2004 (1) TMI 78 - SC - Customs

Whether licence is erroneous? Held that - The crucial question to which the Tribunal should have addressed itself is whether the raw material imported duty free was utilized in the manufacture of exported products. In this regard, the definite case of the assessee, as put forward in the reply to the show cause notice and the documents placed before it or the adjudicating authority should have been examined. Instead of that, the Tribunal made a bald observation that the appellant could not specifically account for utilization of the balance quantity of 36,104 kgs. Neither the case of the assessee, nor the supporting material produced by it was referred to by the Tribunal before reaching this conclusion. True, the adjudicating authority did not accept the appellant s contention in this regard. But, even the adjudicating authority had not gone into all the relevant aspects. The case was rejected merely on the basis of endorsements in the passbook and the alleged discrepancy of 500 kgs. in Sl. No. 3 of the statement. That the balance sheet did not contain details of utilization is another point noted. It has been commented by the learned Counsel for the appellant that the discrepancy was explained before the Tribunal and it was further contended that the balance sheet need not reflect necessarily the details regarding utilization of raw material and the purpose of furnishing the balance sheet was only to show that there were no domestic sales. We need not dilate on these aspects. We consider it a fit case to remand the matter to the Tribunal for examining the issue whether there is satisfactory proof of utilization of the entire raw material for the purpose of exporting the resultant products. The Tribunal may, in addition to the material already filed, take into account any other material furnished by the parties. In the light of the conclusion arrived at by the Tribunal on this crucial aspect, the appeal shall be disposed of by the Tribunal. It is desirable that the appeal is decided expeditiously as the litigation has been lingering for well over ten years. The appeal is allowed.

Summary

Issues:
- Impugning the order of CEGAT regarding the demand of customs duty, interest, and penalty.
- Applicability of conditions for exemption from Customs duties.
- Fulfillment of export obligation in terms of quantity and value.
- Misdirection by the Tribunal in considering the issuance of the license.
- Examination of proof regarding the utilization of imported raw material in manufacturing exported products.

Analysis:
1. The appeal under Section 130E of the Customs Act challenged the CEGAT order upholding the demand of customs duty, interest, and penalty. The appellant imported brass scrap for manufacturing brass artwares for export, mentioning 'quantity to be exported' as 'as per value' in the application. The license granted specified conditions for Customs duty exemption based on the quantities and values mentioned.

2. The dispute arose when the Additional Collector issued a show cause notice for failing to export a specific quantity of finished goods, leading to a demand for Customs duty. The appellant contended that the export obligation was fulfilled, with exports exceeding the FOB value mentioned in the passbook. However, the adjudicating authority rejected these arguments, leading to the imposition of a penalty under the Customs Act.

3. On appeal, the Tribunal upheld the Additional Collector's order, emphasizing the fulfillment of export obligations in terms of quantity and value. The Tribunal's misdirection in considering the license issuance under different appendices led to a flawed analysis. The Tribunal failed to adequately examine the utilization of the imported raw material in manufacturing the exported products.

4. The Supreme Court found the Tribunal's distinction between license types erroneous and emphasized the crucial question of raw material utilization for exports. The Court highlighted the need for a detailed examination of the appellant's case and supporting evidence regarding the utilization of raw material. Consequently, the Court remanded the matter to the Tribunal for a thorough review and directed an expedited resolution due to the prolonged litigation duration.

5. The Court allowed the appeal without costs, emphasizing the importance of determining satisfactory proof of raw material utilization for exporting products. The detailed examination of this crucial aspect was deemed necessary for a fair and accurate resolution of the dispute, highlighting the need for a comprehensive analysis by the Tribunal to ensure a just outcome after years of litigation.