9911796707
TMI Blog2003 (7) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... as subject to the actual user condition i.e., the manufacturer-importer was required to use the imported raw materials in his factory. Such a use can also be for the manufacture of the finished goods which need not be exported but which could be sold in the local market. In this case, it is the contention of the Revenue that the licences have been obtained on prior export basis and that the imported raw material has been utilized for manufacture of fans locally sold. Once it is accepted that the licences are for replenishment and that the export obligations have been fulfilled, then the appellants are permitted to use the said imported materials for manufacture of their other goods, cleared in the domestic market. The CBEC has also issued a Circular No. 108/95-Cus., dated 13-10-1995 in which it has been stressed that in the case of goods imported as replenishment, the spirit of the scheme and the intention of the wordings is that the imported goods shall be subjected to the actual user condition. Therefore, following the same, there is no cause to uphold the impugned order. In the present case, the Show Cause Notice does not even allege suppression of facts at the time of import. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al quantity manufactured by the appellants is sold in the domestic market and the remaining 50% is exported. The models relevant during the disputed period are as follows : - (a) Prima (b) KSD (c) Diplomat Deluxe (d) Pulsar (e) Astra (f) Huggar (g) Supra Out of the models mentioned above, viz., Astra, Huggar and Supra have top and bottom covers made of only aluminium, models Prima, Pulsar and KSD have either a combination of top and bottom covers of cast iron + cast iron or cast iron + aluminium or aluminium + cast iron. The use of aluminium as a material for the top or the bottom cover also resulted in reduction of the weight. While the fan with a cast iron/cast iron top and bottom had a weight of 3.70 Kgs., a fan with a cast iron top and aluminium bottom had a weight of 2.15 Kgs. Similarly, a fan with top and bottom aluminium cover weighs 0.90 Kgs. Thus, a fan weighed less when Aluminium was used as a material for either the top or the bottom cover either exclusively or in combination with cast iron. 2.(a) The appellants were initially importing the raw materials for the manufacture of the top or the bottom covers on payment of duty. In and around 1993, the appellants desired to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was thereafter issued proposing to demand duty and impose penalties on the ground that the appellants had not used the LM-24 Aluminium Alloy imported under the cover of an Advance Licence and had availed the benefit of the notification without using the imported raw material in the export product. (c) After the appellants submitted their replies to the show cause notice, the Commissioner has passed the impugned order rejecting the contentions of the appellants and confirming the demand of duty and imposing penalty, under Sec. 114A of the Customs Act, 1962 and ordered the confiscation of Aluminium Alloy. The Commissioner has, however, reduced the demand of Special Additional Duty, holding that there was a discrepancy in the inclusion and has dropped demand of Rs. 3,29,243/-. (d) Hence this appeal. 4. After hearing both sides and considering the matter, it is found :- (a) The Commissioner relying upon the statements of Shri D.V. Anand, Sr. General Manager, the evidence collected from the factory of M/s. Deccan Iron Manufacturers, Hyderabad and other job workers to the effect that imported Aluminium was converted into components or table fans and his inferences on instruction in corr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contravention of EXIM Policy/Customs Law, the appropriate Customs Duty will be paid by HEI. (emphasis supplied) Q.I2 Are there any models, which have Top and Bottom covers made of Aluminium Alloy? How often is the frequency of export? A. 12 The fans which have Aluminium Die Cast Top and Bottom covers are Astra, Supra, Lulminaire, Astra Hugger which were exported to Singapore and Egypt normally. The exports of these models are comparatively less, however, the actual details will be furnished separately." Statements of Shri Chandra Sekhar Pudi of M/s. Rashmi Die Castings Ltd. :- "M/s. Jay Engg. Works Ltd. (JEWL) has been customer for us, who are the manufacturers of ceiling and table fans. M/s. JEWL duly sends us LM-24 Aluminium alloy Ingots imported in nature under 57 F(4) Challan with a clear-cut instructions for the further pressure Die Castings. On being specifically asked, I state that with the receipt of LM-24 Aluminium Ingot (Imported, we manufacture table fan back cover and ceiling fan Astra top, bottom covers and occasionally for Kohinoor Super Deluxe (KSD) top and bottom cover." The Panchnama recorded at the premises of M/s. Tychc Diecast Pvt. Ltd. and Shri