TMI Blog2018 (12) TMI 957X X X X Extracts X X X X X X X X Extracts X X X X ..... In the instant case the onus for establishing their claimed status of being a manufacturer exporter and fulfilling the conditions of the licence obtained is squarely on the appellants. The status of the appellant decides the eligibility to the Licences. It is not the appellant s case that their status as a manufacturer exporter was fixed by the authorities. It was accorded as per their own declarations. Therefore, it is to be observed that the appellants have not passed the eligibility criteria to lay claim for the benefit of the exemption claimed. The actual user (Industrial) definition as per Para 9.4 of the FTP during the relevant period means a person who utilses the imported goods for manufacturing in his own industrial unit or manufacturing for his own use in another unit including a jobbing unit . Thus, the appellant having obtained the Licenses under the said category as Manufacturer exporter had to fall within this stipulated definition of actual user and as noticed from his activities has failed to comply with this requirement as he has neither used it in his own premises or in a job worker premises for his own use. They are in fact Job worker for M/s OMC who have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OMC's mines at Kurmitar Iron Ore Mines, Khandadhar, Dist. Sundargarh; Gandhamardan Iron Ore Mines, Dist. Keonjhar and Daitari Iron Ore Mines, Dist. Keonjhar in Odisha. Appellant required machines such as Cone Crushers, Screening Units, Excavators and Wheel Loaders etc., for raising/excavation/processing Iron ore. 2.1. Appellant obtained 12 nos. of Authorizations (9 from DGFT, Patna and 3 from DGFT, Cuttack), under the Export Promotion Capital Goods (EPCG, for short) scheme of the Foreign Trade Policy, 2004-09 and imported, 33 Nos. of capital goods by availing exemption under the corresponding Notification No.97/2004-Cus, as amended, by declaring the name of any one of the aforesaid mines of OMC as the place of installation of machines. Capital Goods were installed at the mines of OMC and Installation certificates obtained from the jurisdictional Assistant Commissioner of Central Excise/Chartered Engineers were submitted to the jurisdictional DDGFT. 2.2. The Kolkata Zonal Unit of the Directorate of Revenue Intelligence (DRI) investigated into the imports of the impugned capital goods made by the appellant under the aforesaid EPCG Licences. In the course of such inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n adjudicating authority, the DDGFT, Patna and DDGFT, Cuttack adjudicated their respective SCNs dated 10.7.2008 and 05.8.2008 whereby the DDGFT, Patna passed a 'Blacklisting Order' dated 03.8.2009 and the DDGFT, Cuttack passed a 'Refusal of Licence Order' dated 28.8.2009. 2.7. Meanwhile, Additional Director General of Foreign Trade vide Orders-in-Appeals dated 03.01.2011 and 20.04.2011 respectively set aside the 'Blacklisting Order' dated 03.8.2009 passed by the DDGFT, Patna and the 'Refusal of Licence Order' dated 28.8.2009 passed by the DDGFT, Cuttack. 3. Ld. Counsel for the appellants submitted that 3.1. By virtue of agreements entered into with OMC, the appellant was providing mining services in those mines; for providing such services, the Appellant was using its own labour and equipment; all the impugned capital goods are mobile equipment and were used by the appellant exclusively for providing mining services. 3.2. The impugned Capital Goods were imported under EPCG Licenses at a concessional rate of 5% import duty under Notification No.97/2004, supra, which grants such exemption subject, inter alia to the condition that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own use in the premises over which the appellant was granted permissive possession to carry out manufacturing (i.e. mining) activities. Therefore, for all practical purposes such Mines are to be considered as the appellant's own industrial unit , lest the whole purpose of granting duty exemption to Capital Goods used in 'Mining' and/or including 'Mining' under the definition of 'Manufacture' would be rendered redundant. Construction of a statute leading to absurd results manifestly contrary to express legislative intent must necessarily be avoided. Hon'ble Tribunal held in the cases of Tamil Trading v. CCE, Tuticorin [2006 (198) ELT 539 (T)J and FCI OEN Connectors Ltd, [2006-TIOL-1826-CESTAT-BANG], that in order to be manufacturer with reference to EPCG scheme the Appellant need not own the mines and the expression 'industrial unit' should be construed to mean as the mines where the Appellant utilised the impugned capital goods. The appellant satisfies the conditions attached to being an actual user (industrial) . 