Custom, Excise & Service Tax Tribunal
Vkc Nuts P Ltd vs Commissioner Of Customs-Nhava Sheva-I on 27 June, 2024
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
WEST ZONAL BENCH
CUSTOMS APPEAL NO: 85120 OF 2024
[Arising out of Order-in-Original No: 24/2023-24/Commr/NS-I/CAC/JNCH dated
12th May 2023 passed by the Commissioner of Customs (NS-I), Nhava Sheva.]
VKC Nuts P Ltd
B-23 Sector 63, Noida Gautam Budhha Nagar,
Uttar Pradesh 201301 ... Appellant
versus
Commissioner of Customs (NS-I)
Jawaharlal Nehru Customs House, Nhava Sheva,
Tal: Uran, Raigad, Maharashtra 400707 ...Respondent
WITH CUSTOMS APPEAL NO: 85121 OF 2024 [Arising out of Order-in-Original No: 24/2023-24/Commr/NS-I/CAC/JNCH dated 12th May 2023 passed by the Commissioner of Customs (NS-I), Nhava Sheva.] Sunrise Freight Forwarders Pvt Ltd 310, Monarch Plaza, Plot No. 56, Sector-11 CBD Belapur, Navi Mumbai 400 614 ... Appellant versus Commissioner of Customs (NS-I) Jawaharlal Nehru Customs House, Nhava Sheva, Tal: Uran, Raigad, Maharashtra 400707 ...Respondent AND CUSTOMS APPEAL NO: 85122 OF 2024 [Arising out of Order-in-Original No: 24/2023-24/Commr/NS-I/CAC/JNCH dated 12th May 2023 passed by the Commissioner of Customs (NS-I), Nhava Sheva.] C/85120-85122/2024 2 Spire Logistics India Pvt Ltd No. 1, Shree Arpan Building, Plot No. C-1, Sector-14 Diwale Goan CBD Belapur, Navi Mumbai-400 614 ... Appellant versus Commissioner of Customs (NS-I) Jawaharlal Nehru Customs House, Nhava Sheva, Tal: Uran, Raigad, Maharashtra 400707 ...Respondent APPEARANCE:
Shri Prakash Shah, Advocate for the appellants Shri P A Daulatkhan, Deputy Commissioner (AR) for the respondent CORAM:
HON'BLE MR C J MATHEW, MEMBER (TECHNICAL) HON'BLE MR AJAY SHARMA, MEMBER (JUDICIAL) FINAL ORDER NO: 85637-85639/2024 DATE OF HEARING: 12/02/2024 DATE OF DECISION: 27/06/2024 PER: C J MATHEW In these appeals, the principal challenge is to the propositions in the order1 of Commissioner of Customs (NS-I), Jawaharlal Nehru Customs House (JNCH), Nhava Sheva that cost preference behaviour in business underlies legislative sanction in Foreign Trade (Development & Regulation) Act, 1992 by which the Director General of Foreign Trade (DGFT) crafts 'export promotion schemes' in the 1 [order-in-original no. 24/2023-24/Commr/NS-I/CAC/JNCH dated 12th May 2023] C/85120-85122/2024 3 Foreign Trade Policy (FTP) and that, stemming from renunciation of authority to collect duties of customs which, but for exemption under Customs Act, 1962 to give effect to such schemes, was leviable, 'proper officer' under Customs Act, 1962 was empowered to specify the article of import even in the absence of such details in the said notification and despite the scheme confining itself to generic descriptions. In the framework of this dispute, cavil is about the conclusion that, absence of specific exclusion from the product group in 'standard input output norms (SION)' in the Handbook of Procedures (HoP) appended to the Foreign Trade Policy (FTP) notwithstanding, empowerment to decide that 'dietary fibre' permitted to be imported for manufacture of 'biscuits' did not include 'inshell walnuts' was vested in customs authorities responsible for assessing liability to duty on imports effected under the said scheme; that the assessing officer not having so done at time of import sufficed to empower the Commissioner of Customs to make amends in the impugned proceedings. In effect, it is the recovery of ₹ 26,82,71,059 as differential duty under section 28 of Customs Act, 1964, along with applicable interest under section 28AA of Customs Act, 1962, the appending of ₹ 2,00,00,000 as fine under section 125 of Customs Act, 1962 consequent upon holding 'inshell walnuts' valued at ₹ 24,38,82,774 on import against seven bills of entry as liable to confiscation under section 111(o) of Customs Act, 1962 after rejecting entitlement to benefit of notification no. 98/2009-Cus C/85120-85122/2024 4 dated 11th September 2009 claimed on clearance of 'inshell walnuts' against 64 bills of entry and the imposition of penalty of like amount under section 114A of Customs Act, 1962 besides taking recourse to section 112 of Customs Act, 1962 for imposing penalties of ₹ 10,00,000 each on M/s Sunrise Freight Forwarders Ltd and M/s Ramji Devshi Shah & Co, customs brokers, and of ₹ 1,00,000 on M/s Spire Logistics India Pvt Ltd that is assailed here.
