TMI Blog2017 (9) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... d that: - as per the record the material was initially imported by MSRM who subsequently sold on high sea sale basis to appellant M/s. Prakash Ispat Udyog and Sanvijay Rolling & Engg. Ltd. The appellants cleared the said imported goods on the basis of advance licence under notification 51/2000-Cus and 43/2002-Cus. The goods were directly sent from the port to MSRM for job work under a job work agreement and after processing, the goods were sold to MSRM only. Though on record it appears that the goods were cleared under advance licence by the appellant and till the processing of goods on job work basis the ownership of the goods remained with the appellants. The ownership of goods remains with the appellants from purchase of goods from high sea sales basis till the processed goods are sold. It is important to ascertain that whether the goods have been transferred or otherwise on the basis of payment transaction in every stage right from import of goods till sale of processed goods. The show-cause notice also relied upon the accounts ledger of the appellant but no verification was found to have been carried out by the adjudicating authority. The fact of payment in overall transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods, therefore the clearance of goods by the appellant under advance licence has been transferred to MSRM. Accordingly the condition of notification no. 51/2000 and 43/2002 was violated. The adjudicating authority denying the exemption notification confirmed the demand of customs duty, imposed penalties, demanded interest and also imposed personal penalties on various persons related to the company. Therefore the appellants are before us. 2. Shri T. Vishwanathan, ld. Counsel appearing on behalf of the appellants made a common submission in respect of all the appellants, which is as under:- Condition (vii) of Notification No. 51/00-Cus not violated in the present case. Further Condition (viii) applies to Merchant Exporter only and not to manufacturer-exporter. A.1)In the impugned proceedings conditions (vii) and (viii) of Notification No. 51/2000-Cus have been referred to. According to the SCN, the appellants have violated Condition (vii). Whereas, according to the Commissioner, the appellants could not have availed the facility of job worker or supporting manufacturer, because ass per Condition (viii) of Notification, this facility is available only to a merchant-export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch excisable goods were subsequently sold to the job worker itself by the assessee in that case. A.8)Condition (viii) is applicable to merchant exporter and not to manufacturer exporter. In the present case, the advance licenses have been issued to the appellants as manufacturer exporter and not as merchant exporter. Therefore, there is no violation of Condition (viii) too. In fact, this condition is not applicable to the present case at all. A.9)Let us assume for a moment that only condition (vii) existed in the notification and condition (viii) did not exist. In the absence of Condition (viii), it will be impossible for a merchant-exporter to operate under advance licence scheme, when he first exports and imports later. He being a merchant-exporter and not a manufacturer-exporter, has no use of the imported goods. To enable him to sell the imported duty free goods, condition (viii) is enacted. In fact, it is an enabling provision to a merchant-export to sell the imported goods to the supporting manufacturer, without attracting the wrath of condition (vii). Otherwise, such a sale by the merchant-exported should be violative of condition (vii). A.10)Thus, if a manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a condition for Advance Licence for physical exports and the licence holder desires to have the material processed through any other manufacturer or jobber. Upon such endorsement made by the licensing authority, the license holder and co-licensees shall jointly and severally be liable for completion of export obligation. Any one of the co-licensees may import the goods in his name or in the joint names. The BG/LUT shall also be furnished in their joint names. B.4)A bare perusal of para 7.17, as noted supra makes it abundantly clear that the license holder is eligible to have the export goods manufactured through someone else as well. This license holder can either be a manufacturer-exporter or a merchant-exporter since both the categories are eligible to claim the benefits of advance license. The provisions relating to Advance License do not restrict the operation of Para 7.17 of the Handbook. Therefore, even a manufacturer exporter is entitled to have the facility of a supporting manufacturer. B.5)If the imports are to be effected by the supporting manufacturer, then as envisaged in para 7.18, his name should be mentioned in the advance licence ; the bond to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a)Giving the imported duty free material to the supporting-manufacturer whose name appearing in the license does not amount to sale or transfer (para 2(f) of the order at pages 272 and 273) ; b)It is not mandatory to get the name of the supporting-manufacturer endorsed in the license and it is optional, having regard to the legislative history of the Policy relating to supporting-manufacturer (para 2(f) at page 273) ; c)Where the importer / license-holder gives the imported duty free material to another manufacturer with a stipulation that the duty free material shall be used for further production and the resultant product shall be returned to the license-holder, such transaction will not be hit by the expression sale or transfer (paras 2(f) and 2(h) at pages 273 and 274) ; d)Proviso to Section 28(1) of the Customs Act, 1962 will not apply to demand duty in such circumstances since non-inclusion of the name of the supporting-manufacturer is only an error or omission and cannot amount to willful mis-statement or mis-declaration (para 2(k) at page 274). B.13)Without prejudice to the above, it is submitted that the appellants need to get the name of MSRM added