistant Collector of Customs rejected the Petitioner s explanation and concluded that the Petitioner would have to pay the customs duty proportionate to the unutilised mulberry raw silk which was calculated at ₹ 2,08,899. The Petitioner was called upon to pay the aforesaid amount with 18% interest from the date of importation till the date of payment of duty. 13. Aggrieved by the above order, the Petitioner filed an appeal before the CEGAT in which a specific plea was raised that the .....

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titioner s defence to the show cause notice, the Assistant Collector had in the original order referred to the instructions contained in a letter dated 11th September, 1990 from the Member (Customs) and a DEEC Circular No. 6 dated 19th June, 1990. Neither of those documents had been referred to in the show cause notice and therefore the Petitioner did not get an opportunity to make any submission in that regard. 14. At the stage of grant of stay of the Order of the Assistant Collector, the CEGAT .....

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has heard the submissions of Mr. Rajesh Rawal, learned counsel for the Petitioner, and Ms. Sonia Sharma, learned counsel for the Respondent. 17. As far as the obligations to be fulfilled in terms of the Import Export Pass Book Scheme, the Central Government has issued notification No. 117/88-Cus., dated 29th March, 1988 under Section 25(1) of the Customs Act, 1962. The said notification states, inter alia, that the Central Government exempts goods from the whole of the duty of customs leviable t .....

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ailing of the exemption in terms of the said notification are that the imported goods should be specified in and covered by the import licence, incorporated in the Import Export Passbook in respect of their value, quantity if any, description and technical characteristics. Another specific condition is that the resultant products and manufactory spares, as specified in the said Import Export Pass book in respect of value, quantity (if any), description and technical characteristics are exported .....

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obligation in terms of value and not in terms of quantity. There is no requirement in the licence that the Petitioner is required to fulfil the export obligation both in terms of value and quantity. 19. Interestingly, within a few months of the notification No. 117/88-Cus, a Circular No. 1/88 was issued by the Chief Controller of Import and Exports on 14th July, 1988 clarifying that where the Pass Book Licences are issued for natural silk in terms of import entitlement percentages given in Appe .....

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which reads as under: 259 (3) Wherever, the eligible exporter finds the value norms as specified in Column (4) of Appendix 14-A of the Policy not appropriate for his export product, he will have the following options:- (i) To get the Pass Book issued in terms of the norms prescribed in Appendix 13-C in case all the items required by him are covered by these norms; or (ii) To get the Pass Book issued as per norms already fixed in his case for the same export product by the Headquarters Advance L .....

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higher value addition prescribed for certain products as specified in Appendix 13-D is achieved from the c.i.f. value of imports to f.o.b. value of exports. In cases where a Pass Book is issued on the basis of specific norms as per option outlined at (iii) above, subsequent requests for the issue of Pass Book(s) for the same product received from the same applicant can be considered by the licensing authorities on the basis of these norms without reference to the Advance Licensing Committee at .....

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make it impractical for the exporter to meet the value norms as endorsed on the licence. In the present case, the Petitioner having not opted for any change in the value norms as endorsed in the license, the question of the applicability of Para 259 (3) of the Policy does not arise. 22. It is seen that what has been endorsed in Part F of the Licence is consistent with Appendix14-A to the Policy in which the export obligation has been defined as 50% of the value of the imported goods. In the pres .....

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of Part 2 of the said Pass Book, the importers were supposed to utilise the entire imported quantity in the manufacture of export product. 23. What paras 257 (1), 261, 262(2) and 281 envisage is the utilization of the imported product in the manufacture of the resultant product. It is not the Department s case that the Petitioner has not utilized the imported raw material in the manufacture of the resultant product that has been exported. What is significantly overlooked, both by the Assistant .....

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lue. 24. The order in original dated 24th January, 1992 refers to a DEEC Circular No. 6 dated 19th June, 1990 and a letter dated 11th September, 1990 from the Member, Customs stating that the export obligation has to be discharged in terms of value as well as quantity. Mr. Rawal, the learned counsel for the Petitioner, is right in contending that such circulars and instructions cannot possibly restrict the ambit of a notification issued under Section 25 (1) of the Customs Act. Interestingly, in .....

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ied upon by the Department to restrict the exemption available to the Petitioner in terms of Notification No. 117/88-Cus., dated 29th March, 1988. 25. Ms Sonia Sharma, learned counsel for the Respondent, referred to the decision of the Karnataka High Court in Pooja Exporters v. Assistant Director, D.R.I. 1989 (41) ELT 21 Kar. A perusal of the said decision reveals that it was a case arising under the Advance Licence Scheme and not under the Import and Export Pass Book Scheme. The facts in that c .....

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