2017 (10) TMI 865 - AT - Customs

Advance Authorisation Scheme - clubbing of advance licences and export obligation discharge in respect of some of the advance licences - main contention of appellant is that consequent to the approval granted by DGFT for clubbing of the advance licences and regularization of export obligation, the quantity of excess raw materials utilized will necessarily have to be calculated as the net excess quantity after clubbing of the advance authorizations- Held that - There is considerable merit in this ground of appeal put forth by the appellant, especially when viewed in the context of the letters of DGFT, conveying permission for clubbing of licences and regularization of export obligation. Only in the interest of expediting decision in this appeal, and only based on the request made by the departmental representatives themselves, was a request made by this Bench on 05.10.2016 to the concerned Commissioner for causing verification of these averments. Surely that did not involve any complicated procedural and protracted procedural impediments to cause ascertainment requested for. All that was required to confirm the veracity of copies of the letters submitted by the appellant as having been issued by the DGFT. In case, once the fact of the permission for clubbing of advance authorization and regularization of export obligation has been approved by the DGFT, it only remains to rework the net duty liability and interest thereon, and, to ascertain whether such liability worked out are in sync with that paid by the appellant and appropriated in the impugned order. Sadly, that has not happened. Even at this stage, we find from the letter dt. 07.09.2017 that the Review Cell of Air Cargo Customs, Chennai has only transferred the responsibility to the Asst. Commissioner (DEEC) Group-7D of Chennai Seaport Customs. The end result is akin to the story of Where Everybody Blames Somebody when Nobody did what Anybody could have done . We also note that even in the nine hearings that have happened in this appeal in the last one year, for reasons we are not aware, three different ARs have appeared on behalf of the department - This is certainly not in keeping with the mission of National Litigation Policy which aims to transform the Government into an efficiency and responsible litigant. We are constrained to remand the matter to the original authority for de novo consideration - appeal allowed by way of remand.

Summary

Issues Involved:
1. Clubbing of advance licenses and regularization of export obligation.
2. Demand of customs duty and interest on excess raw materials.
3. Imposition of penalty and redemption fine.
4. Verification of discharge of export obligation by DGFT.
5. Procedural delays and inefficiencies in adjudication.

Issue-Wise Detailed Analysis:

1. Clubbing of Advance Licenses and Regularization of Export Obligation:
The appellants, engaged in manufacturing bulk drugs, procured raw materials under advance licenses without paying customs duties, as per Notification No.43/2002-Cus. Due to the absence of Standard Import Output Norms (SION), the DGFT issued advance authorizations with adhoc norms, requiring the appellants to pay duty and interest on raw materials exceeding the approved norms. The appellants requested the DGFT to club advance licenses and discharge export obligations, which was initially rejected but later approved by the DGFT on 19.05.2011. This approval was crucial for recalculating the net duty and interest liability on excess raw materials.

2. Demand of Customs Duty and Interest on Excess Raw Materials:
The department initiated proceedings against the appellants for customs duty forgone on excess inputs, valued at ?1,34,71,080/-, amounting to ?55,56,183/-, along with interest. The appellants contended that they had paid ?10,90,969/- towards duty and ?5,44,482/- towards interest during the investigation. They argued that the duty liability should be recalculated based on the net excess quantity after clubbing of advance authorizations, as approved by the DGFT.

3. Imposition of Penalty and Redemption Fine:
The adjudicating authority confirmed the proposals of the Show Cause Notice (SCN), imposing a redemption fine of ?10 lakhs under Section 125 of the Customs Act and a penalty of ?5 lakhs under Section 112 (a). The appellants argued that no penalty should be imposed as they had already paid the duty and interest on the net excess raw materials.

4. Verification of Discharge of Export Obligation by DGFT:
The appellants submitted multiple communications from the DGFT confirming the discharge of export obligations and clubbing of advance licenses. However, the adjudicating authority did not consider these communications. The Tribunal directed the Commissioner to verify the discharge of export obligation from the DGFT, which remained pending due to procedural delays.

5. Procedural Delays and Inefficiencies in Adjudication:
The matter faced significant delays, with multiple adjournments and lack of decisive action from the department. Despite nine hearings over a year, the verification from the DGFT was not completed. The Tribunal expressed concern over the inefficiency and lack of progress, emphasizing the need for expeditious resolution in line with the National Litigation Policy.

Conclusion:
The Tribunal remanded the matter to the original authority for de novo consideration, directing verification of the DGFT communications and recalculation of duty and interest liability on net excess raw materials. The adjudicating authority was instructed to complete the process within three months, ensuring the appellants are given sufficient opportunity to present their case. The decision was also endorsed to the Chief Commissioner of Customs, Chennai Zone, for information. The appeal was disposed of accordingly.