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TMI Blog2024 (4) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... ustoms, Import Bond Department, Office of the Commissioner of Customs (Import), New Custom House, Ballard Estate, Mumbai under Section 58 of the Customs Act, 1962 for the storage of warehousing the imported goods/ equipment/ parts/ components/ Spares/ raw materials/ consumables for Boats/Vessels without payment of customs duties/ import duty on the first importation thereof and the said license is duly renewed from time to time. Similarly, the appellants are also holding a private bonded warehouse for manufacturing of 'High-Speed FRP Boats' under Section 65 ibid, in terms of Manufacture and Other Operations in Warehouse Regulations, 1966, as amended which is valid till the license issued under Section 58 for the Premises is in effect. 2.2 On the basis of information received from the Commissioner of Customs (Import), New Custom House vide Reference dated 28.07.2021, that the appellants importer instead of filing ex-bond Bills of Entry (B/E) for the warehoused raw materials/goods at the port of import i.e., ACC, Sahar have filed manual ex-bond Bills of Entry for the clearance of Boats without paying the Customs Duty on the raw materials used for making the Boats, at New Custom Hous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t legally sustainable. In support of their stand he submitted the following decisions of the Hon'ble Supreme Court in the cases below: (i) Aban Loyd Chiles Offshore Ltd., Vs. Commissioner of Customs, Maharashtra reported in 2006 (200) E.L.T. 370 (S.C.) (ii) Anand Nishikawa Co. Ltd. Vs. Commissioner of Central Excise, Meerut reported in 2005 (188) E.L.T. 149 (S.C.) (iii) Fedders Lloyd Corporation Pvt. Ltd. Vs. Collector of Central Excise, New Delhi reported in 2002 (149) E.L.T. 1426 (S.C.) (iv) Uniworth Textiles Ltd. Vs. Commissioner of Central Excise, Raipur reported in 2013 (288) E.L.T. 161 (S.C.) 2.2 Learned Advocate further submits on the merits of the case, that the appellants have been importing the subject goods, for use in manufacture of Boats under the legal provisions of Section 65 of the Customs Act, 1962 without payment of duty, by filing the B/Es for into bond clearance duly following the prescribed procedure. These include submission of application to the Assistant Commissioner of Customs, Bond Department, ACC, Sahar for clearance of imported goods along with space availability certificate in their warehouse situated at Ghodbunder Road, Thane; execution of Gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (AR) appearing for the Revenue reiterated the findings recorded by the learned Commissioner of Customs (Import), ACC in the impugned order dated 10.01.2023 and stated that the appellants have been importing inputs for manufacture of Boats by availing the procedure to be followed in the case of manufacturing operations undertaken in private bonded warehouse under section 65 of the Customs Act, 1962. However, they failed to fulfil the requirements of Manufacture and other Operations in Warehouse Regulations, 1966 and the Regulations 8 & 11 of Warehouse (Custody and Handling of Goods) Regulations, 2016 and the CBIC instructions issued by Circular No. 38/2018-Customs dated 18.10.2018, No. 22/2016-Customs dated 31.05.2016. Thus in respect of raw materials cleared duty-free used for manufacture final products contained in 10 B/Es, on which the customs duty have been confirmed along with interest, imposition of penalty and offering redemption fine on confiscation of goods, is sustainable. 3.2 It was further submitted by learned AR, that on limitation, the demand of duty under extended period is sustainable as the imported goods were under self-assessment and the notification benefit was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, raw materials etc., makes it liable for confiscation under Section 111(m) ibid and consequently the appellants importer by their acts of omission and commission also become liable for penalty under Section 112 (a) and/or (b) ibid. 6.1 The learned Commissioner of Customs in the impugned order had given a finding on the issues at (i) to (iv) above, as follows: "22.2 The question whether there is a distinction between the clearances under Section 65 of the Customs Act, 1962 and those under Section 68 ibid needs to be examined. It is seen that importer has cleared his finished products from the warehouse. He has a license for warehouse too under Section 58. However, in terms of Board's circular No. 38/2018-Customs dated 18.10.2018 relating to "Procedure to be followed in cases of manufacturing or other operations undertaken in bonded warehouse under section 65 the Customs Act", it has been categorically mentioned at para 6 as under: "6. To the extent that the resultant product whether emerging out of manufacturing or other operations in the warehouse is cleared for domestic consumption, such a transaction squarely falls within the ambit of "supply" under Section 7 of the Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid provisions. xx xx xx xx 25. 