Custom, Excise & Service Tax Tribunal
Ashok Enterprises vs Commissioner Of Customs (Exports) on 25 February, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH
CHENNAI
Appeal No.C/MISC/40214/2015 (By dept),
C/MISC/40299/2015 & C/181/2004
[Arising out of Order-in-Original No.1851/2004 dt. 31.3.2004 passed by the Commissioner of Customs (Exports), Chennai]
Ashok Enterprises Appellant
Versus
Commissioner of Customs (Exports),
Chennai
[sought to be changed as Commissioner of Customs
Seaport-Export, Chennai Commissionerate-IV] Respondent
Appearance:
Shri S. Dayaleeswaran, Advocate For the Appellant Ms. Indira Sisupal, AC (AR) For the Respondent CORAM :
Honble Shri R. Periasami, Technical Member Honble Shri P.K. Choudhary, Judicial Member Date of Hearing : 6.11.2015 Date of Pronouncement : 25.02.2016 FINAL ORDER No.40316/2016 Per R. Periasami There are two MISC applications, one filed by Revenue for change of cause title and the other application is filed by assessee for taking on record the additional grounds of the appeal memorandum.
2. Revenue seeks to change the cause title in so far as the respondent's name to be changed from "Commissioner of Customs, Seaport-Export, Custom House, Chennai-600 001" to "Commissioner of Customs, Chennai IV Commissionerate, Custom House, Chennai-600 001" in the wake of implementation of new Commissionerates. Accordingly, the MISC application filed by Revenue for change of cause title is allowed. Registry is directed to change the respondent's name as "Commissioner of Customs, Chennai IV Commissionerate, Custom House, Chennai-600 001" in all future proceedings.
3. The miscellaneous application filed by assessee for taking into account the additional grounds in the appeal is allowed. Both MAs are allowed.
4. Consequent to Hon'ble High Court's order dt. 20.10.2011 in C.M.A. No.2945 of 2005, the appeal is taken up for de novo hearing and decision.
5. The brief facts of the case are that appellants M/s.Ashok Enterprises, Chennai obtained Advance Licence from Jt. DGFT, Chennai declaring themselves as manufacturing exporter having factory at No.183, Walltax Road, Chennai 600 003. Based on the application and the statutory declaration made by the appellant, the Directorate of Foreign Trade issued 12 Advance Licences with actual user conditions for import of SS coils/sheets for manufacture and export of SS utensils by availing the benefits of Customs Notification Nos.30/97 dt. 1.4.1997 and 48/99 dt. 29.4.99.
6. Based on the intelligence that appellant misused the advance licence and contravened the Customs Notification by diverting the duty free imported raw materials instead of utilizing the same for manufacture of resultant export products, DRI conducted detailed investigation, visited the premises of the appellants and it was found that the premises indicated in the declaration given by the assessee was in possession of Mr. Krishnan and he was running a propriety concern in the name and style of "M/s.Shri Krishna Polishing Works". Officers visited the premises and recorded statements of the person who was in actual possession of the premises and also recorded statement from the proprietor of the importing firm. The proprietor of the appellant concern in his statement admitted that there was no rental agreement in respect of the premises bearing No.183, Walltax Road, Chennai 600 003. Based on the documents seized and the statements recorded, a show cause notice dt. 26.3.2003 was issued to the appellant to show cause as to why the exports of locally procured SS utensils should not be held admissible towards export obligation under the said Advance licences and why the benefit of notifications should not be denied on the entire import. After following the principles of natural justice, the Commissioner of Customs (Exports), Chennai in the impugned order No.1851/2004 dt. 31.3.2004 ordered as under :-
"(a) 1 hold that the export of 500.716 MTs of SS utensils valued at Rs. 5,43,75,495/- is inadmissible towards the export obligation under the said licences in as much as the exported goods were locally procured;
(b) 1 deny the benefit of duty exemption claimed, under Customs Notification No. 30/97 dated 01.04.97; 51/2000-Cus.,dated 27.4.2000 and 48/99 dated 29.04,1999 as amended, for the import of 638.368 MTs of SS Coils/sheets totally valued at Rs. 3,84,32,021/- made under the said licences;
