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2011 (1) TMI 1005 - AT - CustomsImport of certain raw materials under six advance licences - clearance of the same duty-free under Notification No. 159/90-Cus dated 30.3. 90 - duty-free import of some of the above raw materials under Notification No. 204/92-Cus dated 19.5.1992 during the tenure of Exim Policy, 1992-97 - SCN issued stating that Glycerine imported by assessee was not liable to be exempted from payment of duty under any of the above notifications inasmuch as the input used in the export product was a different commodity, namely Sorbitol - importer availed MODVAT credit on indigenous inputs (Glycerine, Sorbitol and SLS) used in the manufacture of the export product and, therefore, the inputs subsequently imported as replenishment by them and sold in local market were not eligible for the benefit of Notification No. 204/92-Cus on account of breach of Condition No. (vi) thereof - demand of duty and also proposed to impose a penalty on the importer, apart from a proposal for confiscation of the imported goods - whether the benefit of Notification No. 159/90-Cus and No. 204/92-Cus is liable to be granted to M/s Fresh Laboratories in respect of the raw materials imported by them under the six advance licences during the material period. Held that - The show-cause notice has succinctly brought out the chemical, physical and other differences between Glycerine and Sorbitol. These differences were not disputed by the importer in their reply to the show-cause notice, nor even in the memorandum of appeal before us. If tinplates of thickness of 0.19 mm could be recognized as a commodity different from tinplates of 0.22 mm, in the case of Zenith Tin Works 1994 (4) TMI 183 - CEGAT, NEW DELHI no hesitation to hold that Glycerine can come nowhere near Sorbitol in material characteristics/specifications. The contention raised by the learned counsel that, as both these materials were covered by the advance licences, duty-free import of any of them should be allowed where the other one was found to have been used in the manufacture of the resultant product, is not supported by any judicial authority and hence cannot be accepted. In relation to Notification No. 204/92-Cus also a firm case for the Revenue. In the instant case, the importer has submitted that demand of duty on five raw materials imported by them cannot be sustained inasmuch as no MODVAT credit had been taken on the corresponding inputs used in the exported product. These are items mentioned at clauses (c) Irish Moss, (d) (SMFP), (e) Flavouring Compound, (h) Stearic Acid (i) Aromatic Chemicals, of para (ii) of the operative part of the Commissioner s order. In the case of other raw materials imported by M/s Fresh Laboratories, the learned counsel has submitted that whatever MODVAT credit had been taken on the corresponding inputs contained in the exported final product was reversed with interest and, therefore, the benefit of Amnesty Scheme should be granted. We have not found any valid ground to accept these contentions either. First of all, the claim that no credit was availed on duty-paid inputs contained in the exported product, against which the aforesaid five materials were imported as replenishment, has not been substantiated. Secondly, the plea for Amnesty Scheme cannot be considered against breach of conditions of notifications 159/90-Cus and 204/92-Cus. Thus demand of duty raised on M/s Fresh Laboratories has to be sustained. All the goods imported by them were admittedly covered by advance licences and none of those goods were in the prohibited category so as to attract this provision of law. Considering the fact that M/s Fresh Laboratories reversed MODVAT credit to the extent of Rs 18.8 lakhs and paid interest thereon subsequently, and also considering the inapplicability of Section 111 (d) to this case, we are of the view that the penalty of Rs 4 crores imposed on them is harsh thus be reduced to Rs 50 (fifty) lakhs. Where a penalty stands imposed on the partnership firm, there is no reason why there should be separate penalty on a partner under the same provision of law. Therefore, the penalty on Shri Bhupendra J. Shah is vacated. The records indicate that 60 MT of Glycerine imported by M/s Fresh Laboratories were sold to Mahavir Export and Import Company, of which Mr. Yogesh Korani was the proprietor. There cannot be separate penalties on M/s Mahavir Export & Import Co and its proprietor. In the result, we set aside the penalty imposed on Mr. Yogesh Korani and reduce the quantum of penalty on M/s Mahavir Export and Import Co to Rs one lakh.