2 .....In view of the established Regulations it is clear that the importer is liable for payment of import duty on raw materials used for the manufacture of the finished product. xx xx xx xx 28. In the instant case, it is evident that the vital facts have been mis-stated with respect to the particulars of the impugned goods and therefore, I find that the importer has violated the provisions of Customs Act, 1962 and has failed to ensure that his declaration I relation to the impugned goods is true and correct. Having violated the relevant provisions, the importer has rendered the impugned goods liable for confiscation under Section 111(m) of the Customs Act, 1962. Therefore, I hold that the importer by his act of mis-declaration/mis-classification have rendered the impugned goods valued at Rs. 23,09,22,239/- (as per Annexure-B to the SCN) liable for confiscation in terms of the provisions of Section 111(m) of the Customs Act, 1962. 29...... Thus, taking support from the aforesaid guiding judgement, I find that the fact that the impugned goods are not available for confiscation does not prevent me to impose redemption fine. xx xx xx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that he is unable for want of full information to furnish all the particulars of the goods required under this sub-section, the proper officer may, pending the production of such information, permit him, previous to the entry thereof (a) to examine the goods in the presence of an officer of customs, or (b) to deposit the goods in a public warehouse appointed under section 57 without warehousing the same. (2) Save as otherwise permitted by the proper officer, a bill of entry shall include all the goods mentioned in the bill of lading or other receipt given by the carrier to the consignor. (3) The importer shall present the bill of entry under sub-section (1) before the end of the day (including holidays) preceding the day on which the aircraft or vessel or vehicle carrying the goods arrives at a customs station at which such goods are to be cleared for home consumption or warehousing: xx xx xx xx (4) The importer while presenting a bill of entry shall make and subscribe to a declaration as to the truth of the contents of such bill of entry and shall, in support of such declaration, produce to the proper officer the invoice, if any, 3[and such other documents relating to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the goods or any part thereof are transferred to another person, the transferee shall execute a bond in the manner specified in sub-section (1) or sub-section (2) and furnish security as specified under sub-section (3). Section 60. Permission for removal of goods for deposit in warehouse. (1) When the provisions of section 59 have been complied with in respect of any goods, the proper officer may make an order permitting removal of the goods from a customs station for the purpose of deposit in a warehouse. 1[Provided that such order may also be made electronically through the customs automated system on the basis of risk evaluation through appropriate selection criteria.] (2) Where an order is made under sub-section (1), the goods shall be deposited in a warehouse in such manner as may be prescribed. Section 64. Owner's right to deal with warehoused goods. - The owner of any warehoused goods may, after warehousing the same, - (a) inspect the goods; (b) deal with their containers in such manner as may be necessary to prevent loss or deterioration or damage to the goods; (c) sort the goods; or (d) show the goods for sale. Section 65. Manufacture and othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re an order for clearance of goods for home consumption has been made in respect of such goods, relinquish his title to the goods upon payment of penalties that may be payable in respect of the goods and upon such relinquishment, he shall not be liable to pay duty thereon: Provided also that the owner of any such warehoused goods shall not be allowed to relinquish his title to such goods regarding which an offence appears to have been committed under this Act or any other law for the time being in force." xxx xxx xxx xxx (3) in column (3), the standard unit of quantity is specified for each tariff item to facilitate the collection, comparison and analysis of trade statistics." Section 15. Date for determination of rate of duty and tariff valuation of imported goods. - (1) The rate of duty and tariff valuation, if any, applicable to any imported goods, shall be the rate and valuation in force, - (a) in the case of goods entered for home consumption under section 46, on the date on which a bill of entry in respect of such goods is presented under that section; (b) in the case of goods cleared from a warehouse under section 68, on the date on which a bill of entry for ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lised for an offence under the Act, the Central Excise Act, 1944 (1 of 1944) or Chapter V of the Finance Act, 1994 (32 of 1994 ); (d) he is of unsound mind and stands so declared by a competent Court; or (e) the Principal Commissioner of Customs or the Commissioner of Customs, as the case may be, is satisfied that- (i) the site or building of the proposed private warehouse is not suitable for secure storage of dutiable goods; (ii) the site or building of the proposed private warehouse is not suitable for general supervision by officers of customs; (iii) bankruptcy proceedings are pending against the applicant; or (iv) criminal proceedings are pending against the applicant and the offences involved are of such nature that he is not fit person for grant of