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2016 (2) TMI 1008 - AT - CustomsBenefit of Target Plus Scheme - exemption Notification No. 32/2005-Cus. dated 8-4-2005 - interpretation of the scheme - the Target Plus Scheme allows Star Export Houses to import goods by debiting the duty leviable thereon from the duty credit certificates issued by DGFT in relation to the exports made by them prior to the date of imports - whether the import of Palmolein oil as against the export of rice and wheat is covered by the Target Plus Scheme introduced in the FTP and whether the appellant is entitled to pay duty on the imported goods by using the duty credit certificates issued by the DGFT? Held that - inasmuch as the rice and wheat i.e. exported products and the palmolein oil i.e. imported item fall under the same product group i.e. E-Food products they have to be held as having broad nexus thus satisfying the condition of Target Plus Scheme. Inasmuch as the appellant has established the broad nexus between the imported item and the exported item and has also satisfied the condition of the Notification No. 32/2005 they are entitled to avail the benefit of the Target Plus Scheme. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Applicability of the Target Plus Scheme. 2. Interpretation of "broad nexus" between imported and exported goods. 3. Compliance with the actual user condition. 4. Relevance of judicial precedents. Detailed Analysis: 1. Applicability of the Target Plus Scheme: The appellant, a public sector undertaking engaged in imports and exports, was denied the benefit of the Target Plus Scheme by the lower authority, resulting in a customs duty demand of approximately Rs. 11.29 crores along with interest and penalties. The scheme, introduced in 2005, rewards Star Export Houses based on incremental exports, allowing them to use duty credit certificates for importing various goods. The appellant claimed this benefit for importing Palmolein oil against the export of rice and wheat. 2. Interpretation of "Broad Nexus": The core issue revolved around the interpretation of "broad nexus" as required by Para 3.2.5 of the Handbook of Procedures (HBP). The appellant argued that both rice/wheat and Palmolein oil fall under the same product group (Food Products) as per SION norms, thus satisfying the broad nexus condition. The lower authority and the Revenue contended that Palmolein oil is not an input for rice/wheat and hence does not fulfill the broad nexus requirement. The Tribunal examined various circulars and amendments, noting that the original definition of broad nexus, which included goods within the same product group, was deleted in 2007, leading to differing interpretations. 3. Compliance with the Actual User Condition: The Commissioner also denied the benefit on the grounds that the appellant did not satisfy the actual user condition, as the imported Palmolein oil was repacked into retail packs, an activity not amounting to manufacture under Central Excise laws. The appellant countered that the notification did not mandate the imported goods to undergo manufacturing and that the repacking process should be considered under the definition of manufacture in the Foreign Trade Policy (FTP). 4. Relevance of Judicial Precedents: The Tribunal considered judgments from the Bombay High Court (Essel Mining & Industries Ltd. v. UOI) and the Delhi High Court (Indian Exporters Grievance Forum v. UOI), which clarified that the broad nexus condition is satisfied if the imported and exported goods fall under the same product group. These judgments quashed restrictive circulars that required imported goods to be inputs for the exported products. The Tribunal found these precedents applicable, supporting the appellant's interpretation. Conclusion: The majority held that the appellant satisfied the broad nexus requirement as both the exported (rice/wheat) and imported (Palmolein oil) items fall under the same product group (Food Products). The Tribunal also found that the actual user condition was met as the repacking process, though not amounting to manufacture under Central Excise laws, complied with the FTP definition. Consequently, the appellant was entitled to the benefit of the Target Plus Scheme, and the impugned order was set aside, allowing the appeal with consequential relief.
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