Issues Involved:
1. Confiscation of imported goods under Section 111(d) and 111(o) of the Customs Act, 1962. 2. Demand for customs duties under Section 28(1) of the Customs Act, 1962. 3. Imposition of penalties under Section 112(a) and (b) of the Customs Act, 1962. 4. Eligibility for duty-free import under Notifications No. 159/90-Cus and No. 204/92-Cus. 5. Application of the Amnesty Scheme for reversal of MODVAT credit. Detailed Analysis: 1. Confiscation of Imported Goods: The Commissioner's order held various imported goods liable to confiscation under Sections 111(d) and 111(o) of the Customs Act, 1962. However, as the goods had already been cleared and were not available for confiscation, no confiscation was ordered. The goods included Glycerine, Sodium Lauryl Sulphate (SLS), Irish Moss/Viscarene/Carragenam, Sodium Mono Fluoro Phosphate (SMFP), Flavoring compound, Stearic Acid, and Aromatic chemicals. 2. Demand for Customs Duties: The Commissioner confirmed demands for customs duties totaling Rs. 2,35,79,075/- for Glycerine, Rs. 51,02,951/- for SLS, Rs. 1,10,62,031/- for Irish Moss, Rs. 1,36,959/- for SMFP, Rs. 3,01,923/- for flavoring compound, Rs. 2,40,824/- for Glycerine, Rs. 92,455/- for SLS, Rs. 3,98,634/- for Stearic Acid, and Rs. 3,86,190/- for Aromatic chemicals, under Section 28(1) of the Customs Act, 1962. 3. Imposition of Penalties: Penalties were imposed under Section 112(a) and (b) of the Customs Act, 1962 on various noticees, including M/s Fresh Laboratories (Rs. 4,00,00,000/-), Shri Bhupendra J. Shah (Rs. 50,00,000/-), Shri Yogesh Korani (Rs. 10,00,000/-), and other entities involved in the import and sale of the goods. 4. Eligibility for Duty-Free Import: M/s Fresh Laboratories imported raw materials under six advance licenses, utilizing duty-free import benefits under Notifications No. 159/90-Cus and No. 204/92-Cus. The imported materials were intended for the manufacture of toothpaste and shaving cream. The department alleged that the imported materials did not match the specifications and technical characteristics of the inputs used in the exported products, thus violating the conditions of the notifications. The Tribunal held that the benefit of Notification No. 159/90-Cus could not be claimed by M/s Fresh Laboratories as the imported materials (Glycerine, Irish Moss, and Viscarine) were different from the inputs used in the exported product (Sorbitol and gum). The Tribunal also found that the benefit of Notification No. 204/92-Cus was not available due to the breach of Condition No. (vi), which barred the sale or transfer of imported materials if MODVAT credit had been availed on the inputs used in the exported product. 5. Application of Amnesty Scheme: M/s Fresh Laboratories argued for the application of the Amnesty Scheme to reverse MODVAT credit availed on inputs used in the exported product. The Tribunal held that the Amnesty Scheme was specific to Notification No. 203/92-Cus and could not be applied to Notifications No. 159/90-Cus and No. 204/92-Cus. Thus, the plea for Amnesty Scheme was rejected. Conclusion and Penalties: The Tribunal upheld the demand for customs duties against M/s Fresh Laboratories but reduced the penalty from Rs. 4 crores to Rs. 50 lakhs, considering the reversal of MODVAT credit and the inapplicability of Section 111(d). The penalty on Shri Bhupendra J. Shah was vacated. For M/s Mahavir Export & Import Co, the penalty was reduced to Rs. 1 lakh, and the penalties on other appellants were vacated. Final Orders: - The appeal by M/s Fresh Laboratories was dismissed on merits, with a reduction in the penalty to Rs. 50 lakhs. - The appeal by M/s Mahavir Export & Import Co was disposed of by reducing the penalty to Rs. 1 lakh. - The appeals by other appellants were allowed, vacating the penalties imposed on them.
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