licence. Manufacture and Other Operations in Warehouse (no. 2) Regulations, 2019. Regulation 9. Conditions for transport of goods. - (1) Where the goods are transported from the customs station of import to a warehouse or from one warehouse to another warehouse or from the warehouse to a customs station for export, the load compartment of the means of transport shall be securely sealed with a one-time-lock: Prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer authorized under the Act. (3) A licensee shall also preserve updated digital copies of the records specified under sub-regulation (1) at a place other than the warehouse to prevent loss of records due to natural calamities, fire, theft, skillful pilferage or computer malfunction. (4) A licensee shall file with the bond officer a monthly return of the receipt, storage, operations and removal of the goods in the warehouse, within ten days after the close of the month to which such return relates. 8. From the plain reading of above legal provisions, it transpires that in order to determine the appropriate duties of customs payable on any imported goods, an importer is required to file a Bill of Entry (B/E) giving all required particulars of such imported goods for assessment to duty and depending upon whether such imported goods are required for clearance towards warehousing or home consumption, such of the legal provisions governing warehousing or customs clearance for home consumption would apply on such goods. 8.1. From the facts of the case, as provided in Annexure-A & B to the SCN dated 14.01.2022, the imported raw materials have been brought into the country by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 311017 15.04.2017 9340609 17.04.2017 9526098 02.05.2017 9939005 02.06.2017 9984376 06.06.2017 2142208 19.06.2017 2214193 23.06.2017 2287951 30.06.2017 2347321 07.07.2017 2406665 11.07.2017 2479423 17.07.2017 2480179 17.07.2017 2663944 31.07.2017 2905932 19.08.2017 2780597 09.08.2017 3407046 27.09.2017 3565180 10.10.2017 3574939 11.10.2017 3722882 23.10.2017 3942857 11.10.2017 3 8350720 28.01.2017 107146 21.02.2019 39,58,158 8343366 27.01.2017 8610969 20.02.2017 8658958 23.02.2017 9984376 06.06.2017 2905932 19.08.2017 3574939 11.10.2017 4050244 18.11.2017 4335784 11.12.2017 4716569 18.01.2018 4948328 25.01.2018 4975950 29.01.2018 5028816 01.02.2018 5128086 08.02.2018 5041533 03.02.2018 5172079 12.02.2018 5289641 20.02.2018 5351273 26.02.2018 5357594 26.02.2018 5443436 05.03.2018 5443995 05.03.2018 &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018 had requested the Assistant Commissioner of Customs, Bond Department, ACC, Sahar for clearance of imported goods under Airway Bill No. 23569014061 for which they had filed the B/E No. 5443436 dated 05.03.2018 and have executed the triple duty bond along with space availability certificate Ref No. 68/17-18 dated 05.03.2018 obtained from the Superintendent of Customs/ Bond Officer, New Custom House, Mumbai indicating that there is sufficient space in their private bonded warehouse under Section 58 & 65 ibid, for storage and manufacture operation of the goods covered under Invoice No. SO 1711066P dated 22.11.2017 of the said airway bill. Accordingly, the goods have been assessed for the applicable import duties and the said duties were debited in the General Bond for Rs. 14,37,751/- (triple amount of duty); Transit bond for Rs. 4,79,250/- (total duty) and for transit insurance Rs. 4,79,250/- for permitting deposit in warehouse without payment of duty under Section 60 ibid and for the transfer of the imported goods in terms of Section 67 ibid, for movement from one port premises to the bonded warehouse. We also find that upon arrival of the said imported goods a re-warehousing cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al product i.e., Boats classifiable under CTI 8906 9000 from the appellants private bonded warehouse have been duly assessed and after payment of duty as determined by the Customs authorities of New Custom House, Mumbai, these goods have been allowed for home consumption clearance. It is also not the case of the Revenue, that there was any short payment of duty that is being demanded in respect of final products cleared from the appellants' private bonded warehouse. 8.5 In the case before us, the contending issue connected with the above is that the appellant importer has not filed ex-bond bills of entry with the port of import i.e., ACC, Sahar and had wrongly instead filed the ex-bond bills of entry at New Custom House, Mumbai for clearance of final products. In this regard, we find that as explained in the previous paragraphs at 8.3 & 8.4, all procedure and assessment of imported goods have been duly followed by the appellants and in terms of Section 68 ibid, duties of customs applicable on the clearance of final products manufactured from the imported raw materials in the private bonded warehouse, would be applicable at the time clearance for home consumption of such final prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied heavily on the precedent Tribunal decisions in the case of Relish Foods (Pvt.) Ltd. v. Collector of Customs, reported in 1990 (45) E.L.T. 622 (Tribunal) and M.K. Fisheries v. Collector of Customs, reported in 1989 (41) E.L.T. 408 (Tribunal). However, it is noted that both those decisions were given in the context of jurisdiction to