2. M/s VKC Pvt Ltd had imported 'inshell walnuts' by deploying the impugned scrips belonging to M/s Global Exim, as well as others, that had been rendered freely transferable by the Directorate General of Foreign Trade (DGFT) on completion of export obligation and made available, while yet in possession of the said holders, on negotiated consideration per consignment of import to customs broker concerned for necessary endorsement by customs authorities. It is common ground that the 'standard input output norms (SION)' for the export product permitted 'dietary fibre source' and 'food flavouring' and which, with no further detailing, sufficed for the 'proper officer' to construe broadly enough as allowing 'inshell walnuts' the privilege of exemption. During the course of investigations, several consignments had been seized which, barring one, came to be released as the sources of procurement were evinced either as local or, even if imported, was eligibly effected as 'other confectionery ingredients - nut and nut products' in contrast with those imported as 'dietary fibre' that, though C/85120-85122/2024 5 released provisionally after seizure under section 110 of Customs Act, 1962 with the others, were confiscated in the impugned order for fine to be levied in lieu thereof. Relying on sources, lacking provenance though, it was taken note of that the impugned goods were made up of 'dietary fibre' only to the extent of 7%, with fat of 65%, though 'polyunsaturated fat', comprising 'alphalinoleic acid' (14%) and 'linoleic acid' (58%), of 72% was present, along with water of 4%, protein of 15% and carbohydrates of 14% for asserting that '26.1 .....Since walnut contains only 7% dietary fibre and it is relatively much expensive vis-à-vis the other sources of dietary fibre viz wheat bran, barley bran, oat bran etc., no prudent/sensible manufacturer would use walnut to provide dietary fibre in the biscuit and doing so would not make commercial and practical business sense.
26.2......Allowing the import of all primary food articles other than oils and fat against the import item of 'Dietary Fibre under the DFIA scheme, in terms of Notification No. 98 of 2009-Cus, dated 11.09.2009, does not appear to be as per the legislative intention behind the whole DFIA scheme.' thus setting forth the proposition supra of 'prudent and/or sensible' as inhering in the scheme as well as suggesting that customs notification had not manumitted the eligible inputs from mandate, that admittedly restricts usage when imported prior to exports, of use in manufacture of outputs even after export obligation has been fulfilled to attend upon the secondary proposition of 'end use' being entailed forever on imports against scrips. It was also posited that the remaining inputs, C/85120-85122/2024 6 viz., cocoa powder and fruit, as well as food flavours, did also not provide for fitment as the two former are not either interchangeable with, or produced from, walnuts, and the latter was not ever contemplated as anything not commonplace and beyond commercially viable. Further, relying upon titles of chapters in Import Trade Classification (ITC-HS) appended to the Foreign Trade Policy (FTP), it was enunciated that 'walnuts' are covered by a chapter other than that for 'dietary fibre' and 'food flavouring' in chapter 23 and chapter 21 or chapter 33 therein while inferring from presence of 'nuts/nut products' among imports permitted for manufacture of 'assorted confectionery' in 'standard input output norms (SION)' that, absent such specific inclusion, entitlement was not claimable for manufacture of 'biscuits' to be exempted.
