2020 (3) TMI 1434 - AT - Customs

Denial of benefit available under Advance Licence Scheme by N/N 203/92-Cus. dated 19-5-1992 - Benefit denied on the ground that the appellant had availed the input stage Modvat credit which was in violation of provisions of Para 126 of the Handbook of Procedures laid down in the EXIM Policy 1992-97 read with the Notification dated 19-5-1992 - HELD THAT - It is an admitted fact on record that the Advance Licence was issued by the office of DGFT in favour of M/s. Hap International which was transferred in favour of the appellant for procurement of the duty free imported goods. On perusal of the case records it transpires that the appellant had not availed any Modvat credit in respect of the goods imported by it. It is also not the case of Revenue that the Advance Licence was fraudulently obtained by the appellant. Since the said licence was transferred by the original licencee to the appellant under the confirmation of the office of DGFT availment of Modvat credit by the transferor cannot be questioned subsequently by the Customs Authorities for denying the benefit of the duty exemption to the appellant. The identical issue had been considered by the Larger Bench of this Tribunal in the case HICO ENTERPRISES VERSUS COMMISSIONER OF CUSTOMS MUMBAI 2005 (9) TMI 625 - CESTAT MUMBAI holding that endorsement of valid licence by the competent authority i.e. DGFT cannot be questioned by the Customs Authorities in absence of any provisions contained in the exemption notification - the Civil Appeal filed by Revenue against the said Larger Bench decision was dismissed by the Hon ble Supreme Court in COMMISSIONER OF CUSTOMS (IMPORTS) BOMBAY VERSUS HICO ENTERPRISES 2008 (4) TMI 117 - SUPREME COURT . There are no merits in the impugned order - appeal allowed.

Summary

Issues involved:
Import of goods duty-free under a specific notification, availing of Modvat credit, transfer of Advance Licence, compliance with export obligations, validity of endorsement by DGFT, applicability of exemption notification.

Analysis:

1. Availing of Modvat credit:
The appellant imported goods duty-free under a notification that required no availing of input stage credit. The department alleged that the appellant had availed Modvat credit, which was a violation of the provisions. However, it was found that the appellant had not availed any Modvat credit for the imported goods. The Tribunal noted that the Advance Licence was transferred to the appellant by the original holder with the confirmation of the DGFT. Since there was no fraudulent obtaining of the licence and no Modvat credit was availed by the appellant, the Customs Authorities could not deny the duty exemption benefit based on the transferor's actions. The Tribunal cited a previous decision and the dismissal of a Civil Appeal by the Supreme Court, establishing that the endorsement of a valid licence by the competent authority cannot be questioned by Customs Authorities in the absence of specific provisions in the exemption notification.

2. Compliance with export obligations:
The appellant contended that it had complied with the export obligations as required for the duty-free imports under the notification. The department initiated proceedings against the appellant for confirmation of duty demand, interest, and penalties. However, the Tribunal found that the appellant had fulfilled the export obligations and had not availed any input stage credit that would disqualify them from the duty exemption. The Tribunal's decision was based on the transfer of the Advance Licence and the lack of Modvat credit availed by the appellant.

3. Validity of endorsement by DGFT:
The Tribunal emphasized the importance of the endorsement of a valid licence by the DGFT. The transfer of the Advance Licence from the original holder to the appellant was done with the confirmation of the DGFT. This confirmation played a crucial role in establishing the legitimacy of the transfer and the appellant's eligibility for duty-free imports. The Tribunal held that the Customs Authorities could not question the validity of the endorsement by the DGFT, especially when no Modvat credit was availed by the appellant.

Conclusion:
The Tribunal found no merit in the impugned order and allowed the appeal in favor of the appellant. By setting aside the order, the Tribunal upheld the appellant's right to duty-free imports under the specific notification, considering the transfer of the Advance Licence and the absence of Modvat credit availed by the appellant. The decision reaffirmed the significance of compliance with export obligations and the validity of endorsements by competent authorities in such cases.