raise demand in respect of and consequent upon misuse of materials imported duty free against Advance Licence under the Duty Exemption Entitlement Scheme (DEEC) covered by Customs Exemption Notification No. 117/78 conditional upon proof of utilisation of the imported raw material in the export product. Under that Scheme the material is imported duty free on the strength of Duty Exemption Entitlement Certificate issued along with the Advance Licence in terms of the exemption notification. The DEEC indicates separately the quantity and description of material allowed to be imported under exemption and also the quantity and description of the export product which is to be produced out of the imported exempted material which is to be exported in fulfilment of the export obligation. In such a scheme the goods are cleared on filing Bill of Entry for Home ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xecution of warehousing bond, is not conclusive. Para-6 of the Madras High Court decision reads as follows: - * * * * * * * * * * * Therefore, the reservations expressed by the referring Bench in the present case, about the aptness of the Ferro Alloys Corporation Ltd. decision as regards the jurisdiction in a situation under the warehousing provisions of the Customs Act, 1962, are well-founded. For the reasons discussed above, it has to be held that in the circumstances of this case the jurisdiction for raising demand for short levy will be with the proper officer having jurisdiction over the E.O.U. and not the Custom House where the goods were assessed on an into bond Bill of Entry for the purpose of being warehoused." 8.7 We also find that similar views have been expressed by the Tribunal in the Final Order dated 08.01.2008 in the case of Indian Oil Corporation Ltd Vs. Commissioner of Customs, Jamnagar - 2008 (225) E.L.T. 226 (Tri. Ahmd.) on this issue. The relevant paragraph of the above order of the Tribunal is extracted below: "6. We have carefully considered the submissions. It is not disputed that the entire goods imported by the appellant were warehoused by filing In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-section (i), vide number G.S.R. 185(E), dated the 17th March, 2012, except as respects things done or omitted to be done before such supersession, the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the goods of the description specified in column (3) of the Table below or column (3) of the said Table read with the relevant List appended hereto, as the case may be, and falling within the Chapter, heading, sub-heading or tariff item of the First Schedule to the said Customs Tariff Act, as are specified in the corresponding entry in column (2) of the said Table, when imported into India, - (a) from so much of the duty of customs leviable thereon under the said First Schedule as is in excess of the amount calculated at the standard rate specified in the corresponding entry in column (4) of the said Table; and (b) from so much of integrated tax leviable thereon under sub-section (7) of section 3 of said Customs Tariff Act, read with section 5 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017) as is in excess of the amount calculated at the rate specified in the corresponding entry in column (5) of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssional Rate of Duty) Rules, 2017], giving details of such goods and also undertake to utilize the same for manufacture of goods falling under heading/tariff item 8901, 8902, 8904 00 00, 8905 (except tariff item 8905 20 00) or 8906; and (ii) In the event of failure to use such goods for the specified purpose, the unit shall pay on demand, an amount equal to the duty payable on such goods but for the exemption under this notification: 6[Provided that nothing contained in this Sl. No. shall have effect after the 31st March, 2025.] "Annexure Condition No. Condition 9. If the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017. xx xxxxxxxx 85. If any of the goods manufactured from the imported raw materials and parts are subsequently intended to be broken up, a fresh bill of entry in respect of such manufactured goods shall be presented to the Commissioner of Customs and thereupon these goods shall be chargeable with the duty which would be payable as if such manufactured goods had been imported and entered for home consumption, under section 46 of the Customs Act, 1962 (52 of 1962), on the date of the presentatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e private bonded warehouse, the appellants have duly followed the procedure by complying with the warehousing provisions under the Customs Act, 1962. The appellant importer being a private bonded warehouse licensed under section 58 and 65 ibid, there was no requirement to pay import duty on the materials taken into such warehouse from the port of import under customs custody, for the purpose of authorised operations within the private bonded warehouse. Further, considering that the imported goods meant for warehousing has been assessed to duty by the Customs officers at the port of import, it cannot be said that the exemption available under S. No. 559, under which the appellant had followed the proper procedure for warehousing the goods, can be denied to the appellants at this distant stage, as the exemption entry under S. No. 558 have been continued under entry at S. No. 