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Ashok Enterprises Versus Commissioner of Customs (Exports) , Chennai

2016 (3) TMI 221 - CESTAT CHENNAI

Entitlement of benefit - Exemption Notification No. 30/97 dt. 1.4.1997 and 48/99 dt. 29.4.99 as amended availed for import of duty-free materials under Advance Licence as Actual user manufacturer-exporter - Appellants obtained Advance Licence with actual user conditions declaring themselves as manufacturing exporter for import of SS coils/sheets by availing the benefits of the above said Notifications. But Department contended that it misused the advance licence and contravened the Customs Notif .....

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licences as the appellants had no factory for manufacturing finished goods at the declared premises and have not used the SS coils/sheets imported under DEEC Advance Licences and cleared without duty under customs exemption Notification 30/97 as amended by 51/2000, 48/99 as amended for manufacture of finished goods exported. Therefore, the benefit should not be granted and the demand of customs duty and interest and confiscation, and penalty upheld. - Decided against the appellant - Appeal No. .....

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orandum. 2. Revenue seeks to change the cause title in so far as the respondent's name to be changed from "Commissioner of Customs, Seaport-Export, Custom House, Chennai-600 001" to "Commissioner of Customs, Chennai IV Commissionerate, Custom House, Chennai-600 001" in the wake of implementation of new Commissionerates. Accordingly, the MISC application filed by Revenue for change of cause title is allowed. Registry is directed to change the respondent's name as " .....

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ined Advance Licence from Jt. DGFT, Chennai declaring themselves as manufacturing exporter having factory at No.183, Walltax Road, Chennai 600 003. Based on the application and the statutory declaration made by the appellant, the Directorate of Foreign Trade issued 12 Advance Licences with actual user conditions for import of SS coils/sheets for manufacture and export of SS utensils by availing the benefits of Customs Notification Nos.30/97 dt. 1.4.1997 and 48/99 dt. 29.4.99. 6. Based on the int .....

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hna Polishing Works". Officers visited the premises and recorded statements of the person who was in actual possession of the premises and also recorded statement from the proprietor of the importing firm. The proprietor of the appellant concern in his statement admitted that there was no rental agreement in respect of the premises bearing No.183, Walltax Road, Chennai 600 003. Based on the documents seized and the statements recorded, a show cause notice dt. 26.3.2003 was issued to the app .....

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95/- is inadmissible towards the export obligation under the said licences in as much as the exported goods were locally procured; (b) 1 deny the benefit of duty exemption claimed, under Customs Notification No. 30/97 dated 01.04.97; 51/2000-Cus.,dated 27.4.2000 and 48/99 dated 29.04,1999 as amended, for the import of 638.368 MTs of SS Coils/sheets totally valued at ₹ 3,84,32,021/- made under the said licences; (e) I demand the duty of ₹ 2,57,82,659/- on 638.368 MTs or SS coils/Sheet .....

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29.04.99 as amended; (e) I order enforcement of the bonds/bank guarantee executed towards recovery of duty and other adjudication liabilities; (f) 1 confiscate 638.368 MTs of S.S. Sheets/Coils totally valued at ₹ 3,84,32,021/- imported duty free, under section 111 (o) of the Customs Act, 1962. Since the goods are not available, 1 impose a fine of ₹ 40,00,000/- (Rupees Forty Lakhs only) under Sec 125 of the Custom Act, 1962. (g) I impose a penalty of ₹ 2,57,82,659 along with in .....

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d a C.M.A. against this Tribunal's order before the Hon'ble High Court, Madras and the Hon'ble High Court in their order dt. 20.10.2011 in C.M.A.No.2945/2005 set aside the Tribunal order and remanded to the Tribunal. Accordingly, the appeal is restored for de novo hearing and decision. 8. Learned Advocate appearing for the appellant submitted a written synopsis dt. 31.7.2015 and reiterated the same. He also submitted 3 volumes of bound typed set containing DEEC licences, test reports .....

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having the address of factory at No.183, Walltax Road, Chennai-600 003. It was subsequently amended as Merchant-Exporter in 2002 as per FIEO Endorsement dt. 6.9.2002 available at page 18. Ld. counsel also relied on the certificate issued by the Superintendent of Central Excise, Chennai (Ref.Page 19 to 21). He also drew our attention to the application filed before the DGFT authorities for obtaining the licence (Page 22) and the licence issued by the DGFT (Page 33). He submits that as per the li .....