in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing with ownership without a consideration. The said expressions will not apply to a case where the imported goods are used for further production in the factory of the job worker. C.6)This is the view taken by the Tribunal in Tetrapak (supra).The Tribunal in Tetra Pak supra held that supply of the inputs (even on sale basis) to the job worker to manufacture the intermediate product did not amount to sale or transfer of the inputs imported duty free as long as the intermediate product was used in the manufacture of the final product by the license holder. C.7)It is submitted that the phrase sale of transfer shall necessarily include an element of transfer of ownership. This is also made clear from the definitions extracted from various dictionaries, which can be found at Page No. 56 59 of Vol. IV. Further reliance is also placed on the definition as given and approved by the Honble Supreme Court in 20th Century Finance Corporation [Page No. 53 55 of Vol. IV]. C.8)Without prejudice to the above, If giving of raw material to supporting manufacturer is treated as a sale or transfer, then, giving the goods to the supporting manufacturer will be treated as a violation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te the actual user condition. D.4)Further, the contention of the department that even for job work, it is necessary that some activity must be undertaken in the factory of the license holder, is incorrect. D.5)It is submitted that in those cases decided by the Tribunal as aforesaid, the notifications provided that the imported material shall not be used for any purpose other than for discharging the export obligation. Even after noting the condition, the Tribunal in Dolphin Drugs, supra held that Therefore, the position in law with respect to the issue of whether duty of customs is to be recovered when the export obligation has been fulfilled not in the initial period, but in the extended period, is now a well settled one to the effect that the Customs duty and penalty etc. are not leviable. E. There is no suppression of facts by the appellants. The demand of duty is therefore time barred and the extended period of limitation under the proviso to section 28(1) is not invocable. E.1)The cause for demand of duty is in giving the Billets to MSRM for conversion basis. If MSRM is included in the advance licence as supporting manufacturer, no objection would be ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T 340. F.2)The entire demand is because of the omission on the appellants part to include all the units in the DEEC book. Under these circumstances, it is submitted that there is no evasion of duty as alleged. In the facts and circumstances of the case, the question of levying interest and imposition penalty does not arise. In any case since extended period of limitation is not invocable, the question of imposing penalty under Section 114A is not sustainable in law. F.3)Since no duty is recoverable, no interest is required to be paid by the appellants under section 28AB of the Customs Act. F.4)The Larger Bench in the case of Shiv Kripa Ispat Pvt. Ltd. V. Commissioner of C.EX Cus., Nasik, 2009 (235) E.L.T. 623 (Tri. - LB) held that goods cannot be confiscated when not available and redemption fine is not imposable. This decision of the Larger Bench has been upheld by the Bombay High Court Customs Appeal No. 70/2009, by the judgment dated 22nd September, 2009, reported at 2015 (318) ELT A259. F.5)In so far as redemption fine is concerned, the Bombay High Court has also taken an independent view in the case of Commissioner of Customs (Import) V. M/s Flurose Crea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n duty payment, cleared without duty payment showing on high sea sale to itself through advance licence issued in name of appellant i.e. Prakash Ispat Udyog b. The importer has transferred the goods without knowledge or intimation to licensing authority or customs. As the importer is a manufacturer exporter it is not entitled to transfer/sale the duty free goods in view of condition no. vii of notification. c. The contention of appellant that there was no requirement of endorsement of supporting manufacturer in licence, i.e. optional, and that after import of goods, same were sent directly to the job worker i.e. MSRM, Mumbai for conversion is misleading. d. As per investigation cost of purchase of billets on high sea sale was never transferred to MSRM, but only a book entry which regularised subsequently showing sale of MS angles to them. e. There is violation of para 4.1.3 of EXIM (not bringing goods to factory premises) para 4.1.2 (not actually using goods in its factory premises), and condition of notification no. 51/2000, 43/2002 (materials shall not be transferred or sold) f. MSRM have entered into conspiracy with importer by entering into MOU dated 01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord the material was initially imported by MSRM who subsequently sold on high sea sale basis to appellant M/s. Prakash Ispat Udyog and Sanvijay Rolling Engg. Ltd. The appellants cleared the said imported goods on the basis of advance licence under notification 51/2000-Cus and 43/2002-Cus. The goods were directly sent from the port to MSRM for job work under a job work agreement and after processing, the goods were sold to MSRM only. Though on record it appears that the goods were cleared under advance licence by the appellant and till the processing of goods on job work basis the ownership of the goods remained with the appellants. On this basis the contention of the appellants is that the goods or licence has not been transferred to MSRM or any other person, therefore, there is no violation of the condition of the notification. 5. We observe that the adjudicating authority has not verified the monetary transaction in respect of the following transactions:- i) Purchase of goods on high sea sale basis ii) Payment of customs duty iii) Payment of other charges such as CHA, transportation etc. iv) Payment transaction of job work v) Transaction towards the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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