3. It is seen from the impugned order that 'proprioception' did set the tone for adjudicatory disregard of decisions of the Tribunal and High Courts on grounds of 'sub silentio' for not having had the benefit of sage wisdom from the bar during arguments. There was additional layering for discard of judicial pronouncements that, remaining unchallenged only for reason of 'public interest convenience', was claimed as insulated under the authority of section 131BA of Customs Act, 1962. In girding itself for the battle to come, the armour of strict interpretation of exemption notification, settled by the Hon'ble Supreme Court in Commissioner of Customs (Import), Mumbai v. Dilip C/85120-85122/2024 7 Kumar & Company [2018 (361) ELT 577 (SC)], was also donned while refusing to accept the breastplate of report from Central Revenue Control Laboratory (CRCL) for its lack of expertise in matters of food and nutrition, in contrast with familiarity of matters chemical, with the selectivity attributable to the desire for exclusion of test reports against which goods had been cleared in the past.
4. According to Learned Counsel for appellants, the imports of 'inshell walnuts' had been effected against sixty four bills of entry between September 2018 and March 2019 and, having been cleared on declaration of eligibility for exemption afforded by notification no. 98/2009-Cus dated 11th September 2009 against transferable 'scrips', was beyond the pale of recovery by recourse, in show cause notice of 30th September 2020, to section 28 of Customs Act, 1962 owing to the time frame in proviso to section 28(9) of Customs Act, 1962 that, especially after the amendment in Finance Act, 2018, brooked no ground for delay except in circumstances embodied therein. He contended that the privilege of exclusion of time, contemplated in section 28(9A) of Customs Act, 1962, was not available in these proceedings as the legal pre-requisite of notice from 'proper officer' of intendment to call 'time out' had been ignored and even the communication, such as it was, citing instruction no. 04/2021-Customs dated 17th March 2021 of Central Board of Indirect Taxes & Customs (CBIC) enjoining such cases of doubtful consequence to be transferred to 'call book' had long since ceased to C/85120-85122/2024 8 subsist when the impugned order was issued. He submitted that an officialdom displaying such scant regard for enacted law was barred from the protection of that very law in service of its 'unpublic interest' for unjustified demand of duty.
5. It was further contended by Learned Counsel that eligibility for import was no longer in dispute in view of decision of the Hon'ble High Court of Bombay in Commissioner of Customs, Nhava Sheva-V v. VKC Nuts Pvt Ltd [2022 (9) TMI 26 - BOMBAY HIGH COURT] which has dealt with all the issues in contention and which, despite specific directions to the appellants therein to consider the facts and precedent decisions that were before the Hon'ble High Court, the adjudicating authority not only declined to do but went to the extent of doubting the conclusion therein as having been rendered sub silentio in arguments limited to substantial question of law not subsisting. It was argued that other decisions, including that of the Tribunal in Uniborne Food Ingredients LLP v. Commissioner of Central Excise, Hyderabad [2019 (369) ELT 1048 (Tri-Hyd)] which had followed the decision of the Hon'ble High Court of Madhya Pradesh in Global Exim v. Union of India [2019 (365) ELT 359 (MP)], that were approvingly referred to in re VKC Nuts Pvt Ltd by the Hon'ble High Court of Bombay had been discarded in breach of all canons of judicial discipline; according to Learned Counsel, non- appeal for low tax effect could not, in the absence of public record offering evidence that Revenue did have contrary viewpoint let alone C/85120-85122/2024 9 cogent reasons for such, dilute the precedent value of a decision. The casual discard of the decision of the Hon'ble High Court of Punjab & Haryana in Pushpanjali Floriculture Ltd v. Union of India [2016 (324) ELT 32 (P&H)] without validating reasons was, according to Learned Counsel, abhorrent for insinuating the contrary proposition of 'actual use' which is neither to be found in the rubric of the export promotion scheme nor in the corresponding notification issued under Customs Act, 1962 or, for that matter, even in the show cause notice.
