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2019 (6) TMI 1426 - AT - CustomsAdvance authorisation scheme - Actual use of inputs in the export goods - Misdeclaration of export goods - export of various Petroleum products including Motor Spirit LPG SKO etc falling under chapter heading 25 and 27 of the First Schedule to the CETA 1985 - It was alleged that the Appellant has not used LSFO as an input in the export goods but has used VGO (Vacum Gas Oil) generated during the refining of crude oil and had subsequently imported permissible input LSFO without payment of customs duty under Notification no. 96/2009 Cus dt. 11.09.2009 against the Advance authorizations and has thus contravened the provisions of Rule 14 of Foreign Trade (Regulation) Rule 1993. Whether an import made against an Advance Authorization issued prior to 1.8.2013 are subject to the restrictions imposed by DGFT Notification No.31/(RE-2013)/2009-14 dated 1.8.2013 inserting para 4.1.15 of the policy? - HELD THAT - Since the Revenue s case is based on the DGFT Notification dated 1.8.2013 by which para 4.1.15 was introduced the demand for duty in the present case as well as consequential levies of interest and penalties cannot be sustained. Assuming that para 4.1.15 was applicable even to Advance Authorization issued prior to 1.8.2013 whether on its true and correct reading the said para required export products to be manufactured only from permissible inputs? - HELD THAT - Every holder of Advance Authorization will necessarily have to first import duty free materials use the very same imported goods for production of export goods and then export such goods. This is clearly not envisaged either in the FTP or in the Customs Notification both of which allow exports to be made first by using indigenous raw materials and import to be made thereafter as replenishment entitlement which could then be used for domestic production. The above conclusion reached by the Adjudicating authority with respect to the meaning and effect of the DGFT Notification is therefore not correct. Assuming that para 4.1.15 was applicable and did require the export product to be manufactured only from permissible input whether the Appellant had infact satisfied this requirement by using VGO for manufacture of motor spirit? - HELD THAT - While the Revenue has claimed that the maximum sulphur content in LSFO should be one percent in view of the BIS standards of heavy petroleum stock in 11489 1985 the Appellant has contended that the one percent criteria cannot be applied as BIS 11489 1985 applies only to heavy petroleum stock and not to fuel oils. As observed by us in para 7 above the IS standard 1593 1982 for LSFO does not prescribe any upper limit for the sulphur content and leaves the same to the contracting parties to decide. An upper limit for sulphur content (3.5 to 4.5) exist only for normal fuel oils covered by the same standard. When no upper limit has been prescribed in the said standard for LSFO we are of the view that both the Appellant as well as the Commissioner are wrong in debating about the precise upper limit of sulphur content (1% or 2%). The opinion of Joint Director Customs laboratory Shri Rajaraman Dhasharathan justifying the application of BIS 11489 1985 to LSFO is totally unacceptable particularly in view of the statutory definition of LSFO in the chapter note which refers only to IS 1593 1982 and not to IS 11489 1985. The Joint Director has otherwise gone beyond his role of testing samples and reporting test results by offering his own interpretation and views on what LSFO is. Whether the customs had overstepped its jurisdiction by going beyond the terms of the exemption Notification and by acting contrary to a valid and subsisting authorization and EODC issued by DGFT? - HELD THAT - In any case an act of misdeclaration on the shipping bill which is a Customs document is certainly actionable under the Customs law. The Customs did not act beyond its jurisdiction in questioning the correctness of the redemption letter issued by the DGFT. This conclusion however will not make any difference to the result of this case as we have already held above while dealing with the third issue that there was infact no mis-declaration on the shipping bill. Whether the extended period of limitation in terms of Section 28(4) has rightly been invoked for demanding duty and imposing mandatory penalty? - Whether there was any mis-declaration made by the Appellant on the Shipping Bill dated 7.10.2013 and consequently whether it had become liable to a penalty under Section 114(iii) of the Customs Act 1962? - HELD THAT - Since we have already held above that there was no mis-declaration on the Shipping Bill the Appellant cannot be held liable for any penalty under Section 114 (iii) of the Customs Act. For the same reason no basis exists for sustaining the invocation of the extended period of limitation in Section 28(4) of the Customs Act. These two issues are therefore decided in favour of the Appellant. Appeal allowed - decided in favor of appellant.
Issues Involved:
a) Retrospective application of DGFT Notification No.31/(RE-2013)/2009-14 dated 1.8.2013. b) Interpretation of para 4.1.15 of FTP regarding the use of permissible inputs. c) Compliance with para 4.1.15 by using VGO for manufacturing motor spirit. d) Customs jurisdiction over DGFT's authorization and EODC. e) Invocation of the extended period of limitation under Section 28(4). f) Mis-declaration on the Shipping Bill and liability under Section 114(iii). Detailed Analysis: a) Retrospective Application of DGFT Notification: The Tribunal held that the DGFT Notification No.31/(RE-2013)/2009-14 dated 1.8.2013 could not be applied retrospectively to imports made against an Advance Authorization issued prior to 1.8.2013. This conclusion was supported by the judgment of the Hon’ble Punjab and Haryana High Court in Pushpanjali Floriculture Pvt Ltd, which stated that the power to legislate retrospectively is not inherent and must be specifically conferred by statute, which was not the case here. b) Interpretation of Para 4.1.15 of FTP: The Tribunal found that the interpretation of para 4.1.15 by the adjudicating authority was incorrect. The Commissioner’s understanding that the exported goods should be manufactured only by using permissible duty-free inputs was not supported by the FTP or the Customs Notification. The Tribunal noted that para 4 of the DGFT Notification, which sought to explain para 4.1.15, had been struck down by the High Court as being manifestly absurd and unreasonable. c) Compliance with Para 4.1.15 by Using VGO: The Tribunal concluded that the exported motor spirit was produced out of FCCU feed stock comprising mainly of sweet VGO, which met the specifications of LSFO as per IS 1593:1982. The Tribunal found that the statutory definition of LSFO would prevail over any contrary trade parlance or refinery terminology. The in-house test reports and statements from refinery personnel supported the claim that VGO conformed to the specifications of LSFO. d) Customs Jurisdiction: The Tribunal held that the Customs did not overstep its jurisdiction by questioning the correctness of the redemption letter issued by the DGFT. The redemption letter itself stated that it was issued without prejudice to any action by the customs authorities in case of fraud or mis-declaration. Therefore, the Customs had the authority to act on any mis-declaration on the shipping bill, which is a Customs document. e) Extended Period of Limitation: Since the Tribunal found no mis-declaration on the shipping bill, it held that the invocation of the extended period of limitation under Section 28(4) was not justified. Consequently, the demand for duty and the imposition of penalties could not be sustained. f) Mis-declaration on the Shipping Bill: The Tribunal concluded that there was no mis-declaration on the shipping bill. The VGO used in the manufacture of motor spirit met the specifications of LSFO, and the declaration on the shipping bill was correct. Therefore, the Appellant was not liable for any penalty under Section 114(iii) of the Customs Act. Conclusion: The appeal filed by the assessee was allowed, and the impugned order was set aside. The Revenue's appeal for the imposition of a penalty under Section 114(iii) was dismissed as the demand itself was not sustained. The application for change of cause title was allowed, and the cross-objection was disposed of.
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