TMI Blog1996 (3) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... writ, order or direction directing the opposite party No. 2 to give duty free clearance of the goods imported against the value based advance licence Nos. 3390229 dt. 30-6-1993 and 3390244 dated 8-7-1993 or to be imported against licence Nos. 3390218, 3390216 and 3390214; And In the alternative issue an appropriate writ, order of direction to opposite party No. 1 to forthwith transfer valid transferable licence to the petitioner acceptable to opposite party No. 2 in lieu of the licence bearing Nos. 3390216, 3390244, 3390214 and 3390229 transferred earlier; And In the alternative issue writ in the nature of mandamus and/or any other appropriate writ, order or direction commanding the opposite party No. 1 to make payment of any duty that is liable to be paid by the petitioners and/or their agents under the aforesaid five licences towards the goods imported; And Issue a writ in the nature of mandamus or any other appropriate writ, order or direction commanding opposite party No. 3 to extend the validity of the licences bearing Nos. 3390218, 3390216, 3390244, 3390214 and 3390229; And Issue a writ in the nature of certiorari or any other appropriate writ, order or direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... free clearance of goods against such advance licences are stated to be in the nature of export incentives granted to an exporter, instead of giving cash incentives or any other duty/excise exemption or any concessions of import duty on imported raw materials. Under the scheme of the policy such advance licence represents a benefit to an exporter which can be translated in tangible terms. In the present case licence was granted to opposite party No. 1 who in turn by selling the same and having it endorsed by opposite party No. 3 D.G., Foreign Trade, has received its value and thus availed for itself the export benefit. In the given circumstances, the remedy for any defect in the procurement of any licences and/or transfer thereof, is that the duty ought to be strictly recovered from NALCO. As far as the petitioners are concerned, they are bona fide purchaser of the said licences and have purchased the same on the representation of opposite party No. 1 (NALCO) and opposite party No. 3 (D.G., Foreign Trade) and as such, goods imported against the said licences cannot be withheld by the Custom authorities. There are allegations that the clearance of goods have been withheld purportedly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... import licences having expired after six months of the dates of transfer the petitioner has no cause of action in the manner as alleged. It is contended that from the Departmental clarification issued by Nagpur Collectorate of Excise Customs Department, published in ELT-Volume 72, NALCO came to learn that input stage credit under Rule 57A of the Central Excise Rules should not be availed in respect of "any of the inputs" used in the manufacture of exported goods to make import licences under the said Rule eligible for transfer. 5. NALCO allegedly calculated the excise concessions it had availed in respect of other inputs like Lime, Soda Ash, CGM and Furnace Oil under five import licences and other value-based import licences. On purported calculation NALCO found that it had availed of Excise concession to the tune of Rs. 40,65,319 in respect of 8 licences including the five licences which it had transferred to the petitioner. Thereafter suo motu NALCO debited an amount of Rs. 40,65,319 in favour of Central Excise in the personal ledger account. Subsequently, Central Excise was intimated about the aforesaid reversal of the Modvat credit. In substance, by this reverse entry in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re all dutiable goods relating to the said items are assessed) seeking to assess into bond and warehouse the goods in the private bonded warehouse of M/s. V.V.F. Co. Ltd., Hay Bunder Road, Sewree, Bombay, a sister concern of the Importer. The Bill of Entry was assessed provisionally under Test Bond and the goods were passed into Bond on 22-2-1995. The normal bonding period is one year and bond period expires on 21-2-1996. Apparently, realising that the licence purchased by the Hindustan Lever Ltd. being ineligible to obtain duty exemption in respect of the imported goods under Notification No. 203/92 and realising that the fraud and mis-declaration committed by NALCO is likely to be exposed and the Customs authorities are insisting upon proper verification in view of the public notice, M/s. NALCO in order to cover up the mis-declaration refunded Rs. 40,65,319 representing input credit benefits already availed by them, as per their calculation. It is claimed that even this is not a true reflection of the actual amount of Modvat claimed under Rule 57A and the amount is more than few crores of rupees. 8.The Custom authorities further add that M/s. Hindustan Lever Ltd. filed ex-bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed. The said order of the Licensing Authority is without jurisdiction and is not binding on the Customs authorities. The Customs authorities have accordingly passed an order disallowing the benefit of duty-free exemption. The mandatory provisions of law prohibiting availment of input credit cannot be lawfully equated with availment and subsequent refund/reversal after repeated false declarations and to thwart the penal action, if possible. It is made clear that the custom authorities have lawfully denied the exemption under Notification No. 203/92 and the importers are free to clear their goods on payment of appropriate duty. The amount of credit availed is much more running into few crores and not Rs. 40,65,319, as calculated by M/s. NALCO. 