Srinu Vasantha' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner, which goes to prove that Aluminium Alloy was converted into components. (c) The instructions, received from M/s. Usha International, Delhi, directing the appellants, not to use Aluminium Alloy during the period 1997-98 and that these instructions to be pointers to the fact that only cast-iron was used in the manufacture of the export products, as held by the Commissioner cannot be a unbiased conclusion. Infact this correspondence demolishes the case of Revenue. The letters by themselves would indicate that there has been receipt of a number of complaints from the overseas customers on account of the fans-exported having a lesser weight. The reduction in the weight, would be only when Aluminium Alloy was used in the manufacture of top or bottom cover. Infact, the letter dated 4-2-97 from M/s. Usha International, Delhi, requests the appellants to refrain from supplying the Aluminium covers in the export market i.e., the supplies being effected were with Aluminium covers used as received from the ancillaries. The fax message dtd. 13-11-97 from M/s. Ashema Link Trading Co., L.L.C. also refers to the fact of receipt of two consignments of Pulsar ceiling fans - one with motor wei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., 'required for manufacture of export product specified in Part E of the said Certificate'. (iv) Notification No. 149/95 applies to imports under advance licence applied for and issue on or after 19th September, 1995. The definition of the term 'materials' is identical to the definition in Notification No. 80/95. (v) The appellant submits that the term 'required for use in the manufacture of export products' contemplates an intended use and not an actual use. So long as the material is figuring in the Input/Output Norms and is specified in the licence issued by the licensing authority, the item will be deemed to be material required for the manufacture of export product. The licence-holder is not required to prove further that the said material has actually been used in the manufacture of the export product. (vi) The provisions in Notification Nos. 80/95 and 204/95 are in contrast with the provisions of Notification No. 116/88-Cus., dated 30-3-88 issued in furtherance of the Import and Export Policy for the period April 1988 to March 1991. These Notifications exempted materials imported against an advance licence issued under the Imports (Control) Order, 1955. Explanation (viii) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial' underwent a change whereby raw materials, components etc., required for the manufacture of the exported product were permitted to be imported duty free. (xii) The EXIM Policy for 1992-97 was replaced with a new Policy for the period 1 April 1997 to 31 March 2002. Para 7.3 of this Policy provided duty-free benefit to imported inputs required for the manufacture of the goods. In other words, the words 'required for the manufacture' were retained in this Policy as well. Notification No. 31/97-Cus., dated 1-4-97 issued in furtherance of the EXIM Policy 1997-2002, accordingly, retained the same definition for the term 'materials'. In other words, raw materials, components, etc., required for the manufacture of the resultant product were permitted to be imported duty free. (xiii) From the above, it is apparent that during 1994-98, the period covered by the Show Cause Notice, the EXIM Policy and the corresponding Customs Notifications permitted duty free import of materials required for the manufacture of the export product. The actual use of the imported input in the export product was not a condition under these notifications unlike the earlier Notifications such as 116/88 and 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the licensing authorities, following the same, the impugned order cannot be upheld. These findings would lead to a conclusion that Commissioner has not appreciated the EXIM Policy and notification provisions correctly. (e) (i) The question whether the materials permitted for import should be physically incorporated in the export product was examined by the Central Board of Excise and Customs. In particular, the extent of nexus between the input and the export product was examined. This issue was examined by the CBEC in the context of the Value Based Advance Licence Scheme and the corresponding Customs Notification No. 203/92-Cus., dated 19-5-92. The said notification exempted materials imported into India against a Value Based Advance Licence from the basic and additional duty of customs subject to the conditions specified therein. Explanation (iii) to the said notification defined the term 'materials' to mean raw materials, components, intermediates, consumables, computer software and parts required for manufacture of export product. The definition of the term 'materials' in Notification No. 203/92-Cus. is identical to the definition of the said term in Notification No. 