2015 (1) TMI 367 - AT - Customs

Misdeclaration of goods - Import of goods under advance license - Import of Acid Oil - Revenue alleges that appellant had actually imported Palm Fatty Acid Distillate (PFAD) which attracts duty and is not covered under the licences granted to the appellant - Manipulation of document by putting white ink - Denial of benefit of exemption Notification No.93/2004-Cus - violation of the conditions of Notification No.93/2004 - Admission of additional evidence - Confiscation of goods - Held that - It is stated in the application that 2000 metric tonnes of PFAD was declared as arrived through vessel MT Chemrod, and in the said arrival report the description was corrected by hand and instead PAO was mentioned therein. While this change in description could only have been explained by the Shipping Agents, it is very likely that an incorrect description of the product had been corrected by the shipping agent, by applying white ink and writing the description PAO in hand. The fact that such a change was done by the Shipping Agent is not disputed. It is also not in dispute that J M Baxi., was the authorized agents for the shipping line and were therefore entitled to make corrections. We fail to see how an inference of forgery or manipulation of document can be reached when undisputedly the corrections were made by the shipping agency itself and not by the importer or any unauthorized third party. It is not as if every act of putting white ink is an act of manipulation or forgery, if the white ink is put to correct a mistake and is done by the author of the document or by a person duly authorized by that person, the same can only be construed as a correction and not as a manipulation or forgery . - application for additional evidence cannot be entertained in terms of the provisions of Rule 23 of the CESTAT Procedure Rules and that even otherwise the additional evidence does not further the case of the Revenue. Appellant had declared the imported goods as Acid Oil while according to the Revenue the same were PFAD. In support of its contention the Revenue has primarily placed reliance on the test report of the Chemical Examiner, Visakhapatnam; his technical opinion; report of the Chemical Examiner, Kandla; as also statements of some of the Appellant s employees. - The entire evidence which has been relied upon in the notice in the form of the test results of the Chemical Examiner and the opinion of the Chemical Examiner, Visakhapatnam proceed on the presumption that the goods were declared by the Appellant as Palm Acid Oil and that they were required to examine as to whether what was imported was Palm Acid Oil or not. None of the Chemical Examiners have in their test reports examined and opined on the issue whether what had been imported was Acid Oil or not. As such the test results and the opinion of the Chemical Examiner are totally irrelevant to the dispute in hand as the same have been issued on the mistaken presumption that what was required to be examined was whether the goods imported were Palm Acid Oil or not. The adjudicating authority has in the impugned order refused to take cognizance of this error on the ground that the Appellant had raised the said contention only in the course of adjudication and not during investigation. We find this reason to be totally unacceptable as the Commissioner of Customs., Kandla while adjudicating the case was not acting as an Appellalte authority but as an adjudicating authority. A defense set up by a noticee cannot be rejected or brushed aside merely for a reason that the same was not put forth before the investigating agency. The stage of investigation is not a stage for making submissions. The stage of adjudication is the first stage where a noticee is called upon to make his submissions and to produce evidence in support of his submissions. The adjudicating authority is under an obligation to take on record the submissions made by the noticee as also the evidence produced by him and then come to a conclusion after examination in entirety along with evidence on record. The adjudicating authority cannot shut out or reject a defense merely because the investigating agency was not appraised of such a defense. On this short ground alone the order of the Commissioner needs to be set aside as there is, in effect no answer to be found to the appellants defense that the evidence on record does not dispute that the goods imported answer the description Acid Oil , as declared in the Bill of Entry. Finding of adjudicating authority is baseless and incorrect in as much as from the technical literature produced, it is very clear that FFA content in oil is measured in terms of Palmetic or Steeric . The technical literature produced do not state that the measurement of FFA in terms of Palmetic is confirmatory of the oil being palm based. The show cause notice in the very first paragraph records and accepts that PFA and Acid oil fall under the same tariff classification and attract then same rate of duty. This being the accepted position, the conclusion in the opinion of the chemical examiner that the goods in question were other than palm acid oil and that they had the characteristic of PFAD are both irrelevant and both insufficient for drawing an inference that the goods were other than Acid oil as declared on the bill of entry and as covered by the advance licence. The finding of mis-declaration and the further finding that the goods imported were not covered by the description of the licence are therefore unsustainable. Merchant exporter who gets his goods manufactured from a supporting manufacturer is barred from using the duty free material for purposes other than discharge of the export obligation while for a manufacturer-exporter there is no such stipulation. The only stipulation qua a manufacturer-exporter is that the said license and materials should not be transferred or sold. It is not the Revenue s case that this condition has been violated. - Central Government has been for the last at least 15 years been issuing three separate sets of exemption notification for advance licence/authorization holders, who obtain the licence for effecting physical exports; deemed exports and in respect of advance licence for annual requirement. Each of these notifications have separate set of conditions and stipulations with regard to utilisation of the duty free imported raw material. It is settled law as laid down by the Apex Court in the case of Commissioner of Trade Tax vs Kajaria Ceramics Ltd 2005 (7) TMI 351 - SUPREME COURT OF INDIA that were Notification are issued under the same section and for the same purpose and are a part of a chain of progress without there being any overlap, then for the purpose of resolving the ambiguity the contents of the previous or subsequent notification can be looked into. The ratio laid down by the Apex Court applies in all fours to the facts of the present case as the Advance Licence Notifications are also a part of a chain of notification issued from time to time without any overlap, and accordingly the difference in the language of the Notification over a period of time has to be taken note of and given effect to. Benefit of duty exemption under Notification No.93/2004 was wrongly denied to the subject goods and the finding that there was a contravention of condition No.(vii) of the said Notification is totally incorrect. - goods imported by the Appellant were covered by the description of the licence produced by the Appellant and there was no contravention of condition (vii) of the Notification No.93/2004-Cus in using the goods for domestic production. - contentions of the Appellant that the material was imported as replenishment material in respect of another license held by it where under it had already fulfilled the export obligation is not being examined as the Appellants are entitled to succeed on its first entitlement itself as also on various issues. - demand for duty, interest and penalties as also the order of confiscation are consequently set aside. - Decided in favour of assesse.

