2006 (7) TMI 371 - AT - Customs

Demand duty - EXIM policy - Advance licence - DEEC Scheme - goods imported duty free - transfer to another unit - violation of post import condition - condition No. (vii) of Notification 30/97 - HELD THAT - We agree with the appellants submission that as per definition of actual user in the policy use by their other unit cannot be considered as transfer to any other person as long as the goods have not been sold as such but have been used for the manufacture of final product and the final product is sold by Taloja unit and therefore there cannot be any contravention of condition no. (vii). The material in these cases were essentially for replenishment and only imbargo imposed on replenished material is that they should not be sold or transferred to any other person. Since we have already held that once the material is used in the appellant s own unit it cannot be considered to be transfer and since the other unit has not sold the material as such but used it in manufacture of the final product the requirement of condition no. (vii) have been fulfilled. As regards the use of duty free imported raw material first in the manufacture of final products required to be exported for meeting export obligation before being used for use for domestic clearances of the same product we find that the Tribunal in the cases of Dolphin Drugs 1999 (8) TMI 258 - CEGAT, MADRAS , Standard Industries 1999 (8) TMI 956 - CESTAT MUMBAI and Jay Engineering Works 2003 (7) TMI 236 - CESTAT, BANGALORE have consistently taken a view that as long as the export obligation has been met it is immaterial whether the goods were first used for domestic clearances and exports were made later on or vice versa. Even though in the above decisions there was difficulty in selling the product in international market the duty exemption were nevertheless held admissible and only the export obligation period was extended due to extenuating circumstances. We, therefore, hold that there has been no violation of condition No. (vii) of Notification No. 30/97 in these cases also. This is relevant only in respect of Appeal as in the other two cases the imports were made after export obligation were already fulfilled. Thus, we set aside the order of the Commissioner s and allow the appeal with consequential relief. Stay petitions also get disposed of.

Summary

Issues:
Violation of Condition No. (vii) of Notification No. 30/97 regarding imported materials usage for export goods, diversion of imported material to another unit, duty demand, and confiscation.

Detailed Analysis:

1. Imported Material Usage and Export Obligation:
The appellants obtained advance licenses for importing Lauryl Alcohol for manufacturing export products. The material was diverted to another unit at Tarapur instead of the designated Taloja unit. The department alleged a violation of Condition No. (vii) of Notification No. 30/97 as the material was not used for the intended export goods. However, the appellants argued that the export obligation was fulfilled, and the usage in their own unit did not constitute a violation of the actual user condition.

2. Interpretation of Actual User Condition:
The appellants contended that using the imported material in their own manufacturing units, even if different from the specified unit, did not violate the actual user condition. They argued that the policy did not restrict the usage to the unit specified in the DEEC book. The definition of 'actual user' was crucial in determining compliance with the policy requirements.

3. Use of Duty-Free Imported Material for Domestic Sales:
The appellants argued that as long as the export obligation was met, the sequence of using the imported material for domestic sales before export goods did not violate the conditions. They cited precedents where similar situations were considered acceptable as the ultimate export obligation was fulfilled.

4. Judgment and Decision:
The Tribunal found that the export obligations were met in all cases and that the diversion of material to the Tarapur unit did not violate Condition No. (vii) as it was used for manufacturing final products. The Tribunal also upheld the argument that the sequence of using duty-free imported material for domestic sales before export goods did not breach the conditions. Consequently, the Commissioner's orders were set aside, and the appeals were allowed with consequential relief.

In conclusion, the Tribunal's judgment focused on the fulfillment of export obligations, the interpretation of actual user conditions, and the permissible use of duty-free imported material for domestic sales. The decision clarified that as long as the export obligations were met, the specific usage sequence of imported material did not constitute a violation of the relevant conditions.