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TMI Blog2016 (11) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... customs authorities is held to be absolute. Imposition of penalty u/s 114A - export obligation under the advance authorisation - Held that: - the assessee suppressed the actual consumption of raw-materials and undeclared consumption norms while applying for licences on ad-hoc norm basis. The allegation is of diversion of raw-materials imported duty free for the manufacture of finished goods in domestic market before fulfillment of export obligation. This is one violation or breach alleged or attributed. The tribunal, in para 39 also holds that in some cases, raw-materials imported were not utilised or physically incorporated in the production of goods exported. The declarations given for obtaining the licences were false. It is also held that export obligation in large number of licences is yet to be completely fulfilled even though the period is over long back - penalty upheld. No interest is payable on any of the customs duties that are due from the appellant. Appeal dismissed - decided partly in favor of appellant. - CUSTOMS APPEAL NO. 23 OF 2015 WITH CUSTOMS APPEAL NO. 5, 4, 6, 7, 11, 12, 13, 18, 19, 49, 51, 52, 53, 54, 55, 56, OF 2015 - - - Dated:- 27-10-2016 - S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of para 4.1.1 of the Export Import Policy 2002-07 (Exim Policy) or under Para4.1.3 of the Foreign Trade Policy 2004- 2009 (Policy). Correspondingly, the raw materials imported against these advance licences were exempt from customs duty under Notification Nos. 43/2002-Cus dated 19th April, 2002 and 93/2004-Cus dated 10th September, 2004, respectively. 6 Procurement of raw material and manufacture of bulk drugs are an integrated, continuous and un-interrupted operations. The resultant product manufactured and exported are by using : a) Customs duty free raw materials imported against advance licence; and /or b) Customs duty paid imported raw materials, and /or c) Raw materials from indigenous sources . 7 In view of common storage, handling, manufacture and sale for both export and domestic market, and activity being a continuous activity, it is possible that the exported goods are made using the indigenous raw materials and same final products manufactured out of the imported materials are sold in the local market in India. 8 None of the raw materials imported duty free against advance licences has been sold as such. The raw materials have indeed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions include certain advance authorizations where M/s. KDL Biotech Limited has been named as the supporting manufacturer. All the advance authorizations involved in the present case have been issued in terms of para 4.1.1 of the Export-Import Policy 2002-2007 (Exim Policy) and also under para 4.1.3 of the Foreign Trade Policy ( FTP for short) 2004-2009. The raw materials imported against advance authorizations were exempt under Notifications dated 19th April, 2002 (Notification No.43/2002-CUS) and 10th September, 2004 (Notification No,93/2004-CUS). The claim of the appellants is that there is nothing illegal, much less any fraudulent act on the part and they have been complying with all the requisite legal provisions. 11 Yet, investigations were commenced by the officials of the DRI somewhere in 2007 on alleged violation of the Notification Nos. 43/202-Cus dated 19th April, 2002 and 93/2004- Cus dated 10th September, 2004, for imports made under the cover of various advance licences obtained during the period 2003-04 to August 2007. The said investigation culminated into the issuance of show-cause notice F. No.DRI/MZU/INV-04/07-08- URL/3533 dated 24th April, 2009. 12 It is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld on the ground that appellants have diverted the raw materials imported duty free for manufacture of finished goods sold in the domestic market before fulfillment of export obligation. f) Penalty under section 112(a) is imposable on the directors / employees. 19 Being aggrieved and dissatisfied by the impugned order dated 23rd April, 2014, the appellants have preferred the present appeal under section 130 of the Customs Act, 1962. It is submitted that the impugned order confirms the demands as per the show cause notice and particularly Annexure-B onwards to the same. It is submitted that the demand raised in Annexure-B and B-1 to the show-cause notice pertains to fifteen advance authorizations. All such advance authorizations have been issued based on Standard Input Output Norms ( SION for short) published by the DGFT. Annexure B gives the break-up of the demand of ₹ 4,42,90,312/- month-wise and advance authorization-wise. It also gives the break-up of various types of customs duties demanded, namely, basic customs duty, additional duty of customs, special additional duty of customs (SAD) and cesses. Annexure B-1 gives the details as to how this demand in the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be imported under the advance licence. It does not mean that the imported duty free materials to be actually used in the manufacture of final product exported. 