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TMI Blog2024 (12) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... /2012-Cus dated 17.03.2012. 8 show cause notices were issued to the appellant during the period 18.12.2018 to 04.07.2019. All the show cause notices were issued Section 72 of the Customs Act 1962. In some show cause notices invoked Section 73A of the Customs Act, was also invoked and some demand was raised by invoking section 28 and sub-section 28(4) of the Customs Act. The appellant had obtained private bonded warehouse license under Section 58 of the Customs Act 1962 within the premises that were otherwise registered under Central Excise Act. The first license was granted on 31.03.1986 and thereafter license was renewed in the name of the appellant on 28.05.2014. The said license was amended on 29.11.2016 and again on 01.09.2017. The second amendment dated 01.09.2017 enlarged the bonded area under Section 58 to the full factory as per the request of the appellant. It transpires that the activity for which the appellants are being charged was happening in full knowledge of the Revenue. The Conditions imposed under Section 58 and 65 licenses were imposable to follow and that fact was acknowledged by Revenue - The Revenue did not, at any stage, crystallize the matter during more tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bonded warehouse and accordingly duty has been demanded under Section 72 read with Sections 73A and 28 of the Customs Act, 1962. Learned Counsel submits that the SCNs so issued by the customs authorities at the port of import are without jurisdiction as only the officers having territorial jurisdiction over the warehouse can demand duty in present case. The assessment of the warehoused goods takes place at the time of clearance from the warehouse, in terms of Section 15(1)(b). In support of this proposition the following cases are being relied upon. Ferro Alloys Corpn Lid vs. Collr. of Customs (Appeals), Bhubaneswar, 1995 (77) E.LT. 310 (Tribunal - LB) (Refer to Sr No. 11 of the Compilation) Cosmo Ferrites Ltd. Versus Commissioner of Central Excise, Chandigarh. [2014 (8) E.LT. 633 (Tri-Del.) (Refer to Sr No. 12 of the Compilation) 2.1 Learned Counsel for the appellant further submits Where the warehouse is situated in a place where there is no Customs Port or Custom Station or Commissionerate exists, then the Central Excise Officers act as customs officers too, deriving powers from the Customs Act, 1962. In this regard, Notifications mentioned at Sr No. 5 of the Compilation may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, Commissioner, Surat had granted permission to undertake the manufacture in the Excise Area. Commissioner, Surat had sought a clarification on the practice in 2015 and accordingly, the Assistant Commissioner, Surat had visited the Appellants' factory and submitted a detailed report to the Commissioner. Pursuant to the same, the Commissioner, Surat also highlighted the issue to the Chief Commissioner and sought clarification, and pending theclarification the Commissioner, Surat had given the Appellants a verbal assurance to maintain status qua until revert from the CBEC. (vi) Appellants' vide pplication dt. 31.7.2017 wrote to the Commissioner, Surat, and explained about the manner of manufacturing in detail and again sought amendment of the private bonded warehouse license, to include the complete manufacturing premises. 2.2 The Appellants further submit that following inter-departmental Communications and reference to the Central Board of Excise and Customs/Central Board of Indirect Taxes and Customs, clearly show that since 1986 manufacturing activities were permitted to be carried out within the Central Excise registered premises, with the knowledge and approval of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time. The Appellants submit that the manufacturing practice followed by the Appellants was as established procedure/practice followed for more than 3 decades. Courts have consistently held that such established practice must be given due consideration. Reliance for the same is placed on the following cases: Sedco Forex International Drilling Inc vs Commr of Cus., Mumbai [2001 (135) ELT 625 (Tri-Mumbai)] Maintained by the Hon'ble Supreme Court of India in Commissioner v. Sedco Forex International Drilling Inc. [2005 (179) ELT. A39 (SC)] (Refer to Sr No.18 of the Compilation). Commissioner of Customs, Kandia vs PSL Lid [2015 (327) ELT 706 (Tri. Mumbai)] (Refer to Sr No. 19 of the Compilation). Hindalco Industries Ltd vs CC Ahmedabad [2024 (2) TMI 25] (Refer to Sr. No.20 of the Compilation). Aban Loyd Chiles Offshore Limited vs Commissioner of Customs [2006 (200) ELT 370 (SC)] (Refer to Sr No.21 of the Compilation). Ram Parvesh Singh Ors vs State of Bihar Ors [2006 (8) SCC 381] (Refer to Sr No.22 of the Compilation) 2.3 The Appellants submit that the license issued to the Appellant under Section 58 of the Customs Act, 1962 