6. It was further contended by Learned Counsel that the issue was never about 'dietary fibre' being 'inshell walnuts' but about 'inshell walnuts' being 'dietary fibre' - a distinction that the adjudicating authority conveniently ignored - in contriving to reject the report of their own laboratory as well as other expert opinion and in taking refuge in classification clusters without adherence to the General Rules for Interpretation of the Import Tariff for inexplicable disowning of the amendment sheets issued by the licencing authority clarifying the scope of 'dietary fibre' on unacceptable pretext. According to Learned Counsel, an obligation, or responsibility, that was not fastened on the exporting licence-holder could not be brought to bear on a transferee of such licence after fulfillment of export obligation; he argued that neither had the customs authorities supervising export nor the licencing authority endorsing transferability identified any confining sphere for 'dietary fibre' by use in manufacture of the biscuits or from the cost of C/85120-85122/2024 10 production of biscuits. On the finding of the adjudicating authority in the illogic of business sense in use of 'walnuts' for the manufacture of biscuits, Learned Counsel relied upon the decision of the Tribunal in Commissioner of Customs, New Delhi v. Uttam Singh Manohar Singh [2013 (295) ELT 409 (Tri-Del)] to demonstrate that, in imposing detriment, circumstances had been inappropriately appreciated. He submitted that it cannot be denied that 'inshell walnuts' did comprise 'dietary fibre' and that the report of Central Revenue Control Laboratory (CRCL) favoured this view while the adjudication order, in contrast and absent legal authority to do so, held the 'dietary fibre' in 'inshell walnuts' to be not sufficient for viable acceptance in a business proposition.
7. According to Learned Authorized Representative, the appellant had produced amendment sheet pertaining to only one licence whereas several had been utilised for imports and the licencing authority had been unable to confirm those to have also been similarly authorized. It was argued that the Hon'ble High Court of Bombay had merely examined the jurisdictional competence of the Tribunal to decide on provisional release and the finding that no substantial question of law had been argued concatenated with discard of report of Central Revenue Control Laboratory (CRCL) and distinguishment of the decision in re Global Exim as clearly brought out in the impugned order. It was contended by him that the decision in re Uni Bourne Food C/85120-85122/2024 11 Ingredients LLP would not apply as that was rendered in the context of a clarification from the licencing authority and submitted that it would be absurd for a chemical in an article to substitute as description of the article. According to him, the decision of the Hon'ble High Court of Bombay in Commissioner of Customs (Export), Mumbai v. USMS Saffron Co Inc [2016 (344) ELT 161 (Bom)] could not be a binding precedent as it was concerned with 'saffron' which the impugned goods was not.
8. The dispute before us pertains to imports effected between 2019 and 2022 against authorization issued much earlier and even made transferrable subsequently to enable imports of several ingredients for manufacture and export of 'biscuits' that, unarguably, deployed 'dietary fibre' - an expression that does not exist in the Harmonized System of Nomenclature (HSN) and the hierarchical parent of both the First Schedule to Customs Tariff Act, 1975 as well as the Import Trade Classification (HS) appended to the Foreign Trade Policy (FTP). The absence of meaning assigned to this expression did not appear to have troubled the adjudicating authority in resorting to one of the two pillars of assessment under Customs Act, 1962, viz., 'rate of duty', to conclude, even if not exclusively therefrom, that the scheme of export promotion did not envisage the generality of 'dietary fibre' to intend 'inshell walnuts' as permissible import. The economic unviability in import of 'inshell walnuts' for the manufacture of biscuits intended for C/85120-85122/2024 12 export was a vital aspect of the transactions that the adjudicating authority found as justifiable support for emplacement of such restriction.
