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2018 (12) TMI 957 - AT - CustomsViolation of import condition - actual user condition - N/N. 97/2004-Cus dated 17-9-2004 - whether the appellants were actual users in terms of Notification No 97/2004-CUS dated 17.09.2004 and as to whether they have violated any of the conditions of the Notification so as to be ineligible for the exemption claimed on the impugned goods? Held that - The licenses were obtained disclosing to the DGFT authorities that they were manufacturer exporter. For being a manufacturer, the appellants should be owners/lessee of the mines or get the ore mined with the help of job workers. The appellant s case doesn t fall under either of these categories. Even if one accepts the argument of the appellants that mining is an activity that amounts to manufacture for the purposes of FTP, the essential condition should be that they are owners of the product even if they get the same manufactured with the help of a job worker. In the instant case the onus for establishing their claimed status of being a manufacturer exporter and fulfilling the conditions of the licence obtained is squarely on the appellants. The status of the appellant decides the eligibility to the Licences. It is not the appellant s case that their status as a manufacturer exporter was fixed by the authorities. It was accorded as per their own declarations. Therefore, it is to be observed that the appellants have not passed the eligibility criteria to lay claim for the benefit of the exemption claimed. The actual user (Industrial) definition as per Para 9.4 of the FTP during the relevant period means a person who utilses the imported goods for manufacturing in his own industrial unit or manufacturing for his own use in another unit including a jobbing unit . Thus, the appellant having obtained the Licenses under the said category as Manufacturer exporter had to fall within this stipulated definition of actual user and as noticed from his activities has failed to comply with this requirement as he has neither used it in his own premises or in a job worker premises for his own use. They are in fact Job worker for M/s OMC who have at no point of time parted with the ownership of either the premises or the product to the appellants - by no stretch of imagination the appellants can be treated as manufacturer exporter. As discussed above, they have suppressed the facts in the course of obtaining the licences. Therefore, they have violated the eligibility criterion of the Licences and thus violated the provisions of Notification 97/2004 and there is no ambiguity in the language of Notification or the policy. There is no ambiguity in the Customs Notification, FTP and Licences issued thereunder, the terms have to be strictly interpreted as per the plain wordings thereof. This being the case, by obtaining Licences by way of misrepresentation of the status being that of a manufacturer and not complying with the conditions of Licences or Customs Notification do not confer any benefit to the appellants for concessional rate of duty - As the conditions of the Notification have been violated, the appellants have rendered the imported goods liable for confiscation under Section 111(o) of Customs Act, 1962. Penalty u/s 114A and Section 114AA of Customs Act, 1962 - Held that - Notification does not provide for levy of penalty. When confiscation and demand of duty is on account of violations of conditions of the Notification, one need not traverse beyond the Notification for the purpose of demand of duty and imposition of penalty - the penalty imposed on the main appellants i.e., M/s. KCC is not maintainable. Appeal allowed in part.
Issues Involved:
1. Violation of 'Actual User Condition' 2. Validity of Installation Certificates 3. Eligibility as Manufacturer-Exporter 4. Fulfillment of Export Obligation 5. Imposition of Penalty and Confiscation of Goods Detailed Analysis: 1. Violation of 'Actual User Condition' The primary issue was whether the appellants violated the 'Actual User Condition' under the EPCG scheme. The appellants argued that they were providing mining services using their own equipment and labor, and all imported capital goods were used exclusively for this purpose. The DRI alleged that the capital goods were not used by the appellants but were installed at OMC's mines, thus violating the 'actual user condition'. The Tribunal found that the appellants were job workers for OMC, not owners or lessees of the mines, and did not use the capital goods for their own manufacturing. Therefore, they violated the 'Actual User Condition'. 2. Validity of Installation Certificates The appellants submitted installation certificates from Chartered Engineers confirming the installation of capital goods at OMC's mines. However, the Commissioner found these certificates invalid as they were issued without physical inspection and some were undated. The Tribunal upheld this finding, stating that the certificates could not be treated as valid since the capital goods were not installed in the appellants' premises. 3. Eligibility as Manufacturer-Exporter The appellants claimed they were manufacturer-exporters under the EPCG scheme. The Tribunal examined the agreement between the appellants and OMC, which showed that the appellants were engaged in mining services for a fixed fee, and the mined ore belonged to OMC. The Tribunal concluded that the appellants were job workers, not manufacturers, and did not fulfill the eligibility criteria for manufacturer-exporters under the EPCG scheme. 4. Fulfillment of Export Obligation The appellants contended that they fulfilled the export obligation through third-party exports. The Tribunal noted that while third-party exports are permissible, the appellants did not inform the authorities or get the necessary endorsements on their licenses. Therefore, the Tribunal held that the appellants did not fulfill the export obligation as required by the EPCG scheme. 5. Imposition of Penalty and Confiscation of Goods The Commissioner imposed penalties under Sections 114A and 114AA of the Customs Act, 1962, and ordered the confiscation of goods. The Tribunal found the composite penalty under both sections untenable and noted that the notification did not provide for a penalty but only for the recovery of duty with interest. Therefore, the Tribunal set aside the penalty but upheld the demand for duty and interest. Additionally, penalties on two individuals, Shri P.K. Bhattacharya and Shri S.K. Mall, were also set aside as their actions did not fall under the purview of the Customs Act, 1962. Conclusion: The Tribunal partially allowed the appeal by confirming the demand for duty and interest but set aside the penalties imposed on the appellants and the two individuals. The appellants were found to have violated the 'Actual User Condition', did not fulfill the eligibility criteria as manufacturer-exporters, and failed to meet the export obligation requirements under the EPCG scheme.
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