10.Mr. G. Ramaswamy, Senior Counsel, appearing for the petitioner, Fair Exports Private Ltd. has mainly argued that under the Act, the J.D.G.F. T. is the authorised authority to grant or cancel the licence. The power of grant includes the power to cancel the licence if the the J.D.G.F.T. is satisfied that it is obtained by misrepresentation. It is open to J.D.G.F.T. or the delegated authority to issue a show cause notice under Section 9(4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at. Therefore, the conditions are satisfied. According to him, the crucial date as it would be relevant to note, the only consequence of applicability of para 67 is import free of duty. Para-67 does not exempt import from duty. The non-payability of import duty arises not by para-67 but by Notification No. 203 issued under Section 25 of the Customs Act which provides that imports made under transferred VBAL (Value-Based Advance Licence) is free from duty. The question as to whether duty is payable is to be determined only when the Bill of Entry is submitted to the Customs authorities. This is very clear from the decision reported in 1989 (43) E.L.T. 189 (SC) = A.I.R. 1989 S.C. 2054. (M/s. Bharat Surfactants (Pvt.) Ltd. v. Union of India and another). Therefore, as Mr. Ramaswamy submits, that if at the time of presentation of Bills of Entry which alone is the crucial date for leviability of duty, in law, the assessee has not availed Modvat. 12.The entire aspect of the submissions of Mr. Ramaswamy is that since NALCO did not avail any Modvat and/or it has reversed by refunding the amount purportedly obtained under Modvat, there is no bar and/or impediment to avail the exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above four inputs. Total value allowed for importation of these four inputs is specified in the VBAL. (In VBAL value of individual inputs are not mentioned, only total value of all inputs are mentioned). The licensee/transferee of the licence has the flexibility in VBAL to import one or some or all the inputs within the overall value specified in the VBAL. In the event, the licensee/transferee of the licensee imports only one input for the full value of the VBAL he gets the benefit of duty free import for the value of all the four inputs. For the other three inputs which were not imported though specified in the VBAL, if the licensee/transferee of licensee purchases the same indigenously and avails benefit of inputs stage credit under Rule 57A, in that situation it gets double benefit. 16.Mr. Patnaik asks the Court to appreciate that in order to prevent licensee/transferee of the licensee from getting double benefit in para 67 of the EXIM policy and also in Custom Notification No. 203/92 condition (V), stipulation has been made regarding non-availment of input stage credit under Rule 56A or 57A for any of the inputs used in the manufacture of exported goods (specified in VBAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... na" and as such, the other said four inputs would not and do not come within the purview of Duty Exemption Scheme and as such, are not specified in the five VBALs in terms of para 51 (Duty Exemption Scheme of EXIM Policy). NALCO, as (sic) Mr. Patnaik addresses, has availed input stage credit, i.e., benefit of non-payment of Central Excise Duty in respect of these four inputs. NALCO, as he adds, has not availed input stage credit in respect of caustic soda Lye. As such, NALCO has not availed double benefit, i.e., benefit of exemption from import duty and benefit of exemption from Central Excise Duty by way of input stage credit in respect of any one of the five inputs used in the manufacture of export product, i.e., Calcined Alumina. In this context extract from para 108 at page 38 and para 109B at page 39 and page 363 (Item No. 727) of Vol. II of the Hand Book of Procedure (issued under para 16 of EXIM Policy) are brought to the notice of the Court. The aforesaid extract indicates, inter alia :- "Licenses will be issued only for products for which standard input and output and value addition norms have been published." Paragraph 109B provided, inter alia :- "Where standard in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... importer-exporter is required to export the [goods by not] availing Modvat credit on any of the inputs used in the manufacture of export products. A plain reading of the provisions of para 67 of the EXIM Policy, which deals with the transferability of the Advance Licence of both VBAL and QBAL shows that different language has been used deliberately because of difference in the nature and scope of the schemes. The same distinction has been made in the customs duty exemption Notification No. 203/92 for VBAL and Notification No. 204/92 for QBAL. In VBAL, the Modvat credit is to be availed in respect of any of the inputs used in the manufacture of the export goods, while in QBAL, Modvat credit is available but neither the licence nor the imported inputs are transferable for inputs for which Modvat credit is availed, as clearly made out in the respective Customs Exemption Notification. Mr. Das has taken the Court in between the lines as to the relevant Notification for proper appreciation of the entire dispute raised between the parties. 