22 This is also evident from para 4.12 of the Handbook, which reads as under : Exports/supplies made from date of EDI generated file number for an Advance Authorisation, may be accepted towards discharge of EO, shipping / supply document(s) should be endorsed with File Number or Authorisation Number to establish correlation of exports / supplies with Authorisation issued. If the application is approved, authorization shall be issued based on the input/output norms in force on the date of receipt of the application by RA in proportion to the provisional exports/supplies already made till any amendment in the norms is notified. For remaining exports, the Policy/Procedures in force on authorization issue date shall be applicable. 23 Thus, the exports made from the date of receipt of an application for an advance licence by RA also will be taken into consideration for discharge of export obligation under the advance licence to be issued. In such cases, the raw material which will be imported under such advance lice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e duty free materials imported under advance licence were required for the manufacture of resultant export products and, therefore, there is no violation of para 4.1.3 of the Policy. 24 The CESTAT in para 11 of the impugned order also accepts that there is no bar in Policy and Notification from clearing the resultant product manufactured from the duty free materials in the domestic market and fulfilling export obligation by exporting resultant product manufactured from inputs obtained from indigenous sources. 25 Mr. Sridharan then went on to point out that prior to April 2000, the conditions of the Customs Notifications were stringent and provided that the imported duty-free raw materials against advance licenses shall be utilized for discharge of export obligation alone and no part thereof shall be disposed of in any other manner before export obligation under the said licence has been discharged in full and export proceeds realized. Even then the Exim Policy at that relevant time was favourable to the assessee and not so stringent. After inviting our attention to the relevant portion of the Customs Notification and as reproduced in para A.14 of the written submissions, Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be exported and can be disposed of in the local market. This is what the amendment made in April 205 seeks to achieve. That is why this term option is introduced. Therefore, to clear all doubts, the Policy was amended in April, 2005. Additional option / sentence was inserted stating that the resultant product manufactured from the materials imported against advance licence as replenishment need not be exported and can be disposed of. Thus, this additional sentence in the Policy favours the assessee. The interpretation of this additional sentence by CESTAT is plainly erroneous. The departure made by the Customs Notification in April 2000 cannot be nullified by this additional sentence introduced in the Policy in April 2005. In any event, Mr. Sridharan submits that such amendment cannot apply to advance licence issued prior to April 2005. 26 Mr. Sridharan submits that customs duty is not payable when the quantity of inputs imported as per licence is as per SION. The quantity of inputs as per licence based SION is more than the quantity of inputs actually consumed due to efficiency in the process. For that purpose, he relies upon para 4.1 of the Policy, para 4.1.3 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice pertains to 13 advance authorizations. The case of the department is that the appellants have imported two raw materials, namely, Pyridine and Methylene Chloride against 13 advance authorisations without payment of duty, availing benefit of Notification No.93/-04-Cus. The resultant product mentioned in these licences is Nimesulide. 28 The appellants had indicated (a) M/s. Mangalam Drugs and Organics Ltd., Vapi and M/s. Aarti Drugs Ltd, Tarapur as the co-authorisers. 29 According to the department, the appellants did not supply the said raw materials to the co-authorisers for manufacture of the resultant product. In other words, according to the department, the resultant products were not manufactured using the imported inputs and hence the imported inputs are not eligible for exemption under Notification No.93/04/-Cus. 30 The appellants were holding advance authorizations (mentioned in Annexures 4 5 of the reply to the show-cause notice) for import of Pyridine and Methylene Chloride respectively. All these authorizations were valid for import of the goods as given in Annexure-D to the show-cause notice. The resultant product mentioned in these authorizations are 7ACCA, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ume II compilation). 