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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 ..... 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 - 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 appellants by filing various Bills of Entry for warehousing and the same were assessed to duty by the Customs officers at the port of import i.e., Air Cargo Complex, Sahar and seaport of Nhava Sheva. Thus, the appellants had complied with the requirements of Section 46 ibid by filing an entry on importation of the goods into the country, and there is no case for any non-compliance in this regard. It is also found that the finished goods manufactured out of such raw materials/ inputs imported as explained above, have also been removed from the private bonded warehouse by the appellants on payment of applicable import duties on the date of presentation of Bill of Entry in terms of Section 15(1)(b) ibid, by claiming exemption from b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc. and warehoused them without payment of duty. Manufacture and other operations in a bonded warehouse is only a duty deferment scheme and the applicable duties is payable at time of clearance of final products - The capital goods can be cleared for home consumption as per Section 68 read with Section 61 of the Customs Act on payment of applicable duty without interest. The capital goods can also be exported after use, without payment of duty as per Section 69 of the Customs Act. In the present case, the adjudged demands is not in relation to the demand of import duty in respect of final products cleared from the warehouse. The imported raw materials/inputs used in the manufacture of final products under a Customs bonded warehouse in terms of Section 58 and 65 of the Customs Act, 1962 are not liable for payment of import duties at the time of clearance of such final products manufactured in the said customs bonded warehouse - the impugned order dated 10.01.2023 passed by the learned Commissioner of Customs (Import), Air Cargo Complex (ACC), Sahar, Mumbai by confirming the adjudged demands is not sustainable and thus, the same is set aside. The appeals are allowed in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand of customs duty amounting to Rs. 4,51,52,580/- along with applicable interest in respect of raw materials used for manufacturing the Boats which are imported by the warehousing bills of entry under Section 28(4) of the Customs Act, 1962 and for confiscation of such raw materials for violation of section 111(m) ibid, besides imposition of penalties under Sections 112(a) or 112(b), 114A, 114AA ibid. After providing personal hearing to the appellants on 03.11.2022, the learned Commissioner of Customs had adjudicated the case by passing the impugned Order dated 10.01.2023, wherein he confirmed the adjudged demands along with interest as proposed in the SCN, besides imposition of 100% mandatory penalty under section 114A ibid. Further, he confiscated the raw materials imported under various bills of entry which are being utilized for manufacture of Boats totally valued at Rs. 23,09,22,239/- and offered the same to be released on payment of redemption fine of Rs. 2,30,00,000/- under Section 125(1) ibid. Being aggrieved with the above impugned order, the appellants have filed this appeal before the Tribunal. 2.1 Learned Advocate appearing for the appellants, stated that they are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rming that the entire goods have been properly received in their warehouse, and there was no shortage or any other discrepancy during the transportation of goods from the port of import/ACC, Sahar to the private bonded warehouse. Further, the final products of FRB Boats manufactured in the private bonded warehouse were cleared by them availing Nil import duty exemption available to such goods in notification No. 50/2017-Customs Dated 30.06.2017. However instead of mentioning the exemption entry of serial number 559, they had mentioned incorrectly entry of serial number 558, as both relate to similar goods classifiable under Chapter heading 8901, 8902, 8904, 8905 (except 890520) or 8906. 2.3 Furthermore he submitted that the issue of show cause proceedings initiated by the customs authorities and the port of import/ACC is without jurisdiction, as demand of customs duty on imported raw material contained in the final/finished products manufactured under bonded warehouse in terms of section 65 ibid, in the above case is no longer under dispute, in view of the decision of Larger Bench of the Tribunal in the case of Ferro Alloys Corporation Ltd., Vs. Collector of Customs (Appeals), Bhub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dure set out in Customs (Import of Goods at a Concessional Duty for Manufacture of Excisable Goods) Rules, 1996. CBIC s circular No. 38/2018-Customs dated 18.10.2018 categorically provide payment of import duty on the imported goods contained in the certain final product, to be paid at the time the supply of the product from the warehouse by filing ex-bond as prescribed. 