2009 (4) TMI 164 - AT - Customs

Invalidated Advance Licence - Advance release order - The appellant is engaged in the manufacture of Aqueous and Non-Aqueous paints falling under Chapter 32 of the Central Excise Tariff Act, 1985. They have made supplies to M/s. Tuffware Industries against the advance licenses issued to them and subsequently invalidated by the Dir. General of Foreign Trade, (DGFT) Mumbai. The said supplies were made in terms of the exemption Notification No. 28/2001 - appellants have very strongly contended that the effect of invalidation of advance licenses to M/s. Tuffware Industries by DGFT, itself show that the appellants are entitled to clear the goods to M/s. Tuffware Industries, without payment of duty. Invalidation letter issued by DGFT is nothing but advance release order only. M/s. Tuffware Industries have approached DGFT for issuance of such Advance Release Order (ARO), who was not willing to issue the same on the ground that invalidation of advance licenses would serve the purpose held that - that there was difference of opinion between Ministry of Commerce and Ministry of Finance. DGFT is of the view that invalidation letter is as per the policy and no separate ARO is required to be issued penalty set aside.

Summary

Issues:
Interpretation of exemption Notification No. 28/2001 regarding production of advance release order for duty-free clearance.

Analysis:
The appellant, engaged in manufacturing paints, supplied goods to a company against advance licenses invalidated by DGFT Mumbai. The dispute centered on the requirement of producing an advance release order (ARO) as per Notification No. 28/2001. The appellant argued that the invalidation of licenses entitled them to clear goods duty-free without an ARO, as the invalidation letter itself served as an ARO. They cited Foreign Trade Policy provisions supporting this interpretation. The Tribunal noted that the DGFT clarified that invalidation letters were equivalent to AROs, as observed in a previous case. The legislative intent was to ensure supplies matched imports, and denial of benefits due to a technicality was unjustified.

The Commissioner (Appeals) acknowledged a discrepancy between the Ministry of Commerce and Ministry of Finance regarding ARO requirements. The penalty imposed under Rule 25 of Central Excise Rules was set aside, recognizing the confusion caused by conflicting interpretations. The appellate authority emphasized following the DGFT's clarification aligning with legislative intent, thereby justifying the appellant's position and absolving them of any penalty.

In conclusion, the Tribunal overturned the impugned order, granting relief to the appellant based on the DGFT's clarification and the alignment with legislative intent. The decision highlighted the importance of interpreting regulations in line with their underlying purpose and ensuring consistency between different government authorities to avoid penalizing parties due to conflicting interpretations.