38 Mr. Sridharan submits that the demand Annexure-F to the show-cause notice has been raised for non-fulfillment or shortfall in fulfillment of export obligation of all the licences / authorizations. With regard thereto, he would submit that this demand is highly inflated. It does not take into account the actual exports. It also ignores the clubbing of advance licences pending before the DGFT. Mr. Sridharan submits that out of the customs duty demand of ₹ 397,65,602/- non cenvatable customs duty is ₹ 1,60,74,569/- and rest are additional duties of customs whose cenvat credit is admissible to the appellants. Therefore, at best, and without prejudice the sum of ₹ 1,60,74,569/- alone is payable by the appellants for non-fulfillment of shortfall in the fulfillment of export obligations of all the licences / authorizations involved in the present case. Mr. Sridharan then criticizes the confiscation of goods and submits that it is not at all possible in the present case. The goods in question have already been cleared. They are not available for confiscation. No redemption fine can be imposed in lieu of confiscation of these goods. If the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not imposable in the case of non-fulfillment of export obligation and section 112 is not applicable in such case. 46 Reliance is also placed on the following decisions in support of the submission that penalty is not imposable. (i) Maruti Udyog Ltd. Vs. Commissioner of Customs 2011 (132) ELT 340 (T) (ii) Suncity Synthetics Ltd. Vs. Commissioner of Customs 2001 (132) ELT 684 (T). (iii) Pattu Exports Pvt. Ltd. Vs. Commissioner of Customs, Chennai- 2007 (213) ELT 454 (T). 47 Failure to fulfill export obligation is only an inability to achieve bonafide future business forecast, not involving any malafide. Further turn of events like change in international market conditions which cannot be anticipated / provided for and which results in failure to fulfill export obligation cannot be equated with penalty applicable for breach of law. 48 Mr. Sridharan has relied upon the following judgments:- (i) Commissioner of Customs (Import), Mumbai vs. Zincollied (Ind) Ltd., 2014 (300) ELT 475. (ii) VVF (India) Ltd. vs. Commissioner of Customs, Kandla, 2015 (317) ELT 561. (iii) Arkema Catalyst India Pvt. Ltd. vs. Union of India, 2012 (276) ELT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has taken us through the impugned order of the CESTAT and particularly the findings at para 11 page 91 of the paper book. He submit that the goods have been imported. However, such imported goods are not available in the factory. These imported goods have been utilised in the manufacture of the goods which are sold in the domestic market. There is no compliance made with the obligation to export the goods. Mr. Jetly submits that the tribunal framed the necessary issues and in that regard, the discussion can be found from pages 91 to 103 of the paper book in Customs Appeal No. 23 of 2015. He has taken us through the entire discussion on these issues and submits that the reasons assigned are cogent, satisfactory and by no means, the impugned order can be termed as perverse. He submits that all the five issues result in an ultimate finding of fact that there is no fulfillment of the export obligation. Rather all lapses are admitted. There is no factual dispute. The only answer provided by the appellant is that the goods are freely importable. That can hardly be said to be an answer for the appellant claims to be satisfying all requirements including that of fulfillment of export oblig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble advance authorisation for import of various products. The show cause notice and copy of which is to be found at Annexure 'C' to the paper book came to be issued on investigation by the officials of the Directorate of Revenue Intelligence, somewhere in 2007. These officials were of the opinion that there is a violation of Notification Nos. 43/2002-Cus dated 19th April, 2002 and 93/2004-Cus dated 10th September, 2004 in import made under the cover of this authorisation. The statements of various officials of the appellants were recorded. The show cause notice is at page 149 of the paper book. That is issued under section 12, proviso to section 28(1), section 124 and 143 of the Customs Act, 1962 read with section 11(1) of the Foreign Trade Regulation Act, 1992, Exim Policy, 2002-2007 and Foreign Trade Policy, 2004-2009. That accuses the appellant of alleged misuse of DEEC Scheme by illegally diverting the finished goods manufactured out of raw materials imported duty free without fulfilling their export obligation, involving aggregate of the customs duty to the tune of ₹ 14,53,74,294/-. 54 It is the case of the Revenue that the appellant is a public limited compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious inputs as per SION were allowed to be imported, the said company had generally imported only some of them though in huge quantities. The major items imported were Penicillin G. Potassium, D Alpha Salt and D Alpha Base and Pyridine through JNCH, GCLE through Air Cargo Complex, Sahar, Methylene Dichloride, Toluene and Acetone etc. through Kandla Port. The company also procured various raw materials from domestic manufacturers on the basis of the invalidation certificates issued by the licencing authority. After setting out the details of these licences obtained during the relevant period and their present status and drawing the summary thereof, it is alleged that in many cases, the company has failed to fulfill their export obligations though duty free imports of inputs had been effected by them as per the licences. Investigation in the case revealed that in addition to non fulfillment of export obligation, in many cases, they had also failed in applying for EODC to the Joint Director of Foreign Trade within the time limit prescribed. It is also alleged that the company has not furnished the prescribed documents in the requisite and relevant forms in terms