9911796707
TMI Blog2012 (11) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent had imported such highly valued item against DFIA issued for import of printing ink used for printing on bags/sacks used for export of rice, thereby evading huge amount of customs duty. It was also gathered that the respondent had imported such consignments of OVI through Air Cargo Complex against DFIA licenses, originally issued by DGFT, New Delhi to M/s. Shrinath Rai Harnarain (India) Ltd. (M/s. SRHI) against their export of rice packed in printed polypropylene bags. On the above intelligence, the premises of M/s. SICPA and M/s. SRHI were searched and various statements were recorded. During the course of investigations the consignment of OVI weighing 300 kgs imported through Bill of Entry No. 102285 dated 22-5-2008 was intercepted and 150 kgs of OVI found at godown which was seized and were provisionally released after the fulfilment of conditions laid down by the DRI in their release order i.e. on payment of duty, Indemnity bond, bank guarantee etc. After the investigation a show-cause notice dated 15-10-2008 was issued to M/s. SICPA for confiscation of the consignment of OVI imported under five Bills of Entry, demanding customs duty along with interest and penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses. The adjudicating authority depended solely upon the findings of another adjudicating authority i.e. Joint Director General of Foreign Trade without appreciating the various decisions of the Hon'ble Supreme Court. He further submitted that the adjudicating authority has wrongly relied upon the decision of the Pradip Polyfils Pvt. Ltd. v. UOI - 2004 (173) E.L.T. 3 (Bom.). As the show-cause notice does not at all challenge the jurisdiction of the DGFT to issue the DFIA license, in fact, the notice has been issued for import of an item which was different commodity than the input required to make the final product for which the DFIA has been issued. He also relied on the decision of Apex Court in the case of Sheshank Sea Foods Put. Ltd. v. UOI - 1996 (88) E.L.T. 626 (S.C.) wherein the Hon'ble Supreme Court held that customs authority can independently take action where the condition of any notification exempting goods from payment of duty is violated notwithstanding any action taken or otherwise by the DGFT or other agencies. He further submitted that in the case of Guest Keen Williams Ltd. v. Collector - 1997 (95) E.L.T. A144 (S.C.) it was held that "licensing and exemption from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng material are capable of being used for manufacture of self adhesive tape but the same will not be allowed. As per SION E-38 norms, one of the inputs for the export of rice, packed in printed PP/HDPE bags, is printing ink. Further, ink has to be such ink which can be used for printing the PP bags for packing the rice and in the present case the import of OVI does not fit in the description of printing ink meant for output product namely PP/HDPE bags of rice. In fact the printing ink imported by the respondent was never used in the exported product and the same will never be used for printing of rice bags as these OVI is used for printing the currency notes. He further submitted that the DFIA Licence No. 0510209278 dated 21-9-2007 issued against export of 8000 MT of rice of FOB value of Rs. 10,28,30,000/- permitted import of 640 kgs. of printing ink for the CIF value of Rs. 8,56,91,666/- i.e. about 83.33% of the total FOB value of exports. The issuance of license was in complete disregard to para 4.4.1 of the Policy and General Notes to SION which was a result of incorrect requests in the application made by M/s. SRHI to DGFT. In fact, M/s. SRHI opted for quantity of ink, double t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es as security for future liability. The sole motive of M/s. SRHI in obtaining the said three licenses under DFIA scheme was to sell them to a particular importer who imported an absolutely distinct commodity i.e. OVI of very high value and about which the broker in the deal Shri Lalit Jain as well as the exporter and importer had prior knowledge. It appeared to be a conspiracy hatched by Shri Lalit Jain. The said OVI was to be used exclusively for printing of currency notes by the subsidiaries of RBI, under these licenses. The Foreign Trade Policy and the relevant customs notification clearly mandate that a nexus is to be maintained between imported inputs and resultant exported product. Accordingly, the licenses issued by the DGFT carried an endorsement on the body of the licenses to the effect that the license holder shall maintain the nexus in their imported inputs and the result products". Therefore, only that printing ink ought to have been imported. 