3.7. Without prejudice to the submission heretofore, alternatively the Appellant begs to refer to the definitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reof either by way of sale, hire or lease or any other manner to any other person. Indeed, the impugned order, at page-67, categorically confirms that the Appellant has not diverted, sold or otherwise parted with the capital goods and that the Appellant has used the goods for mining . This further fortifies the appellant's submission that it has satisfied the 'Actual User Condition' attached to the EPCG licenses in terms of the Policy. 3.10. In support of the above, the findings of the Additional Director of Foreign Trade, New Delhi in his Order-in-Appeal dated 03.01.2011 are relevant and are as under: 9(viii). But in any case, from their (The Deputy Director General of Foreign Trade, Cuttack) letters dated 06.09.2010 and 29.09.20 10 it is clear that the correctness of licenses, fulfillment of export obligation and utilization of licenses is not under dispute, there is no complaint by adjudicating authority in his correspondence regarding misutilisation of authorizations i.e. by way of transfer, sale or hiring to others. Dy. DGFJ, Cuttack has not in his Order showed any agreement with DRI or supported their stand with reference to appellant not being ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y provisioning in shifting some of the machines between these working places for the purpose of optimum production and to prevent idling of the machines during lean period at work sites. There is no infringement of licensing condition as these machines were and are in possession of appellant at all times have not been disposed off, loaned or otherwise transferred to any other person. This can be verified by any means. Verification has been done by the FTDOECA on... and found the requisite machine has been installed there. 3.13. It is evident from the above Orders-in-Appeals read with the above letters of the Regional Licensing Authority that the appellant has not violated the 'Actual User Condition' with regard to the impugned Capital Goods. Such findings/opinions of Authorities in the DGFT Organization are binding on the Customs Authorities and thus the findings in the impugned Order regarding violation of 'Actual User Condition' cannot be sustained. The appellant relies upon (i). Bharath Steel Corporation Vs. CC, Chennai [2004-TIOL-1036-CESTAT-MAD], wherein it was held that adjudication Order of JDGFT is binding on the Customs Authorities. (ii). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conditions of the Notification No.110/95-cus dated 05.06.1995. (iv). Policy Circular No.26/2009-14 dated 17.03.2010: Movable capital assets cannot be installed at one particular location and therefore, the requirement of 'Installation Certificate' cannot be insisted upon, for such movable capital assets/goods. 3.15. In the instant case, OMC never supplied to the appellant any raw material or semi-finished goods to complete a part of the processes resulting in the manufacture (i.e. mining). Instead the appellant was only granted permissive possession of the premises to carry out manufacturing (i.e. mining) activities by using their own men and machine and other resources. Thus, the appellant is bound to be treated as a Manufacturer and, not as a job worker as per the provisions of the Foreign Trade Policy. 3.16. Needless to reiterate that the EPCG Scheme under the Foreign Trade Policy is a beneficial scheme, intended to permit import of Capital Goods, under concessional rate of duty, with a view to augment export from the country for earning precious foreign exchange. Thus, denying the appellant the benefit by alleging frivolous procedural violation, tant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Addl. DGFT, New Delhi, the said Black Listing Order dated 07.08.2009 has since been set aside. Thereafter, the other show cause notice dated 07.08.2009 has never been adjudicated by the DGFT, Patna. Therefore, none of the EPCG licenses issued by the DGFT, Patna and/or Cuttack has been cancelled as on date. 3.19. In any view of the matter, in the present case the SCN was issued by the Additional Director General, DRI, Kolkata, on 08.05.2009 without authority and in terms of the decision of the Hon'ble Supreme Court in the case of CC Vs. Sayed All [2011 (265) ELT 17 (S.C), it is not legal and valid. In view of the above, the impugned Order is wholly unsustainable and liable to be set aside with consequential relief to the appellant. 3.20. During the course of hearing on 7-9-2018 the counsel reiterated the above submissions and further stated that the Ld Commissioner has erred in coming to conclusion on the basis of pending SCN by DGFT. Commissioner erred in finding that they are Actual user (industrial). Mining is deemed to be manufacture only for the sake of Policy and not for Central Excise purposes. Commissioner based his finding on policy provisions rather than th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit claimed. 