2013 (9) TMI 921 - HC - Customs

Licence for import of raw materials - import of waste/scrap/discarded/ obsolete plastic items. - SEZ unit - Whether a SEZ unit is required any licence for import of raw materials and whether it was required to pay any Custom duties on such raw materials - Held that - requirements of license under the public notice was not made applicable to imports of plastic waste and scrap by 100% EOU and units situated in EPZ, and they were continued to be governed by the provisions contained in paragraph 94 of the Export Import Policy. It is, however, true that such paragraph also provided with parameters for import of such plastic waste and scrap as specified in the public notice shall be kept in view of the Board of Approval while approving such units under the relevant scheme. Thus, the specific units of 100% EOU and those located in EPZ continued to get the benefits of the approval granted under the relevant scheme. It was, of course, open for the Government to impose additional conditions in tune with the public notice. Tribunal committed error in holding that the appellants breached the conditions of the public notice - at the relevant time, the units located in EPZ did not require license for import of raw materials as permitted under the approval of LoP. In the present case, approval was for plastic waste. We have also taken into consideration the language used in the specific LoP granted to the appellants, the conditions of such license, as also the language used in the public notice in question. If by virtue of some other policy declared by the Government of India from time to time, any additional requirements or restrictions were imposed on the industries even located in the EPZ, the same obviously would be governed by such policy pronouncements - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the Appellate Tribunal was right in upholding the analysis of samples of imported goods by Custom House Laboratory in view of Public Notice No. 392(PN)/92-97, dated 1-1-1997.
2. Whether the appellant-company having a manufacturing unit in Kandla Free Trade Zone/Kandla Special Economic Zone required any license for import of raw materials and whether it was required to pay any Custom duties on such raw materials.

Detailed Analysis:

Issue 1: Analysis of Samples by Custom House Laboratory
The appellants argued that the samples of imported plastic scrap should have been sent to the nearest CIPET laboratory instead of being tested at the customs laboratory. They contended that there was a variance between the CIPET laboratory's opinion and the customs laboratory's findings. According to the appellants, the independent laboratory's opinion should prevail, as even the public notice envisaged sending samples to the CIPET laboratory.

The Tribunal, however, upheld the analysis conducted by the Custom House Laboratory. The Tribunal examined whether the conditions of the public notice dated 1-1-1997 were satisfied and found that the imports and declarations made by the appellants did not conform to various conditions of the public notice. Consequently, the Tribunal rejected the appellants' contentions.

Issue 2: Requirement of License and Custom Duties
The central controversy revolved around whether the public notice dated 1-1-1997 applied to the appellants, who were operating in the Kandla Free Trade Zone (KAFTZ). The appellants contended that they were not governed by the public notice and that their imports were made under the authorization granted by the Letter of Permission (LoP). They argued that there was no further requirement of obtaining any license, and the conditions provided in the public notice would govern units other than Export Oriented Units (EOU) and those situated in Export Processing Zones (EPZ).

The Department, however, relied on condition No. 4 of the LoP, arguing that the appellants had to fulfill the requirements of imports at the time of actual imports, which included adhering to the public notice dated 1-1-1997. The Department contended that this public notice governed the imports to be made by all importers without any distinction.

To resolve this controversy, the Court examined the provisions of the Export and Import Policy of 1992-97 and the Handbook of Procedures. The Court noted that the Export Import Policy provided a different procedure for imports to be made by EOU/EPZ units, which were primarily for production of export goods. Paragraph 94 of Chapter IX of the Export and Import Policy allowed EOU/EPZ units to import goods free of duty, provided they were not prohibited items in the Negative List of Imports.

The public notice dated 1-1-1997, issued in reference to paragraph 27(2) of the Handbook of Procedures, prescribed guidelines and conditions for the import of plastic waste/scrap. The Court observed that the public notice specifically mentioned that it pertained to units other than EOU/EPZ units. Furthermore, paragraph 10 of the public notice clarified that the requirements of a license under the public notice did not apply to imports of plastic waste and scrap by 100% EOUs and units situated in EPZ, which continued to be governed by the provisions of paragraph 94 of the Export Import Policy.

The Court concluded that the Tribunal erred in holding that the appellants breached the conditions of the public notice. The Court found that at the relevant time, units located in EPZ did not require a license for the import of raw materials as permitted under the LoP. The Court also considered the language used in the specific LoP granted to the appellants and the conditions of such license, as well as the language used in the public notice.

Conclusion:
The Court set aside the common judgment of the Tribunal dated 26-9-2005. It answered question No. 2 in favor of the appellants, concluding that the appellants did not require a license for the import of raw materials as permitted under the LoP and were not governed by the public notice dated 1-1-1997. Consequently, the Court did not need to address question No. 1. All appeals were allowed and disposed of accordingly.