559, even though it was wrongly indicated by the appellants and the Customs officers assessing the goods had also not raised any objection to the appellants' claim. Thus, we find that in the present case, the raw materials/inputs used in the manufacture of 'boats' being a specified product duly following the proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under any law for the time being in force as an addition to, and in the same manner as, a duty of customs, but does not include the tax referred to in sub-section (7) or the cess referred to in sub-section (9). (8A) Where the goods deposited in a warehouse under the provisions of the Customs Act, 1962 (52 of 1962) are sold to any person before clearance for home consumption or export under the said Act, the value of such goods for the purpose of calculating the integrated tax under sub-section (7) shall be,- (a) where the whole of the goods are sold, the value determined under sub-section (8) or the transaction value of such goods, whichever is higher; or (b) where any part of the goods is sold, the proportionate value of such goods as determined under sub-section (8) or the transaction value of such goods, whichever is higher: Provided that where the whole of the warehoused goods or any part thereof are sold more than once before such clearance for home consumption or export, the transaction value of the last such transaction shall be the transaction value for the purposes of clause (a) or clause (b): Provided further that in respect of warehoused goods which remain uns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d more than once before such clearance for home consumption or export, the transaction value of the last of such transaction shall be the transaction value for the purposes of clause (a) or clause (b): Provided further that in respect of warehoused goods which remain unsold, the value or the proportionate value, as the case may be, of such goods shall be determined in accordance with the provisions of sub-section (10). Explanation.-For the purposes of this sub-section, the expression "transaction value", in relation to warehoused goods, means the amount paid or payable as consideration for the sale of such goods. (11) The duty or tax or cess, as the case may be, chargeable under this section shall be in addition to any other duty or tax or cess, as the case may be, imposed under this Act or under any other law for the time being in force. (12) The provisions of the Customs Act, 1962 (52 of 1962) and the rules and regulations made thereunder, including those relating to drawbacks, refunds and exemption from duties shall, so far as may be, apply to the duty or tax or cess, as the case may be, chargeable under this section as they apply in relation to the duties leviable under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompensation cess, if any. As regards import duties payable on the imported goods contained in so much of the resultant products are concerned, same shall be paid at the time of supply of the resultant product from the warehouse for which the licensee shall have to file an ex-bond Bill of entry and such transactions shall be duly reflected in the accounts prescribed under Annexure B. As per MOOWR, 2019, the applicant shall also inform the input-output norms, wherever considered necessary, for raw materials and final products and shall also inform the revised input-output norms in case of change therein. 9. The waste generated during the course of manufacture of the resultant product may be cleared for home consumption as per clause (b) to sub-section (2) of section 65 of the Customs Act on payment of applicable duties of customs and GST." As we had discussed the issue of levy of GST on imported raw materials/inputs used in the manufacture of final products under bonded warehouse under the Customs control, in detail at paragraphs at 9.3 and 9.4, we do not find any legal basis for the conclusion arrived at in the impugned order on the basis of aforesaid CBIC's clarification, as we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rehouse is the 'proper officer' for the purpose of Section 68 ibid and it is only on his permission, such final products have been cleared for home consumption. Thus, we do not find it necessary to go into these details, as these are not the subject matter of the case before us. It is for the jurisdictional customs authorities to decide on whether the finished goods, when removed for home consumption have been paid with appropriate duty and such clearances are in compliance with the various legal provisions of warehousing under Chapter IX of the Customs Act, 1962. 10. As regards the disputed issue at (iv) in respect of confiscation of imported raw materials under Section 111(m) ibid and imposition of consequent penalty on the appellants importer for their acts of omission and commission under Section 112 (a) and/or (b) ibid, having discussed the issue of compliance to the provisions of warehousing in respect of imported goods and in manufacture of final products by the appellants in the customs bonded warehouse in detail under paragraphs 8.1 to 8.5, we do not find any basis on which any violation of omission or commission in the entry made for import of goods could be fastened on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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