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TMI Blog2002 (10) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Customs Act, 1962. 2.Shri Sasidharan and Ms. Mythili, Advocates appeared before us and submitted that the charges levelled against them in respect of 31 advance licences have been dropped by the ld. Commissioner as not maintainable. He has confirmed the charges levelled against them in respect of only one advance licence where imports had proceeded the exports and they had allegedly sold the imported goods in the open market. They further submitted that there is no nexus between the export and import of the goods and they had imported these goods before discharging the export obligation. They invited our attention to para 11 of the Order-in-Original and submitted that the imported goods have been used in the manufacture of their product which had been ultimately exported. They further submitted that they had fulfilled export obligation even in respect of the 32nd advance licence that is Licence No. 405040 dated 16-3-1995. They further submitted that the findings of the ld. Commissioner that they had sold imported materials for profit in the local market and used some other materials for manufacturing goods which were exported later on is devoid of evidence. They also invite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion should be taken since the ingredient required for manufacture of matches is paper board and by using paper board there has been a substantial compliance of the input output norms. The choice of a paper board depends on the market conditions, the price offered and the nature of the export commodities. They had also submitted that it is not necessary that the goods imported must be physically incorporated in the export product. (iv) The appellant have not disposed/sold the imported material. The materials were consumed and used in the factory of the company and export obligation in respect of the licence has been subsequently fulfilled and the proceedings realised in full. They had also pointed out that the term 'disposal' used in the notification normally refers to loan, lease, sale and the appellant had applied for and hired the licence in the capacity of the exporter. (v) Any penal provisions can only be made prospective and cannot be made retrospective. This principle has been repeatedly laid down by the Hon'ble Supreme Court and followed by the appellate Tribunal. They had therefore submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed paper board. In other words, inasmuch as the licence allows import of only relevant item actually used/to be used in the export, the coated paper imported so far as it related to match inners are concerned, is not eligible for exemption "duty free" under Notification No. 80/95, dated 31-3-1995. The aspect of coated paper board not being used in the match inners is evident not only from the statement of various personnel of the company including its Vice President, but also from their internal documents maintained at their Tiruvottiyur factory. In addition to the above facts that only coated paper board had been used for manufacture of match inners, investigation further revealed that M/s. ITC Ltd., Chennai had been importing only coated paper board duty free under several licences in a continuous manner though they were using uncoated paper board for the manufacture of inners; however, the paper board imported by them had thus never been used for any export production but in the manufacture of other packing materials viz. cigarette/ liquor packaging manufactured in their same factory. The investigation also revealed that the coated paper used in the manufacture of match outers h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ysically incorporated in the export product. The appellant had also submitted that the term 'required' only implied that the goods imported must be a category that had been used in the export product. ld. SDR also invited our attention to para 8.3 of the impugned order in which ld. Commissioner has noted that insofar as the allegation regarding the 32nd licence namely No. 405040, dated 16-3-1995 is concerned the party admitted that the fact exports in effect had not preceded the imports for which they crave the indulgence of the department and request that this may be condoned for the simple reason that the export obligation was completed immediately thereafter. 5.In counter ld. Counsel invited our attention again to their submissions made in para 7 which was in reply to the show cause notice issued on 13-8-97 which have already been discussed in para 2 supra. 6.We have carefully considered the submissions made by both sides and have perused the records and are of the considered opinion that ld. Commissioner had in fairness dropped the charges levelled against the appellant in respect of 31 advance licences as the ld. Commissioner had found that the appellant had fulfilled certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks. M/s. ITC were found to have completed export obligation in full prior to importation. Further, the investigation conducted by the Revenue revealed that (i) paper board (coated) imported by them were not at all required for the manufacture of match inners and (ii) in respect of match outers, paper board (coated) imported by them did not correspond in technical characteristic to the coated paper board actually used for export production. As regards paper/paper board, the appellant as per advance licences were entitled to import "paper/white board/paper board coated/uncoated other than ivory board." The advance licence further stipulates only relevant item actually used/to be used in export shall be allowed. Whereas in the instant case the appellant had imported only coated paper board. However, the importers were found to have used coated paper board for match outers only. In respect of match inners, they used only uncoated paper board. In other words, inasmuch as the licence allowed import of only relevant item actually used/to be used in the export the coated paper imported so far as it related to match inners was not eligible for exemption "duty free" under Notification No. 