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TMI Blog2003 (3) TMI 752X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, New Delhi for importation of capital goods viz. machines forming cocoa beans processing line and chocolate making, finishing and packing line valued at ₹ 3,53,57,072/- under concessional rate of duty of 25% with an obligation to export Cocoa and Chocolate products valued at ₹ 10,60,76,215/- manufactured out of the said imported machinery within a period of four years from the date of first importation. The importation was in February, 1992 through the Madras port. In terms of para 197 of the Import & Export policy for the period 1990-93 read with Notification No. 169/90-Cus., dated 3-5-90, Registered manufacturers and Exporters are eligible to import capital goods at concessional rate of customs duty of 25% subject to the condition that the licence holder undertakes to fulfil the export obligation equal to three times the value of capital goods permitted for import within a periods of four years from the date of first import of capital goods by exporting the final products manufactured through the capital goods permitted to be imported. They have imported capital goods valued at ₹ 3,53,57,072/- and out of the this sum, the value of the imported chocolate makin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs were making representation to DGFT for extension of export obligation from time to time and their request was rejected. However, after repeated requests DGFT agreed to consider their request provided they agreed to increase the value of export obligation by 10% and extend the validity period of Bank Guarantee by one year i.e. till 30-11-1997. 4. The assessee-respondents had made some further export of Cocoa butter and powder but not even a Kg. of Chocolate manufactured out of the imported chocolate making machinery valued at ₹ 2,42,97,582/- was exported. The Importers were required to export Chocolate to the tune of ₹ 7,21,00,000/- i.e. three times the value of the Chocolate making machinery imported worth ₹ 2,42,97,582/-. It is in these circumstances that show cause notice was issued to the Respondents calling upon them to show cause : (i) as to why the benefit of Notification No. 169/90-Cus., dated 3-5-90 in respect of Chocolate making machinery imported by them should not be denied to them and why duty short levied by reason of wilful misstatement and suppression of facts as aforesaid amounting to ₹ 3,19,03,077 should not be demanded from them u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation placed by him on the words of the policy and his clarification overrides the policy provisions and enlarge the scope of the licence. He has invited our attention to page No. 9 of the paper book wherein under para 13, the respondents under heading "PROJECT ACCOUNTING" clearly stated that the Company's plant facilities consist of two separately identifiable plants, one for the manufacture of Cocoa derivatives and the other for the manufacture of Chocolate products. He has also invited our attention to para 1 of the Show cause notice wherein details regarding importation of two types of machineries have been adverted to. He has also referred to page 14 of the paper book wherein para 197 of the policy regarding import of capital goods at concessional rates of Customs duty has been reproduced. He has also referred to para 5 of the impugned order dealing with import of capital goods for the manufacture and export of specified product. He has also referred to the statement given by Shri Shiv Kumar, General Manager, Finance & Company Secretary of the respondents wherein he has categorically stated that Cocoa Plant and Chocolate plants are installed separately. He has also referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no suppression. However, the impugned order has dropped the entire proceedings against the Respondents. (c) The bond executed by the respondents clearly shows that heading as "Cocoa and Chocolate products". This established that the products are not entirely two separate lines of production. The cocoa powder and liquid chocolate produced by one set of machines are also the feed stock for manufacture of chocolates. (d) The EPCG licence itself is issued for the total value and also for the total export obligation as a combined figure. (e) licence issued by the competent authority shows the total value of the machine as ₹ 3,53,57,072/- and it has not separated a value of ₹ 2,42,97,852/- as mentioned in the show cause notice. (f) If the intention of the licensing authority was to make a distinction between export obligation in respect of Cocoa products and Chocolates, it should have mentioned so. The licence does not show the export obligation itemwise. It only mentions the period of export and the quantum of the goods to be exported. (g) The Respondents have not contravened the provisions of Notification No. 169/90-Cus. and they have fulfilled the export obligation ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de Control authorities before clearance of the goods. (5) 1992 (58) E.L.T. 248 in the case of Overseas Cycle Co. v. CC, wherein it was held that ...... if a licence is granted in respect of a particular item by the licensing authority, the Customs authorities have no jurisdiction to shift over the licence so granted by the licensing authority and they have no power to go beyond the licence and determine as to whether the said licence related to prohibited item. (6) 2002 (140) E.L.T. 131 (T) = 2001 (75) ECC 874, in the case of M/s. U-Foam Pvt. Ltd. v. CC, Hyderabad wherein it was held if there was fulfilment of the export obligation and the DGFT has granted extension of time, the Commissioner has no power to challenge the said decision of the DGFT because the reference was made by the Commissioner himself. 