3.3 Learned AR also stated that in terms of the decision taken by the Tribunal in the case of Trafigura India Pvt. Ltd. Vs. Union of India reported in 2023-TIOL-737-HC-AHM-CUS in respect of imported goods by the appellant, invoking of extended period on the grounds of suppression is sustainable. In view of the above, he prayed that the appeals filed by the appellant may be dismissed. 4. Heard both sides and perused the records of the case. We have also considered the additional written submissions given in the form of paper books by learned Advocate for the appellants as well as Authorised Representative for the Revenue. 5. Brief issues for consideration in the present case before us are the following: (i) whether the appellants importer have complied with the requirements of legal provisions (a) for making an entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the cover of GST invoice on the payment of appropriate GST and compensation 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. From the above para it emerges that it is incumbent on the importer that he has to file ex-bond Bills of entry for these raw materials that are being for manufacture of the finished product and such ex-bond Bs/E are to be filed at the place of importation in terms of Board s circular No. 22/2016-Cus. dated 31.05.2016 read with Public notice No. 16/2016 issued by General Commissionerate of Air Cargo Complex, Sahar. The procedure mentioned is in relation to Manufacture and Other Operations in Warehouse Regulations, 1966 (MOOWR, 1966) under Section 65 read with Warehouse (Custody and Handling of Goods) Regulations, 2016. Thus, the importer is liable to pay the duty on the imported goods contained in so much of the resultant products are co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to comply with the provisions under the Customs Act, 1962 and has wilfully mis-stated the facts with the intention to evade duty .. Further, by virtue of the proviso to section 114AA of the Act, 1962. Separate penalty cannot be imposed under section 112 of the Act when a penalty has been imposed under section 114 AA of the Customs Act, 1962 and I refrain myself doing so. 6.2 Thus, from the above findings and conclusions arrived at by the learned Commissioner of Customs in the impugned order, it is seen that he had confirmed the adjudged demands and confiscated the impugned raw materials contained in the finished products and offered them on redemption fine of Rs. 2,30,00,000/- as well as imposed penalty under Section 112 ibid on the above basis. 7. In context with the conclusions of the learned Commissioner in the impugned order and to address the issues under consideration referred above in paragraph 5, we would like to refer the relevant legal provisions contained in Section 46, 58, 59, 60, 64, 65, 67, 68 of the Customs Act, 1962 and Rules, Regulations framed thereunder to decide on the legality of the actions for demand of appropriate duty leviable of the subject goods under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orce.] (5) If the proper officer is satisfied that the interests of revenue are not prejudicially affected and that there was no fraudulent intention, he may permit substitution of a bill of entry for home consumption for a bill of entry for warehousing or vice versa. Section 58. Licensing of private warehouses. - The Principal Commissioner of Customs or Commissioner of Customs may, subject to such conditions as may be prescribed, licence a private warehouse wherein dutiable goods imported by or on behalf of the licensee may be deposited. Section 59. Warehousing bond. (1) The importer of any goods in respect of which a bill of entry for warehousing has been presented under section 46 and assessed to duty under section 17 or section 18 shall execute a bond in a sum equal to thrice the amount of the duty assessed on such goods, binding himself- (a) to comply with all the provisions of the Act and the rules and regulations made thereunder in respect of such goods; (b) to pay, on or before the date specified in the notice of demand, all duties and interest payable under sub-section (2) of section 61; and (c) to pay all penalties and fines incurred for the contravention of the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er sub-section (1), there is any waste or refuse, the following provisions shall apply: - (a) if the whole or any part of the goods resulting from such operations are exported, import duty shall be remitted on the quantity of the warehoused goods contained in so much of the waste or refuse as has arisen from the operations carried on in relation to the goods exported : Provided that such waste or refuse is either destroyed or duty is paid on such waste or refuse as if it had been imported into India in that form; (b) if the whole or any part of the goods resulting from such operations are cleared from the warehouse for home consumption, import duty shall be charged on the quantity of the warehoused goods contained in so much of the waste or refuse as has arisen from the operations carried on in relation to the goods cleared for home consumption. Section 67. Removal of goods from one warehouse to another. The owner of any warehoused goods may, with the permission of the proper officer, remove them from one warehouse to another, subject to such conditions as may be prescribed for the due arrival of the warehoused goods at the warehouse to which removal is permitted. Section 68. Clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gage and goods imported by post. Manufacture and Other Operations in Warehouse Regulations, 1966. 