TMI Blog2021 (2) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... n defined in Explanation II to mean raw materials, components, intermediates, consumables, computer software and parts required for manufacture of resultant product specified in Part E of the said certificate. It is also pertinent to note that phrase 'required to manufacture' as stated in the Notification contemplates possible or intended use and not actual use as clarified in Circular No.36/97 dated 16.09.1997. Thus, the material need not be directly used in the manufacture of resultant product and proof of actual use is not a condition attached to the exemption Notification. The aforesaid position has been explained in the Circular 36/1997-Cus dated 16.09.1997 which was issued specifically in the context of difficulties faced by garment exporters as the custom field formations were insisting that nexus between export product and duty free material imported was required to be established. The imported goods need not be physically used in the manufacture of goods that are exported. Condition (vii) of Notification No.30/97-Cus permitted discharge of export obligation either by usage of imported duty free material or by replenishment material. The only requirement as per cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by a bench of this court are answered against the revenue and in favour of the assessee - appeal dismissed. - C.S.T.A. NO.1 OF 2010 - - - Dated:- 13-1-2021 - HON BLE MR. JUSTICE ALOK ARADHE AND HON BLE MR. JUSTICE NATARAJ RANGASWAMY APPELLANT (BY MR. JEEVAN J. NEERALGI, ADVOCATE) RESPONDENT (BY MR. RAVI RAGHAVAN, ADVOCATE) JUDGMENT ALOK ARADHE J., This appeal under Section 130 of the Customs Act, 1962 (hereinafter referred to as the Act for short) has been filed against the order dated 27.05.2009 passed by Customs, Excise and Service Tax Appellate Tribunal, Bangalore (hereinafter referred to as 'the tribunal' for short). The appeal was admitted by a bench of this court vide order dated 07.01.2013 on the following substantial questions of law: 1. Whether the tribunal was right in taking the view that an advance licence creates only rights in favour of the licencee and therefore if the licensing authority is of the opinion that the advance licence had been obtained by misrepresentation, then, the licensing authority cannot take action in terms of the conditions subject to which the licence had been granted without seeking the opinion of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.30/97-Cus. It was also stated that goods were got manufactured by the respondent through certain job workers who were not indicated as supporting manufacturers in the two advance licenses in question. The respondent submitted a reply on 24.07.2006 to the said show cause notice. The adjudicating authority after affording an opportunity of hearing to the respondent, by an order dated 28.02.2008 confirmed the proposals made in the notice. The respondent thereupon challenged the aforesaid order in an appeal before the tribunal, which was allowed by an order dated 27.05.2009. Thereupon, the revenue filed an appeal before this court which was disposed of by a bench of this court vide order dated 26.04.2014 inter alia on the ground that the dispute does not fall within the jurisdiction of this court as contemplated under Section 130 of the Act and the only remedy available to the revenue is to challenge the order under Section 130E of the Act before the Supreme Court. The Supreme Court by an judgment dated 05.09.2019 set aside the order passed by a bench of this court and remitted the matter to high court for de novo consideration of the appeal on merits. In the aforesaid factual b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials in the goods which are imported towards fulfillment of export obligations. It is also submitted that the phrase 'required for manufacture' as stated in the Notification contemplates possible or intended use and not the actual use as has been clarification is Circular No.36/1997 dated 16.09.1997. It is also contended that the respondent shall also be entitled to exemption if the respondent produces a commercially known product. Reliance has been placed on Notification Nos.80/95 and 204/95. It is also urged that imported goods have rightly been replenished in the present case without any violations of conditions of exemption Notification and there is no violation of actual user of condition in the present case. It is also pointed out that the nexus between the imported material and exported goods are not required to be proved before custom authorities, once export obligations are met. Our attention has also been invited to para 4.3 of Chapter IV of EXIM Policy, 1997-2002. It is also pointed out that the licensing authority did not raise any dispute in granting the licence as well as Export Obligation Discharge Certificate (EODC), as the customs authorities cannot no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting Board's instructions contained in Circular Nos.4/93 dated 04.03.1993, 1/94 dated 05.01.1994 and 34/94, dated 12.12.1994 and Member (customs) letter F.No.605/373/96-DBK, dated 16.01.1997. These instructions clearly spell out that correct interpretation of the words 'raw materials required for use', does not mean that raw materials must be physically incorporated. It was also clarified with the help of examples that inputs may be allowed even if they are not exactly those used in the export product but provided the inputs are commercially known to be useable in the product exported. 3. Further, it appears that at the stage of logging of Par-II of DEEC Book, the exporters have, in some cases, been asked to establish that the entire quantity of raw materials, mainly fabric, was used in the manufacture of Garment entered for export. Attention in this regard is invited to Exemption Notification Nos.30/97 and 31/97 both dated 01.04.1997 (QBAL), Para (V) of both the Notifications only requires that the exporter must discharge his export obligation by exporting the resultant products which are specified in Part (E) of Duty Entitlement Exemption Certificate. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exported. Condition (vii) of Notification No.30/97-Cus permitted discharge of export obligation either by usage of imported duty free material or by replenishment material. The only requirement as per condition No.(vii) is that such inputs should not be sold or transferred in the market. In other words, the replenished inputs can be used in manufacture of other products and not necessarily incorporate in export of goods. Thus, from the aforementioned reasons, it is evident that the respondent has not violated the conditions of the Notification No.30/97-Cus and has rightly imported the material and has discharged its export obligations. The tribunal therefore, in the impugned order has rightly held the Circular to be applicable in the case of the assessee. 8. From perusal of clause 3.4 and 3.45 of export import policy 1997-2002, it is evident that licence holder is free to get in the material processed through not just supporting manufacturers specified in the licence but also through other job workers as imported goods and exported goods are properly accounted for. This requirement has been duly fulfilled by the respondent inasmuch as there has been a proper account of imported ..... X X X X Extracts X X X X X X X X Extracts X X X X
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