9. The case of customs authorities is that 'walnut inshell' had been imported unauthorizedly against the 'scrips' as these had not been used in production of biscuits that had been exported for earning eligibility to import, inter alia, 'dietary fibre' under notification no. 98/2009-Cus dated 11th September 2009 without payment of duty and that, even if these did comprise 'dietary fibre', the composition thereof was insufficient to pass muster as commercially acceptable. It is not the case of the adjudicating authority that the impugned notification, administered by 'proper officer' in pursuance of empowerment to assess such imports to duty, excluded 'inshell walnuts' but that jurisdiction to interpret notification, concomitant to such empowerment, conferred authority to restrict entitlement to such 'dietary fibre' as was actually used by exporter. Even assuming that to be, the lack of identification of the eligible article that could be imported has, by recourse to post- clearance empowerment under section 28 of Customs Act, 1962, erased the entitlement in toto which is tantamount to altering the rubric of the export promotion scheme designed by authority that is neither subject to the jurisdiction of the Commissioner of Customs nor drawing empowerment from a statute subordinate to Customs Act, 1962. To arrive at the impugned conclusion, the adjudicating authority also withheld acknowledgement that 'scrips' did incorporate 'inshell C/85120-85122/2024 13 walnuts' by amendment and disowned the report of Central Revenue Control Laboratory (CRCL) for lack of domain expertise other than in chemical analysis; it falls within our appellate jurisdiction to determine the competence, jurisdictionally and evidentiary, so to do. It is the case of the appellant that infelicity on these counts has been compounded by erroneous discard of precedent decisions that, taken together, not only conclusively jeopardizes the impugned findings but that erasure of judicial legacy to overwrite its own contrived interpretation of the scheme and attendant notification is also the adjudicatory behaviour disapproved by the Hon'ble Supreme Court in Union of India v. Kamalakshi Finance Corporation Ltd [1991 (55) ELT 433 (SC)]; it also falls within our appellate jurisdiction to ascertain such obduracy in the impugned order.
10. It is on record that copy of one of the 'scrips' used for clearance did carry the amendment permitting 'inshell walnuts' within entitlement of import earned by export of 'biscuits' as resultant product. That similarly amended 'scrips' had not been furnished at the time of imports for clearance of the rest is not contended by the adjudicating authority. It is also on record that, as transferee of part of entitlement under 'scrips', the appellant was not ever in possession of the originals. It is on record that the investigation agency had sought certain confirmations from the licencing authority. It would appear that even as response was pending, the notice came to be issued and was taken up for adjudication by presuming against the veracity of the C/85120-85122/2024 14 amendments. This militates against adjudicatory empowerment for several reasons. First and foremost, there no allegation that, at the time of import, these 'scrips' had not been produced or that the 'proper officer' under section 17 of Customs Act, 1962 had resorted to contrary, and incorrect, interpretation of 'dietary fibre' to allow clearance. It, therefore, behoved the show cause notice issuing authority to evidence otherwise and the presumption to the contrary on the part of the adjudicating authority by drawing upon non-response to the correspondence lacks legal sanction. There is also no narration of the efforts undertaken to pursue verification from the licencing authority; it is inconceivable that two wings of the Central Government - and both entrusted with the economic management of the State - are devoid of wherewithal to communicate with each other. This unfilled gap suffices to set aside the presumption contrived in the impugned order against validity of the imports.
11. The adjudicating authority ventured to rule out commercial feasibility of usage by adverting to the limited 'dietary fibre' content in 'inshell walnuts' as well as the disparity of chapters of First Schedule to Customs Tariff Act, 1975 covering 'inshell walnuts' and the generic expressions deployed in the 'standard input output norms (SION)' appended to the Foreign Trade Policy (FTP). While reason and logic have their place in communication, the authority to rely upon commercial feasibility for determining assessment or importability is C/85120-85122/2024 15 not evident in the law and the impugned order too has not chosen to enunciate. The tariff has a purpose which is set out in section 12 of Customs Act, 1962; while it may be useful in classification of the impugned goods, its relevance to nomenclature deployed in 'standard input output norms (SION)' appended to the Foreign Trade Policy (FTP) is also neither self-evident nor was conjectured upon in the impugned order. It is common ground that product group 'E5' - biscuits
- does not exclude 'inshell walnuts' from eligible 'materials' as far as 'standard input output norms (SION)' referred to in the scheme of the Foreign Trade Policy (FTP) and attendant notification under Customs Act, 1962 is concerned. It is on record that the adjudicating authority has cast aspersions on the domain competence of its own laboratory. We are unable to ascertain the existence of any public document that discounts the technical expertise of the laboratory or restricts its operations to chemical analysis. Hence, adjudicatory findings of such lacks legal and factual foundations. Indeed, it would appear that no Commissioner of Customs is empowered to venture upon circumscribing that jurisdiction by right of administrative supervision or delegated authority and it would appear to have been undertaken without appreciation of the appellate jurisdiction of the Central Revenue Control Laboratory (CRCL). It is all too clear that this contrived finding was resorted to solely to overcome the opinion that 'inshell walnuts' do contain 'dietary fibre' and deployed in production C/85120-85122/2024 16 of biscuits. The lack of factual and legal sustenance to this finding renders it untenable.