9. Maintenance of accounts.- The manufacturer shall maintain accounts relating to stocks, raw materials, goods in process, finished goods, waste and refuse in proper form: Provided that where the manufacturer maintains for his own purpose such detailed accounts and has carried out such alterations in the form of accounts as may be required in this behalf, the Assistant Commissioner of Customs or Deputy Commissioner of Customs may in his discretion direct such forms of accounts to be adopted as the proper form. Private Warehouse Licensing Regulations, 2016. Regulation 3. Licensing of private warehouse.- (1) Upon an application being made to license a private warehouse, the Principal Commissioner of Customs or Commissioner of Customs, as the case may be, may issue a licence to the applicant who, - (a) is a citizen of India or is an entity incorporated or registered under any law for the time being in force; (b) submits an undertaking to comply with such terms and conditions as may be specified by the Principal Commissioner of Customs or Commissioner of Customs, as the case may be; (c) fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be affixed by the license. (4) where the warehoused goods are removed, from the warehouse to a customs station for export, the one-time-lock as per sub-regulation (1) shall be affixed by the license. Regulation 14. Removal of resultant goods for home consumption. - (1) A licensee may remove the resultant goods from warehouse for home consumption: Provided that a bill of entry for home consumption has been filed in respect of the warehoused goods contained in so much of the resultant goods and the import duty, interest, fine and penalties payable, if any, in respect of such goods have been paid. (2) The licensee shall retain a copy of the bill of entry filed and take into record the goods removed. Regulation 17. Maintenance of records in relation to warehoused goods. - (1) A licensee shall, - (i) maintain detailed records of the receipt, handling, storing, and removal of any goods into or from the warehouse, as the case may be, and produce the same to the bond officer, as and when required; (ii) keep a record of each activity, operation or action taken in relation to the warehoused goods; (iii) keep a record of drawal of samples from the warehoused goods under the Act or any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... license/permission as follows: (i) License for Private Bonded warehouse for the storage of warehousing the capital goods, equipment, parts, components, spares, raw materials, consumables for Boats/Vessels without payment of customs import duty under Section 58 ibid in F.No. S/15-31/12-13 Bond NCH dated 17.07.2012, initially issued for valid upto 16.07.2014 and renewed thereafter; (ii) Permission for manufacture of High Speed FRP Boats at the Private Bonded Warehouse situated at 53-A, Sasunavghar, Ahmedabad Highway, Versova Bridge, Behind Gurudwara Khatyawadi, Ghodbunder Road, Thane, under Section 65 ibid. Thus, we also find that the requirements of obtaining license/permission for storage of imported goods in an area approved by the competent Customs authorities and for manufacturing process in relation to such goods have also been fulfilled by the appellants as required under Section 58 and 65 of the Customs Act, 1962. 8.3 The gist of the details in respect of imported raw materials and the resultant final products manufactured under the private bonded license under various Bills of entry in this case are tabulated in the SCN and extract of the same, for ease of reference are giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the appellants. The department had demanded the total import duty on raw materials etc. consumed in the said final products as detailed in column (4) and the same had been confirmed in the impugned order. 8.4. In this context, we find that in an illustrative case of B/E No. 5443436 dated 05.03.2018 under which the inputs/raw materials have been received into the private bonded warehouse and used in the manufacture of boats have been shown in the SCN to have demanded a duty of Rs. 4,79,250/- out of the total duty of Rs. 39,58,158 in that entry at serial No. 3 of the above table. We have perused the records of the case with respect to this particular illustrative transaction. The marine air conditioning parts for manufacture of ship classifiable under Customs tariff item 8415 9000 have been imported under B/E No. 5443436 dated 05.03.2018 for warehousing for a total value of Rs. 11,38,902.86/- and import duties at the rate of 10% BCD, 28% IGST and 10% SWS have been determined as the applicable duty by the customs officers at ACC, Sahar. In this regard we find that firstly, the appellants importer vide their letter dated 05.03.2018 had requested the Assistant Commissioner of Cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions for transfer, removal of goods and its