(e) I demand the duty of Rs. 2,57,82,659/- on 638.368 MTs or SS coils/Sheets imported under the said licences, under proviso to Section 28(1) of the Customs Act, 1962 read with terms of the bond executed by them and as per the conditions of the Customs Notification No. 30/97 dated 01.04.1997, 51/2000 dated 27.04.2000 and 48/99 dated 29.04.99 as amended;
(d) I demand interest at appropriate rate under Section 28AB of the Customs Act, 1962 read with the terms of bonds executed and as per Customs Notification No.30/97 dated 1.4.97; 51/2000 dated 27.04.2000 and 48/99 dated 29.04.99 as amended;
(e) I order enforcement of the bonds/bank guarantee executed towards recovery of duty and other adjudication liabilities;
(f) 1 confiscate 638.368 MTs of S.S. Sheets/Coils totally valued at Rs. 3,84,32,021/- imported duty free, under section 111 (o) of the Customs Act, 1962. Since the goods are not available, 1 impose a fine of Rs. 40,00,000/- (Rupees Forty Lakhs only) under Sec 125 of the Custom Act, 1962.
(g) I impose a penalty of Rs.2,57,82,659 along with interest on the duty demanded, under Section 114A of the Customs Act, 1962, on M/s. Ashok Enterprises for rendering the aforesaid goods liable to confiscation."
Against this impugned order, appellant preferred appeal before this Tribunal. The Tribunal vide Final Order No.1072/2004 dt. 24.11.2004 allowed the appellant's appeal with consequential relief by relying the DGFT's order dt. 10.12.2003 and the Tribunal held that DGFT order is binding on the Customs authorities.
7. Revenue filed a C.M.A. against this Tribunal's order before the Hon'ble High Court, Madras and the Hon'ble High Court in their order dt. 20.10.2011 in C.M.A.No.2945/2005 set aside the Tribunal order and remanded to the Tribunal. Accordingly, the appeal is restored for de novo hearing and decision.
8. Learned Advocate appearing for the appellant submitted a written synopsis dt. 31.7.2015 and reiterated the same. He also submitted 3 volumes of bound typed set containing DEEC licences, test reports etc. He drew our attention to page 1 to 18 of Vol-I where he referred to Registration Certificate issued by the Department of Industries and Commerce (at Page 1) to the appellants unit as a small scale industry. He referred to Industrial production returns filed by appellants (at page 2-14) for the years 1996-2001 and the Registration cum Membership Certificate issued by Federation of Indian Export Organizations (F.I.E.O) [Ref.Page 17-18] wherein appellant is registered as manufacturer exporter having the address of factory at No.183, Walltax Road, Chennai-600 003. It was subsequently amended as Merchant-Exporter in 2002 as per FIEO Endorsement dt. 6.9.2002 available at page 18. Ld. counsel also relied on the certificate issued by the Superintendent of Central Excise, Chennai (Ref.Page 19 to 21). He also drew our attention to the application filed before the DGFT authorities for obtaining the licence (Page 22) and the licence issued by the DGFT (Page 33). He submits that as per the licence, they have fulfilled the export obligation and licensing authority have issued EODC (available at page 70, 71). He also referred to DEEC book Part I for import and Part-II for export. He also referred to SCN dt. 26.3.2003 (at page 79) wherein at para-8, the DRI made a reference to the Department of Industries and Commerce, Chennai and submitted a report on the registration issued to manufacturing premises and submits that no reply has been produced by the department so far. He also relied cross examination (at page 124) of the investigating officer and submits that no seizure was made. He submits that based on the DRI investigation and the report submitted to DGFT, DGFT also issued SCN dt. 14.2.2003 which is annexed at page 96 of Vol-I of the paper book. The JDGFT in his order dt. 10.12.2003 considered the investigation and the allegations of the DRI and dropped the proceedings in so far as fulfilment of export obligation except imposing a penalty of Rs.10,000/-on the appellant for non-intimation of job work. He submits that as per the annexures, test reports (Page 51-A), it clearly confirms that exports were made as per law and submits that as per Notification No.48/99 dt.29.4.99 and 30/97 dt. 1.4.97 they have fulfilled the conditions of Advance licences for actual user condition in the manufacture and fulfilled the export obligation. He relied the following citations :-
(1) Hy-Grade Pellets Ltd. Vs CC Visakhapatnam 2004 (171) ELT 177 (Tri.-Del.) (2) King Exports Vs CC Amritsar 2011 (266) ELT 318 (Tri.-Del.)