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arette and liquor packs and not for match outers/inners for which required GSM was 250 to 350 GSM. 9.In view of the above facts and circumstances, the importers M/s. ITC Ltd. Chennai have to pay duty foregone in full which works out to Rs. 69,78,348.87 inasmuch as M/s. ITC had imported materials viz. coated paper board, printing ink, industrial glue and water based coating duty free under DEEC scheme (quantity based) with an obligation to export safety matches but failed to fulfill the conditions stipulated in the notification No. 80/95 dated 31-3-1995. 10.As regards their plea that they are not liable to penalty under Section 114A of the Customs Act, we are inclined to accept their plea since the provisions of Section 114A were incorporated with effect from 28-8-1996 whereas the goods imported under dispute were between the period 20-3-1995 to 5-5-1995 as has been held by the Apex Court in the case of Elgi Equipments v. CC as reported in 2001 (128) E.L.T. 52 (S.C.). Therefore the order of imposing penalty of Rs. 69,78.348.87 under Section 114A is set aside. Subject to above modification, the order of the ld. Commissioner is otherwise sustained. Ordered accordingly. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot of force. The show cause notice was for violation of 32 advance licences by which the total duty liability of Rs. 69,78,348.87 was computed, while the Commissioner has given a finding with regard to violation of only one advance licence for which entire duty amount is not applicable. Further, there is no evidence on record or alleged in the show cause notice of appellants having sold the materials in respect of advance licence No. 405040 dated 16-3-1995. The Commissioner in para 11 of his order has given only presumptive finding and there is no clear cut evidence with regard to sale of imported materials in the local market. Appellants(iv) contended that the entire material was utilized in the factory and therefore the notification has not been violated. On careful consideration, this plea is acceptable and requires to be upheld. The notification does not lay down specific criteria for use of the imported material. In the absence of any such specific clauses, it cannot be said that there is a violation of the terms of the notification. Therefore, the arguments raised were in two folds with regard to the order being beyond the terms of the show cause notice, and the notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces were utilized for the manufacture of the inners and outers of match boxes exported in discharge of the export obligation under the Notification; that the paper board which was imported duty-free under the licence was different from the particular variety of paper board required for the manufacture of the inners and outers of match boxes and that the paper board so imported had been diverted to the local market. The learned Commissioner, however, found that the export obligation under the said licence No. 405040 had been fulfilled by the party. On the basis of his findings, the learned Commissioner confirmed the demand of duty (amounting to Rs. 69,78,348.87) on the raw materials imported under the advance licence No. 405040. Same amount of duty which had already been paid under protest by the party was adjusted against the demand so confirmed. The learned Commissioner also imposed a penalty of equal amount on the assessee under Section 114A of the Customs Act. The penalty has been set aside by the regular Bench. The point of difference is in relation to duty only. 16.The learned Counsel for the appellants and learned SDR for the Revenue have reiterated their respective submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve 350 whereas the raw material imported under the advance licence No. 405040 was a different variety of paper board i.e. paper board of GSM less than 250 and more than 350, which was not useful for the manufacture of inners and outers of safety match boxes. The learned DR submits that the imported raw material should have been both qualitatively and quantitatively compatible with the exported product. Non-fulfilment of this requirement under the Exim Policy amounted to breach of the conditions of the exemption notification. The exemption was not available to the paper board of GSM less than 250 and more than 350 under the advance license No. 405040 read with the input-output norms laid down under the Exim Policy. 18.With reference to the above submissions of the learned SDR, the learned Counsel relies on Board's Circulars No. 4/93, dated 4-3-1993 and No. 1/94 dated 5-1-1994. The learned Counsel argues that, by virtue of the clarification issued by the Board, it was not open to the Adjudicating Authority to meticulously correlate imported raw materials, in terms of the technical characteristics and properties, to export product under the DEEC Scheme. 19.I have examined the submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Circular No. 1/94 :- "It is, therefore, once again reiterated that whereas minute details of the kind indicated in the preceding para may not be gone into establish a close nexus, it will be necessary to establish a nexus between the inputs and the export product keeping in view the commercial use of the inputs imported and the normal manufacturing process for the product exported." 20.The gist of the above provisions of the circulars is that the goods imported should be shown to be goods of a kind which are commercially known to be used in the export product and are covered by the description of inputs in the DEEC licence. In the instant case, the description of raw material in the licence is 'paper board'. The raw material imported is admittedly paper board. The department has no case that the appellants did not use paper board in the export products. As per the circulars, it is not necessary for the departmental officers to establish a close nexus with reference to quality and technical specifications of inputs vis-a-vis the export product, for allowing the benefit of the exemption notification. The learned Counsel has relied on the decisions in the cases of Standard Industr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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