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TMI Blog2012 (7) TMI 640X X X X Extracts X X X X X X X X Extracts X X X X ..... d on them by the adjudicating authority under Section 112 of the Act. The particulars of the party-appeals are as tabulated below: Sl. No. Appeal No. Appellant name Period of Export Period of Import Duty demand under proviso to Section 28(1) Rs. Penalty under Section 114A/112(a) Rs. 1. C/249/09 M/s Gimpex Ltd. 2003-04 2004-05 September 2006 to April 2007 3,95,68,820/- 3,95,68,820/- (u/s 114A) 2. C/250/09 Samir Goenka, Joint Managing Director of M/s Gimpex Ltd. 20,00,000 (u/s 112(a) 3. C/251/09 Anil Goyal, General Manager of Metal and Copper Division of M/s Gimpex Ltd. 15,00,000/- (u/s 112(a)) 4. C/252/09 Ranjit Choudhari 7,50,000/- (u/s/112(b) 5. C/399/09 M/s Sree Enterprises 2003-04 2004-05 June 2006 to Sept.2007 1,50,47,618/- 1,50,47,618/- 6. C/400/09 Sanjay Bansal, Proprietor of M/s Sree Enterprises 20,00,000/- (u/s 112(a) 7. C/401/09 Anil Goyal Authorized Signatory of M/s Sree Enterprises 15,00,000/-- (u/s 112(a)) 8. C/402/09 Ranjit Choudhari Rs 10,00,000/- (u/s 112(b)) 2. Both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make them eligible for duty credit certificates under Target Plus Scheme (TPS) for a total amount of Rs.7,08,12,793/-. GL applied in the prescribed format to the Director-General of Foreign Trade (DGFT) for grant of such certificates and obtained 7 such certificates for a total amount of Rs.7,08,12,793/- in the month of May, 2006. These duty credit certificates/licences under TPS, which were granted by the Joint DGFT, Chennai, enabled GL to import canalized items as per para (3.2.5.) of the Handbook of Procedures (Volume-I) 2004-09 and subject to actual user condition. The Conditions Sheet attached to each certificate/licence specified two export product groups viz. CHEMICAL AND ALLIED PRODUCTS and ENGINEERING PRODUCTS and also carried an endorsement: Import will have broad nexus . As these licences were registered at Chennai Port Customs and GL wanted to make imports through ICD Hyderabad, they obtained Transfer Release Advices(TRAs) from Chennai Customs for imports through ICD Hyderabad. GL used these TRAs for importing continuous cast copper rods (a canalized item) (hereinafter, also, referred to as c.c. copper rods ) in 14 consignments (total weight 427.383 MTs and value Rs.13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chaudhari under Section 112 of the Act. The demands and other proposals were contested. In adjudication of the dispute, the Commissioner of Customs passed order-in-original No.7/2009. The operative part of this order reads as follows: (i) The benefit of exemption in terms of Notification No.32/2005-Cus. Dt. 8/4/2005 as amended in respect of the Copper rods imported by M/s. Gimpex Ltd. against the duty credit certificates issued under Target Plus Scheme vide Bills of Entry mentioned in Annexure A.17 of the show cause notice is denied. (ii) An amount of Rs.3,95,68,820/- (Rupees three crores ninety five lakhs sixty eight thousands eight hundred and twenty only) towards duties of Customs not paid on the quantities of copper rod imported by them during the period from September 2006 to April 2007 should be paid by them in terms of proviso to Section 28(1) of the Customs Act, 1962 read with provisions of Customs Notification No.32/2005-Cus. Dt. 8/4/2005 as amended. An amount of Rs.75 lakhs voluntarily paid by M/s. Gimpex Ltd. is adjudged against the above amount of duty of Customs. (iii) The Continuous Copper rods weighing a quantity of 427.383 MTs totally valued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of Order-in-Original No.10/09 reads as follows: (i) The benefit of exemption in terms of Notification No.32/2005-Cus. Dt. 8/4/2005 as amended in respect of the Copper rods imported by M/s. Sree Enterprises against the duty credit certificates issued under Target Plus Scheme vide Bills of Entry mentioned in Annexure A.44 of the show-cause notice is denied. (ii) An amount of Rs.1,50,47,618/- (Rupees one crore fifty lakhs forty seven thousand six hundred and eighteen only) towards duties of Customs not paid on the quantities of copper rod imported by them during the period from June 2006 to September 2006 is demanded in terms of proviso to Section 28(1) of the Customs Act, 1962 read with the provisions of Customs Notification No.32/2005-Cus. Dt. 08/04/2005 as amended. (iii) The Continuous Copper rods weighing a quantity of 136.654 MTs totally valued at Rs.4,92,28,835/- is held liable to confiscation in terms of Section 111(o) of the Customs Act, 1962. However, since the goods are not physically available, no fine is imposed. (iv) Interest as applicable is to be paid by M/s. Sree Enterprises on the duty amount demanded above, in terms of Section 28AB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that, for the purpose of duty-free import of inputs under the said scheme, broad nexus would mean goods imported with reference to any of the product groups of the exported goods within the overall value of the certificate/licence. Paragraph (3.7.6) of the FTP authorized the certificate/licence-holder to utilize the duty credit in the import of any inputs subject only to two conditions viz. (i) such inputs should be freely importable and (ii) such inputs were imported for the importer s own use. Paragraph (3.7.6.) did not stipulate that the imported goods must be inputs for the manufacture of products identical to the products which were exported for obtaining TPS certificates/licences. The Department had no case that the copper rods imported by GL were not intended for their own use or that the goods were not freely importable. Therefore, according to the learned counsel, GL was entitled to the benefit of the aforesaid Notification in respect of the subject imports. 