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TMI Blog2009 (4) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... order passed by the CESTAT in final order No.107/03 dated 16.12.2003. At the time of admitting this appeal, the following questions of law were framed for consideration: 1. Whether in the circumstances of the case, the violation of conditions of the Advance Licence r/w customs Notification No.48/99 is not an offence committed under section 111(o) of the Customs Act 1962 and whether goods are not liable for confiscation. 2. Whether the second respondent is not lilable to pay penalty under section 112(a) of the Customs Act 1962. 3. The relevant facts of the case is as hereunder: The second respondent had imported four consignment of Copper Scrap totally weighing 86.963 Mt.Tonns in four containers and filed four Bill of Entries on 20.11.2001. They availed the benefit of the Notification No.48/99- CUS dated 29.4.1999, which permitted import of goods free from Duty of Customs. The said notification pertains to an exemption in respect of import against Annual Advance Licence with Actual User Condition. 4. The allegation against the second respondent was that they were not entitled to the benefit of notification No.48/99 and therefore were liable for payment of duty for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be non existent and the building was never used for any manufacture of copper items and that without a factory and without an ancillary, the importer cannot fulfill the conditions of the said Advance Licence. The Adjudicating Authority also made a note about past consignment which was imported about 1 = years prior to the present importation and that no evidence has been produced by the Importer to prove that they have made any export of the items manufactured out of the imported copper scrap. The authority ultimately held that the impossibility of performance of the licence condition renders the licence null and void and renders the declaration in the bill of entry as mis-declaration and ordered for confiscation of the goods under section 110(o) of the Act and liable for penalty under section 112(a) of the Act. The Adjudicating Authority had given an option to the Importer to redeem the goods on payment of fine of Rs.20 lakhs, demanded a duty of Rs.30,63,748/- under section 28(1) of the Act and impose a penalty of Rs.10 lakhs on the second respondent under Section 112(a) of the Act. 9. The second respondent filed an appeal before the CESSTAT against the order of the adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms would submit that the second respondent having violated the conditions of the Advance Licence, is not entitled to claim exemption of duty as per provisions of the Customs Notification No.48/99. The learned Senior Standing Counsel took us through the various conditions contained in the Notification No.48/99 and stated that the exemption has been granted based on stringent conditions laid down under the notification and the export obligation has to be discharged within the period specified or within such extended period. It was further submitted that the second respondent has declared themselves as manufacturer exporter and the investigation conducted by the Department reveals that there is no manufacturing unit and therefore, they are not entitled to claim the exemption under notification 48/99. That the terms and conditions of an exemption notification are subject to strict interpretation. 13. It was the further contented that the liability to manufacture and export goods from the materials imported is both statutory and contractual, the statutory obligation is enforced by the provisions of the various sections under the Customs Act, the Rules framed thereunder and the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to as the said certificate), issued by the Licensing Authority in the form specified in the Schedule annexed to this notification, in respect of the value, quantity, description, quality and technical characteristics. vi. that the export obligation is discharged within the period specified in the said certificate or within such extended period as may be granted by the Licensing Authority by exporting resultant products manufactured in India which are specified in Part E of the said certificate (hereinafter referred to as resultant products). viii. exempt materials shall not be disposed of or utilized in any manner except for utilization in discharge of export obligation or for replenishment of such materials and the materials so replenished shall not be sold or transferred to any other person. 16. The importer shall also execute a declaration to the effect that the information furnished in the statement for obtaining the Licence is correct. A careful reading of the above referred notification establishes that the same is an Actual User Licence, were the Importer is bound to discharge the import obligation within the time prescribed. There is also a bar for disposal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the 445.162 m. tones of copper scrap imported duty free during the earlier period between September 2001 to November 2001. However the show cause notice was restricted in respect of 86.963 m. tones covered under 4 Bills of Entry, with a further rider that show cause notice for the past clearances will be issued separately. 19. It is seen from the reply dated 10.3.2003 given by the 2nd Respondent, that there is no denial regarding the allegation that they have no manufacturing facility. The 2nd Respondent stated that they had a valid licence and that before the expiry of the period of licence the same has been seized and the goods have been seized on the apprehension that they will not be utilized and that the same cannot be a ground for confiscation under Section 111 (o) of the Customs Act. Thus it is safe to conclude that the declaration given by the 2nd Respondent that they are Manufacturer-Exporter for availing the Annual Advance Licence with Actual User Condition is a false declaration. 20. With this factual background, the point to be considered would be as to whether the 2nd Respondent would still be entitled to the benefit of exemption on the reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the licence non-est with the result that such goods should be deemed to have been imported without licence so as to attract Section 167(8) of the Sea Customs Act and it is only voidable but otherwise such a licence is good. The Learned Counsel for the Respondent also placed reliance on the Judgments of the High Court of Bombay reported in 1988 (36) ELT 52 (Bombay) and 1990 (46) ELT 527 (Bombay) wherein the Judgment of the Hon'ble Supreme Court in East India Commercial Company case has been followed. The Learned Counsel for the Respondent placed reliance on the Judgment of the Hon'ble Supreme Court in Union of India vs. Sampath Raj Dugar reported in 1992 (58) ELT 163 (SC) were the Hon'ble Supreme Court held as follows. "21. the next question is whether the import of the said goods was contrary to law in any manner and whether the said goods are liable to be confiscated under the Customs Act. The only provisions relied upon by the appellants are Clauses (d) and (o) in Section 111 of the Customs Act which we have set out hereinabove. In our opinion none of these clauses are attracted in the present case. Clause (d) contemplates an import which is contrary to any prohibition impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in