2005 (8) TMI 247 - AT - Customs

Import - Spring Steel Wire - suppression or mis-declaration of details in the documents - benefit of DEEC Scheme - Word 'Materials' and 'Raw materials' as in the Notification Nos. 116/88-Cus - Demand duty - HELD THAT - On a careful consideration of the judgment of the Apex Court ruling in the case of CC, Kolkata v. Rupa and Co. Ltd. 2004 (7) TMI 90 - SUPREME COURT , we find that the Apex Court's explanation of the term 'Goods required for manufacture' to mean to include materials not directly used in the manufacture of resultant product but still required therein, also applies to the facts of the case. The Apex Court has relied on the earlier ruling rendered in the case of Oblum Electrical Industries Pvt. Ltd. 1997 (9) TMI 104 - SUPREME COURT . We find that a similar view was expressed by the Tribunal in the case of Siddhartha Tubes Ltd. 2000 (4) TMI 138 - CEGAT, NEW DELHI and in the case of Kitply Industries Ltd. 2002 (10) TMI 188 - CEGAT, KOLKATA . In the ITC Ltd. 2002 (10) TMI 169 - CEGAT, CHENNAI case also, a similar view has been expressed by the Tribunal. All these judgments clearly apply to the facts of the case and the appellants' contention that the replenishment materials are required for manufacture of resultant products and they have been used so and it satisfies the Notification, should be accepted. The further case of the assessee that the demands are barred by time is a well taken ground for the reason that all the details and particulars have been mentioned in the records and on our perusal of the entire records, including the licence and the documents furnished at the time of export and at the time of import of the raw materials for replenishment, we find that the details had been furnished. Licence, DEEC passbook and other documents had been scrutinized by the DGFT and the Customs Authorities and there was no details which had not been declared was discovered by the DRI in the investigation. There was no suppression or mis-declaration of facts. Therefore, in the light of the judgment cited by the Counsel, the demands are clearly barred by time. The appellants succeed on both grounds and the appeals are allowed with consequential relief if any.

Summary

Issues Involved:
1. Misdeclaration of details to avail DEEC Scheme benefits.
2. Fulfillment of Export Obligations (EO).
3. Use of imported raw materials in manufacturing exported goods.
4. Invocation of the extended period for issuing the Show Cause Notice (SCN).
5. Validity of the import licenses and Customs authorities' jurisdiction.

Detailed Analysis:

1. Misdeclaration of Details to Avail DEEC Scheme Benefits:
The Commissioner of Customs found that the appellants had misdeclared details in their documents to avail the DEEC Scheme benefits. The appellants argued that they had not violated any conditions of the advance license and had fulfilled all terms of the notification. They contended that the description of items imported and exported matched the Standard Input-Output Norms (SION), and the DGFT had accepted their submissions without seeking additional information. The Commissioner admitted that the imported items were in accordance with SION and were not sold or transferred, but denied the DEEC Scheme benefits based on discrepancies found by the DRI regarding the actual use of imported materials in the manufacturing of exported goods.

2. Fulfillment of Export Obligations (EO):
The appellants argued that they had fulfilled their EO in terms of value, quantity, description, quality, and technical characteristics. They provided evidence of obtaining Export Obligation Discharge Certificates (EODC) for 18 out of 24 advance licenses and claimed that the remaining six were pending due to the ongoing case. The Commissioner acknowledged that the export obligation had been fulfilled but emphasized that the imported raw materials did not match the specifications required for the exported products.

3. Use of Imported Raw Materials in Manufacturing Exported Goods:
The core issue was whether the imported raw materials were used in the manufacture of exported goods. The Commissioner noted that the imported materials' sizes did not match those of the finished products, indicating they could not have been used in the exported goods. The appellants argued that the term "materials required for manufacture" should include materials necessary for manufacturing but not necessarily used directly. They relied on various judgments, including Oblum Electrical Industries Pvt. Ltd. v. CC and Jay Engineering Works Ltd. v. CC, which supported a broader interpretation of the term "materials required for manufacture."

4. Invocation of the Extended Period for Issuing the Show Cause Notice (SCN):
The appellants contended that the SCN issued on 21-3-2003 for the period 1996 to 2000 was time-barred. They argued that all required details were furnished in their declarations, and there was no misdeclaration or suppression of facts. The Commissioner, however, invoked the extended period, citing discrepancies found during the DRI investigation. The Tribunal, upon reviewing the records, found that all details had been declared, and there was no suppression of facts, making the extended period inapplicable.

5. Validity of the Import Licenses and Customs Authorities' Jurisdiction:
The appellants argued that once the DGFT and Customs authorities accepted the export obligations and technical specifications, the Customs authorities could not question the validity of the import licenses or the use of imported materials. They relied on several judgments, including UOI v. Oceanic Export Corporation and CC v. Ryben Pharmaceuticals, which supported their stance. The Tribunal agreed, stating that the Customs authorities should not question the import licenses' validity once the export obligations were fulfilled.

Conclusion:
The Tribunal concluded that the appellants had fulfilled their export obligations and that the imported materials were required for manufacturing the resultant products, even if not directly used. The Tribunal found that the demands were barred by time as all details had been declared, and there was no suppression of facts. Consequently, the appeals were allowed, and the appellants were granted consequential relief.