TMI Blog2003 (7) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... over also resulted in reduction of the weight. While the fan with a cast iron/cast iron top and bottom had a weight of 3.70 Kgs., a fan with a cast iron top and aluminium bottom had a weight of 2.15 Kgs. Similarly, a fan with top and bottom aluminium cover weighs 0.90 Kgs. Thus, a fan weighed less when Aluminium was used as a material for either the top or the bottom cover either exclusively or in combination with cast iron. 2.(a) The appellants were initially importing the raw materials for the manufacture of the top or the bottom covers on payment of duty. In and around 1993, the appellants desired to import the aluminium alloy for the manufacture of the aluminium top or bottom covers by availing the benefit of an Advance Licence on a prior export basis i.e., the import of the raw materials would be made after the export of the finished goods. The appellants, therefore, submitted documents like the shipping bill, the invoice raised on the foreign purchaser after the export of the goods to enable the authorities to issue the licence. The licences so issued were to replenish the raw materials used in the manufacture of the product exported. (b) In the application submitted for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 962 and ordered the confiscation of Aluminium Alloy. The Commissioner has, however, reduced the demand of Special Additional Duty, holding that there was a discrepancy in the inclusion and has dropped demand of Rs. 3,29,243/-. (d) Hence this appeal. 4. After hearing both sides and considering the matter, it is found :- (a) The Commissioner relying upon the statements of Shri D.V. Anand, Sr. General Manager, the evidence collected from the factory of M/s. Deccan Iron Manufacturers, Hyderabad and other job workers to the effect that imported Aluminium was converted into components or table fans and his inferences on instruction in correspondences from M/s. Usha International, Delhi to importers not to use Aluminium alloy during 1997-98, concluded and held :- (i) Aluminium Alloy imported under DEEC was not used in the export-product and it was not used for the purpose it was intended and was diverted for other uses. (ii) He was not in agreement with the submission that 'intended use' and 'not actual use' only was contemplated under the scheme. (iii) The CBEC circular relied upon by noticees [viz., 4/93, dtd. 4-3-93 and 1/94, dtd. 5-6-94] were issued relating to a Value Bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely." Statements of Shri Chandra Sekhar Pudi of M/s. Rashmi Die Castings Ltd. :- "M/s. Jay Engg. Works Ltd. (JEWL) has been customer for us, who are the manufacturers of ceiling and table fans. M/s. JEWL duly sends us LM-24 Aluminium alloy Ingots imported in nature under 57 F(4) Challan with a clear-cut instructions for the further pressure Die Castings. On being specifically asked, I state that with the receipt of LM-24 Aluminium Ingot (Imported, we manufacture table fan back cover and ceiling fan Astra top, bottom covers and occasionally for Kohinoor Super Deluxe (KSD) top and bottom cover." The Panchnama recorded at the premises of M/s. Tychc Diecast Pvt. Ltd. and Shri Srinu Vasantha's explanation therein :- ".....Shri Srinu Vasantha explained and on being specifically asked that they receive imported LM-24 Aluminium Alloy Metal from M/s. Jay Engg. Works, Hyderabad and the same are used in the pressure Die-casting for Table Fan-front and back cover. He further explained that they received LM-24 Aluminium Alloy metal of M/s. Venkateswara Non-ferrous Foundery through M/s. Jay Engg. Works, Hyderabad, which are used in the manufacture of bottom cover for magnetic ceiling fan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mselves would indicate that there has been receipt of a number of complaints from the overseas customers on account of the fans-exported having a lesser weight. The reduction in the weight, would be only when Aluminium Alloy was used in the manufacture of top or bottom cover. Infact, the letter dated 4-2-97 from M/s. Usha International, Delhi, requests the appellants to refrain from supplying the Aluminium covers in the export market i.e., the supplies being effected were with Aluminium covers used as received from the ancillaries. The fax message dtd. 13-11-97 from M/s. Ashema Link Trading Co., L.L.C. also refers to the fact of receipt of two consignments of Pulsar ceiling fans - one with motor weighing 6 Kgs., and other weighing 4.5 Kgs. The message also refers to the fact that the heavier model of the ceiling fan did not have a problem since it had a normal cast-iron cover. These messages very clearly indicate that the lighter ceiling fan could have only top or the bottom cover made of aluminium. The appellants placed on record a statement indicating the quantities of the aluminium alloy that were issued to the ancillary units and the aluminium covers received from them and a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material is figuring in the Input/Output Norms and is specified in the licence issued by the licensing authority, the item will be deemed to be material required for the manufacture of export product. The licence-holder is not required to prove further that the said material has actually been used in the manufacture of the export product. (vi) The provisions in Notification Nos. 80/95 and 204/95 are in contrast with the provisions of Notification No. 116/88-Cus., dated 30-3-88 issued in furtherance of the Import and Export Policy for the period April 1988 to March 1991. These Notifications exempted materials imported against an advance licence issued under the Imports (Control) Order, 1955. Explanation (viii) to this Notification defines 'material' to mean goods which are raw materials, components etc., used in the manufacture of resultant export products. These, Notifications contemplated duty exemption only to those materials, which are used in the manufacture of the resultant products. Thus, on clearances made under these notifications, actual use of the imported inputs for the manufacture of the resultant product was a pre-condition for grant of exemption. (vii) The above p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Policy as well. Notification No. 31/97-Cus., dated 1-4-97 issued in furtherance of the EXIM Policy 1997-2002, accordingly, retained the same definition for the term 'materials'. In other words, raw materials, components, etc., required for the manufacture of the resultant product were permitted to be imported duty free. (xiii) From the above, it is apparent that during 1994-98, the period covered by the Show Cause Notice, the EXIM Policy and the corresponding Customs Notifications permitted duty free import of materials required for the manufacture of the export product. The actual use of the imported input in the