12. These forays into contriving technical justification for concluding that 'inshell walnuts' could not, reasonably, have been used in manufacture of 'biscuits' and exclusion of licencing authorization for import of 'inshell walnuts' could only be enabled from enlargement of jurisdiction in relation to 'post exportation' imports by distinguishing the impugned proceedings from decisions that differentiated the restrictions on goods imported before and after fulfillment of export obligation or by discarding others for one reason or the other. The adjudicating authority has chosen to disregard the decision of the Hon'ble High Court of Punjab & Haryana in re Pushpanjali Floriculture Pvt Ltd with a casual observation that the goods in question are dissimilar. Likewise, the decision of the Tribunal in re USMS Saffron Co was discarded for the same reason. The reliance placed by noticee on the decisions of the Hon'ble High Court of Madhya Pradesh in re Global Exim and of the Tribunal in re Unibourne Food Ingredients LLP was also discarded with a sweeping generalization of '50.1......I find that the real facts and legal position were not brought to the notice of the Hon'ble Courts and Tribunals in the above cited judgements. It is well settled position of law that such sub silentio judgement has no precedence value for future cases....' C/85120-85122/2024 17 in the impugned order. Thus it was that the findings of the Hon'ble High Court of Bombay on the impugned goods at the stage of 'provisional release' came to be discountenanced by the adjudicating authority as also the decision of the Hon'ble High Court of Bombay in Union of India v. Shah Nanji Nagsi Exports Pvt Ltd [2019 (367) ELT 335 (Bom)] which held that 'actual use' condition is not built into the export promotion scheme.
13. In re VKC Nuts Ltd, the observations of the Hon'ble High Court of Bombay on aspects of impugned goods being in compliance with the scheme of import were particularly relevant as the substantial point of law arising from decision of the Tribunal to release the goods unconditionally, which was carried to the Hon'ble High Court by the Commissioner of Customs only to be rejected thereupon, emanated from the finding that the goods could not be subjected to conditions for provisional release as settled law would not sanction confiscation itself; the conditions for release were erased by deeming the goods as 'not seized' for the purpose of section 110A of Customs Act, 1962 without interfering in the seizure under section 110 of Customs Act, 1962 which could be taken up for consideration only on conclusion of adjudication proceedings. Hence, it was incumbent on the adjudicating authority to base its decision within the framework set out by the Hon'ble High Court; failure to do so has compromised the confiscation rendered in the impugned order. The decision of the Hon'ble High Court in re Shah C/85120-85122/2024 18 Nanji Nagsi Exports Pvt Ltd is categorical and unambiguous; the scheme did not envisage the restrictions placed on 'pre exportation' imports to continue for 'post exportation' import of goods which are freed of 'actual use' requirement as well as condition of obligation to make good duty foregone under any circumstances. Non-consideration of this decision of the jurisdictional High Court is fatal to the impugned proceedings.