3.2 To avail benefit of Notification No. 40/2006-Cus., dated 1-5-2006 the description of the goods imported should be covered by DFIA. It is important to refer to the provision under which DFIA is issued. Para 4.4.1 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpreted in such a manner as to become tool for facilitating evasion of duty. "Is not required to be established" has to be accorded a strict interpretation and cannot be interpreted to mean that even when the inputs on their face also have no use in the production of the export goods, the import is still to be allowed by giving the benefit of exemption notification. In view of the above submissions he submitted that the impugned order be set aside. 4. On the other hand Shri. A.R. Madhav Rao, Advocate, learned Counsel appeared for the respondent submitted that the submissions of the learned SDR are not fully correct. He points out the crux of the arguments of SDR as that the DFIA licenses are issued as per scheme under the policy stated in para 4.4.1 of the Hand Book of Import Export Procedures and is intended for duty free import of inputs used in the export product, that import entitlement, in terms of value and quantity would be as per SION, that value addition prescribed is minimum 20% as per para 4.4.4, that the Notification No. 40/2006-Cus. itself provides that the materials should be used in the export product as per the Explanation at the end of the notification. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed by the DGFT but no such review has been undertaken and therefore that order has also attained finality. The order of Jt. DGFT makes reference to the clarification earlier given by the DGFT itself on 14-1-2008 in respondent's own case and on 26-11-2007. The Circular laid down that only with reference in para 4.55.3 of Handbook, correlation of inputs to export product is required. The said position is also made clear in Notification No. 40/2006-Cus., C.B.E.C. circulars dated 9-5-2006 and 20-12-2007. The pre-cursor to DFIA scheme was the DFRC scheme. The earlier Notification No. 46/02-Cus. for implementing DFRC Scheme corresponds to Notification No. 40/2006-Cus. In Notification 46/02-Cus. also correlation was required only for the products under then para 4.31 of the Handbook as per Circular No. 24/02-Cus. Therefore from the legislative history there is a continuous and conscious intent to permit import of printing ink without correlation to the export product and such correlation is required only for 22 items under 4.55.3 of the Handbook of Procedures. In fact among the lower level officers in Customs department there is confusion in extending Notification No. 40-2006-Cus. and de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts downscaling the quantity permitted and also adjusting the excess quantity imported as 4 gm for 50 Kg bag. against further DFIA's. Since, due to bona fide error, higher quantity of DFIA was granted, the excess quantity given earlier DFIA was adjusted against subsequent DFIA. There is no mala fide intention involved. As the quantity applied in DFIA was a bona fide error and the respondent has acted in accordance with circulars C.B.E.C. and DGFT bonafidely, the extended period cannot be invoked in the facts of the case. 4.3 The learned Advocate relied on the decision of this Tribunal in the case of Global Exim - 2010 (253) E.L.T. 417 which was affirmed by the Hon'ble Bombay High Court as reported in 2010 (259) E.L.T. A139, Commissioner of Customs v. Sterling Pools reported at 2011 (269) E.L.T. 341 (Kar.) and Titan Medical Systems Pvt. Ltd. v. Commissioner of Customs Delhi - 2003 (151) E.L.T. 254 (S.C.). He further submitted that in the circulars of C.B.E.C. and DGFT in the present case being in consonance and in accordance with law are binding on the department as held by the Hon'ble Supreme Court in the case of State of Tamil Nadu v. India Cements Ltd. and Another as report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 of the Foreign Trade (Regulation) Rules, 1993. (vii) Whether there was a conspiracy hatched by Shri Lalit Jain of M/s. Bhagya Laxmi Enterprises in collusion with the exporter M/s. SRHI through its Managing Director Shri Prem Garg, Shri. S.K. Valecha and the importer M/s. SICPA through its MD Shri Arun Viz and GM (Tech) Shri A.B. Sachan for evasion of customs duty misusing these licences as alleged in the show-cause notice. 6.2 The adjudicating authority had dealt with all the issues in detail and given his findings. We have also examined the findings made by the adjudicating authority. 