6. The learned counsel further pointed out that the CBEC s Circular No.21/2007-Cus dt. 8/5/2007 which took a different view on the nexus issue was struck down by both the High Courts as ultra vires t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his group as per SION as well as ITC(HC) classification. The broad nexus required under the FTP was established and, therefore, it was not open to the Customs authorities to deny them the benefit of Notification No.32/2005-Cus. The goods in question were imported under the TPS as permitted by the licensing authority. The relevant licences/certificates were never withdrawn or revoked, nor even amended to the detriment of the importer. Hence it was not open to the Customs authorities to take the view that the goods were not permitted to be imported under the Foreign Trade Policy. They were rather bound by the terms of the TPS certificates/licences. In this connection, the learned counsel relied on Varun Industries Ltd. vs. UOI [2009(244) ELT 39(Bom.)]. Furthermore, it was submitted that the relevant Bills of Entry had been finally assessed by the proper officer of Customs granting the benefit of the exemption notification and that it was not open to the Department to invoke Section 28 of the Customs Act for recovery of duty without successful challenge (by way of appeal) to such assessments. In this connection, the counsel relied on Priya Blue Industries Ltd. vs. Commissioner of Cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up of products. In this view of the matter, the appellants were required to satisfy the Customs authorities that the copper rods imported by them had such broad nexus with the exported goods. According to the learned Consultant, this condition of broad nexus, as interpreted by the Hon ble High Courts, was not satisfied by the assessees in the present case. In the context of explaining the scope of the above coverage within a group of products similar to the exported goods , the learned consultant referred to the dictionary meaning of the word similar as also to the meaning of the expression similar goods defined in the Customs Valuation Rules. If such meaning was applied in the present case, it could be concluded that any goods imported as inputs under the TPS must be inputs for products having general likeness, by way of comparable features and applications, to the exported goods. Thus it was argued that, as against iron ore fines exported by GL, the permissible imports would be goods meant for producing products similar to iron ore fines. According to the learned Consultant, such similar products would be those falling under ITC (HS) heading 26.01. In his view, only the products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shudh Vanaspat Ltd. the Hon ble Supreme Court had held as follows :- It is patent that a show-cause notice under the provisions of Section 28 for payment of Customs duties not levied or short-levied or erroneously refunded can be issued only subsequent to the clearance under Section 47 of the concerned goods. Further, Section 28 provides time limits for the issuance of the show-cause thereunder commencing from the relevant date ; relevant date is defined by sub-section (3) of Section 28 for the purpose of Section 28 to be the date on which the order for clearance of the goods has been made in a case where duty has not been levied; which is to say that the date upon which the permissible period begins to run is the date of the order under Section 47. The High Court was, therefore, in error in coming to the conclusion that no show-cause notice under Section 28 could have been issued until and unless the order under Section 47 had been first revised under Section 130. 6.?We further note that, in the case of Venus Enterprises (supra), the assessee had filed 11 Bills of Entry for clearance of computer parts in 1995-96. The declared value was accepted in respect of some of these Bills o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled against the above decision of the High Court was dismissed by the Apex Court [Venus Enterprises v. Commissioner - 2007 (209) E.L.T. A61 (S.C.)]. The above excerpt from R.R. Patel will also meet the case which was sought to be made out by the assessees by relying on Priya Blue Industries (supra). In the result, it has to be held that it was within the powers of the proper of officer of Customs to issue show-cause notices to the assessees under Section 28 of the Act demanding the duty forgone under Notification No.32/2005-Cus. 13. Another contention raised on behalf of the assessees is that, once the DGFT duly issued duty credit certificates/licences enabling them to import canalized goods with broad nexus to the exported products and to claim the benefit of Target Plus Scheme, it was not open to the Customs authorities to deny the benefit on any ground whatsoever. This argument is also unacceptable. The Customs authorities have exclusive jurisdiction to examine the importer s eligibility for claiming exemption under a Customs Notification vide Sheshank Sea Foods (supra). The TPS certificates did not specifically name the goods for import. It was for the Customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertificates were issued in accordance with para (3.7.) of the FTP. Para (3.7.6.) of the Policy provided that the duty credit could be used for import of any inputs, capital goods provided the same was freely importable under ITC(HS) for the importer s own use or for use of his supporting manufacturer declared in Appendix 17D , the format prescribed for an application for issue of duty credit certificate under the TPS. In column 10 of Appendix 17D, it was provided thus Goods