204/9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is supplied) (iii) It is, thus, clear that duty free clearance cannot be denied, so long as the materials permitted to be imported duty-free are those which are required for the manufacture of the export product. Further, the fact that the word 'required' indicates only an intention or capability of being used in the export product as contra-distinct to actual use contemplated in earlier Notifications such as No. 116/88 and 159/90 supports the above conclusion. (iv) The Commissioner has observed that the condition in the Notification No. 204/92 that the imported material 'shall be utilized in discharge of the export obligation' to mean that the material imported shall be incorporated in the export product. This observation is directly in contradiction to the Circular dated 4-3-93 and Circular No. 1/94, dated 5-1-94 issued by the Central Board of Excise and Customs, therefore it cannot be upheld. (v) The Commissioner's finding, by referring to the Schedule of Quantity Based Advance Licence Part-II annexed to the notification, to come to the conclusion, that the imported items and the resultant products are required to match is considered. That such a 'matching' has already been done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the licensing authority has permitted imports of raw materials on the basis of the Standard Input/Output Norms. Once an export obligation has been fulfilled, then neither the policy nor the notification places any restriction on the disposal of the imported raw materials, at least till 1997. On and after 1997, the disposal of the raw materials imported under the advance licence is subject to actual user condition. A comparison of the wordings in the notification and the Policy indicates that both the Policy and the Notification placed a restriction on the disposal of the raw materials imported under the Advance Licence only till the fulfilment of the export obligation. In other words, once an export obligation is fulfilled, then both the policy and the notification permit disposal of the raw materials. On and from 97-98, the disposal of the raw materials was subject to the actual user condition i.e., the manufacturer-importer was required to use the imported raw materials in his factory. Such a use can also be for the manufacture of the finished goods which need not be exported but which could be sold in the local market. In this case, it is the contention of the Revenue that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minium Alloy has, indeed, actually been used in the manufacture of top and bottom covers and other parts, of the exported models of ceiling fans, there is no mis-declaration, leave alone a mis-declaration which is wilful. Consequently, the extended period of five years cannot be invoked under Proviso to Sec. 28(1). Suppression, mis-declaration, if any, has to be with reference to the imported goods and at the time of import. In the present case, the Show Cause Notice does not even allege suppression of facts at the time of import. Thus, proviso to Sec. 28(1) cannot be invoked for this reason also. The Commissioner invoking the larger period of limitation under Sec. 28(1) on the ground that the appellants had wilfully misdeclared the consumption of the Aluminium Alloy even though the same were never used or intended to be used in the manufacture of the export product, cannot be a cause to be upheld since, the appellants had applied for the issue of an Advance Licence on the basis of the Standard Input-Output Norms, which recognizes a class, of inputs as required for the manufacture of an export product. The appellants were under the bona fide belief that in view of the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial shall not be disposed off or utilized in any manner before discharging the export obligation and realization of the export proceeds. It is not the case in the Show Cause Notice that the materials had been utilized in a manner contrary to condition (vii). (viii) Condition (viii) is about transferability of the licence. The licences under consideration have been used by the appellants and have not been transferred. This is also an admitted fact. (ix) It will be observed from the above factual position that all the eight conditions specified in the notification have been observed fully. Consequently, Sec. 111 (o) is not at all attracted in this case. The confiscation of the goods is, therefore, not correct. Since all the conditions are fulfilled, there cannot be any confiscation of goods under Sec. 111 (o) of the Customs Act, 1962. Reliance is placed on the decision of the Tribunal in the case of VBC Industries Ltd., Hyderabad v. C.C. vide Final Order No. 911/2003, dated 11-7-2003 [2003 (156) E.L.T. 872 (Tri. - Bang.)]. (j) Sec. 114A dealing with mandatory penalty is attracted only in cases where the non-levy or short-levy of duty is by reason of collusion or wilful mis-stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
