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TMI Blog2006 (3) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... ld to such unit on loan or outright sale basis subject to the condition that the export of jewellary, made out of such gold was made within three months from the date of such loan or sale. 2.1 As per the REP Circular No. 22/88, dated 15-6-1988, penalty equivalent to 10% of the price of gold could be imposed by Metal and Mineral Trading Corporation Ltd. (MMTC) in case export was not made within three months or within the extended period of further three months. Third extension was not allowable to such defaulter who would become ineligible for any further loan /purchase of the duty free gold from the appellant for export as jewellary. 2.2 The appellant was eligible for exemption from customs duty on import of such gold under Notification No. 258/87-Cus., dated 2-7-1987 and Notification No. 177/94-Cus., dated 21-10-1994. The appellant had set up a bonded warehouse under Section 58 of the Customs Act, 1962 in Noida Export Processing Zone (NEPZ) and had executed bond under Section 59(2) of the said Act. The appellant as a primary importer, had also executed a bond, undertaking to export gold jewellery out of such import within the stipulated period. The appellant was required to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its officials asking them as to why the conditions of the bond executed by the appellant should not be invoked and the customs duty amount of Rs. 84,18,550/- on 23 kgs. of gold should not be recovered under Sections 72(d) and 143 of the said Act and penalty imposed under Sections 112 and 114(A) of the Customs Act. 5. According to the appellant, its liability of due accountal of the gold imported terminated when the gold was supplied to the approved jewellery unit. It had duly informed the customs department about the default of the unit and the customs department had proceeded against the defaulter by issuing letter dated 21-6-95. It was contended in their reply by the appellant that in terms of Paragraph 2 of the Notification No. 258/87 and Notification No. 177/94-Cus. the appellant was not required to monitor the fate of the gold once it was supplied against assessed Bill of Entry after debiting the bond. It was also contended that the Notification No. 258/87 and No. 177/94 did not provide for execution of bond in respect of any liability to pay duty in cases where gold was transferred to another person and was to be covered by a bond executed by the transferee. According to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty leviable on the imported gold. The liability ceased only when the export was completed and the export proceeds were realized. In the present case, the exports were on behalf of the appellant and the proceeds were being remitted to it directly. The gold was only being given on loan to the associate units until the export had been completed. The liability in respect of the gold given on loan continued with the appellant until export obligation was discharged. The obligation did not cease merely upon the gold being warehoused in the private bonded warehouse of the jewellery unit. Even the appellant had admitted its liability in its letter dated 21-6-1995 addressed to the Assistant Commissioner in which it was stated that the time limit for export of gold jewellery had expired and the unit had failed to fulfil the obligation of the appellant s gold loan scheme and that the customs are aware that the liability of MMTC also exists for payment of customs duty in terms of the bond executed by them . It was found that the goods were clandestinely removed. However, the recovery of customs duty was sought to be made for non-discharge of export obligation and not merely for improper remo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to export as per paragraph 2 of the Notification No. 258/87. It was also submitted that the Circular No. 38/96 and 27/97 and the amendment of Notification No. 177/94 by Notification No. 11/98 were not brought to the notice of the previous Bench that had decided the earlier case against the appellant on a similar issue. 8. The learned Authorised Representative for the department supported the reasoning and findings of the Commissioner in the impugned order and contended that the appellant had never challenged the validity of the bond which spelt out its liability to pay duty in respect of the gold imported under the scheme on non-fulfilment of export obligation. It was submitted that under the scheme the appellant continued to be liable even when the gold was transferred on loan basis under the associate scheme. It was submitted that the bond executed by the unit was not of the nature contemplated by Section 59(3) and did not absolve the appellant of its liability. That bond was a general bond of the unit for raw material meant for undertaking export and did not contain provision regarding goods loaned by the appellant to the unit. Since the goods were not accounted for, the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9(2) executed by the appellant contemplated that it would continue in full force notwithstanding the transfer of the said goods warehoused under this bond to another warehouse. The learned Authorised Representative for the department further submitted that the benefit of the proviso to Section 59(3) of the Act was not admissible to the appellant as no bond in terms of the provisions of Section 59 and of the type as contemplated in the said proviso was executed by the unit. It was also argued that the property in the gold remain with the appellant who continued to be owner thereof and therefore was liable to pay the customs duty, since the gold was given on loan by the appellant. It was also argued that the same issue in respect of the same appellant was decided by the Tribunal in favour of the revenue in the case of MMTC Limited v. Commissioner of Customs, ICD Tughlakabad, Delhi reported in 2001 (128) E.L.T. 412 (Tri.-Del). It was pointed out that this decision was upheld by the Hon ble Delhi High Court in MMTC Limited v. Commissioner of Customs reported as 2001 (133) E.L.T. 310 (Del.). 9. Admittedly, the appellant had supplied 23 kgs. of gold which was imported by it under the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort-oriented unit (EOU) complexes . It was, inter alia, provided therein that such units may import gold. In addition, gold of 0.999 or 0.995 fineness may also be made available to these units through SBI/MMTC or any other agency nominated by the Ministry of Commerce . The appellant was the nominated agency as per the scheme and was making such imports. It was further provided in the scheme that the MMTC may also supply gold, ...... to the approved gold jewellery manufacturing exporting units set up under this scheme, in accordance with the procedure specified from time to time . 