2017 (9) TMI 135 - AT - Customs

Advance licence scheme - appellant have exported MS angles on deemed export basis and have obtained intermediate licence for duty free import of various inputs including MS billets. They had imported MS billets duty free against these advance intermediate licence and they cleared them free of custom duty - N/N. 50/2000-Cus dated 27.04.2000, 51/2000 dated 27.04.2000 and 43/2002 dated 19.04.2002 - case of Revenue is that the appellant have not imported the goods whereas the said goods was imported by Maharashtra Steel Rolling Mills (MSRM), Mumbai and the appellant have purchased the same on high sea sale basis. The goods were further given to MSRM for job work and after manufacturing the said goods were sold to MSRM. In this fact department contended that right from import of goods to sale of finished goods it is MSRM who owns the goods, therefore the clearance of goods by the appellant under advance licence has been transferred to MSRM. Accordingly the condition of N/N. 51/2000 and 43/2002 was violated. Held that - as per the record the material was initially imported by MSRM who subsequently sold on high sea sale basis to appellant M/s. Prakash Ispat Udyog and Sanvijay Rolling & Engg. Ltd. The appellants cleared the said imported goods on the basis of advance licence under notification 51/2000-Cus and 43/2002-Cus. The goods were directly sent from the port to MSRM for job work under a job work agreement and after processing, the goods were sold to MSRM only. Though on record it appears that the goods were cleared under advance licence by the appellant and till the processing of goods on job work basis the ownership of the goods remained with the appellants. The ownership of goods remains with the appellants from purchase of goods from high sea sales basis till the processed goods are sold. It is important to ascertain that whether the goods have been transferred or otherwise on the basis of payment transaction in every stage right from import of goods till sale of processed goods. The show-cause notice also relied upon the accounts ledger of the appellant but no verification was found to have been carried out by the adjudicating authority. The fact of payment in overall transaction of the imported goods as well as sale of processed goods is very vital. However, we have observed that the adjudicating authority has not properly examined the payment transaction issue from the records. The matter needs to be reconsidered by the adjudicating authority - appeal allowed by way of remand.

Summary

Issues Involved:
1. Violation of Conditions (vii) and (viii) of Notification No. 51/2000-Cus.
2. Facility of Supporting Manufacturer.
3. Violation of Actual User Condition.
4. Suppression of Facts and Extended Period of Limitation.
5. Confiscation, Fine, and Penalty.
6. Personal Penalty on Officials.
7. Payment and Book-Entries.

Issue-wise Detailed Analysis:

1. Violation of Conditions (vii) and (viii) of Notification No. 51/2000-Cus:
The appellants argued that Condition (vii) was not violated as the ownership of the billets remained with them, and Condition (viii) applies only to merchant exporters, not manufacturer-exporters. They cited the case of Silver Line Plastpack Pvt. Ltd. vs. CCE, Bhavnagar, where it was held that giving imported goods to a job worker for conversion does not constitute a sale or transfer. The Commissioner had not examined whether the imported billets were sold or transferred, implying no violation of Condition (vii).

2. Facility of Supporting Manufacturer:
The appellants contended that both manufacturer-exporters and merchant-exporters could use supporting manufacturers, citing para 7.17 and 7.18 of the Handbook of Procedures. They argued that the Commissioner’s reliance on Condition (viii) was incorrect, as it was meant for merchant-exporters. The Tribunal in Tetra Pak (I) Ltd. vs. Commissioner Of Customs held that giving imported materials to a supporting manufacturer did not amount to a sale or transfer.

3. Violation of Actual User Condition:
The appellants maintained that they did not violate the actual user condition as defined in Paras 9.4 and 9.5 of the Policy, 2002-2007. They argued that using imported goods in another unit, including a jobbing unit, satisfies the actual user condition. The Tribunal in Dolphin Drugs held that customs duty and penalties are not leviable if the export obligation is fulfilled, even if not in the initial period.

4. Suppression of Facts and Extended Period of Limitation:
The appellants argued that the demand for duty was due to the omission of including MSRM as a supporting manufacturer, not due to evasion of duty. They contended that the extended period of limitation under Section 28(1) could not be invoked as there was no willful suppression or mis-statement. They cited decisions in Geep Industrial Syndicate and Mahindra & Mahindra Ltd. to support their argument.

5. Confiscation, Fine, and Penalty:
The appellants argued that Section 111(o) could not be invoked for post-importation conditions and cited Maruti Udyog Ltd. They contended that since the goods were not available for confiscation, no redemption fine could be imposed, citing Shiv Kripa Ispat Pvt. Ltd. and Commissioner of Customs (Import) vs. M/s Flurose Creation INC.

6. Personal Penalty on Officials:
The appellants argued that no personal penalty could be levied on officials as the duty demand was not sustainable. They contended that there was no conduct inviting Section 112 of the Customs Act, 1962, and cited the case of Sh. Janki Prasad Shah.

7. Payment and Book-Entries:
The appellants argued that book adjustments are a known way of payment and counter-payment, citing the commentary on the Income Tax Act, 1961 by Kanga and Palkhivala. They contended that the department’s focus on book entries was misplaced.

Conclusion:
The Tribunal found that the adjudicating authority had not verified the monetary transactions related to the import and sale of goods. It emphasized the need to ascertain whether the goods were transferred based on payment transactions. The matter was remanded to the adjudicating authority for reconsideration, with instructions to verify all transactions and provide the appellants with an opportunity for a personal hearing and submission of necessary documents.