4.1. However, the appellants vide miscellaneous application filed in 2014 have submitted that the case of Sushant Minerals (P) Ltd (supra) can be distinguished on the following grounds. (i). the ingredients necessary for deciding whether the appellant is a manufacturer or not for EPCG purposes was not before the Tribunal. The distinction between a job worker manufacturer and service provider was not discussed. (ii). Concept of nexus under EPCG has changed over the years, 1992-2004, from requirement of physical use of machinery in the manufacture of export of goods to export of goods being capable of being manufactured by imported machines. (iii). Third party exports are permitted in terms of Notification 97/2004. (iv). Along with M/s Sushant Minerals (P) Ltd, one more contractor i.e. M/s Thriveni Earth movers were also working as contractors of M/s KJS Ahluwalia. But they were not proceeded against even after the decision of Tribunal in M/s Sushant Minerals (P) Ltd. In fact, largest contractors like M/s Thriveni Earth movers (41 Licenses) and M/s. Taurian Resources Ltd (37 Licenses) were not proceeded against as per information received by them un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1975) as is in excess of the amount calculated at the rate of five per cent ad valorem, and (ii) the whole of the additional duty leviable thereon under section 3 of the said Customs Tariff Act, when specifically claimed by the importer. 2. The exemption under this notification shall be subject to the fallowing conditions, namely:- (1) that the goods imported are covered by a valid licence issued under the Export Promotion Capital Goods Scheme in terms of Chapter 5 of the Foreign Trade Policy permitting import of goods at the rate of five percent duty and the said licence is produced for debit by the proper officer of customs at the time of clearance : Provided that for import of spare parts specified at S. No. 4 of the said Table, the validity period of the licence shall be deemed to be the period permitted for fulfilment of the export obligation in full; (2) that the importer executes a bond in such form and for such sum and with such surety or security as may be specified by the Deputy Commissioner of Customs or Assistant Commissioner of Customs binding himself to fulfil export obligation on FOB basis equivalent to eight times the duty saved on the goods impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said Customs Tariff Act for the purpose of calculation of the duty saved amount for calculation of export obligation; (4) that the importer produces within 30 days from the expiry of each block from the date of issue of licence or within such extended period as the Deputy Commissioner of Customs or Assistant Commissioner of Customs may allow, evidence to the satisfaction of the Deputy Commissioner of Customs or Assistant Commissioner of Customs showing the extent of export obligation fulfilled, and where the export obligation of any particular block is not fulfilled in terms of the preceding condition, the importer shall within three months from the expiry of the said block pay duties of customs of on equal amount equal to that portion of duties leviable on the goods, but for the exemption contained herein which bears the same proportion as the unfulfilled portion of the export obligation bears to the total export obligation together with interest at the rate of 15 per cent per annum from the date of clearance of the goods; (5) that the capital goods imported, assembled or manufactured are installed in the importer s factory or premises and a certificate from the jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pur, Jallandhar, Kanpur, Ludhiana, Moradabad, Nagpur, Pimpri (Pune), Pitampur (Indore), Surat, Tirupur, Varanasi, Nasik, Rudrapur (Nainital), Dighi (Pune), Vadodara, Daulatabad (Wanjarwadi and Mailiwada), Waluj (Aurangabad), Anaparthy (Andhra Pradesh), Salem, Malanpur, Singanalur, Jodhpur, Kota, Udaipur, Ahmedabad, Bhiwadi, Madurai, Bhilwara, Pondicherry, Garhi Harsaru, Bhatinda, Dappar (Dera Bassi), Chheharata (Amritsar), Karur, Miraj, Rewari, Bhusawal, Jamshedpur, Surajpur and Dadri or through the Land Customs Station at Ranaghat, Singhabad, Raxaul, Jogbani, Nautanva (Sonauli), Petrapole and Mahadipur. (7) notwithstanding anything contained in condition (4), where the Licensing Authority grants extension of block-wise period for any block(s) or overall period of fulfilment of export obligation upto a period of two years or regularization of shortfall in export obligation, not exceeding five per cent of such export obligation, the said block-wise period or