of para 4.25 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act is warranted. The endorsement is that the enforcement action against the appellant and M/s. KDL Biotech Limited is dropped by the officer of the Foreign Trade. This is an endorsement and remark, which has been recorded in a letter dated 4/5th June, 2009. Prior to the show cause notice, on 7th February, 2008, the company tried to clarify certain aspects and which emerged during the search of its premises and subsequent discussions. It recorded its view that duty free imports were utilised for manufacturing of resultant finished products, which are also sold in the domestic market, even before fulfilling the export obligation, would not render the company liable to pay customs duty. The company sought to explain that there is a confusion that the imported goods under advance licence were used for the purpose of manufacture of resultant products and sold in domestic market. The goods imported under the advance authorisation scheme have been used fulfilling actual user condition and the resultant goods were manufactured and the same were disposed of. The advance licence/authorisation can be obtained even for the replenishment of the goods which were used for the export product, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2001-Cus., dated 30-5- 2001; No. 122/2001-Cus., dated 3-12-2001; No. 9/2000-Cus., dated 21-1-2002; No. 113/2002- Cus., dated 16-10-2002 and No. 125/2002-Cus., dated 12-11-2002. GENERAL EXEMPTION NO. 89 Exemption from anti-dumping duty to imports against Annual advance licence when utilised in discharge of export obligation. - In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts articles imported into India, against an Annual Advance Licence from whole of the anti-dumping duty leviable thereon under Section 9A of the Customs Tariff Act, 1975 (51 of 1975), subject to the condition that the exempt articles shall not be disposed of or utilised in any manner except for utilisation in discharge of export obligation in accordance with the said Annual Advance Licence. Explanation In this notification, Annual Advance Licence means, an annual advance licence issued in terms of paragraph 7.4A of the Export and Import Policy 1997- 2002 published vide notification of the Government of India in the Ministry of Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade after the discharge of export obligation in full; (iv) that the imports and exports are undertaken through seaports at Mumbai, Kolkata, Cochin, Magdalla, Kakinada, Kandla, Mangalore, Marmagoa, Madras, Nhava Sheva, Paradeep, Pipavav, Sikka, Tuticorin, Visakhapatnam, Dahej, Mundhra, Nagapattinam and Okha or through any of the airports as Ahmedabad, Bangalore, Bhubaneswar, Mumbai, Kolkata, Coimbatore, Delhi, Hyderabad, Jaipur, Madras, Srinagar, Trivandrum, Varanasi, Nagpur and Cochin or through any of the Inland Container Depots at Agra, Bangalore, Coimbatore, Delhi, Faridabad, Gauhati, Guntur, Hyderabad, Jaipur, Jallandhar, Kanpur, Ludhiana, Moradabad, Nagpur, Pimpri (Pune), Pitampur (Indore), Surat, Tirupur, Varanasi, Nasik, Rudrapur (Nainital), Dighi (Pune), Vadodra, Dauladtabad, (Wanjarwadi and Maliwada), Walunj (Aurangabad), Anaparthy (Andhra Pradesh), Salem, Malanpur, Singanalur, Jodhpur, Kota, Udaipur, Ahmedabad, Bhiwadi, Madurai, Bhilwara, Pondicherry and Garhi Harsaru or through the Land Customs Station at Ranaghat, Singhabad and Raxaul: Provided that the Commissioner of Customs may by special order and subject to such conditions as may be specified by him, perm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, - (i) Export Import Policy means the Export and Import Policy 2002-2007, published vide notification of the Government of India in the Ministry of Commerce No. 1/2002-2007, dated the 31st March, 2002; (ii) Licensing Authority means the Director General of Foreign Trade appointed under Section 6 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) or an officer authorised by him to grant a licence under the said Act. (iii) Materials means - (a) raw materials, components, intermediates, consumables, catalysts, computer software and parts which are required for manufacture of resultant product; (b) mandatory spares within a value limit of 10 per cent of the value of the licence which are required to be exported along with the resultant product; (c) fuel, oil and catalysts required for manufacture of resultant product; and (d) packing materials required for packaging of resultant product. [Notification No. 43/2002-Cus., dated 19-4- 2002 as amended by Notification No. 113/2002- Cus., dated 16-10-2002 and No. 125/2002-Cus., dated 12-11-2002.] 