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TMI Blog2001 (5) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... sed. 2. The matter was heard on 27-4-2001 at Kolkata. When Shri K.K. Banerjee, Advocate appearing for M/s. KIL, submitted that M/s. KIL were an established exporter and had been exporting commercial plywood to different countries. They had already discharged their export obligations prior to the issuance of the advance licences in question. The raw material used in the exported commercial plywood was Phenol, and the statements of their suppliers on whom reliance has been placed to charge them with mis-utilisation of the imported duty free Phenol, had been obtained behind their back. No cross-examination of these witnesses was allowed. They have pointed out a number of discrepancies in the statements of these witnesses and have submitted that the documents referred to in those statements had no relevancy to the exports made by them prior to the issuance of advance licences. Their export obligations had been duly fulfilled to the satisfaction of both the customs authorities and the licensing authorities. The goods exported had been examined by the Customs and no proceedings had been drawn by the licensing authorities as they had not violated any provisions of the law. It was his su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he advance licences were issued to them between 10-12-1993 to 28-12-1993 while the export obligations had already been fully met between 10-6-1993 to 14-10-1993. The due foreign exchange had been realised before 3-12-1993. Similarly, with regard to the second consignment of 1050 M.T. of Hydrated Phenol, the export obligations had been fully met prior to the purchase/issuance of advance licences. It was submitted that the statements of different representatives of the manufacturing factories had not been recorded in the presence of the appellants. Further, they have prayed for the cross examination of such witnesses. It was further submitted that most of the AR 4A's mentioned in the statements of respective representatives did not relate to the relevant period of exports completed under the relevant advance licences. In the AR 4A's the resin used for bonding had not been mentioned. (Refer page 983 of the paper book). They had reiterated that the phenol had been generally used by them in the production of exported goods. The phenol subsequently imported was sent to the factories at different places and was subsequently used for production of commercial Plywood, (refer page 984 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree in Indian market were other benefits to attract exporters to increase their exports (para-10 of Collector of Customs v. Pankaj V. Sheth - 1997 (90) E.L.T. 31 (Calcutta). While dealing with the exports and alleging charges of non-use of import materials in the manufacture of export goods, as in the present case, it has also to be remembered that the policy adopted for the purpose of export or import is detected by the economic needs of the country, earning of foreign exchange, financial stability, etc. (refer para-13 of the Bakul Cashew Co. v. Union of India represented by the Ministry of Finance, Department of Revenue - 1984 (15) E.L.T. 379 (Madras). 7. While dealing with this aspect of the matter, we may also refer to the Supreme Court's decision in the case of Oblum Electrical Industries Pvt. Ltd. v. Collector of Customs, Mumbai - 1997 (94) E.L.T. 449 (S.C.), wherein the Hon'ble Supreme Court had observed that the wordings in the notification have to be construed keeping in view the objects and purpose of the exemption. Para-11 from that decision is extracted below :- "11. A perusal of Notification No. 116/88-Cus. shows that the object and purpose of the said notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Imports and Exports v. I.T.C. Ltd. - 1998 (102) E.L.T. 17 (A. P.). Para 13 from that decision is extracted below :- "13. The basic object of the Advance Licensing System and the Duty Exemption Scheme as contained in Chapter XIX of the Import-Export Policy, 1990-93, is to ensure that Indian manufacturers and business people should earn foreign exchange for the country by the promotion of exports and it is for that purpose the facility of securing imported raw materials duty free was made available. The basic concern and objective of such scheme is that of the material imported under the advance licensing system is utilised in the production of goods for exports and the manufacturers shall earn the prescribed or stipulated amount of foreign exchange from the export of the finished goods. Such objectives are duly fulfilled in the present cases inasmuch as all the imported boxes were actually utilised for exporting the unmanufactured tobacco and the value of the exported commodity far exceeded the specified FOB value of such commodity. The only lapse on the part of the respondent in exporting the commodity is shortfall in the quantity of such exported commodity. The respondent cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was booked subsequent to the completion of all formalities with regard to the exports and imports. Further, we do not find anything in these instructions that the inputs imported should actually be used in the export goods. In fact in the present case, it could not be possible as the exports had already been completed before the import of the inputs. The import of inputs had been duly allowed. The licensing authority had raised no objection about the import of the inputs subsequent to the exports and the procedure adopted in this regard by KIL. In the Directorate General of Foreign Trade Circular No. 17/94, dated 8-11-1994, the same position had been explained and the emphasis was not on the use but on the nexus between the export products and the items imported with reference to their technical characteristics including grade, quality and specifications. This circular takes cognizance of the fact that the inputs could be imported subsequent to the exports when it states in para-3 as under :- "It may also be noted that for the purposes of nexus between resultant products and imported inputs, the technical characteristics, grades, quality and specifications shall be equally rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licensing authority in the form specified in the schedule annexed to that notification. In Condition No. (II) while requirement for production of proof of having executed a bond or a legal undertaking before the licensing authority concerned for complying with the conditions of that Notification and the requirement of making a declaration etc. were laid-down, it was provided that a bond or a legal undertaking and the declaration was not necessary in respect of the imports made after discharge of export obligation in full as evidenced by endorsement of licensing authority in the DEEC Certificate. In Condition No. (VI), it was provided that the exempt material was to be utilised for discharge of export obligation and no part thereof was to be disposed of in any other manner before export obligation under the said value based advance licence had been discharged in full and the export proceeds realised. It is clear from the express language of the above notification dated 19-5-1992; (i) imports could even be made after discharge of export obligation, (ii) while exempted materials were to be utilised for discharge of export obligation, there was no requirement that the exported materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondition of legal undertaking, and the licences were made transferable in view of fulfilment of export obligations. He had correctly noted that the actual use of the imported goods in the goods already exported was not relevant. 11. The allegations regarding non-use of phenol had been made after the matter had been settled by the customs authorities and the licensing authorities. There is nothing on record to show that the goods exported did not meet the requirements of the exemption notification. The case had been made on the basis of the statements of the suppliers and the employees of the appellants' company. The appellants have pleaded that the statements of their employees had been recorded without fully explaining the implications of the questions and that these parsons were not concerned with the activities with regard to which the questions had been asked. The statements of their suppliers had also been obtained behind their back and they were not allowed cross-examination. The AR 4A's mentioned by the suppliers were not for the relevant period. We also find that there is no test report for the goods exported and there is no independent evidence with regard to the use or n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch they were imported had been fulfilled and it is immaterial whether the petitioner had supplied the goods in advance from his old stock or not. According to the petitioners, the respondents are bound to release the same without payment of any Duty as the goods had already been used as raw materials and components for manufacture. The relevant notification in this connection did not in so many words clearly permit the petitioners to import goods which had already been used for the very purpose for which such importation had been made. Here is a case where the petitioners could get the exemption from Customs Duty if the goods were imported and used as raw materials and components by the said manufactures. But in the instant case the petitioners already supplied the goods for being used as components and raw materials in advance and thereafter sought to replace the same by the goods so imported. The Hon'ble Calcutta High Court referred to the amending Notification No. 235/87 Cus., dated 5-6-1987 (amending Notification No. 210/82 Cus., dated 10-9-1982) and held that the appellants in that case were entitled to get the benefit of duty free importation of goods which have already been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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