8. Shri Rajeswara Sastry and Shri MS Nagarajan, learned Counsels for the Respondents reiterated the grounds taken in the Cross Objection and submitted that once a clarification has been given by the competent authority the same is binding on the Customs Department. They also referred to page 95 of the paper book wherein they have mentioned that "as it is an integrated plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereby making exports competitive in the international market, import of capital goods up to a maximum cif value of ₹ 10 crores will be permitted at concessional rate of Customs Duty of 25% of CIF value of the Capital Goods imported. The applications for this purpose shall be considered by an inter-ministerial Committee headed by the CCI & E. The above facility will be available to registered manufacturer, exporters who have been regularly exporting for a period of not less than three years. The applicant will have to undertake an export obligation equivalent to three times the value of the capital goods permitted for import and the obligation will have to be fulfilled within a period of four years from the date of import of the capital goods............" The Terms of the licence reads as under : "(i) This licence has issued under para 197 of the Import & Export Policy 1990-93 (Vol. I) and carries a obligation to export Cocoa & Chocolate. (ii) The additional value of export obligation to be fulfilled by the firm is ₹ 10,60,71,215/-. (iii) The total value of export obligation to be fulfilled under the scheme will be equal to three times the cif value of machinery i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his own. The question posed before the Hon'ble Apex Court was whether the Collector is justified in ignoring the clarification given by the CCI&E and whether the department's grievance on that ground is justified. We observe that all the case laws cited by the Respondents-importers are centered on one issue i.e. whether the clarification given by the DGFT is binding on the Customs authorities and the view taken in those case laws including in the judgment of the Hon'ble Supreme Court cited supra. We are of the considered view that the clarification given by or on behalf of the DGFT has to be in consonance with the policy provisions and the licence issued. This import licence was issued by a High Power Committee consisting of DGFT, a representative of the Revenue department and a nominee of the nodal Ministry, as a result of the decision of the 14th meeting of the C.C. main committee held on 6-12-90 as could be seen from the licence in question. Therefore, any decision to amend the licence could only be taken by the said High Power Committee and the decision of the said Committee also has to be consistent with the policy framed by the Government of India. The power to amend the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of these two plants, the company had approached the CCI&E, New Delhi (now DGFT) for allowing concessional rate of duty under EPCG scheme vide their application dated 27-9-90 enclosing two separate lists of capital goods for chocolate making plant and cocoa beans processing plant and accordingly the CCI&E granted them the licence. He has also stated that initially Chocolate plant was commissioned and later on only Cocoa plant was commissioned and that no exports were made out of chocolate plant. Shri R. Shiva Kumar, General Manager, Finance of the Respondents also gave statement under Section 108 of the Customs Act, 1962 on 6-7-96 wherein he has corroborated the statement given by Shri S. Raghu. He has also clearly stated that cocoa plant and Chocolate plants are installed separately. Another Senior Officer viz. Shri PA Duraiswamy, General Manager (Operations) of the Respondents while corroborating the statement given by the other two officers noted above, has also stated that Chocolate manufactured out of the Chocolate making plant imported, were sold in the domestic market. Yet another senior Officer of the Respondents viz. Shri R. Badtrinarayan, Managing Director, has als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly Cocoa has been exported. While we agree that clarification issued by the DGFT is binding on the Customs Department, such clarification has to be within the frame-work of the policy and the licence and the DGFT cannot override the policy provisions and the terms of the licence as the power of the DGFT is not unfettered. As rightly contended by the learned SDR, it is not the case of the respondents-assessee that the licence which provided for export of cocoa and chocolate has been amended to provide for export of only Cocoa powder. The clarification issued on behalf of the DGFT in the present case is wholly inconsistent with the Exim policy framed by the Central Government and the said clarification in fact purport to amend the Exim policy provisions itself and the licence issued under such policy. The power to amend the policy is exclusively vested with the Central Govt. and not with the DGFT. Any Clarification which is not in consistent with the Exim Policy is neither binding on the Custom authorities nor on the Tribunal or Court. We are therefore, of the considered opinion that decision cited by the Revenue in the matter of General Traders v. CC (supra) squarely applies to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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