61 The other notification is Customs Notification No. 93 of 2004 dated 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ennai, Nhava Sheva, Paradeep, Pipavav, Sikka, Tuticorin, Visakhapatnam, Dahej, Mundhra, Nagapattinam and Okha, Jamnagar and Muldawarka or through any of the airports as Ahmedabad, Bangalore, Bhubaneswar, Mumbai, Kolkata, Coimbatore, Delhi, Hyderabad, Jaipur, Chennai, Srinagar, Trivandrum, Varanasi, Nagpur and Cochin or through any of the Inland Container Depots at Agra, Bangalore, Coimbatore, Delhi, Faridabad, Gauhati, Guntur, Hyderabad, Jaipur, Jallandhar, Kanpur, Ludhiana, Moradabad, Nagpur, Pimpri (Pune), Pitampur (Indore), Surat, Tirupur, Varanasi, Nasik, Rudrapur (Nainital), Dighi (Pune), Vadodra, Dauladtabad, (Wanjarwadi and Maliwada), Walunj (Aurangabad), Anaparthy (Andhra Pradesh), Salem, Malanpur, Singanalur, Jodhpur, Kota, Udaipur, Ahmedabad, Bhiwadi, Madurai, Bhilwara, Pondicherry and Garhi Harsaru, Bhatinda, Dappar (Dera Bassi), Chheharata (Amritsar), Karur, Miraj, Rew..., Bhusawal, Jamshedpur, Surajpur and Dadri or through the Land Customs Station at Ranaghat, Singhabad and Raxaul, Jogbani, Nautanva (Sonauli), Petrapole and Mah..pur Provided that the Commissioner of Customs may, by a Public Notice and subject to such conditions as may be specified by him, permit i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation . - for the purposes of this notification, - (i) Foreign Trade Policy means the Foreign Trade Policy 2004-2009 published vide notification of the government of India in the Ministry of Commerce and Industry, No. 1/2004 dated the 31st August, 2004; (ii) Licensing Authority means the Director General of Foreign Trade appointed under Section 6 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) or an officer authorised by him to grant a licence under the said Act. (iii) Materials means - (a) raw materials, components, intermediates, consumables, catalysts, and parts which are required for manufacture of resultant product; (b) mandatory spares within a value limit of ten per cent of the value of the licence which are required to be exported alongwith the resultant product; (c) fuel required for manufacture of resultant product; and (d) packing materials required for packaging of resultant product. (iv) manufacture has the same meaning as assigned to it in paragraph 9.37 of the Foreign Trade Policy. [Notification No. 93/2004-Cus., dated 10-9-2004] 62 A perusal of these notifications would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port and export from any other seaport/airport/inland container depot through any land customs station. Condition (v) says that the export obligation as specified in the said licence (both, value and quantity terms) is discharged within the period specified in the said licence or within such extended period as may be granted by the licensing authority by exporting resultant products, manufactured in India, which are specified in the said licence and in respect of which facility under rule 18 or rule 19(2) of the Central Excise Rules, 2002 has not been availed. Proviso to condition (v) is important and says that any advance intermediate licence holder shall discharge export obligation by supplying the resultant products to ultimate exporter in terms of sub-para (b) of para 4.1.1 of the said Exim Policy. Condition No. (vi) obliges production of evidence so as to prove discharge of export obligation to the satisfaction of the authority mentioned therein, within the period of 30 days of the expiry of the period allowed for fulfillment of export obligation or within such extended period as the authority may allow. Condition No. (vii) says that the licence and the materials shall not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese licencees other than advance licence for deemed exports are exempted from payment of the basic customs duty, surcharge etc. The licences are issued and to the categories of persons mentioned in para 7.3(i) and (ii). They shall and/or materials imported thereunder shall not be transferable even after completion of export obligation. However, in exceptional cases, the materials may be allowed to be transferred on merits by ALC. 66 Chapter 7 of a prior Exemption Policy 1997-2002 speaks of transferability. It permits transferability after completion of the export obligation and endorsement of the transferability by the licencing authority. Notwithstanding this, namely, para 7.19(1), by para 7.19(b), it is clarified that advance licence with actual user condition under para 7.4(i) and/or material imported against it shall not be transferred, sold or otherwise disposed of by the licence holder in any circumstances and there are other conditions stipulated in para 7.19(b)(ii). 67 Our attention is also invited to the general exemption available in case of material imported against advance licence with actual user condition, as appearing at page 32 of the paper book and the condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, this amendment in the policy was to put the above aspect of the matter beyond doubt. That aspect of the matter is highlighted in the written submissions and then it is submitted that this amendment does not apply to advance licences issued prior to April, 2005. 