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2014 (9) TMI 287 - HC - CustomsMisuse of advance License with actual user condition - import of SS Coils/Sheets - diverting the duty free imported raw materials instead of utilizing the same for manufacture of resultant export products. - Held that - The CESTAT proceeded on the premise that only the Director General of Foreign Trade has authority to decide the issue regarding misuse of advance licenses. While quashing the order passed by the Commissioner of Customs, CESTAT ignored the basic fact that the proceedings in question was initiated only under the provisions of the Customs Act and more particularly under Section 111(o) of the Act. The Customs Authorities have nothing to do with the order passed by the Joint Director General of Foreign Trade. Entitlement of duty exemption is a matter to be decided by the Customs Authorities. Joint Director General of Foreign Trade is concerned only with the Import License. The conclusion arrived at by the Director General of Foreign Trade in the matter of alleged violation of Advance License has absolutely no bearing on the question to be decided by the Customs Department under Section 111(o) of the Customs Department. This aspect was not considered by the CESTAT. - Matter remanded back - Decided in favor of revenue.
Issues Involved:
1. Binding nature of the order passed by the Joint Director General of Foreign Trade on the Customs Authorities. 2. Maintainability of the appeal before the High Court. 3. Entitlement of the assessee to the benefits of Customs Notifications. 4. Jurisdiction of Customs Authorities under Section 111(o) of the Customs Act. Detailed Analysis: Binding Nature of the Order Passed by the Joint Director General of Foreign Trade: The primary issue was whether the order passed by the Joint Director General of Foreign Trade (DGFT) dropping further proceedings against the assessee was binding on the Customs Authorities. The Customs Department contended that the DGFT's order was not binding on them as their proceedings were concerned with the payment of duty and not merely the misuse of the license. The High Court agreed with this contention, stating that the Customs Authorities have independent jurisdiction under the Customs Act to investigate and levy duty if the imported raw materials were not used for the manufacture of resultant export products. The Court emphasized that the DGFT's findings pertain to the licensing conditions, whereas the Customs Department deals with duty exemptions and their conditions. Maintainability of the Appeal: The assessee argued that the dispute related to the rate of duty and hence, the appeal should lie before the Supreme Court under Section 130E(b) of the Customs Act. The High Court rejected this argument, clarifying that the issue was not about the rate of duty but the entitlement to the benefits of Customs Notifications. Therefore, the appeal was maintainable before the High Court. Entitlement to the Benefits of Customs Notifications: The High Court scrutinized whether the assessee was entitled to the benefits of Customs Notifications Nos. 30/97 and 48/99. The Customs Department's inspection revealed that no manufacturing unit existed at the declared premises, and the assessee admitted to selling the imported goods in the local market. The Court held that the onus was on the assessee to prove that they were entitled to the exemption by showing that the imported materials were used in manufacturing the export products. The Court reiterated that exemption notifications should be construed strictly, and the assessee failed to provide sufficient evidence to support their claim. Jurisdiction of Customs Authorities under Section 111(o) of the Customs Act: The High Court discussed the jurisdiction of the Customs Authorities under Section 111(o) of the Customs Act, which deals with the confiscation of goods improperly imported. The Court cited the Supreme Court's decision in Sheshank Sea Foods Pvt. Ltd. v. Union of India, affirming that the Customs Authorities have the power to investigate and levy duty for the breach of conditions of the exemption notification. The DGFT's role is limited to the licensing conditions, and their findings do not preclude the Customs Authorities from exercising their jurisdiction under the Customs Act. Conclusion: The High Court concluded that the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) erred in holding that the DGFT's order was binding on the Customs Authorities. The CESTAT did not independently evaluate the merits of the case and wrongly quashed the order passed by the Commissioner of Customs. The High Court set aside the CESTAT's order and remitted the matter for fresh consideration on merits. The substantial question of law was answered in favor of the Revenue, and the appeal was allowed.
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