was amended on 1.9.2017 with corresponding amendment in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The finished goods were also exported out of India, which were too used for offshore petroleum operations. Illustrative DGH Certificates and supporting documents and Completion Certificates of the ONGC projects towards which imported goods were consumed/utilized. These certificates demonstrate that the inputs in question were used in manufacture of goods which were supplied to petroleum operations.The Appellants submit that once the goods have been supplied to ONGC projects, the end-use condition attached to Sl. No. 357 of Notification No. 12/2012-Cus has been fulfilled. These goods are also otherwise covered by list 13 attached to Sl. No. 356 of Notification No. 12/2012-Cus, exempting from payment of both BCD and CVD.The Appellants further submit that, once manufactured goods have been exported, the desired purpose has been achieved and duty ought not to be demanded. 2.5 The Impugned Order has denied the benefit of Notification No. 12/2012-Cus dated 17.03.2012 to the Appellant on the ground that the Appellant failed to follow the conditions scrupulously and accordingly placed reliance on the order in CE v. Hari Chand Shri Gopal [2010 (260) ELT. 3 (SC)]. The Appellants submit th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Tullow relates to exemption notification pertaining to exemption granted for petroleum operations. The Court held that the essentiality certificated produced after the importation is also in compliance of the Notification. The Appellants further submit that the recent decision of Supreme Court in Mother Superior-2021 (376) ELT 242 in the context of interpretation of an exemption notification applies in this case. 2.6 The Appellants further submit that the duty demand in present case is revenue neutral, as evidenced by below: a. In case of manufactured goods which have been exported, duty drawback is available b. In case of manufactured goods which have been supplied to ONGC projects, the supplies are against ICB Contracts. Thus, the same are deemed export, and deemed export benefits qua the same are available. The Appellants further submit that the following export benefits are available to the Appellant for physical as well as deemed exports. a) Brand Rate of Duty Drawback- reimbursing the duties paid on the finished goods exported out of India b) Merchandise Exports from India Scheme (MEIS) c) Advance Authorization Scheme-granting completion exemption from payment of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Offshore Limited vs Commissioner of Customs [2006 (200) ELT 370 (SC)] wherein the Hon'ble Supreme Court of India has held that extended period of limitation cannot be invoked when the when the activities were carried on with the approval of the Department (Refer to Sr No.29 of the Compilation). 2.8 The Appellants further submit that the goods in question are not liable to confiscation as no wrong has been committed. Accordingly redemption fine also is not payable. Confiscation has been proposed under Section 111(j) and 111(o) of the Customs Act.Section 111(j) is only applicable to goods removed from warehouse without permission from Proper Officer. As set out above and in the Appeal in detail, the goods were removedfrom the warehouse with permission from the concerned Proper Officer. Thus, Section 111(j) is not applicable.The Appellants further submit that Section 111(0) is applicable only if any post import condition set out in the exemption has been violated, unless the non-observance of the condition was sanctioned by the Proper Officer. The post import condition allegedly violated in the present case is that the goods were not used for further manufacture in bonded warehou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which by their own admission was not sufficient to carry out the manufacturing operations. They have themselves admitted in their defence reply that the manufacturing activity was carried out by them in an open yard adjacent to bonded warehouse. Thus it is established beyond any doubt that the condition of notification no. 12/2012-customs has not been fulfilled. The notification is to be interpreted in terms of the language used therein and is to be strictly followed. 3.1 Learned Authorized Representative further stated that the appellants have also relied upon procedure adopted by them since 1988 and the documents filed by them at different stages before the Central Excise/Customs officers. He submits that this argument cannot justify the wrong practice followed by them. The SCN has been issued subsequent to the issue of licences under section 58 and Permission to manufacture under section 65 of the Customs Act in 2014. Any wrong practice for an earlier period cannot justify the wrong done after 2014. He submits that as far as their claim that the procedure adopted by them was in the knowledge of department, the adjudicating authority has given clear and unambiguous findings in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017 is amending the licence issued in 2014. In 2017 the complete manufacturing unit in Hazira has been incorporated in the Appellant's licence issued under section 58. This amendment dates back to 2014. 