6.3 The main allegation of the Revenue is that as per para 4.4.1 of the Foreign Trade Policy, duty free import of only inputs which are used in export product is allowed. The import entitlement, quantity should be as per SION and subject to value addition in goods exported as prescribed in para 4.4.4. the Notification No. 40/2006. The main contention of the learned DR is that as per para 4.4.1 and 4.55.3 there should be a nexus between the goods imported and that used in the exported goods; if the nexus is established then only the exemption under Notification No. 40/2006 is avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly in respect of products specified in paragraph 4.55.3 of the Handbook a correlation of technical characteristics, quality and specification of the inputs with the export product is required to be established under the DFIA Scheme. Such correlation is not required to be established in other cases unless the SION prescribes for the same. It is, therefore, clarified that except for the items specified in paragraph 4.55.3 of the Handbook of Procedures, Vol. I 2004-09, in all other cases a correlation between the inputs under import with those used in the exported product is not required to be established and that clearance under DFIA scheme may be allowed if other conditions of the scheme and Customs notification referred to above are fulfilled." 6.4 In the adjudication order the adjudicating authority has relied on the Circular No. 46/2007-Cus. which deals with the issue and clearly lays down that correlation of imported inputs to the export product is required only for products specified in para 4.55.3 of the Handbook of Procedures. The same has been explained in the 1st proviso to the Notification No. 40/2006-Cus. and is required only in the case of products specified in pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OVI imported by the respondent is also classifiable under Chapter 32. So as along as restriction in terms of quantity and value ceiling of license are complied with there cannot be any dispute that the license was fraudulently used. There were no restrictions imposed in the impugned DFlAs for import of polypropylene granules and printing ink in terms of technical characteristics. So the importer is entitled for the benefit of Notification No. 40/2006-Cus. 6.6 These DFIAs are issued to the exporter, for export already made, permitting import of the items mentioned therein and the said DFIAs are freely transferable. Once DFIAs are transferred the transferee will import the material with the characteristics that the importer requires, of course subject to other restrictions in the license. There cannot be a burden on the transferee to verify the characteristics of the materials used in the goods already exported. In the case of Nick Sons Exports Pvt. Ltd. v. UOI - 1990 (48) E.L.T. 356 (Bom.) the Hon'ble High Court of Bombay held that transferee of the licence is entitled to import raw materials, components and other things for utilization in his factory whether or not such arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sultant product. Therefore, we have to agree with the arguments advanced by the learned advocate that the conditions prescribed in paragraph 4.55.3 is not applicable to them since what was exported was electric motor and what has been imported is bearings. On this ground alone, in the normal course the appeal could have been allowed. However, we proceed to examine the other contentions also. 7. The next contention is that the specification provided in the DFIA is only upto 50 mm bore in respect of bearings and appellants have imported several types of bearings whereas the export was only of one type. In this regard, we have to take note of the fact that when exports were made shopping bill was filed with Customs Authorities and in the shipping bill a declaration to the effect that it is under DFIA scheme would have been made. In such a situation, customs officers also should have verified the specifications. Having allowed export of motors with input specifications as bearing upto 50 mm bore, it may not be appropriate for the customs authorities to insist on technical specifications at the time of import of bearings. Further, we also find that the specifications provided in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said decision cannot be relied upon. The Hon'ble Supreme Court in the case of State of Tamil Nadu and Anr. (supra) has held that in that case the Circular dated 1st May, 2000 was not in conflict with either any statutory provision or the schemes announced and therefore the circular was binding in law on the adjudicating authority. In this case the circular of C.B.E.C. and DGFT are in consonance and in accordance with law, and therefore the same are binding on the department. These issues has also been dealt with by the Hon'ble High Court of Bombay in the case of Vodafone Essar South Ltd. v. UOI - 2009 (237) E.L.T. 35 (Bom.) in para 21 and 22. 6.8 There is a suggestion from Revenue that the fact that the importer had paid only 50% of the value of license was paid to the license holder by the transferee and this is indicative of fraud. The Counsel for the respondent submits that money has been retained to cover the risk that some-times DFIA licenses turn out to be fraudulent and the transferee faces consequent risk. In fact in this case Shri. Lalit Jain, the broker, is seen to have used some forged letters for transferring the license from the exporter to the importer thro ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