69 The tribunal has discussed all these aspects and from para 11 of the impugned order. The tribunal notes that the dispute is that the appellant imported Pencillin-G free of Customs duty. During visit to the said unit, no Pencillin-G or goods manufactured from the said Pencillin-G were found in the manufacturing unit. This implied that the goods manufactured out of the said Pencillin-G have been sold in the domestic market. This fact has also not been disputed by the appellant. They also do not dispute that export obligation was yet to be fulfilled. The argument of the appellant was noted and mainly that the Customs notifications relating to advance licence do not require that the duty free imports alone should be used in the resultant export products. The tribunal understood the Revenue's objections not on these lines, but to be that before fulfilling export obligation, the imported duty free materials cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xport Import Policy and relevant customs notifications would mean that the exemption available is to materials imported in to India against an advance licence issued in terms of subparas (a) and (b) of para 4.1.1 of the Export Import Policy. Hence, all the conditions of the export import policy/FTP are applicable for grant of exemption. We do not think that this conclusion of the tribunal is perverse or vitiated by an error apparent on the face of the record. However, we agree with Mr. Shridharan that the amendment noted in para 68 above can be applied to the advance authorisations issued after April, 2005. We modify the order of the Tribunal in that regard and direct reworking of the liability accordingly. 71 As far as the other demand of ₹ 3,70,12,020/- as per Annexures C-1 to C-4 of the demand notice is concerned, there as well, the tribunal noted the detailed submissions of both sides and found that admittedly, the raw material imported was far in excess of the required quantity of the appellant. This fact was not brought to the notice of the licencing authorities. Therefore, they could have issued the licences as per the requirement. Even after duty free importa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay customs duty on the un-utilised value of imported material, along with interest thereon as notified or effect additional exports within the export obligation period. The argument was that the assessee failed to comply with the said provision. It neither paid duty on the un-utilised value of the imported material nor has it effected any additional exports. The detailed arguments of the special counsel appearing for the Revenue, on this point, are noted in paras 23 and 24. Thereafter, in para 25, the tribunal found that it is undisputed that the rawmaterial imported was far in excess of that required by the assessee. This fact was not brought to the notice of the licencing authorities, so that they could have issued the licences as per the actual requirement. Even after the duty free importation, the assessee has not made any additional exports nor paid the customs duty. These details were suppressed and came to the light during investigation. The tribunal agreed with the Revenue that there is a violation of the provisions of the Handbook of Procedures read with FTP. Since exemption is granted to raw materials imported against advance licence or advance authorisation issued in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 78 The Revenue's arguments and which have been reiterated before us are that there is an admission that the imported duty free raw-materials were not used in the manufacture of export product Nimesulide. It was also argued that the request to debit as noted above against some other licences cannot be accepted, as the advance authorisations/licences were granted for specific export orders and namely of Nimesulide. For a particular advance licence, one has to see what inputs were used to execute the export order. Therefore, when the object of the advance licence is for duty free import, then, such belated request cannot be granted. The past practice cannot now be resorted to and the distinguishing feature is pointed out in the Revenue's contention as noted in para 28 of the tribunal's order. Special emphasis was that the two rawmaterials can be imported easily. Their import is free and without any licence. Advance licences/authorisations have been issued only for the purpose of exemption from customs duty and there is, therefore, an obligation to use the imported goods as per the conditions of the notifications for the manufacture of main product and clearance thereof. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inflated. It does not take into account the actual exports and also ignores the issue of clubbing of advance licences, which is pending before the DGFT. To our mind, the calculations as made in para D.3 of the written submissions by the assessee cannot be accepted. We also do not find that such a plea was raised before the tribunal. If the customs duty payable is ₹ 3,97,65,602/-, according to the assessee, then, we do not find any warrant for now urging that since the request before the DGFT noted above is pending, there is an element or component of non cenvatable customs duty of ₹ 1,60,74,569/- and that alone is payable. We do not think that now all such aspects, as are introduced during the course of arguments before us, can be considered. As and when the DGFT grants the request or the CENVAT Credit is admissible, it would be open for the appellants and if permissible in law, to raise an appropriate grievance. We have no doubt in our mind that if law permits, the authorities will definitely take care of these aspects of the matter. 80 For the present, we do not think that any relief can be granted. 81 Mr. Sridharan then submits that the impugned order also upho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, restriction and prohibition, to rely on the free importability of the goods. 