3.6 He contended that appellant s contention that the permission given for the larger area in 2017 should be given effect from 2014, is also not tenable. There is nothing in the Act or Rules which empower any authority granting licence or permission to give it with retrospective effect. The case laws relied upon by the appellants have been distinguished by the adjudicating authority. In para 6.8 of Order-in-original. 3.7 He further submits that the principle of revenue neutrality will be applicable in this case. All the supplies by the appellants to ONGC are supplies to projects under ICB. Whatever duty is paid on the inputs is available as deemed export benefit to the appellants. Thus the demand of the duty itself is revenue neutral. The imported goods were used for supply to offshore oil exploration or exploitation projects. Thus the ultimate purpose of the imported goods has been fulfilled without causing any loss of exchequer. 3.8 Learned Authorised Representative further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est in case of violation of Customs Act and/or Bonds so executed. The reading of section 28(4) does not have any adverse impact on the demand so made. He submits that the appeal filed by the Appellants are liable to rejected. 4. We have considered the rival submissions. We find that undisputed facts that appellant obtained duty free goods availing benefit of Notification 12/2012-Cus dated 17.03.2012. One of the condition of the said notification is that the parts and raw materials imported should be used in the manufacture of goods in accordance with Section 65 of the Customs Act. The notification prescribes as under: S. No. Chapter or Heading or Sub-heading or tariff item Description of goods Standard rate Additional duty rate Condition No. (1) (2) (3) (4) (5) (6) 357 84 of any other Chapter Parts and raw materials for manufacture of goods to be supplied in connection with the purposes of offshore oil exploration or exploitation Nil Nil 41 Condition No. Conditions 42. If,- (a) The parts and raw materials are used in the manfaucture of goods in accordance with the provisions of section 65 of the Customs Act, 1962 (52 of 1962); and (b) A certificate is produced in each case to the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods warehoused shall, within seven days from the date on which order of such cancellation is served on the licensee or within such extended period as the proper officer may allow, be removed from such warehouse to another warehouse or be cleared for home consumption or export : Provided that the provisions of this Chapter shall continue to apply to the goods already deposited in the warehouse till they are removed to another warehouse or cleared for home consumption or for export, during such period.] The section 65 of Customs Act 1962 read as under: SECTION 65. Manufacture and other operations in relation to goods in a warehouse. (1) [With the permission of the Principal Commissioner of Customs or Commissioner of Customs and subject to the provisions of section 65A] and such conditions] as may be prescribed, the owner of any warehoused goods may carry on any manufacturing process or other operations in the warehouse in relation to such goods. (2) Where in the course of any operations permissible in relation to any warehoused goods under 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egrated tax under sub-section (7) and the goods and services tax compensation cess under sub-section (9), of section 3 of the Customs Tariff Act, 1975 (51 of 1975.) have been paid before the goods are so removed from that other warehouse; (iv) the provisions of section 59, subject to the following modifications therein, have been complied with, namely : (a) for the words bill of entry for warehousing , the words bill of entry for home consumption shall be substituted; and (b) for the words amount of the duty assessed , the words amount of duty assessed, but not paid shall be substituted; (C) the duty payable in respect of warehoused goods referred to in clause (A), to the extent not paid, is paid before the goods are removed from the warehouse in such manner as may be prescribed. (2) The provisions of sub-section (1) shall not apply for the purpose of manufacturing process or other operations in terms of section 65 to dutiable goods which have been deposited in the warehouse or permitted to be removed for deposit in the warehouse prior to the date notified under that sub-section. (3) The Central Government may, if it considers necessary or expedient, and having regard to such crite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consequent to the Revenue realizing that it is not possible