allowed to be imported under this scheme shall have a broad nexus with the product exported and declaration in this regard shall be made by the applicant in Appendix 17D. For the purpose of import entitlement under this scheme, broad nexus would mean goods imported with reference to any of the product groups of the exported goods within the overall value of the entitlement certificate. Identical provision was available under para (3.2.5.) of the Handbook of Procedures (Volume-I), 2004-09. The learned counsel for the assessees have argued that a broad nexus as envisaged under para (3.2.5.) of the Handbook of Procedures was established by them between the imported goods and the exported products. In this connectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on by the adjudicating authority in the cases of GL and SE, and the quashing thereof by the Hon ble High Courts has, of course, rendered the impugned orders infirm to the extent to which those orders relied on the said Public Notice and Circulars. 16. What emerges from the above findings of the Hon ble High Courts is that the Policy provisions as interpreted by the Hon ble High Courts did not restrictively require the assessees, (for exemption under Notification No.32/2005-Cus) to prove that the goods imported by them were usable in the very products which were exported by them for obtaining the TPS certificates. It was enough for them to show that the c.c. copper rods imported by them could be used as input in the manufacture of any goods of a larger group of similar goods including the exported goods. If this burden of proof was discharged, the importers would be held to have established a broad nexus between the imported and exported goods. But this larger group of similar goods cannot be left indeterminate, lest it should be unduly enlarged by unscrupulous seekers of TPS benefit (No offence to GL or SE!). Therefore the licensing authority which issued TPS certificates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of the TPS certificate. As there was broad nexus between the copper rods imported by GL and one of the exported products (iron ore fines of Engineering Products Group), the importer could claim the benefit of the scheme within the overall value of the TPS certificate, according to the learned counsel. This, in our view, is a specious argument which, if accepted, can yield results not envisaged by the Policy as interpreted by the Hon ble High Courts. 18.2. For illustration, we may consider a hypothetical case: A Star Export House (SEH) exported the product X [Engineering Products Group] with its FOB value contributing to the extent of 50% of the incremental growth in FOB value of exports in a given fiscal year over the previous year. It also exported the product Y [Chemical and Allied Products Group] with its FOB value contributing to 50% of the incremental growth in FOB value of exports. Suppose, on an application made by the SEH, the DGFT taking into account the entire incremental growth in FOB value of exports granted a duty credit certificate under the TPS entitling them to make duty-free import of inputs having broad nexus with the exported products. Where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extended period of limitation under the proviso to Section 28(1) of the Customs Act was invoked on the alleged ground of suppression of facts with intent to evade payment of duty . Admittedly, in the case of both the assessees, the demand of duty is for the extended period of limitation under the said proviso. Both GL and SE have contested the demand by submitting that the larger period of limitation is not invocable in their case. We have considered their submissions and the connected arguments put forward by their counsel. 19.2. It is not in dispute that c.c. copper rods imported by the assessees were a canalized item which could be used as input in the manufacture of products of Engineering Products Group. The duty credit certificates/licences which were used by them for duty-free clearance of the imported goods required them only to establish a broad nexus between the imported goods and the products exported under the TPS. The products exported by SE were, admittedly, of Engineering Products Group and at least one of the products exported by GL was also, admittedly, of the said group. Apparently, GL bona fide believed that a broad nexus as defined in para (3.2.5.) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaning of broad nexus to the extent of taking the view that this expression meant that an input imported under the TPS should be one which could be used in the manufacture of the exported product. On the contrary, the importers wanted to stretch the meaning of broad nexus to the other extreme. The Hon ble High Courts of Delhi and Bombay got occasion to interpret the Policy provisions, and the Circulars/Public Notices in question came to be struck down. Having outlined the chequered history of the Target Plus Scheme, we must accept that the ambiguous TPS provisions made the assessees believe bona fide that they were entitled to claim the benefit of Notification No.32/2005-Cus in respect of the c.c. copper rods imported by them, and they did not have any intention to evade payment of duty. Therefore, the extended period of limitation was not invocable against them. In the result, the demands of duty raised on the assessees are liable to be set aside on the ground of limitation and the penalties imposed on them under Section 114A of the Customs Act are also liable to be set aside. 20. If the person sought to be penalized under Section 112 of the Act is, in relation to any good ..... X X X X Extracts X X X X X X X X Extracts X X X X
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