86 Before us, it was argued that the case of the present appellant is covered by the judgment and order of this court in the case of Commissioner of Customs vs. National Leather Cloth Manufacturing, reported in 2015 (321) ELT 135. 87 In the case of Weston Components Ltd. (supra), it was held by the Hon'ble Supreme Court that the argument that redemption fine could not be imposed because the goods were no longer in the custody of the respondent authority cannot be accepted. Admittedly, the goods were released on an application made by the assessee and on execution of a bond. Therefore, if subsequently it is found that the import was not valid or that there was irregularity which would entitle the customs authority to confiscate the goods, then, mere fact that the goods were released on the bond being executed would not take away the power of customs authority to levy redemption fine. 88 In the present case, the confiscation has been ordered under sections 111(d) and 111(o) of the Customs Act, 1962. 89 Section 111(d) of the Customs Act, 1962 falls in Chapter XIV titled as Confiscat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d been imported by the appellant Sheshank Sea Foods Pvt. Ltd. under advance licences granted to them under the duty exemption scheme. The argument of the Customs was that the raw-materials had been imported without payment of duty by availing of benefit of Exemption Notification No. 116 of 1988 dated 30th April, 1988. The terms and conditions thereof have been violated by the appellants. The search and seizure operation in this behalf was, therefore, within their powers. 93 The Hon'ble Supreme Court of India, in dealing with such a controversy, held thus:- ..... 3. The said Exemption Notification was issued in exercise of powers conferred by Section 25(1) of the Customs Act and one of the conditions thereof was that the materials exempted thereunder would not be sold, loaned, transferred or disposed of in any other manner . 4. Learned counsel for the appellant submitted that the investigation by the Customs authorities was in respect of alleged violations of the terms of the appellants' advance licences which incorporated the terms of the said Exemption Notification. Only the licensing authority had the jurisdiction to investigate the alleged violations. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, it was open to the Customs authorities to confiscate imported goods under Section 111(o) of the Customs Act. The said communication stated that before Section 111(o) could be attracted there had to be an exemption, subject to a condition, from a prohibition. Where a valid licence has been issued, it is not a case of an exemption from the prohibition. Therefore, if a pos-timportation condition of a licence is contravened, it cannot be said that any condition of exemption is contravened. 7. For the reasons stated above, the Ministry of Law have advised that it may not be possible to take action under Section 111(o) with respect to the conditions of the licence relating to the use of goods after they are cleared from the Customs Charge. 8. Section 111(o) is the sheet-anchor of the respondents' case. It reads thus: 111. confiscation of improperly imported goods, etc. - The following goods brought from a place outside India shall be liable to confiscation - (o) any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this act or any other law for the time being in force, in respect of which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are liable to confiscation. The power of the customs authorities is held to be absolute. In these circumstances, we do not find that the appellants can escape from the judgment in the case of Sheshank Sea Foods Pvt. Ltd. (supra). 95 We do not think that the judgment in the case of National Leather Cloth (supra) can assist the appellants any further. We, therefore, set aside the tribunal's order in part, but uphold the confiscation of the goods to the extent the customs resorted to section 111(o) of the Customs Act, 1962. 96 Then remains the issue of penalty. Two provisions have been invoked for imposition of penalty following confiscation. We are not concerned with section 114 of the Customs Act for that deals with penalty for attempt to export goods improperly etc. We are concerned herewith section 114A, which reads as under:- 114A. Penalty for short-levy or non-levy of duty in certain cases.- Where the duty has not been levied or has not been short-levied or the interest has not been charged or paid or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts, the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to in the first proviso or the fourth proviso shall be adjusted against the total amount due from such person. 97 The argument is that no penalty under section 114A is imposable for non fulfillment of export obligation under the advance authorisation. 98 In dealing with the said contention, the tribunal held that penalty is imposed on the main appellant, namely, the company. The violation and breach of law is highlighted once again in that regard. In para 39 of the tribunal's order, this fact has been dealt with. It is evident that without adverting to section 114A and interpreting it, imposition of penalty has been upheld. Section 114A deals with the penalty for short levy or non levy of duty in certain cases. Where the duty has not been levied or has been short levied or the interest has not been charged or paid or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful misstatement or suppression of facts, the person who is liable to pay the duty or interest, as the case may be, as determined under sub-section (8) of section 28 shall, also be liable to pay penalty equal to the duty or interest so determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is upheld. 