proper accounting in the manufacturing process warehousing bond have been duly followed by the appellants. Further, we also find that it is not the case of Revenue that the appellants importer have not complied with the proper receipt, accounting of the imported goods in their private bonded warehouse. It is only the issue of demand of duty on the raw materials etc. consumed in the final products cleared from the private bonded warehouse, which is in dispute in the present case. Furthermore, we also find that the finished goods manufactured out of such raw materials/ inputs imported as explained above, have also been removed from the private bonded warehouse by the appellants on payment of applicable import duties on the date of presentation of Bill of Entry in terms of Section 15(1)(b) ibid, by claiming exemption from basic customs duty under entry S. No. 558 of Notification No. 50/2017-Customs dated 30.06.2017 and upon payment of effective rate of IGST at 5% as per S. No. 250 at Schedule-I of Notification No. 1/2017-Integrated Tax (Rate) dated 28.06.2017. These clearances of final product i.e., Boats classifiable under CTI 8906 9000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diction to raise demand of duty on exempted goods found to be not utilised as per terms of exemption by an E.O.U. The Ferro Alloys Corporation decision has held that where original assessment into bond had been done at the Custom House through which the goods were imported, then any reassessment in respect of the warehoused goods can be done only by the same Custom House and the officers having jurisdiction over the warehouse cannot disturb the classification adopted by the Custom House of origin but can only apply the rate of duty prevalent on the date of actual removal of the goods from the warehouse as per Section 15 of Customs Act, 1962. During the arguments before the Larger Bench, it was pointed out that a subsequent decision on the same notification in the case of Collector of Central Excise, Chandigarh v. Delta Hamlin Ltd. (supra) had also followed the ratio of Ferro Alloys Corporation decision as regards jurisdiction. Para 15.3 of the Ferro Alloys Corporation decision and para-5 of the Delta Hamlin decision are as below:- * * * * * * * * * * * From the above, it may be seen that both the decisions have relied heavily on the precedent Tribunal decisions in the case of Relis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants E.O.U. which is licensed under Section 58 of Customs Act, 1962 as a private bonded warehouse from where ex-bond clearances will have to take place. The decisions of the Tribunal in the case of Collector of Customs v. Instrumentation Ltd., reported in 1990 (45) E.L.T. 570 (Tribunal) and Sandeep Woollen Mills cited therein, relied upon by learned Senior Departmental Representative, on the other hand, more aptly covered such a situation. Para-6 of the Instrumentation Ltd. decision runs as follows: - * * * * * * * * * * * The Tribunal has held in these two decisions that in a situation of clearance of warehoused goods, the jurisdiction for raising demand for short levy or refund on reassessment will be with the proper officer granting ex-bond clearance. This view of the Tribunal finds support in the Madras High Court decision in the case of Collector of Customs, Madras v. Tungabhadra Fibres Ltd., reported in 1994 (71) E.L.T. 655 (Mad.). The High Court had held that the assessment of goods into bond on a warehousing Bill of Entry is only tentative and such assessment being made only for the purpose of execution of warehousing bond, is not conclusive. Para-6 of the Madras High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an entry of the imported goods under Section 46 of the Customs Act, 1962, and for clearance of goods under warehousing provisions contained under Chapter IX of the Customs Act, 1962. 9.1 On second issue, that is whether the appellants importer is eligible for availing benefit of Notification No. 50/2017-Customs dated 30.06.2017 under serial No. 558 or 559 in respect of imported raw materials/inputs etc. at the time of ex-bond clearance of final products manufactured in their private bonded warehouse, we have perused the relevant exemption entries in the said notification along with relevant conditions. For ease of reference the same are extracted and given below: G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962) and sub-section (12) of section 3 of Customs Tariff Act, 1975 (51 of 1975), and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 12/2012-Customs, dated the 1 [17th March, 2012] published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 185(E), dated the 17th March, 2012, except as respects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of State tax or the Assistant Commissioner of State tax, as the case may be, 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 Nil - 9 xx xxxxxxxx The said explanation in the entry at S. No. 559 was later amended which is also captured below for the sake of clarity, even though such changes have been effected subsequent to the period of dispute. Explanation . - For the purposes of this entry, it is clarified that in the case of raw materials and