2017 (3) TMI 701 - AT - Customs

Duty Entitlement Passbook Scheme - denial of DEPB benefit on the ground that the goods had not been manufactured out of inputs enumerated for the export product in the Standard Input-Output Norms (SION) - denial also on the ground that the appellant had admitted to not purchasing or utilizing nitro benzene or cast iron boring for the manufacture of exported products - Held that - the exporter would not be eligible for credit if inputs allowed in the Standard Input Output Norms (SION) entry at serial no. K-195 (Misc. Product Group) had not been used in the manufacture of the product - That their manufacturing process does not utilise these two ingredients has been admitted by the appellant. Accordingly the decision of the original authority to withhold the approval for allowing credit does have the sanctity of law - It is also seen that the original authority had permitted conversion of the said shipping bills to free status. Accordingly, denial of credit alone would have sufficed, redemption fine and penalty not required - appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Denial of credit under the Duty Entitlement Passbook (DEPB) scheme by the Commissioner of Customs.
2. Eligibility of goods for credit under the DEPB scheme.
3. Interpretation of Standard Input-Output Norms (SION) for export products.
4. Admissibility of inputs like 'nitro benzene' and 'cast iron boring' for export of iron oxide pigments.
5. Applicability of penalties and confiscation of goods.

Detailed Analysis:
1. The appellant, M/s Selective Minerals & Colour Industries Pvt Ltd, appealed against the denial of credit under the DEPB scheme by the Commissioner of Customs. The denial was based on the appellant's failure to use specified inputs for the export product as per the SION norms.

2. The original authority found that the goods were ineligible for credit as they were not manufactured using the required inputs like 'nitro benzene' and 'cast iron boring.' The appellant's claim of not mis-declaring the goods was supported by test samples but was countered by the admission of not using the specified inputs in the manufacturing process.

3. The SION norms listed 'nitro benzene' and 'cast iron boring' as permissible items for the export of black/red iron oxide pigments. The appellant's argument that the rate-list entry did not specify conditions for eligibility was refuted based on the clarification by the Directorate General of Foreign Trade that non-utilization of specified inputs would make the exporter ineligible for credit.

4. The appellant relied on various tribunal decisions to support their contention, but the Tribunal upheld the original authority's decision to withhold credit approval due to non-utilization of specified inputs. The impugned order was modified to set aside the confiscation of goods and penalties imposed, as there was no evidence of suppression or mis-declaration.

5. The Tribunal concluded that denial of credit alone was justified, and there was no basis for confiscation of goods or imposition of penalties. The appeals were disposed of with the modification of the impugned order on the specified terms.

This judgment clarifies the importance of adhering to SION norms and utilizing specified inputs for eligibility under the DEPB scheme, emphasizing the consequences of non-compliance and the appropriate actions to be taken in such cases.