100 We are of the view that the tribunal has mixed up these issues. Once the penalty under section 114A is for short levy or non levy of duty in certain cases and a determination thereof is contemplated by section 28, then, unless and until the tribunal came to a conclusion that in the present case the determination followed a finding that there was collusion or wilful misstatement or suppression of facts and the determination is therefore traceable to sub-section (4) of section 28 and not subsection (1) of section 28, it could not have proceeded to uphold the penalty as imposed. 101 We are not taking a hyper-technical view. We do not agree that non-fulfillment of export obligation under advance authorisation is the only reason assigned in the tribunal's order to uphold the imposition of penalty. The imposition of penalty should have been upheld by clearly outlining as to whether that follows the determination of the quantum of duty payable for reasons attributable to the appellant company within the meaning of sub-section (4) of section 28 of the Customs Act, 1962. Thereafter, it should have been held that the determination under sub-section (8) of section 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion for such act. 102 The only argument canvassed is failure to fulfill export obligation will not attract the penalty under section 112 of the Customs Act, 1962. We do not find this argument to be sound for it is not some business forecast which had gone haywire or is upset, but is a clear act attributable within the meaning of clause (a) of section 112 of the Customs Act, 1962. That in the present case has been amply clarified. There was a confiscation of goods and which confiscation is traceable to clause (o) of section 111 of the Customs Act, 1962. That attracts the penalty under clause (a) of section 112 of the Customs Act, 1962. In the present case, we have upheld the act of confiscation of goods traceable to the above clause. Therefore, in relation to any goods, if any act or omission has been committed which would render such goods liable to confiscation, then, this penalty can be imposed. That has been imposed by specifically referring to the direct act of the Executive Director Mr. Mehul Jayant Parikh, Mr. Yogesh N. Parikh, Director of Finance and Mr. Suresh Mandhana, General Manager, Supply Chain and Mr. Anwar Husain Patel, General Manager, Logistic. The penalty as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scharge of the export obligation while for a manufacturer exporter there is no such stipulation. The only stipulation qua a manufacturer exporter is that the said licence and materials should not be transferred or sold. The tribunal itself clarified that this is not the case of the Revenue. That condition has not been violated. We do not think that these observations and the one heavily relied upon in para 11.3 can carry the case further. The tribunal may not have agreed with the order passed by it in the case of Unimark Remedies Ltd. (in the subject appeal) and for reasons assigned by it in para 11.3, yet, once we have rendered our independent opinion and by analysing all the relevant documents, including the notification, then, this disagreement or divergence in the tribunal's views need not detain us. 107 Then, Mr. Sridharan relied upon the view taken in the case of Arkema Catalyst India Pvt. Ltd. vs. Union of India, reported in 2012 (276) ELT 206. That was a case where the petitioner before the High Court imported raw-materials, which were to be used in the manufacture of goods and which had to be exported to avail duty exemption. There was never a dispute that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India was partially allowed by the tribunal. The concession noted in para 8 of the' order of the Hon'ble Supreme Court of India reveals that there was never any dispute raised about failure to fulfill the export obligation. Therefore, the exemption could not have been claimed. Thus, the liability to pay duty was conceded. The concession was that basic customs duty and special customs duty as well as special additional duty was payable. The argument was that anti-dumping duty was not payable, no interest is chargeable, inasmuch as the bond that was furnished under Notification No. 30 of 1997 did not stipulate that in the event of default, interest would become payable. The further reasons for questioning that part of the findings of the tribunal are found in the submissions of the appellant's learned advocate. It is for these reasons that the Hon'ble Supreme Court of India, while agreeing with the earlier judgments, came to the conclusion that even the liability to pay anti dumping duty would arise, it rejected the first argument of the appellant's advocate, but directed that the anti-dumping duty has to be calculated at the rate specified in Notification No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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