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cross examination (at page 124) of the investigating officer and submits that no seizure was made. He submits that based on the DRI investigation and the report submitted to DGFT, DGFT also issued SCN dt. 14.2.2003 which is annexed at page 96 of Vol-I of the paper book. The JDGFT in his order dt. 10.12.2003 considered the investigation and the allegations of the DRI and dropped the proceedings in so far as fulfilment of export obligation except imposing a penalty of ₹ 10,000/-on the appell .....

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Vs CC Amritsar -2011 (266) ELT 318 (Tri.-Del.) 9. On the other hand, Ld. A.R reiterated the grounds of appeal made in C.M.A. and the Hon'ble High Court order and submits that High Court in their findings relied on Supreme Court order in the case of CCE New Delhi Vs Hari Chand Shri Gopal 2010 (260) ELT 3 (SC) and submitted that any exemption clause should receive strict construction. She explained the allegations brought out in the SCN and particularly drew our attention to statement of Shri .....

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red under 12 advance licences. She submits that no factory premises of other persons existed. Retraction of statement has no evidence of manufacturing of goods by using imported raw materials. She submits that statements retracted are not supported with any corroborative evidence as there was no manufacturing facility existed and manufacturer had no capacity of manufacturing finished goods so as to fulfil export obligation under 12 advance licences. She relied the following decisions :- (1) CCE .....

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LT 166 (Mad.) affirmed by Hon'ble Supreme Court in Gaur Impex Vs Com. - 2010 (249) ELT A28 (SC) (9) South India Exports Vs JDFT 2004 (177) ELT 57 (Mad.) (10) Pooja Exporters Vs Asst.Director, DRI 1989 (41) ELT 21 (Kar.) (11) 1992 (61) ELT 548 (Kar.) Kamath Packaging Ltd. Vs UOI (12) CC (Exports) Vs Pattu Exports Pvt. Ltd. Hon'ble Madras High Court order dt. 28.11.2014 (13) CC Hyderabad Vs Pennar Industries Ltd.-2015 (322) ELT 402 (SC) (14) CC (Exports) Chennai Vs KRM International Ltd. & .....

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of the Hon'ble High Court in their order dt. 20.10.2011 and perused the records. The issue before us is whether the appellant violated the condition of the Notification No.30/97 dt. 1.4.1997 and 48/99 dt. 29.4.99 as amended and whether they are entitled to the benefit of the said exemption notification availed for import of duty-free materials under Advance Licence as Actual user manufacturer-exporter. The adjudicating authority in his findings discussed the issue in detail and the modus ope .....

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export documents and contended that once the Licensing Authority accepted the export obligation, the Customs has no power to deny the benefit of Advance Licence. 11. The appellants obtained 12 Advance Licences for import of duty free raw material i.e. SS coils. On perusal of Advance Licence No.0410016181/19.7.2001 (annexed at page 33 Vol-I of paper book) we find that the said licence was issued to the appellant with actual user condition. Under the column "Class of Importer:", it is d .....

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the condition sheet attached to the said licence, we find the details of export items, quantity and FOB value are described in the condition sheet with 7 conditions: The conditions No.3, 5 and 7 which are relevant to the present dispute are reproduced as under :- 3. The exempt goods imported against this licence shall only be utilised in accordance with the provisions of the Export Import Policy 1997-2002 and the concerned customs notifications No.50/51/2000 dt. 27/04/2000 as amended from time .....

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2001 issued by JDGFT, Mds-14 to the above licence and covered by the list of materials specified in list (a) Part 'C' of this certificate would be eligible for exemption from duty of Customs specified in the first schedule to the Customs Tariff Act, 1975 (51 of 1975) subject to the conditions specified in the Notification of the Government of India, Ministry of Finance, Department of Revenue No.51/2000/Customs, dated 27.4.2000. The Part 'A' of the above DEEC contains Names and ad .....

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shall only be utilised in accordance with provisions of EXIM Policy 1997-2002 and the Customs Notification 50/51/2000. Condition No.5 mandates that the appellant shall maintain a true and proper account of consumption and utilisation of imported goods as per proforma given in Appendix 21 of Hand Book of Procedures and Condition No.7 stipulates that for sensitive items customs should carry out necessary checks. 12. The investigation proved that the so called premises No.183, Walltax Road, Chennai .....

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ve any rental agreement with Mr.Krishnan nor any profit sharing arrangement. He also admitted that he had no other factory or premises for manufacture of resultant goods and admitted that he procured the utensils in the local market and exported towards fulfilment of export obligation under DEEC Licences. This was corroborated with the statement dt. 13.1.2003 of Mr.Krishnan, Proprietor of "Krishna Polishing Works", wherein he clearly stated that the appellant had obtained SSI Registrat .....

