2003 (3) TMI 752 - AT - Customs

Summary

Issues Involved:
1. Mis-utilization of Import Policy Provisions.
2. Non-fulfillment of Export Obligations.
3. Clarification by DGFT and its Binding Nature.
4. Independent Functioning of Imported Machinery.
5. Invocation of Extended Period for Demand.

Detailed Analysis:

1. Mis-utilization of Import Policy Provisions:
The Revenue alleged that the importers mis-utilized the provisions of para 197 of the Import Policy by not fulfilling the export obligations. The importers had imported machinery under a concessional rate of duty with an obligation to export cocoa and chocolate products worth three times the value of the imported machinery within four years. However, the importers only exported cocoa products and not chocolates.

2. Non-fulfillment of Export Obligations:
The importers were required to export cocoa products worth Rs. 3.5 crores and chocolates worth Rs. 7.21 crores. Despite repeated requests for extension, they failed to export even a single kilogram of chocolate. The show cause notice demanded duty short-levied amounting to Rs. 3,19,03,077 and proposed confiscation of machinery and imposition of penalties.

3. Clarification by DGFT and its Binding Nature:
The DGFT clarified that exporting either cocoa products or chocolates would suffice for fulfilling the export obligation. The Revenue contested this, arguing that such a clarification overrides the policy provisions and enlarges the scope of the licence. The Tribunal observed that the DGFT's clarification must be consistent with the policy and the licence terms. The Tribunal held that the DGFT's power is not unfettered and any clarification inconsistent with the policy is not binding on the Customs authorities or the Tribunal.

4. Independent Functioning of Imported Machinery:
The imported machinery consisted of two separate sets: one for cocoa processing and another for chocolate making. The Tribunal noted that these plants were independent of each other, functioning separately in different sheds. The importers' claim of an integrated plant was rejected based on statements from their senior officers and the project's layout. The Tribunal concluded that the importers did not fulfill the export obligation as they only exported cocoa products and not chocolates.

5. Invocation of Extended Period for Demand:
The Tribunal considered whether the extended period for demand could be invoked due to alleged suppression of facts by the importers. The importers argued there was no suppression, but the Tribunal found that the importers' failure to export chocolates, despite the clear terms of the licence, justified invoking the extended period.

Conclusion:
The Tribunal set aside the impugned order that had dropped charges against the importers and remanded the matter for de novo consideration. The original authority was directed to pass a speaking order addressing all allegations in the show cause notice, after providing an effective opportunity for the importers to be heard. The Revenue's appeal succeeded by way of remand, and the cross-objection was disposed of accordingly.