Summary

Issues Involved:
1. Alleged mis-declaration of imported goods as 'Acid Oil' instead of 'PFAD'.
2. Alleged violation of Condition (vii) of Exemption Notification No.93/2004-Cus by utilizing imported goods for domestic production before fulfilling export obligations.

Issue-wise Detailed Analysis:

1. Alleged Mis-declaration of Imported Goods:
- Facts: The appellant imported consignments declaring them as 'Acid Oil' under an advance license for duty-free import to manufacture export products. The Revenue Department suspected the goods were actually Palm Fatty Acid Distillate (PFAD), which attracts duty and is not covered under the licenses.
- Investigation: Samples were taken and analyzed, with the chemical examiner opining the goods had characteristics of PFAD, not Palm Acid Oil. The adjudicating authority concluded mis-declaration, confiscated the goods, and denied duty exemption.
- Appellant's Argument: The appellant argued that the goods met the BIS standards for Acid Oil and never declared them as Palm Acid Oil. The chemical examiner's report did not categorically state the goods were not Acid Oil.
- Tribunal's Analysis: The Tribunal noted that the chemical examiner's reports were based on the mistaken presumption that the goods were declared as Palm Acid Oil. The reports did not conclusively state the goods were not Acid Oil. The Tribunal found the evidence insufficient to prove mis-declaration and held that the goods imported matched the description of Acid Oil as per the advance license.

2. Alleged Violation of Condition (vii) of Exemption Notification No.93/2004-Cus:
- Facts: The Revenue contended that the appellant violated Condition (vii) by utilizing imported goods for domestic production before fulfilling export obligations, contrary to the stipulations in the Foreign Trade Policy (FTP).
- Appellant's Argument: The appellant argued that the exemption notification issued under Section 25 of the Customs Act, 1962, relaxed the stringent conditions of the FTP. They contended that Condition (vii) only prohibited the transfer or sale of imported materials, not their use in domestic production.
- Tribunal's Analysis: The Tribunal observed that the Central Government had issued different notifications with varying conditions for different types of advance licenses. For manufacturer-exporters, the only stipulation was that the materials should not be transferred or sold. The Tribunal held that the Customs authorities could not impose additional conditions not specified in the exemption notification. The Tribunal distinguished the case from the Unimark Remedies case, noting that the latter did not consider the overriding effect of the exemption notification.

Conclusion:
The Tribunal concluded that the goods imported by the appellant were covered by the advance license and there was no contravention of Condition (vii) of Notification No.93/2004-Cus. The demand for duty, interest, and penalties, as well as the order of confiscation, were set aside. The appeals filed by the appellant company and its Managing Director were allowed.