the said Writ appeals contended that the Learned Single Judge is not correct in permitting the clearance of the goods on the conditions stipulated in the order and that the Learned Single Judge on the facts and circumstances of the present case ought not to have ordered the release of the goods pending investigation. The Learned Counsel further contended that since the goods namely, Staple Pins were sought to be cleared without payment of duty relying on the exemption Notification 203/92, and the conditions to be satisfied for claiming exemption from payment of duty under Notification 203/92, have not been observed, the goods in question become liable for confiscation under Section 111(o) of the Act and therefore, such goods cannot be released to the Petitioner pending adjudication proceedings. The learned counsel also contended that even assuming that the importer had not participated in the illegal acts with regard to the falsification of the licence, the confiscation being an action in rem, would render the goods liable for confiscation in whosesoever hands and therefore, the release of such goods to the importer cannot be permitted. In support of the said contention, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve list or in the sensitive list of imports. For the goods in question there are no restrictions for import and they can be imported lawfully without licence but subject to payment of duty. In these circumstances, it has to be held that the goods in question are not liable to confiscation under Section 111 of the Act and to such a case, principles laid down in Collector of Customs, Madras and others vs. D.Bhoormull (AIR 1974 S.C. 859 - 1983 (13) ELT 1546 (S.C.) will have no application. Therefore, we see no merit in Writ Appeals 353 and 354 of 1993 filed by the Department also. 24. The next decision relied on by the Learned Counsel for the Respondent is in the case of Titan Medical System Case which has been referred above. In the said decision the Hon'ble Supreme Court held that once an Advance Licence was issued and not questioned by the Licensing Authority the Customs Authority cannot refuse exemption on an allegation that there was misrepresentation. The Learned Counsel placed reliance upon a Division Bench Judgment of this Court in 2004 (177) ELT 57 (Madras) and is Lordship Mr. Justice V.S. Sirpurkar (As he then was), delivering the Judgment on behalf of the Division Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 111 (o) states that when goods are exempted from Customs Duty subject to a condition and the condition is not observed, the goods are liable to confiscation. The case of the Respondent is that the goods imported by the Appellants, which availed of the said exemption subject to the condition that they would not be sold, loaned, transferred are disposed of in any other manner, had been disposed of by the Appellants. The Customs Authorities, therefore, clearly had the power to take action under the provisions of Section 111(o). 10. We do not find in the provisions of Import and Export policy or the hand book of procedure issued by the Ministry of Commerce, Government of India, anything that even remotely suggests that the aforesaid power of the Customs Authorities had been taken away or abridged or that an investigation in to such alleged breach could be conducted only by the licensing authority. That the licensing authority is empowered [to] conduct such an investigation does not by itself preclude the Customs Authorities from doing so. 11. The communication of the Central Board of Excise and Customs, dated 13th May, 1969 refers to the breach of the condition of a licence and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich was subsequently withdrawn. At that stage of the matter the DRI had issued the show cause notice dated 6.3.2003, whch is subject mater of the present case. 29. Next, coming to decision of the Hon'ble Supreme Court in UOI vs. Sampat Raj Dugar , relied on by the Respondent, it is to be seen that the issue which came up for consideration was regarding the ownership of the goods in question and the import of Section 111(o) of the Customs Act, and the further question as to effect of subsequent cancellation of license. Therefore we find that the decision of the Judgment of the Apex Court in Sampat Raj Dugar would not be applicable to the facts of the present case. 30. Now coming to the Judgment of the Division Bench of this Court in 2004 (177) ELT 57 (Mad.) we find the Judgment would apply to the facts of the present case in its entirety. In the said case the Writ Petitions were filed challenging the summons issued under Section 108 of the Customs Act. The Learned Single Judge of this Court dismissed the Writ Petition as against which the appeals were filed before the Division Bench. The Appellants placed reliance on the Judgment of the Hon'ble Supreme Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned, a similar provision regarding the export obligation also appears there. However, there appears to be a specific clause added., i.e. clause (vii), which is to the following effect: "(vii) exempt materials shall not be disposed of or utilized in any manner except for utilization in discharge of export obligation nor for replenishment of such materials and the materials so replenished shall not be sold or transferred to any other person". Learned Senior Counsel appearing on behalf of the Department very heavily relies on this clause and says that it is in this direction that the enquiry has to be made. We agree with the Learned Senior Counsel that there can be a scope of enquire and the summons issued under Section 108 of the Customs Act for effecting the enquiry such as these cannot be bad for the lack of jurisdiction. 31. We are entirely in agreement with the law laid down by the Division Bench of this Court as stated above, which has followed the decision of the Hon'ble Supreme Court in the case of SHESHANK SEA FOODS and we are inclined to accept the contention of the Appellant Department. Admittedly in the present case the misrepresentation made by the importer has not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... securing an advance license with Actual User Condition. The fact that the time within which he had to discharge his obligation has not come to an end, does not advance the case of the importer. The basis for his discharge of the export obligation is existence of a factory. The basis does not exist, the address given is a false address, so the whole edifice falls. The fact that the importer could affect his export obligation through job workers and the existence of a factory is not a sine quo non, does not advance his case either. The importer claimed he had a factory when he had none. So, whether he could have completed the manufacture otherwise hardly matters. For the purpose of obtaining such license with Actual User Condition, it is mandatory that the importer should be a Manufacturer - Exporter. The importer made a false declaration of being one. Having made such a false declaration and obtained a license, the importer cannot be permitted to now say that the imported material is freely importable under OGL and therefore should be allowed to be clear on merit rate. The Tribunal fell in error in permitting the clearance of the goods on merit rate. By doing so the Tribunal has vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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