2018 (6) TMI 20 - AT - Customs

Import of Human Hair - duty exemption benefit under Notification No.32/97-Cus - Classification of imported goods - job-worker - misstatement or suppression of facts - Department took the view that the goods were not supplied free of cost by the foreign supplier but at a cost thus they would not be entitled to duty exemption benefit - Held that - The appellant has complied or satisfied all the mentioned requirements, however has allegedly fallen foul of the requirement that imported raw materials should have been supplied to him free of cost. From perusal of the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods), Rules 1996, it emerges that while such application is required to be made under Rule 4 of the Rules ibid to the Assistant / Deputy Commissioner of Central Excise and countersigned by the latter, the said document is then required to produce before the Assistant / Deputy Commissioner of Customs to allow benefit of exemption notification claimed by importer and also debit the quantity and value of imports made under a particular consignment before allowing the benefit of exemption notification - In this back and forth movement of documents between the Customs and Central Excise authorities with constant updation of the nature and quantity of goods imported and of the exemption notification availed, there cannot be any allegation that appellants have mis-stated or suppressed the fact of availment of Notification 32/97-Cus. and in particular the fact of the raw materials having been invoiced to appellants at some cost. All the requirements and conditionalities of the notification have been complied with or satisfied by the appellant. There is no dispute that appellant has not satisfied or complied with the requirements of Notification No.32/1997-Cus. After this dispute, the appellants have switched over to advance authorization scheme and carrying out the very same activities of job work and export of the resultant goods, without running with the Customs. It is only the words free of cost in the Notification that have caused them the niggles which led to this appeal. Notifications like 32/97-Cus. and schemes like advance authorization etc. and nothing but incentives and schemes approved by the Legislature and for the purposes of enhancing the export quotient of our country. If the intended purposes of these notifications, including the prescribed value addition etc. is complied with and there are no allegations of misuse or diversion of the imported goods, the larger substantive benefits of the notification should not be denied for a procedural requirement. The appellants are very much eligible for the exemption benefit under N/N. 32/1997-Cus. - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Eligibility for duty exemption under Notification No. 32/1997-Cus.
2. Interpretation of "supplied free of cost" condition in the notification.
3. Allegations of mis-declaration and evasion of duty.
4. Compliance with Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996.
5. Invocation of extended period of limitation and imposition of penalties.

Issue-wise Detailed Analysis:

1. Eligibility for duty exemption under Notification No. 32/1997-Cus.:
The appellants imported "Human Hair" for processing and re-export, claiming duty exemption under Notification No. 32/1997-Cus. The Department contested this, arguing that the goods were not supplied free of cost, thus disqualifying them from the exemption. The Tribunal examined whether the appellants met the conditions set out in the notification, including the requirement that the raw materials be supplied free of cost.

2. Interpretation of "supplied free of cost" condition in the notification:
The Tribunal noted that the purpose of the "free of cost" condition is to ensure that the job worker does not bear the cost of raw materials. The appellants argued that the payment made was a security and that they received advances from suppliers for the exports, implying they did not bear the cost. The Tribunal found that the appellants complied with the notification's substantive requirements, including achieving the required 10% value addition in exports.

3. Allegations of mis-declaration and evasion of duty:
The Department alleged deliberate mis-declaration by the appellants to evade duty. The Tribunal, however, found no evidence of mis-statement or suppression of facts. The appellants had informed the authorities about their operations and the terms of their MOU with the foreign supplier. The Tribunal concluded that the appellants had not willfully mis-declared the nature of their imports.

4. Compliance with Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996:
The Tribunal confirmed that the appellants complied with the relevant rules, including executing necessary bonds and fulfilling procedural requirements. The Tribunal emphasized that the appellants' communication with the authorities and the documentation provided supported their compliance with the rules.

5. Invocation of extended period of limitation and imposition of penalties:
The Tribunal addressed the Department's invocation of the extended period of limitation and the imposition of penalties under Section 114A of the Customs Act, 1962. The Tribunal found that the appellants had kept the authorities informed about their operations and had not suppressed any facts. Consequently, the extended period of limitation could not be invoked, and no penalties were imposable.

Conclusion:
The Tribunal concluded that the appellants were eligible for the duty exemption under Notification No. 32/1997-Cus. The Tribunal set aside the impugned order, allowing the appeal with consequential relief. The Tribunal emphasized that procedural lapses should not overshadow substantive compliance with the notification's conditions, especially when the intended purpose of promoting exports is achieved. The Tribunal's decision underscores the importance of interpreting notifications in a manner that aligns with their broader objectives.