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TMI Blog2004 (2) TMI 646X X X X Extracts X X X X X X X X Extracts X X X X ..... cs as inputs and manufactured export products therefrom. Consequently the statements of the exporters were recorded under Section 108 of the Customs Act, 1962 in which they stated that they had applied for and obtained Pass Books. They also submitted documents pertaining to purchase of grey cotton fabrics, job working of such grey cotton fabrics into processed fabrics, conversion of the job worked fabrics into export products, invoices/shipping bills/bill books etc., for the input items as well as export products. 2. The Government of India introduced the Pass Book Scheme with effect from 1-4-1995. The relevant provisions were made in para 54 of the EXIM Policy 1992-97 and corresponding procedural provisions were incorporated in para 114 of the Hand Book of Procedures Vol. 1. The goods imported by a Passbook holder against the credit available in the Pass Book were exempted from payment of Customs duty in terms of Notification No. 104/95-Cus., dated 30-5-1995. The guidelines for use of Pass Book and credit/debit in such Pass Books were contained in the Advanced Licensing Committee (ALC) circular No. 15/95, dated 28-7-1995 issued by the DGFT. Further clarifications were issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and/or printed cotton made ups . Further, it also added note 16 to the General Notes for textile products, which provided that whenever cotton fabrics/yarn was allowed for import, the same would mean gray cotton fabrics/yarn, unless specifically mentioned otherwise. In view of the said General Note 16, the input item for export products covered at Sr. No. 133 was required to be treated as Grey Cotton fabrics . Further, the input Cotton Grey fabrics (woven) all varieties was excluded from the purview of the Pass Book Scheme by the DGFT vide PN No. 393 (PN)/92-97 the dated 14-1-1997. Consequently, the export products made out of cotton gray fabrics (woven), would not attract credit against the deemed import content of such input with effect from 14-1-1997. 4. On an analysis of Sr. Nos. 109, 133 and 321 of the SIONs for textile products, as reproduced above, in accordance with General Condition to the Hand Book of Procedures, Vol. II, it appeared that : (a) the export products viz., 100% cotton bed sheets and 100% cotton bed sets consisting of bed sheets with/without pillow cover shall be covered by the specific norms, i.e., Sr. No. 109. (b) the other bed linen item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imports was recoverable from them in terms of Section 28(1) of the Customs Act, 1962, read with the proviso thereof along with interest in terms of Section 28AB, ibid. The imported goods also appeared liable to confiscation under Section 111(o), ibid as the condition subject to which they were exempted from payment of duty had not been observed. Further, at the time of export, the exporters intentionally mis-declared the SION applicable and the description of actual input used, which was in contravention of procedure prescribed in this behalf by the DGFT. Therefore, export goods as detailed in respective SCNs exported under Pass Books had been exported in contravention of Section 11(1) of Foreign Trade (Development Regulations) Act, 1992 and appeared liable to confiscation under Section 113(d), ibid. As the exporter by their acts and omissions rendered the imported/export goods liable to confiscation under Section 111/Section 113 and had not paid duty due to wilful mis-statement of facts, they appeared liable to penalty under Section 112(a), Section 114(i) and Section 113A ibid, respectively. 7. The said exporters willfully mis-declared the serial number of the SlONs by which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scation under Section 111(o) of the Customs Act, 1962 and the impugned exported goods are held liable to confiscation under Section 113(d) ibid. However, as the said goods are not available, I do not order confiscation. (d) A penalty of Rs. 2,26,69,443/- (Rupees Two crores twenty six lakhs sixty nine thousand four hundred and forty three only) under Section 114A of the Customs Act, 1962 and a penalty of Rs. 25,00,000/- (Rupees Twenty Five lakhs only) under Section 114(i) ibid are imposed on M/s. Vigneswara Exports Pvt. Ltd., Mumbai. (e) The amount of Rs. 40,00,000/- (Rupees Forty Lakhs only) deposited voluntarily is ordered to be adjusted against their customs duty and interest