2016 (12) TMI 136 - AT - Customs

Import against value based advance licence for export - Input stage credit u/r 57A - violation of condition V(A) of the Notification No. 203/92-Cus - Held that - The department has not investigated anything to know whether the input stage credit under Rule 57 in respect of export goods was availed or otherwise. The show cause notice without any relied upon documents or without any factual information cannot sustain. In this regard this Tribunal has taken consistent view that show cause notice without having any evidence is not sustainable - reliance placed on the decision of the case of Consumers Plastics Pvt Ltd Vs. Commr. Of Cus.(export), Mumbai 2001 (7) TMI 456 - CEGAT, MUMBAI . It is also observed that against the duty of total export of 20,000 kgs, for the quantity of approx. 16,000 kgs certificate of non availement of credit/reversal of credit was submitted by the appellant which also indicates that allegation of the show cause notice is contrary to the facts available on record. As per the above settled legal position demand confirmed against appellant denying exemption notification No. 203/92-Cus is clearly not sustainable - appeal allowed - decided in favor of appellant-assessee.

Issues Involved:
1. Alleged violation of condition V(A) of Notification No. 203/92-Cus.
2. Basis and evidence for issuing the show cause notice.
3. Verification of input stage credit availed by the supporting manufacturer.
4. Time-barred demand and incorrect duty quantification.
5. Demand of interest under Section 28AB of the Customs Act.
6. Imposition of penalty under Section 114A.

Detailed Analysis:

1. Alleged Violation of Condition V(A) of Notification No. 203/92-Cus:
The core issue in this case revolves around the allegation that the appellant violated condition V(A) of Notification No. 203/92-Cus by availing input stage credit under Rule 57A for exported goods. The show cause notice claimed that the appellant had breached this condition, leading to the confirmation of the demand by the adjudicating authority and its subsequent upholding by the Commissioner (Appeals).

2. Basis and Evidence for Issuing the Show Cause Notice:
The appellant contended that the show cause notice was issued without any concrete basis or evidence to establish that input stage credit was availed in respect of the exported goods. The Tribunal found that the show cause notice lacked any factual matrix or supporting documents, making it unsustainable. It was emphasized that the department did not investigate whether the input stage credit was availed, which is a prerequisite for sustaining such allegations. The Tribunal cited several judgments, including Consumers Plastics Pvt Ltd Vs. Commr. Of Cus. (export), Mumbai and Oriental Industries Vs. Commissioner of Customs, Kandla, which consistently held that show cause notices without evidence are not maintainable.

3. Verification of Input Stage Credit Availed by the Supporting Manufacturer:
The appellant, being a merchant exporter, argued that whether the credit was availed or not could only be determined through investigation at the supporting manufacturer's end. The department failed to verify this, which was crucial for substantiating the allegations. The Tribunal noted that the notification required a declaration on the export documents that no Modvat credit was availed, and this declaration was not disputed in the present case.

4. Time-Barred Demand and Incorrect Duty Quantification:
The appellant argued that the demand was time-barred as the import was made after fulfilling the export obligation, and the customs authority did not question the fulfillment of the notification's conditions at the time of import clearance. The Tribunal agreed, citing Goel Airshrink (India) Limited Vs. Commissioner of Cus. (Export), Mumbai, which held that the department must show why the exemption was not available and justify invoking the extended period under Section 28(1). The appellant also contended that the duty was wrongly quantified, and the correct amount should be ?93,435/- instead of ?2,54,828/-. Additionally, the demand should be reduced to ?23,209/- based on the pro-rata quantity for which the certificate was not obtained.

5. Demand of Interest Under Section 28AB of the Customs Act:
The appellant argued that the demand for interest under Section 28AB was not sustainable as this section came into force on 28/9/1996, whereas the import was made in 1994. The Tribunal found merit in this argument, noting that the provision for interest could not be applied retrospectively.

6. Imposition of Penalty Under Section 114A:
The appellant contended that the penalty provision under Section 114A did not exist in December 1994, when the import was made. The Tribunal agreed, citing the absence of this provision at the relevant time and thus ruling out the imposition of a penalty.

Conclusion:
The Tribunal concluded that the show cause notice was issued without any factual basis or supporting evidence, making the demand unsustainable. The department's failure to verify whether the input stage credit was availed further weakened the case. The demand was also deemed time-barred, and the incorrect duty quantification was acknowledged. The Tribunal set aside the impugned order and allowed the appeal, providing consequential relief to the appellant.

Order Pronounced in Court on 24-10-2016.

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