12. The Central Government in exercise of its powers under Section 25(1) had issued exemption notification in respect of the goods specified in the annexure to that notification when imported into India by or on behalf of the gem and jewellery units set up in NEPZ at Ghaziabad under the scheme, for the manufacture of jewellery in free trade zones, from the whole of the duty of customs and the additional duty. Clause (vi) of the said general exemption Notification No. 258/87, dated 27-7-1987, provided a condition requiring the importer to execute a bond in the specified form and for the specified sum bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while the second paragraph is intended to extend the exemption also to imports made by the appellant corporation which is a Government of India undertaking and the State Bank of India. The second paragraph of the said notification applies when the import of gold is made for supply to the said units under the scheme for export of gold and silver jewellery and articles from the export processing zone, as specified in Paragraph 88 of the Export and Import Policy of 1992-1997 read with Chapter -VIII of the (Handbook of Procedures, Volume-I 1992-97 of the Government of India in the Ministry of Commerce. This would mean that all the provisions of the scheme applicable to supply of gold by the appellant to the Units were attracted when exemption in respect of imports made by the appellant was claimed by it under this notification. 12.2 As noted above, the appellant was required to follow the procedure specified from time to time when it supplied the gold imported by it to the exporting units set up under the scheme. As per the Public Notice No. 23 of 1987 which, inter alia, related to import procedure for gold, provisions were made for execution of various types of bond. The bond conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to import gold and sell/lend the same to actual users in various EPZ or EOUs, with an export obligation imposed thereon, observing that it was reported that the procedure existing was that the appellant who was the major importer, imported goods, cleared them for home consumption after executing a bond for observing the conditions of exemption, without any security and passed it on to the actual users. This clearly indicated that under the exemption notification even the appellant was require to execute the bond and that this circular was not intended to do away with that requirement but it was intended to impose further procedural requirements as mentioned therein. In Para 2 of the circular it has been recorded that the Ministry had come to know that substantial quantity of gold imported by the appellant had not been duly accounted for by the concerned exporters. In some cases, the gold as well as the loanees have been found missing, indicating gross abuse of duty exemption . Keeping in view the sensitive nature of the commodity and risks to revenue, the matter was reviewed in consultation with the Ministry of Commerce and it was decided that the procedure indicated therein sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring jewellery for export shall be final and binding on the importer. It is, therefore, clear that under the said bond, the appellant was liable to pay an amount equal to the duty of customs leviable on the goods as were not proved to the satisfaction of the Assistant Collector of Customs to have been used for manufacture of jewellery for exports. The material terms of the said bond which was executed by the appellant importer on 27-10-1994 as contemplated by the customs Notification No. 177/94 read as under :- (i) If the importer shall delivery or cause to be delivered to the Assistant Collector of Customs within nine months from the date here such extended period as the said Assistant Collector may in his absolute discretion think fit to grant certificate duly signed by the Customs or by such other person as the said Asstt. Collector from time to time by the effect that the said materials which were cleared free of duty in terms of the said Notification No. 177/94, dated 2-7-87 were in fact used in the manufacture of jewellery and producing proof of exports thereof and to fulfil the exports obligations with the prescribed value addition and to fulfil inter alia the conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not disputed that under of the terms of aforesaid bond failure to fulfil export obligation in respect of gold which was loaned to M/s. BRGL entailed liability on the part of the appellant-importer to pay on demand an amount of duty equal to the duty of customs leviable on the said goods. From a bare reading of the bond, there is absolutely no substance in the contention that the said bond should be treated as a transit bond. It was clearly stipulated therein that the amount covered under the bond could be recovered under Section 142(1) of the Customs Act. It is also not disputed that the amount of the said bond covered even the said 23 kgs. of gold; it being a bond for a much larger quantity of gold. Admittedly, this bond was never revoked or challenged. It is surprising that the appellant being a Government of India undertaking should take such a plea when the bond itself recorded that it was executed under the order of the Central Government. Execution of such a bond was clearly contemplated under the scheme under which the appellant imported gold and supplied it to the units in the zone. Non-fulfilment of export obligation by the unit to whom the gold was loaned created the lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs may permit an importer to enter into a general bond binding himself in a sum equal to twice the amount of the duty assessed. The bond executed by Shri Girdhari Lal under Section 59(2) was in respect of goods imported by him as is clear from clause 9 of that bond; while the bond contemplated by the proviso to sub-section (3) of Section 59 was a fresh bond from transferee in a sum equal to twice the amount of duty assessed on the goods transferred. No such fresh bond as contemplated by the proviso to sub-section (3) of Section 59 was executed by the transferee and the general bond executed by Shri Girdhari Lal under sub-section (2) of Section 59 in respect of the imports made by himself cannot be treated as a fresh bond contemplated by the proviso to sub-section (3) of Section 59. Therefore, the liability of the appellant in respect of the gold in question never lessened as contemplated by the proviso to sub-section (3) of Section 59. Furthermore, the liability under Section 59 is in context of a warehousing bond which was separately executed by the appellant and a copy of which is also on record. That bond is quite different from the Re-export bond and the nature of liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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