liabilities. II. SCN No. DRI/BZU/E/34/97, dated 23-8-1997 against M/s. Divya Textiles. (a) The excess credit amounting to Rs. 95,98,168/- (Rupees Ninety Five Lakhs Ninety Eight Thousand One Hundred and Sixty Eight only) as provided in the passbook is disallowed. (b) The duty paid amounting to Rs. 95,98,168/- (Rupees Ninety Five Lakhs Ninety Eight Thousand One Hundred and Sixty Eight only) by utilising the excess duty as above is demanded and confirmed in terms of proviso to S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees Seventeen Lakhs Ninety Three Thousand Five Hundred Twenty Seven only) as provided in the passbook is disallowed. (b) The duty not paid amounting to Rs. 17,93,527/- (Rupees Seventeen Lakhs Ninety Three Thousand Five Hundred Twenty Seven only) by utilising the excess duty as above is demanded and confirmed in terms of proviso to Section 28(1) along with interest in terms of Section 28AB of the Customs Act, 1962. (c) The impugned imported goods against which the duty as above had not been paid is held liable to confiscation under Section 111(o) of the Customs Act, 1962 and the impugned exported goods are held liable to confiscation under Section 113(d) ibid. However, as the said goods are not available, I do not order confiscation. (d) A penalty of Rs. 17,93,527/- (Rupees Seventeen Lakhs Ninety Three Thousand Five Hundred Twenty Seven only) under Section 114A of the Customs Act, 1962 and a penalty of Rs. 1,80,000/- (Rupees One Lakh Eighty Thousand only) under Section 114(i) ibid are imposed on M/s. Trend Setters. (e) The amount of Rs. 10,00,000/- (Rupees Ten Lakhs only) deposited voluntarily is ordered to be adjusted against their customs duty and interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a penalty of Rs. 7,60,000/- (Rupees Seven Lakh Sixty Thousand only) under Section 114(i) ibid are imposed on M/s. Syntex Corporation. (e) The amount of Rs. 35,00,000/- (Rupees Thirty Five Lakhs only) deposited voluntarily is ordered to be adjusted against their customs duty and interest liabilities. VII. SCN No. DRI/BZU/E/40/97, dated 23-8-1997 against M/s. Texcellence Overseas. (a) The excess credit amounting to Rs. 42,38,854/- (Rupees Forty Two Lakhs Thirty Eight Thousand Eight Hundred Fifty Four only) as provided in the passbook is disallowed. (b) The duty not paid amounting to Rs. 42,33,141/- (Rupees Forty Two Lakhs Thirty Three Thousand One hundred Forty One only) by utilising the excess duty as above is demanded and confirmed in terms of proviso to Section 28(1) along with interest in terms of Section 28AB of the Customs Act, 1962. (c) The impugned imported goods against which the duty as above had not been paid is held liable to confiscation under Section 111(o) of the Customs Act, 1962 and the impugned exported goods are held liable to confiscation under Section 113(d) ibid. However, as the said goods are not available, I do not order confis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stoms Act, 1962. (c) The impugned imported goods against which the duty as above had not been paid is held liable to confiscation under Section 111(o) of the Customs Act, 1962 and the impugned exported goods are held liable to confiscation under Section 113 (d) ibid. However, as the said goods are not available, I do not order confiscation. (d) A penalty of Rs. 22,70,507/- (Rupees Twenty Two Lakhs Seventy Thousand Five Hundred Seven Only) under Section I14A of the Customs Act, 1962 and a penalty of Rs. 2,28,000/- (Rupees Two Lakh Twenty Eight Thousand only) under Section 114(i) ibid are imposed on M/s. Jindal Worldwide. (e) The amount of Rs. 13,00,000/- (Rupees Thirteen Lakhs, only) deposited voluntarily is ordered to be adjusted against their customs duty and interest liabilities. X. SCN No. DRI/BZU/E/44/97, dated 23-8-1997 against M/s. Aditya International. (a) The excess credit amounting to Rs. 76,00,914/- (Rupees Seventy Six Lakhs Nine Hundred Fourteen Only) as provided in the passbook is disallowed. (b) The duty not paid amounting to Rs. 76,00,914/- (Rupees Seventy Six Lakhs Nine Hundred Fourteen Only) by utilising the excess duty as ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. In order to understand the issue in dispute, a little background is required to be given about the passbook scheme. The passbook scheme was introduced w.e.f. 1-4-1995 and discontinued w.e.f. 1997. It did not provide for any procedure or mechanism for withdrawal of duty credit once granted by the Designated Authority under the Scheme in consultation with the customs