2012 (10) TMI 738 - AT - Customs

Demand of duty it was found that they had imported excess quantity of cartons and did not utilise the same in the packing of goods exported Held that - Export obligation have been fulfilled and the cartons have been used in the manufacture of export product, no violation of the terms and conditions of the exemption notification has been committed - duty demanded and confirmed by the department is merely on technical grounds without any legal basis or substance - appellant has utilised the imported cartons in the manufacture and export of Pears soap and they have not diverted or mis-used in favor of assessee

Summary

Issues:
1. Duty demand on excess imported cartons not used for export.
2. Confiscation of goods and imposition of penalties under Customs Act.
3. Applicability of licensing conditions on imported cartons.
4. Validity of using excess imported cartons for export under different licenses.

Analysis:
1. The case involved an appeal against an Order-in-Original regarding the duty demand on excess imported cartons not utilized for export. The appellant, a company, imported inner cartons duty-free for packing soaps under advance licenses but was found to have imported more cartons than required for the export obligation, leading to a duty demand of Rs. 58,89,408.

2. The Commissioner confirmed the duty demand, ordered confiscation of goods, imposed fines and penalties under various sections of the Customs Act. The appellant contended that they used the excess cartons for packing and exporting soaps against other licenses, fulfilling the export obligations and obtaining necessary certificates from licensing authorities.

3. The licensing conditions stipulated that imported cartons must be used for packing exported soaps. The appellant imported 9.10 crore cartons and used them for exporting 9.88 crore soaps, with the remaining cartons obtained locally. The Tribunal noted that the licensing authority issued Export Obligation Discharge Certificates without objections, accepting the appellant's claim of using imported materials as required.

4. The Revenue argued that imports are license-specific, prohibiting the use of materials imported under one license for manufacturing and exporting under another. However, the Tribunal found that the appellant did not misuse or divert the imported cartons, as they fulfilled the export obligations and used the cartons in manufacturing and exporting the soap, in compliance with exemption notifications.

5. Ultimately, the Tribunal set aside the impugned order, ruling in favor of the appellant, as they had utilized the imported cartons for manufacturing and exporting soap without diversion or misuse. The duty demand was deemed to lack legal basis, and the appeal was allowed on 28-10-2011.