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appellants failed to maintain any records of account of consumption and utilisation of imported raw material. Further, it is evident that the S.S. coils/sheets imported by the appellant under these Advance Licences are sensitive items and the investigation by the DRI proved that the appellants failed to produce any evidence against the charges. 13. The Customs Notifications 30/97, 48/99 as amended by Notfn 50/51/2000-Cus. dt. 27.4.2000 issued under Section 25 of Customs Act, exempts the whole of .....

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ter declaring the factory premises for manufacture of resultant product and it is proved that there is no such factory of the appellant in the said premises. Thus, they failed to comply with the condition of the notification. 14. The appellants relying on Membership certificate issued by FIEO has no relevance to the fulfilment of conditions of notification. Similarly the certificate obtained from the Superintendent of Central Excise has no relevance when the appellant is not registered with Cent .....

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are reproduced as under :- 40. In the case before us, the circumstantial?evidence suggesting the inference that the goods were illicitly imported into India, was similar and reasonably pointed towards the conclusion drawn by the Collector. There was no violation of the rules of natural justice. The Collector had given the fullest opportunity to Bhoormull to establish the alleged acquisition of the goods in the normal course of business. In doing so, he was not throwing the burden of proving what .....

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e broad effect of the application of the basic principle underlying Section 106 of the Evidence Act to cases under Section 167(8) of the Act, is that the Department would be deemed to have discharged its burden if it adduces only so much evidence, circumstantial or direct, as is sufficient, to raise a presumption in its favour with regard to the existence of the fact sought to be proved. Amba Lals case, (1961) 1 SCR 933 = 1983 E.L.T. 1321, was a case of no evidence. The only circumstantial evid .....

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#39;s above decision is squarely applicable to the present case as we find the appellant has not adduced any evidence or records against the charges levelled by the revenue either on the receipt of materials in their factory or consumption and manufacture of finished goods in the said premises. Since the appellant declared themselves as actual user manufacturer-exporter, it is mandatory to maintain the production records as per the Hand Book of Policy. Instead of producing valid evidences to pro .....

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Customs Notification No.30/97 dt.1.4.1997 and 40/99 dt. 29.4.1999 as amended. The relevant paragraphs of the Madras High Court's order are reproduced as under :- 14. The question that falls for our consideration in this appeal is as to whether, the assessee is entitled to the benefits of Customs Notifications. The Rate of duty is not in dispute. The entitlement of the assessee to the benefits of the customs notification alone is the issue. Therefore, the appeal is clearly maintainable befor .....

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re of final products with a clear understanding that such products would be exported. When the assessee availed the advance license with actual user condition, they are expected to prove that the imported raw materials were actually used in the manufacture of final products and it was ultimately exported. 16. The inspection conducted by the officials of the Customs Department found that there was no such factory manufacturing SS Utensils as indicated in the license issued to the assessee. Even a .....

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a claim for exemption should prove his case by producing positive materials that they are entitled to exemption. It is not for the Department to prove otherwise. It is trite that exemption notification should be construed strictly. 18. The customs authorities exercise jurisdiction under the Customs Act. Section 111 empowers the Customs Department to confiscate the goods improperly imported from the place outside India. Section 111(o) deals with confiscation of exempted goods, in case the condit .....

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toms notification, is a matter to be decided by the Customs Authorities. The Director General of Foreign Trade has no jurisdiction in such matters. In case it is made out that the assessee has violated the conditions, necessarily, they will be liable to pay duty. ... ... .... 21. In Sheshank Sea Foods Pvt. Ltd. v. Union of India [1996 (88) E.L.T. 626 (S.C.)], the issue before the Supreme Court was whether the Customs Authorities were right in initiating proceedings for the alleged violation of t .....

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Section 111(o) enable the Customs authorities to investigate the matter. 22. A Division Bench of this Court had an occasion to consider a similar matter in M/s. South India Exports v. Joint Director of Foreign Trade and Another in (W.A. No. 1884 of 2003 etc. batch) [2004 (177) E.L.T. 57 (Mad.)]. In the said case, the assessee contended that the violation of the license could be dealt with only under the Foreign Trade (Development and Regulation) Act, 1992 and that too by Licensing Officer and t .....

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estion in that enquiry is going to be as to whether it was the imported material alone which was used in the manufacturing activity. Now, if there was no manufacturing unit available or any such manufacturing unit as would have the capacity to manufacture the goods worth crores of rupees, how was the imported stainless steel utilized. The question would not only be misrepresentation while getting the Advance License but also about the utilization of the imported material, which would squarely fa .....

