2016 (12) TMI 1153 - AT - Customs

Demand of duty with interest and penalty u/s 112(a) of the Customs Act, 1962 - import of goods based on value based advance licences - demand raised on the ground that manufacturer, has availed the benefit of modvat/cenvat credit - Held that - In our considered view, the impugned order is unsustainable for the reason that it does not bring forth any evidence to indicate that the original manufacturer licence holder and exporter had availed modvat credit on the inputs purchased by them. In the absence of any such evidence the allegation in the show-cause notice that the imported goods against such advance licence are liable to customs duty is unacceptable; secondly, we find that the appellant is a transferee of the licence. It is beyond any stretch of imagination to hold that the appellant should have, during the relevant period, ascertained that the manufacturer exporter had not availed the modvat credit on the inputs. Reliance placed in the case of CJ Shah & Co. Versus Commissioner of Customs (EP) , Mumbai 2016 (11) TMI 1322 - CESTAT MUMBAI , where similar issue decided and it was held that the appellant had purchased the advance licenses from the manufacturer exporter and hence, asking the appellant to evidence that original manufacturer exporter had not availed the modvat credit, is a far fetched proposition well neigh impossible act. Impugned order is set aside and the appeal is allowed - decided in favor of appellant.

Summary

Issues: Whether appellant is required to discharge customs duty with interest and be penalized under Section 112(a) of the Customs Act, 1962.

Analysis:
The appeal before the Appellate Tribunal concerns the requirement for the appellant to discharge customs duty with interest and potential penalties under the Customs Act, 1962. The issue revolves around the appellant's importation of goods in March 1994 using value-based advance licenses purchased from the market. The show-cause notice alleged that the appellant, as the holder of the license, is liable for customs duty due to the manufacturer availing modvat/cenvat credit. The appellant contested this, arguing that the notice lacked evidence supporting the claim that the manufacturer had availed input stage credit. Reference was made to a previous case where similar demands on a license transferee were set aside. The Departmental Representative supported the lower authorities' findings.

Upon review, the Tribunal found the impugned order unsustainable due to the lack of evidence indicating the manufacturer had availed modvat credit. The show-cause notice's allegation of customs duty liability on imported goods was deemed unacceptable without such evidence. Additionally, it was established that the appellant was a license transferee, making it unreasonable to expect them to verify the manufacturer's credit status. Citing a previous case, the Tribunal emphasized the genuineness of the licenses and the lack of evidence showing the manufacturer availed modvat credit. The Tribunal referenced a Supreme Court case to support the position that the burden of proof regarding credit utilization rested with the Revenue. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief deemed necessary.