to manufacture the kind of product that the appellants are manufacturing within the bonded premises. The appellant raised the said ground for amending their license under Section 58 to cover the entire manufacturing unit registered under Central Excise vide their letter dated 06.11.2015. In the said letter they suggested as follows: 8. While the aforementioned licensed ware house has limited area within this central excise registered manufacturing yard, the actual manufacturing takes place across the excise registered yard as a matter of practice followed till date. In this regard your good self may appreciate the fact that the Oil Exploration Platforms/Rigs/Floating Vessels/Ships cannot be manufactured with the four falls of warehouse as their multi complex manufacturing process is done in various stages and this require occupies ample space across the yard. 9. Now considering the extent of fabrication that we would be undertaking for the existing orders, huge amount of raw material would be coming under the bonded warehouse for further fabrication. In this regard a doubt has been raised over the availability of the space ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Surat-l and not in the Private Bonded Warehouse as required under Section 65 of the Customs Act, 1962. This practice is followed since 1986. The licence get renewed every year by the Assistant Commissioner of Division with the approval of the Commissioner, Central Excise, Customs Service Tax, Surat-II. (C) Therefore, it is not feasible to manufacture the huge structures required for ONGC Platforms, Oil Exploration Machineries in the Private Bonded Warehouse as permitted manufacturing operations in the Private Warehouse space under section 65 of the Customs Act, 1962 due to the limited space of Private Bonded warehouse. In the case of ship building, a new Sr. No. 469A in place of Sr. No. 469 has been inserted in original Notification No. 12/2012-Customs dated 17.03.2012 vide Notification No. 54/2015-Customs dated 24.11.2015, by which import duty has been exempted subject to condition No. 5 i.e. the Importer has to follow the procedure set out in the Customs (Import of goods at concessional rate of Duty for manufacture of Excisable Goods) Rules, 2016 (Notification No. 32/2016-Customs (NT) dated 01.03.2016). In short, the Condition stipulated in the Sr. no. 469 A if made applicable in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect, and adversely effect the manufacture and clearance of various goods of National Importance. Therefore, under these situation I am requesting Division and range officers for maintaining status quo in respect of existing procedure till the new and revised procedure solving aforesaid difficulties are prescribed by the Board. Therefore the matter may be treated on urgent basis as in the coming GST scenario, in such situations issues will become highly confused and difficult to comprehend. Accordingly, it is kindly requested to address the situation as soon as possible in the interest to safeguard revenue as well as national strategic interest. 9. Subsequently, the request of the appellant dated 06.11.2015 was accepted and the entire premises registered under Central Excise Act were converted into bond licensed under Section 58 of Customs Act on 01.09.2017. 10. From the above facts, it transpires that the activity for which the appellants are being charged was happening in full knowledge of the Revenue. The Conditions imposed under Section 58 and 65 licenses were imposable to follow and that fact was acknowledged by Revenue. The Revenue knew all these facts and allowed the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3; Krishna Filaments Ltd. 2000 (115) ELT 148 (Tri.) In the aforesaid cases the amendment in various licenses were held to be applicable from the date when the original license was issued. Telkar Food Products Pvt Ltd. 2007 (211) ELT 450 (Tri. Chennai) 2. After hearing both sides and considering their submissions, we find that the appellants were obliged to export Pickles in terms of the licence issued on 31-8-1995 so as to be entitled to exemption from payment of duty on the capital goods imported by them under EPCG Scheme. The period allowed for this purpose expired on 31-8-2000. The licence was amended by DGFT on 2-7-1999 substituting Detergent for Pickles . This amendment dates back to the date of issue of the licence in the absence of any remarks to the contrary, of the licensing authority. It is also pertinent to note that the licensee did not ask for any clarification of the DGFT on the question whether the amendment would have only prospective effect. This conduct of the party amounts to acquiescence in the retrospective operation of the amendment. Admittedly, in this case, the requirement of exporting 10% of goods in the second year, 20% of the goods in the third year, 30% ..... X X X X Extracts X X X X X X X X Extracts X X X X
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