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ecides the matter in favour of the assessee. ... .... ..... 26. The claim of the assessee was on the basis of exemption notifications. Therefore, it is for the assessee to prove that they are entitled to the exemption. 27.In Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal, 2010 (260) E.L.T. 3 (S.C.), the Supreme Court observed that the exemption clause should receive strict construction. The Supreme Court said :- Exemption clause - Strict construction The law is well settled t .....

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ory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. In Novopan India Ltd. this Court held that a person, invoking an exception or exemption provisions, to relieve him of tax liability must establish clearly that he is covered by the said .....

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by the language of the notification i.e. by the plain terms of the exemption. 28. The CESTAT proceeded on the premise that only the Director General of Foreign Trade has authority to decide the issue regarding misuse of advance licenses. While quashing the order passed by the Commissioner of Customs, CESTAT ignored the basic fact that the proceedings in question was initiated only under the provisions of the Customs Act and more particularly under Section 111(o) of the Act. The Customs Authorit .....

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epartment. This aspect was not considered by the CESTAT. The Hon'ble High Court clearly discussed the merits of the case and relied apex Court judgements in the case of CC Vs Harichand Sri Gopal (supra) and relied Navin Chemicals Mfg. & Trading Co. Ltd. Vs Collector (supra), Sheshank Sea Foods Pvt. Ltd. Vs Union of India (supra) and also relied Madras High Court's decision in South India Exports Vs JDFT (supra) and held that mere discharge of export obligation per se cannot put an en .....

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on notification. 17. In this regard, the Hon'ble Supreme Court judgement in the case of Seshank Sea Foods Pvt. Ltd. Vs UOI (supra) held the powers of customs under Section 110 and Section 111 (o) and Section 124 of the Customs Act for breach of condition of exemption notification. The relevant paragraphs are reproduced as under :- 9. Section 111(o) states that when goods are exempted from Customs duty subject to a condition and the condition is not observed, the goods are liable to confiscat .....

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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 such alleged breach could be conducted only by the licensing authority. That the licensing authority is empowered [to] conduct such an investigation does not by itself preclude the Customs authorities from doing so. 18. Further the Hon'ble High Court of Madras in the case of CC Vs CESTAT Chennai/Gaur Impex - 2 .....

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003 was issued by the Deputy Director, Directorate of Revenue in Intelligence, Chennai, (hereinafter referred as DRI), calling upon the second respondent to show cause within thirty days of receipt of the notice as to why the benefit of Notification No. 48/99-Customs dated 29-4-1999 should not be denied for 86.963 metric tonnes of copper scrap valued at ₹ 48,73,614/- imported by the second respondent for under the annual Advance Licence dated 10-7-2001, in view of the fact that the licence .....

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e contention of the Appellant-Department. Admittedly in the present case the misrepresentation made by the importer has not been denied while submitting the explanation to the show cause notice and the importer look a technical stand that because the licences were seized by the DRI prior to the period of expiry, it has disabled them from discharging the export obligation. Though the past conduct of the importer is not the subject matter of the show cause notice/adjudication in question, we canno .....

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nce in question was not actually used by the importer for manufacture of resultant export products, it appears that they have diverted the said goods for the purpose other than for manufacture of resultant export products and thus violated the conditions of the aforesaid Customs Notification and DEEC Scheme (Annual Advance Licence). Hence the said 445.162 mts, of Copper Scrap appears to be liable for confiscation under Section 111(o) of Customs Act, 1962. .... ... .... 33. It is to be noted that .....

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s for his discharge of the export obligation is existence of a factory. The basis does not exist, the address given is a false address, so the whole edifice falls. The fact that the importer could affect his export obligation through job workers and the existence of a factory is not a sine qua non, does not advance his case either. The importer claimed he had a factory when he had none. So, whether he could have completed the manufacture otherwise hardly matters. For the purpose of obtaining suc .....

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ly set at naught the purpose behind issuance of an exemption notification. If the Respondent is not an actual user he would not be entitled to utilise the licence. The licence having been secured by adopting fraudulent method would not confer any right on the importer and as such he cannot be allowed to plead any equity. Therefore we find that the order passed by the Tribunal is not sustainable and liable to be set aside. 34. In the result the questions which have been framed in the above appeal .....

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ed and initiate appropriate proceedings for recovery of the balance amount from the 2nd Respondent in accordance with law. The Hon'ble Supreme Court had upheld the above Madras High Court's order and dismissed the SLP filed by M/s.Gaur Impex as reported in Gaur Impex Vs Commissioner (supra) The above Hon'ble High Court decision and the Court's judgements are squarely applicable to the facts of the present case. 19. The appellants relying on the Tribunal decision in the case of Hy .....

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