14. We cannot, for a moment, consider a Commissioner of Customs, in its adjudicatory jurisdiction, as competent to subject decisions of High Courts and Tribunals to scrutiny and critical evaluation; these may, at best, be distinguished on facts for non-applicability. In our view, a precedent is sub silentio when it is cited as binding even though the issue claimed to be settled had not been argued; it is liable to discarded only if the adjudicating authority demonstrates that had the missing argument been made, a different outcome would have occurred. The impugned order has not carried through that determination of sub silentio for discard on that ground to be found acceptable. We cannot but note that the nuanced approach of blanket discarding of a judicial decision on grounds of not having been appealed for reason of low tax effect is, in effect, a review of such order by the adjudicating authority without jurisdiction to do so or stems from unsound reasoning that every decision, and only such decisions, that set aside detriment or duty recovery is to required to be reviewed. The lack C/85120-85122/2024 19 of such exercise compromises the finding in the impugned order. Indeed, the summary dismissal of the cited decisions in the manner supra is breach of judicial discipline which the Hon'ble Supreme Court took strong exception to in re Kamalakshi Finance Corporation Ltd thus '6....... It cannot be too vehemently emphasised that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities. The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the department - in itself an objectionable phrase - and is the subject-matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent Court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws.' and the present adjudicating authority would do well to take to heart its place in the judicial hierarchy before venturing to criticize High Courts and Tribunals for having been misled. This cursory erasure of a catena of decisions that the Hon'ble High Court of Bombay drew attention to in disposing off appeal against provisional release of the impugned C/85120-85122/2024 20 goods is measure of irresponsibility on the part of an adjudicating authority determined to ignore any perceived impediment - legally enacted and judicially erected - to disentitle 'inshell walnuts' from eligibility to be imported.
15. It would have been our usual course of action in such cases to remedy the defects or remand the matter back to the original authority with the exhortation that law should be adhered to and judicial discipline to be complied with. To do so in the present instance would be tantamount to sanctification of illegal proceedings. With effect from assent to Finance Act, 2018, the injunction in section 28(9) of Customs Act, 1962 to complete adjudication within a year from date of notice was rendered absolute. It is on record that the proceedings were not completed within the statutorily stipulated time. Doubtlessly, section 28 (9A) of Customs Act, 1962 enabled flexing of this time frame in specific circumstances and subject to stipulated conditions among which is the mandate of notice from 'proper officer' that was not adhered to in the present instance. It must be noted that responsibility devolved on the 'proper officer' both to ensure that such deferment was made after proper application of mind about the event upon which the deferment was predicated and for the noticee to have opportunity for challenging the correctness of such intention to defer as well as to expect resumption of the 'inexorable cycle of time' upon termination of the triggering event.
C/85120-85122/2024 21
16. Even assuming that the intimation by Assistant Commissioner of Customs, in communication dated 7th April 2021 of instructions of Central Board of Indirect Taxes & Customs (CBIC) on such notices to be kept pending, was covered by section 28(9A) of Customs Act, 1962 and as due adherence, the appellant has contented that the said deferment could not, in the light of amendment by Finance Act, 2022, be kept pending beyond 30th March 2022. The adjudication of the notice dated 30th September 2020 only as late as 23rd May 2023 has stretched way beyond one year after the purportedly validating event of March 2022. As the senior authority of 'proper officer' had not permitted extension of the permitted period for completion of adjudication, the proceedings will have to be deemed as having been concluded well before the impugned order was issued. This stands confirmed by the decision of the Hon'ble High Court of Delhi in Gautam Spinners v. Commissioner of Customs (Import), New Delhi [2023 (386) ELT 62 (Del)] thus '13. Undisputedly, the SCNs' which had been issued against Anil Aggarwal and 11 other individuals did not stand on the same pedestal as the SCNs' impugned here since the former, undisputedly, had been issued by the officials of the DRI. In fact, it was those SCNs' which formed the primary subject matter of the Board's directives dated 17 March 2021 and 16 April 2021. As was noticed hereinbefore, the SCNs' which stand impugned in these petitions had admittedly been issued post the promulgation of those directives by the Board and admittedly by the competent jurisdictional Commissionerates.
C/85120-85122/2024 22
14. We thus find ourselves unable to accept the position of any legal impediment which could be recognised to have either fettered the jurisdiction or restrained the concerned jurisdictional Commissionerates from proceeding to finalize the SCNs' in accordance with Section 28(9)(b). The direction of similar SCNs' being placed in abeyance and which is an aspect which is referred to in the directives of the Board must necessarily be recognised to be restricted to those SCNs' which may have originally been issued by the DRI. This since undisputedly the judgment in Canon India did not place a cloud on the authority and jurisdiction of Customs authorities to initiate proceedings under section 28(4) or take those proceedings to their logical conclusion. The competent authority of Customs would have been justified in placing the impugned SCN proceedings pending only in a situation where the original SCNs' had been issued by an officer of the DRI. This since it was the aforenoted situation which confronted the Department in the matter of Anil Aggarwal. It was the factual position as obtaining in the matter of Anil Agarwal and 11 other noticees which was liable to be understood to constitute the "similar matter" spoken of in Section 28(9A) (c) of the Act.