22.It is pointed out that the policy makes a distinction between VBAL and QBAL from Drawback angle in paragraphs 70 and 70A. Attention of the Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is placed on record that condition V(a) of Notification No. 203/92 clearly stipulates that the export obligation is discharged by exporting the goods in respect of which no input stage credit is obtained. It is claimed by the Customs authorities that NALCO exported the goods during the period 1992-93. At the time of export of the goods at Vizag, they had misdeclared that they have not availed or utilised Modvat credit in respect of the goods exported. While applying for transferability to the licensing authority, they had also misdeclared that they have not availed or utilised Modvat credit in respect of the goods exported. It is submitted that in reality they had availed of the Modvat credit. They had not only taken the credit for their self-maintained register. Actually they had also utilised the said credit. A portion of the credit of Rs. 40 lakhs (they claim the total amount of credit availed by them) in respect of the exported goods, but according to the Department this is only a part and according to rough estimate, it would be more than two crores of rupees. The original contention of NALCO is that since they have paid back the Modvat credit, it should be treated as if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a part of fiscal enactment. It has to be appreciated Mr. Das submits, that Exemption Notification issued under fiscal laws has to be strictly construed. Words used therein to be understood according to their plain phraseology and not on any presumption. Reference is made to 1992 (57) E.L.T. 261 (Madras). The Exemption Notification has to be interpreted by the words used therein and nothing can be added, amended or constructed to make up its deficiency. Reference is made to a case reported in 1983 (12) E.L.T. 24 (Delhi). Taxing statutes, rules and notifications issued thereunder, as he argues, will have to be understood strictly and with the aid of the language employed therein. There is no scope for any element of intention or any element of speculation about intention while interpreting taxing statute. 29.Mr. Das has tried to demonstrate that the mis-declaration and suppressions made by M/s. NALCO are face on the face. They have made the same repeatedly with the intention to avail "Double Benefit" contrary to the provisions of law. In the past M/s. NALCO have themselves availed of the benefit of duty-free import by misdeclaring and suppressing the fact of availment of Modva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernative prayer for issuance of a writ to command opposite party No. 1, NALCO, to make payment of any duty that is liable to be paid by the petitioner and/or their agents under the aforesaid five licences towards the goods imported. 31.The tenders for five Value-Based Advance licences for Caustic Soda Lye of the value for Rs. 7,40,67,482 were called by Press being NIT No. PDC/AA/E-29/94. In response to the said notice inviting tender the petitioner-company had by their letter dated 3rd May, 1994 submitted their bid to NALCO with an earnest money of Rs. 5,00,000. There was a negotiation between the petitioners and NALCO and a final revised offer was made on 9th May, 1994. 32.The aforesaid licences are transferable in terms of para 67 of the Export Import Policy read with Para 127 of the Hand Book of Procedure 192/197. For proper appreciation and by way of ready reference, said para 67 of the Export Import Policy is quoted hereinbelow :- "67. A Value Based Advance Licence or the materials imported against it may be freely transferable after the export obligation has been fulfilled export proceeds realised and the Bank Guarantee/LUT redeemed. The export obligation should have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Collector of Customs, asked for a non-utilised certificate of Modvat from the Central Excise Department, Rayagarh. From the materials on record, it further appears that NALCO had claimed the Modvat benefits to the extent of Rs. 40,65,313 and the earlier certificate/confirmation issued by the NALCO was not correct. The Central Excise Department sent a letter dated 12th March, 1995 addressed to the Assistant Collector of Customs, stating that the Central Excise Department was aware that the said licences have been transferred and, therefore, action has been taken as to Modvat credit availed by opposite party No. 1, NALCO. 35.Now the dispute, as convassed before us, is that if the conditions of Value-Based Advance Licences are not fulfilled, such as, if the benefits under MODVAT scheme are availed, there cannot be double benefit. It is the consistent case of the petitioner involved in one aspect that no benefit was obtained under MODVAT and even if any benefit was contained by NALCO, the same was reversed and there is no bar and/or impediment for the transferee of the licences, such as the petitioners, to get the [release] of the imported goods duty free. 36.The second aspect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the provisions of this section shall apply : "Rule 57A :- (1) The provisions of this Section shall apply to such finished excisable goods (hereinafter referred to as the "final products") as the Central Government may, by notification in the Official Gazette, specify in this behalf, for the purpose of allowing credit of any duty of excise or the additional duty under section 3 of the Customs Tariff Act, 1975 (51 of 1975), as may be specified in the said notification (hereinafter referred to as the "specified duty") paid on the goods used in or in relation to the manufacture of the said final products (hereinafter referred to as the "inputs") and for utilising the credit so allowed towards payment of duty or excise leviable on the final products, whether under the Act or under any other Act, as may be specified in the said notification, subject to the provisions of this Section and the conditions and restrictions that may be specified in the notification : Provided that the Central Government may specify the goods or classes of goods in respect of which the credit of specified duty may be restricted ...........". The EXIM Policy, 1992-97 indicates the concept of "Value Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 975 (51 of 1975) and from the whole of the additional duty leviable thereon under Section 3 of the said Customs Tariff Act, subject to the following conditions :- "(i) that the materials imported covered by a Value Based Duty Exemption Entitlement Certificate issued by the licensing Authority in the form specified in the Schedule annexed to this notification; (ii) That the importer at the time of clearance of the imported materials (a) produces proof of having executed a bond or a legal undertaking before the Licensing Authority concerned for complying with the conditions of this notification; and (b) makes a declaration before the Assistant Collector of Customs binding himself to pay on demand an amount equal to the duty leviable but for the exemption, on the imported materials in respect of which the conditions specified in this notification have not been complied with; ........" 