authorities. The rationale behind the scheme was that all necessary verification was to be carried out in a coordinated manner by the customs authorities as well as the licensing authority prior to the grant of credit in order to ensure that at a later stage the passbook holder is not called upon to explain once again the correctness or otherwise of the grant of duty entitlement on the goods imported. It is for this reason that the passbook scheme required the passbook to be issued by a Designated Authority , who was appointed by the DGFT and working under the supervision of the Commissioner of the Customs for the purpose of granting credit on a passbook issued to an exporter. The exporter was required to present an application for grant of credit, which was to be verified by the Assistant Commissioner of Customs be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the customs authorities and the exporters/appellants produced evidence in the format of certificates from the jurisdictional Excise authorities certifying the actual nature of processing carried out on raw material (gray cotton fabrics) used in the export products. In these circumstances it is not open to the customs authorities to question the decision taken by the licensing authorities regarding grant of credit. 12. We now turn to the merits of the case. The appeals relate to export shipment effected during the period prior to 16-12-1996 and for the subsequent period up to 14-1-1997. For the period prior to 16-12-1996 the dispute is whether the export goods were entitled for duty credit under SION serial No. 133 as claimed by the appellants or SION serial No. 109 as alleged by the department. For the period thereafter the dispute is whether export goods were covered by SION serial No. 321 as claimed by the appellants or SION serial No. 133 as held by the department. The relevant entries read as under : Sr. No. Export Item Import Item Name Qty (Kgs.) Name Qty (Kgs.) 109 100% Cotton printed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the show cause notice issued to M/s. Aditya International contains an analysis of the competing entries, and effectively summarised the case of the department in the following manner : On an analysis of Sr. Nos. 109, 133 and 321 of the SIONs for textile products, as reproduced above, in accordance with General Condition 2 to the Hand Book of Procedures, Vol. II, it appears that :- (a) the export products viz., 100% cotton bed sheets and 100% cotton bed sets consisting of bed sheets with/without pillow cover shall be covered by the specific norm, i.e., Sr. No. 109; (b) the other bed linen items etc., which are in the nature of made ups; shall be covered by SION, Sr. No. 133, up to 16-12-1996; (c) the other bed linen items, where only dyeing and/or printing has been carried out as a process, shall be covered by SION, Sr. No. 133, even after 16-12-1996; (d) the other bed linen items etc., which are in the nature of made ups and where processes over and above dyeing and/or printing have been carried out shall be covered by SION Sr. No. 321 after 16-12-1996 . 16. The above analysis accepts the position that for the period prior to 16-12-1996 SION serial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that what was actually purchased by the exporter was gray fabrics whereas the input on which credit is admissible under SION 321 is processed fabrics. 17. Further in terms of the scheme once a particular product is covered under a particular SION the exporter become entitled to credit with respect to the basic customs duty payable on the deemed import content and the actual import content is not relevant. This view has been held by the Tribunal in the case of Kopran Limited v. CC. - 2002 (150) E.L.T. 1174. The relevant part of the Tribunal s order is reproduced below : We must remind ourselves at this point that the concept of the import content for the export product in the passbook scheme is a fictional one. Credit to be granted is not related to the actual content of imported goods contained in the export product; for credit to be granted, it is not ever necessary that there should be any import content in these goods. There is no such requirement in the policy. The reference to the deemed import content in the Handbook makes this clear. It appears to us that this procedure is not a procedure for replenishment by import of materials used in the manufacture of export ..... X X X X Extracts X X X X X X X X Extracts X X X X
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