15. We are thus of the firm opinion that the proceedings initiated against the present petitioners cannot be said to be covered under the directives of the Board noticed hereinabove. Those SCNs' would also not fall within the ambit of Section 28(9A)(c). Since admittedly, the maximum period as prescribed under section 28(9) has expired, those proceedings would not survive in law.'
17. As far as penalty under section 112 of Customs Act, 1962 imposed on the other appellants is concerned, these are consequent upon liability to confiscate having been determined under section C/85120-85122/2024 23 111(o) of Customs Act, 1962. In re Shah Nanji Nagsi Exports Pvt Ltd, the Hon'ble High Court of Bombay has held that no conditions can attach to goods imported against 'scrips' released from export obligation under authority of Directorate General of Foreign Trade (DGFT) thus '24. The statute should be read as a whole, in its context and scheme, to discover what each clause or word is meant and designed under the scheme. Interpretation of words and clauses must depend on the text and the context. There was no difficulty for the framers of the scheme to specifically lay down that the imported items must be used for manufacturing export items. However, in its absence the term 'can be used' must be interpreted as it stands. It simply conveys that the imported item should be potential to use but not necessary to be used. The scheme itself is of transferable authorisation and therefore in that context different interpretation cannot be made. Moreover, Clause 4.27(iv) conveys that wherever SION prescribes 'Actual User' condition, it will prevail. Herein, no such actual user condition is specifically prescribed by SION for relevant entry. Chapter 9 of the FTP, 2015-20 specifically defines the term 'actual user' as a person who utilizes imported goods for manufacturing in his own unit. It means that actual user condition relates to a person and not to a product. Therefore, the argument advanced by the petitioner regarding actual user condition would not sustain.
25..... The scheme never conveys that there is actual user condition attached to the import against the export obligation. It amounts to adding some conditions in the FTP when they never exist. Moreover, when the authorisation is made transferable under the scheme there is no question of actual C/85120-85122/2024 24 user condition.
26. It reveals that DFIA scheme is distinct than Advance Authorization Scheme where raw material is to be imported on authorization and to be used for manufacturing purpose. Basically, DFIA is post export scheme in which exporter has to first export goods and after realization of proceeds, exporter has to make an application to the authority, who after verification, grant DFIA certificate which is transferable. Therefore, there is no actual user condition inbuilt under the scheme.
The respondents relied on the Circular dated 14-11-2017 to impress about the actual user condition. It is countered on the point that the circular is in relation to the Advance Authorization Scheme and not about DFIA Scheme. Secondly, it is argued that the circular cannot have retrospective effect. In this regard, petitioner relied on reported case of the Commissioner of Customs-IV v. Lactose (I) Ltd., 2017 (355) E.L.T. 541 (Bom.). In said case, it is ruled that the policy circular would apply only if it is issued prior to the date of issuance of licence meaning thereby it has no retrospective effect. In that light on the basis of circular entitlement cannot be denied.
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28...... There is no "actual user condition" so as to restrict right of petitioner to import maize. So long as the export goods and the import item corresponds to the description given in the SION, it cannot be held to be invalid by adding something else which is not in the policy.' and it is not in dispute that eligible exports had earned privileges before impugned goods were imported. In the absence of condition appendant C/85120-85122/2024 25 to import, the liability to confiscation under section 111(o) of Customs Act, 1962 does not survive and, with that, penalties under section 112 have no basis in law.
18. In view of the above findings, the impugned order is set aside to allow the appeals.
(Order pronounced in the open court on 27/06/2024) (AJAY SHARMA) (C J MATHEW) Member (Judicial) Member (Technical) */as