43.So far as the facts of the present case are concerned, there is no inconsistent and contradictory stand between the Licensing Authority and the Customs Authority. We find from the records that the Deputy Director General of Foreign Trade has sworn an Affidavit on 7-4-1995 stating clearly th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertaking before the Licensing authority concerned, for complying with the conditions of this notification; and (b) makes a declaration before the Assistant Collector of Customs binding himself to pay on demand an amount equal to the duty leviable but for the exemption, on the imported materials in respect of which the conditions specified in this notification have not been complied with : Provided that a bond or a legal undertaking and the declaration shall not be necessary in respect of imports made after discharge of export obligation in full, as evidenced by endorsement of Licensing Authority in the said certificate; (iii) that the said licence and the said certificate is produced before the proper officer of customs at the time of clearance of imported goods out of customs control : Provided that no such imported materials shall be permitted clearance under this notification unless a debit entry has been made, in the said licence and the said certificate, by the proper officer of customs; (iv) that the imports and exports are undertaken from sea ports at Bombay, Calcutta Cochin, Kandla, Mangalore, Marmagoa, Madras, Nhava Sheva, Paradeep, Tuticorin and Visakhapatnam, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or disposal of materials shall be allowed in respect of licences issued for the export of all kinds of writing instruments (including gift sets and refills/nibs) on fulfilment of export obligation only in favour of manufacture of writing instruments. Explanations — In this notification. - (i) "Export and Import Policy April 1992-March 1997 means the Export and Import Policy 1 April, 1992 - 31 March, 1997 published vide Public Notice of the Government of India in the Ministry of Commerce No. 1-ITC(PN)/92-97, dated the 31st March, 1992 as amended from time to time. (ii) "Licensing Authority" means an authority competent to grant a licence under Imports (Control) Order, 1955 made under the Imports and Exports (Control) Act, 1947 (18 of 1947); (iii) "Materials" means - (a) raw materials, components, intermediates, consumables, computer software and parts required for manufacture of export product : Provided that in the case of electronic goods and all kinds of writing instruments (including gift sets and refills/nibs), all export items covered by one serial number in the Standard Input Output and Value Addition norms as contained in Handbook of Procedures, 1992-97, Volume- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n taken by the NALCO. First it is asserted as if whatever benefits obtained under Modvat scheme, have been reversed, so it must be construed to a clean scale to get benefit under the VBAL scheme. Secondly, by detailed analysis, an argument has been advanced that with regard to the inputs there is no availment of any benefit under Modvat scheme as spelt out, and there is no bar and/or impediment to receive the benefit under the VBAL Scheme in the manner as claimed and since the licence is transferable, the transferee is equally entitled to get the benefit of duty-free import in respect of those items. 45.On proper scrutiny, we find that, in fact, by a reversal the breach of conditions of the exemption Notification cannot be restored. Besides, there is a factual dispute as to the actual amount of benefit consumed by NALCO and there is a dispute raised by the Customs that there is more amount than what is stated by NALCO as to the Modvat benefit enjoyed by NALCO. Within the scope of the writ petition, it is not possible to investigate this aspect without production of proper evidence by both sides. It is, however, clear to this Court that the second stand to interpret the express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t with the conclusion arrived with regard to the competency of the Customs authority, opposite party No. 2, to demand the duty on the goods in question. 49.It has been made clear in the leading judgment that the inter se disputes as to the liability for payment of the duty between the NALCO and its transferee-licensees are not required to be adjudicated by this Court. The competency of the Customs authorities to detain the goods until the duty is paid has been held to be valid. 50.Opposite party No. 3, the Director General, Foreign Trade, in his counter has admitted the authority of the Customs officials to check and detain the goods in question if there has been any violation of the conditions of the licences under the Export and Import policy. The Joint Director of Foreign Trade under Annexure-7 on 30-3-1995 addressed to the opposite party NALCO stated that since the latter had reversed the credit availed under Section 57A of the Central Excise Rules, 1944, the transferability of the licence so granted had been regularised. 51.Annexure K/2, at page 192 of the brief, is the letter dated 21-8-1995 of the Director General, Foreign Trade addressed to the Commissioner of Cust ..... X X X X Extracts X X X X X X X X Extracts X X X X
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