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2023 (1) TMI 1062 - HC - CustomsAdvance License Scheme - actual user condition - sourcing Lauryl alcohol either through indigenous purchase on payment of appropriate excise duty or it is imported under advance licence without payment of duty or it is imported on payment of customs duty - N/N. 30/97-CUS dated 1 April 1997 as amended by Notifications upto No.63/2004-CUS dated 14 May 2004 - HELD THAT - The question of breach of paragraph 7.4(ii) of the EXIM Policy which clearly provides that Advance Licences and / or materials imported thereunder shall not be transferable even after completion of the export obligation would not arise. Also the question of breach of paragraph 7.16 of the EXIM Policy which pertains to actual user condition and provides that the licences granted under this scheme are subject to actual user condition till endorsement of transferable by the Licencing Authority would not arise as there has been no transfer in the instant case as the materials have been received by one of the Units of the Respondent - The Respondent has used the imported material for manufacturing in its own M-3 Unit at Tarapur and there is also no dispute as regards fulfillment of the export obligation. Therefore the contentions of the learned Counsel for the Appellant appear to be misplaced. There would be no violation of condition (i) or (vii) of the Notification No. 30/97-CUS dated 1 April 1997 as amended by Notifications upto No. 63/2004-CUS as there is no transfer in violation of the actual user condition the discharge of export obligation not being in question.
Issues Involved:
1. Violation of condition of exemption notification and advance licence. 2. Interpretation of the term "actual user" in the policy. Issue-wise Detailed Analysis: 1. Violation of Condition of Exemption Notification and Advance Licence The central issue was whether the Respondent violated the conditions of the exemption notification and advance licence by using imported Lauryl alcohol at a different unit than specified. The Appellant argued that the Respondent directed the imported Lauryl alcohol to its M-3 Unit at Tarapur instead of the V-23 Unit at Taloja, thus violating condition (vii) of the exemption notification, which stipulates that exempt materials should not be disposed of or utilized except for the discharge of export obligations or replenishment, and should not be transferred to any other person. The Respondent countered that the transfer within its own units did not constitute a violation since the materials were used within the same legal entity (Galaxy Surfactants Ltd.). The court noted that the Respondent had discharged the export obligation and that the materials were used in its own M-3 Unit at Tarapur, which falls under the definition of "Actual User (Industrial)" as per the EXIM Policy. Hence, there was no transfer to another person, and therefore, no breach of condition (vii) or the EXIM Policy. 2. Interpretation of the Term "Actual User" in the Policy The Appellant contended that the term "actual user" implied that the imported materials should be used at the specific unit mentioned in the advance licence, and any deviation constituted a breach. The Respondent argued that the term "actual user" allowed the use of imported materials within any unit of the same legal entity, including jobbing units, as long as the materials were not sold or transferred to another person. The court referred to the definitions in the EXIM Policy, particularly paragraphs 3.4, 3.5, and 3.37, which define "actual user" and "person." The court concluded that the Respondent, being a single legal entity with multiple units, did not violate the "actual user" condition by using the imported materials in a different unit. The court also cited a precedent from the Kerala High Court, which supported the view that transfer within units of the same legal entity does not constitute a sale or transfer to another person. Conclusion The court answered both questions of law in favor of the Respondent and against the Appellant Revenue: - The Tribunal was right in setting aside the Order in Original passed by the Commissioner of Customs. - The interpretation given by the Tribunal to the term "actual user" in the policy was justified. The appeals were disposed of, and each party was ordered to bear its own costs.
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