overall period of export obligation shall be extended or condoned by the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be : Provided that in respect of sick unit referred to in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulfilled by, - (a) export of same products capable of being manufactured with the use of said capital goods; or (b) export of same products manufactured in different units of the licence holder; or (c) through third party exports made by an exporter or manufacturer on behalf of the licence holder by exporting the same product and in such cases, inter alia the shipping bills shall indicate name of both the third party and the licence holder; or (d) making supplies of manufactured product in terms of paragraph 5.4 of the Foreign Trade Policy; or (e) export of other goods manufactured by the importer; (ii) in relation to importers rendering services, means, receiving payments in freely convertible foreign currency for services rendered through the use of capital goods: Provided that in respect of units holding licence both as manufacturer-exporter and service provider, the export obligation may be fulfilled either by export of products specified in sub-clause (i) or by receiving payments in freely convertible foreign currency for services rendered through the use of such capital goods. Provided further that in respect of Group Company as defined in paragrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igation shall be fulfilled by the use of the Imported Capital Goods Condition No.6: Import of Capital Goods under this authorisation shall be subject to actual user condition . Condition No.9: (for EPCG licences, covering the 29 machines and 4 machines) the site of installations for 29 capital goods is MIs Kalinga Commercial Corporation at Gandhamardan Iron Ore Mines, Suakati, Dist Keonjhar, Orissa- 758018 and the site of installation for 4 capital goods is MIs Kalinga Commercial Corporation, Kurmitar Iron ore Mines, Kolda, Barsuan, Dist- Sundargarh, Orissa - 770041. Condition No. 13: This authorization shall only be utilized in accordance with the permission of Foreign Trade Policy (2004- 2009) and the concerned Customs Notification No. (971 2004) as amended from time to time . Condition No. 14: The licensee should submit Installation certificate to the Licensing Authority within 6 months from the date of import. 6.4. It is pertinent to note here that as per the agreement the scope of the work undertaken by M/s KCC is Excavation / raising of iron ore and associated rejects/spoils/spurious/sub-grade materials, segregation, sizing of iron ore into calibrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ore; They are not the buyers of the produce; they only rendered an activity using the machinery imported under concessional rate of duty under Notification No. 97/2004, for which they were paid job charges; they did not clear or sell the resultant product after processing as the product did not belong to them but to their principals i.e. M/s OMC. These facts are not disputed by the appellants. They had no ownership of the premises or the product thereof. Therefore, we find that they are at best job workers or service providers to M/s OMC. 6.5. We find that the licenses were obtained disclosing to the DGFT authorities that they were manufacturer exporter. For being a manufacturer, the appellants should be owners/lessee of the mines or get the ore mined with the help of job workers. The appellant s case doesn t fall under either of these categories. Even if one accepts the argument of the appellants that mining is an activity that amounts to manufacture for the purposes of FTP, the essential condition should be that they are owners of the product even if they get the same manufactured with the help of a job worker. As observed rightly by the commissioner, they have not even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case are similar it is clear that submission of false declaration will result in the goods being liable to action under the Act for recovery of duty and imposition of penalty. 6.6. As observed by Ld. Commissioner, we find that Constitutional Bench of Apex Court, held in the case of CCE New Delhi vs. Harichand Shri Gopal 2010-TIOL -95-SC-CX-CB held as under: 22. The law is well settled that a person who claims exemption or concession has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the Statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory 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 noncompliance of which would not affect the essence or substance of the notification granting e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed. 6.7. Coming to the installation certificates, from the records of the case it is seen that most of the machines were installed at the premises of M/s OMC, which were not owned by the appellants. Some machines were found to have been installed in the mines situated at Daiatari , whose name is not even figuring in the Licences. One machine was found to be used for road repair purposes and one was found to be in broke down condition somewhere away from the place of installation. Some machines which were supposed to be installed in one mine were found installed in other mines. 