export product was not a condition under these notifications unlike the earlier Notifications such as 116/88 and 159/90. (xiv) The words 'required for manufacture of export product' have, therefore, to be interpreted keeping in view the fact that the inputs permitted under the Standard Input/Output Norms and in the Import licences are inputs required for manufacture of the corresponding export product. The notification places no restriction on actual use. Once Aluminium Alloy is specified as a standard input for manufacture of ceiling fans and an advance licence has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... input and the export product was examined. This issue was examined by the CBEC in the context of the Value Based Advance Licence Scheme and the corresponding Customs Notification No. 203/92-Cus., dated 19-5-92. The said notification exempted materials imported into India against a Value Based Advance Licence from the basic and additional duty of customs subject to the conditions specified therein. Explanation (iii) to the said notification defined the term 'materials' to mean raw materials, components, intermediates, consumables, computer software and parts required for manufacture of export product. The definition of the term 'materials' in Notification No. 203/92-Cus. is identical to the definition of the said term in Notification No. 204/92-Cus. applicable to Quantity Based Advance Licences. CBEC issued another Circular vide Circular No. 4/93, dated 4-3-93 in the context of Notification No. 203/92. This Circular was issued in the context of the insistence of Customs field formations 'seeking to establish a detailed nexus of inputs with reference to export product' and insisting 'that the material imported must be actually utilized in the manufacture of the goods to be exported', ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in earlier Notifications such as No. 116/88 and 159/90 supports the above conclusion. (iv) The Commissioner has observed that the condition in the Notification No. 204/92 that the imported material 'shall be utilized in discharge of the export obligation' to mean that the material imported shall be incorporated in the export product. This observation is directly in contradiction to the Circular dated 4-3-93 and Circular No. 1/94, dated 5-1-94 issued by the Central Board of Excise and Customs, therefore it cannot be upheld. (v) The Commissioner's finding, by referring to the Schedule of Quantity Based Advance Licence Part-II annexed to the notification, to come to the conclusion, that the imported items and the resultant products are required to match is considered. That such a 'matching' has already been done by means of the 'Standard Input/Output Norms' in the EXIM Policy, itself. It is only after taking into consideration the above situation that the Board appears to have issued the Circulars clarifying that the physical incorporation of the input in the export product is not required. The conclusion of the Commissioner cannot be upheld. (vi) The Commissioner has also he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the advance licence is subject to actual user condition. A comparison of the wordings in the notification and the Policy indicates that both the Policy and the Notification placed a restriction on the disposal of the raw materials imported under the Advance Licence only till the fulfilment of the export obligation. In other words, once an export obligation is fulfilled, then both the policy and the notification permit disposal of the raw materials. On and from 97-98, the disposal of the raw materials was subject to the actual user condition i.e., the manufacturer-importer was required to use the imported raw materials in his factory. Such a use can also be for the manufacture of the finished goods which need not be exported but which could be sold in the local market. In this case, it is the contention of the Revenue that the licences have been obtained on prior export basis and that the imported raw material has been utilized for manufacture of fans locally sold. Once it is accepted that the licences are for replenishment and that the export obligations have been fulfilled, then the appellants are permitted to use the said imported materials for manufacture of their other g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, if any, has to be with reference to the imported goods and at the time of import. In the present case, the Show Cause Notice does not even allege suppression of facts at the time of import. Thus, proviso to Sec. 28(1) cannot be invoked for this reason also. The Commissioner invoking the larger period of limitation under Sec. 28(1) on the ground that the appellants had wilfully misdeclared the consumption of the Aluminium Alloy even though the same were never used or intended to be used in the manufacture of the export product, cannot be a cause to be upheld since, the appellants had applied for the issue of an Advance Licence on the basis of the Standard Input-Output Norms, which recognizes a class, of inputs as required for the manufacture of an export product. The appellants were under the bona fide belief that in view of the fact that the Advance Licence has been granted to them based on an application made by them; as such an Advance Licence was based on Standard Input-Output Norms, the physical incorporation of the input in the export product was not required. Therefore, that there was no mis-declaration of the consumption of the Aluminium Alloy since the said Aluminium All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The licences under consideration have been used by the appellants and have not been transferred. This is also an admitted fact. (ix) It will be observed from the above factual position that all the eight conditions specified in the notification have been observed fully. Consequently, Sec. 111 (o) is not at all attracted in this case. The confiscation of the goods is, therefore, not correct. Since all the conditions are fulfilled, there cannot be any confiscation of goods under Sec. 111 (o) of the Customs Act, 1962. Reliance is placed on the decision of the Tribunal in the case of VBC Industries Ltd., Hyderabad v. C.C. vide Final Order No. 911/2003, dated 11-7-2003 [2003 (156) E.L.T. 872 (Tri. - Bang.)]. (j) Sec. 114A dealing with mandatory penalty is attracted only in cases where the non-levy or short-levy of duty is by reason of collusion or wilful mis-statement or suppression of facts. The appellants had demonstrated very clearly that there is no mis-declaration at all and hence, the proviso to Sec. 28(1) is not attracted. Consequently, the levy of penalty under Sec. 114A fails. Further and in any case, for the imports effected prior to 28-9-96, penalty cannot be imposed u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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