parts already imported under S. No. 558 above and lying unutilized, - (i) the unit will furnish a separate bond to the 5 [Deputy Commissioner of Customs or Assistant Commissioner of Customs having jurisdiction under the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017], giving details of such goods and also undertake to utilize the same for manufacture of goods falling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey are still lying in stock in the unit functioning under bonded warehouse for providing separate bond to the jurisdictional authorities, in respect of such goods. The said explanation also specify that it is only in the event of failure to use such goods for the specified purpose, then the unit shall be required to pay on demand, an amount equal to the duty payable on such goods but for the exemption under this notification. The condition for availing the said exemption is also to follow the procedure prescribed in respect of Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 which was later amended by Rules of 2022. These rules had prescribed the procedure to be followed in giving intimation to the jurisdictional authorities under whose control manufacture operations were being undertaken about the requirement of imported inputs, and duly accounting for such inputs in manufacture for specified end use as provided in the exemption notification. In the present case, when the imported goods were brought into the private bonded warehouse, the appellants have duly followed the procedure by complying with the warehousing provisions under the Customs Act, 1962. The appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to India shall, in addition, be liable to integrated tax at such rate, not exceeding forty per cent. as is leviable under section 5 of the Integrated Goods and Services Tax Act, 2017 on a like article on its supply in India, on the value of the imported article as determined under sub-section (8) or sub-section (8A), as the case may be. (8) For the purposes of calculating the integrated tax under sub-section (7) on any imported article where such tax is leviable at any percentage of its value, the value of the imported article shall, notwithstanding anything contained in section 14 of the Customs Act, 1962 (52 of 1962), be the aggregate of (a) the value of the imported article determined under sub-section (1) of section 14 of the Customs Act, 1962 (52 of 1962) or the tariff value of such article fixed under sub-section (2) of that section, as the case may be; and (b) any duty of customs chargeable on that article under section 12 of the Customs Act, 1962 (52 of 1962), and any sum chargeable on that article 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and any sum chargeable on that article 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). (10A) 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 goods and services tax compensation cess under sub-section (9) shall be, (a) where the whole of the goods are sold, the value determined under sub-section (10) 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 (10) 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 of such transaction shall be the transaction value for the purposes of clause (a) or clause (b): Provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the impugned order had confirmed the adjudged demands on the basis of CBIC Circular No. 34/2019-Customs dated 01.10.2019 wherein on payment of IGST/CGST on the finished goods it has been clarified by the CBIC in Para 8 and 9 of the said Circular No. 34/2019-Customs as follows: 8. 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 Central Goods and Service Tax Act, 2017 (hereinafter referred to as the, CGST Act ). It would therefore be taxable in terms of section 9 of the CGST Act, 2017 or section 5 of the Integrated Goods and Services Tax Act, 2017 depending upon the supply being intra-state or inter-state. The resultant product will thus be supplied from the warehouse to the domestic tariff area under the cover of GST invoice on the payment of appropriate GST and compensation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and IGST) stand deferred till they are cleared from the warehouse for home consumption or are exported. The capital goods can be cleared for home consumption as per Section 68 read with Section 61 of the Customs Act on payment of applicable duty without interest. The capital goods can also be exported after use, without payment of duty as per Section 69 of the Customs Act. In the present case, the adjudged demands is not in relation to the demand of import duty in respect of final products cleared from the warehouse. Further, the authorities under whose control the private bonded warehouse of the appellants were functioning had not raised any demand in respect of the clearances of final products for home consumption from the warehouse. Further, in terms of the entry at S. No. 5 of Notification No. 26/2022-Customs (N.T.) dated 31.03.2022, Superintendent/ Superintendent Customs (Preventive)/ Appraiser in-charge of the appellants private bonded warehouse 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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