'actual user condition' as per the condition laid down in the condition sheet issued with the EPCG authorization by DGFT was not fulfilled since the imported capital goods were installed at a place which does not belong KCC and the said capital goods were not utilized for the own use of KCC. Instead, the capital goods were found in the mines of OMC who engaged the services of KCC for rising of the iron ore. The person who has issued the certificates has stated that he has not physically verified the installation. Some of the certificates are not even dated. The certificates proceeded on a w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome to know of the same only towards the end of the story. It is a situation where the theme, plot and characters are to be pre-approved. Every situation for a manufacturer exporter, merchant exporter, third party exporter etc., has been duly given a thought and has been duly provided for in the law. This being the situation, undertaking every activity at the back of the authorities and claiming substantial compliance of law in the end and crying foul in the event of their request is being turned down cannot be equated with fair business practice. It is not the case of appellants that they have informed the authorities and have got due endorsements. Therefore, the exports claim to have been made through third party, as such their sister concern, M/s. Maa Taruni Ispat, cannot be reckoned towards the export obligation as these third parties are not declared. It is to be held that necessary conditions as per Notification No. 97/2004 are not fulfilled. In view of the facts of the case, we find that case law cited by the appellants in their defence are not appropriate. 6.10. We find that Mumbai Bench of the Tribunal has decided a case with identical situation wherein the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om his activities has failed to comply with this requirement as he has neither used it in his own premises or in a job worker premises for his own use. They are in fact Job worker for M/s OMC who have at no point of time parted with the ownership of either the premises or the product to the appellants. Therefore, by no stretch of imagination the appellants can be treated as manufacturer exporter. As discussed above, they have suppressed the facts in the course of obtaining the licences. Therefore, they have violated the eligibility criterion of the Licences and thus violated the provisions of Notification 97/2004 and there is no ambiguity in the language of Notification or the policy. 6.12. We also find that Hon ble Supreme Court in the case of Dilip Kumar Co vs. Commissioner of Customs (I) Mumbai 2018 (361) E.L.T. 577 (S.C.) held that 43. There is abundant jurisprudential justification for this. In the Governance of rule of law by a written Constitution, there is no implied power of taxation. The tax power must be specifically conferred and it should be strictly in accordance with the power so endowed by the Constitution itself. It is for this reason that the Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification and that they have substantially complied with the provisions is not tenable. Therefore, we hold that having violated the conditions of the Notification, the appellants have rendered themselves liable to pay the duty along with appropriate interest and the capital goods imported by them at different ports. As the conditions of the Notification have been violated, the appellants have rendered the imported goods liable for confiscation under Section 111(o) of Customs Act, 1962. 6.14. We find that Commissioner had imposed penalty equal to the duty demanded. However, Commissioner has imposed a composite penalty in terms of Section 114A and Section 114AA of Customs Act, 1962. The Commissioner has not specified as to what is the amount of penalty liable to be paid under each of the Sections. We find that such an imposition is not tenable. Moreover, we find that the Notification provides for recovery of duty along with interest in case the appellants default, on any of the conditions contained in the Notification, in terms of the bond submitted by them at the time of import. Notification does not provide for levy of penalty. When confiscation and demand of duty is on accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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