9. On the other hand, Ld. A.R reiterated the grounds of appeal made in C.M.A. and the Hon'ble High Court order and submits that High Court in their findings relied on Supreme Court order in the case of CCE New Delhi Vs Hari Chand Shri Gopal 2010 (260) ELT 3 (SC) and submitted that any exemption clause should receive strict construction. She explained the allegations brought out in the SCN and particularly drew our attention to statement of Shri R. Goutham Chand, Proprietor of appellant firm (page 77) and statement of Sri J.Krishnan (Page 78) wherein he has clearly admitted that the Proprietor Shri Goutham Chand had taken the premises of 183, Walltax Road, Chennai-3 on rent belonging to Krishnan and there was no rebuttal given. This clearly confirms that appellants are not the manufacturer of goods and not used the imported goods cleared at Nil rate of duty and not fulfilled the export obligation instead diverted the imported goods cleared under 12 advance licences. She submits that no factory premises of other persons existed. Retraction of statement has no evidence of manufacturing of goods by using imported raw materials. She submits that statements retracted are not supported with any corroborative evidence as there was no manufacturing facility existed and manufacturer had no capacity of manufacturing finished goods so as to fulfil export obligation under 12 advance licences. She relied the following decisions :-
(1) CCE New Delhi Vs Hari Chand Shri Gopal 2010 (260) ELT 3 (SC) (2) Navin Chemicals Mfg. & Trading Co. Ltd. Vs Collector 1993 (68) ELT 3 (SC) (3) Sheshank Sea Foods Pvt. Ltd. Vs Union of India 1996 (88) ELT 626 (SC) (4) South India Exports Vs JDFT 2004 (177) ELT 57 (Mad.) (5) CC Madras Vs D.Bhoormull 1983 (13) ELT 1546 (SC) (6) CC Chennai Vs Ashok Enterprises 2014 (302) ELT 191 (Mad.) (7) CC (Sea) Chennai Vs CESTAT Chennai 2009 (240) ELT 166 (Mad.) (8) CC Vs CESTAT Chennai/Gaur Impex 2009 (240) ELT 166 (Mad.) affirmed by Hon'ble Supreme Court in Gaur Impex Vs Com. - 2010 (249) ELT A28 (SC) (9) South India Exports Vs JDFT 2004 (177) ELT 57 (Mad.) (10) Pooja Exporters Vs Asst.Director, DRI 1989 (41) ELT 21 (Kar.) (11) 1992 (61) ELT 548 (Kar.) Kamath Packaging Ltd. Vs UOI (12) CC (Exports) Vs Pattu Exports Pvt. Ltd.
Hon'ble Madras High Court order dt. 28.11.2014 (13) CC Hyderabad Vs Pennar Industries Ltd.
2015 (322) ELT 402 (SC) (14) CC (Exports) Chennai Vs KRM International Ltd. & Others 2014-TIOL-1249-HC-MAD-CUS She submits that this is a clear case of violation of condition of the notification where the appellants imported S.S. coils/sheets with actual user conditions and it is proved that goods imported are not used in the manufacture of export goods thereby violated the condition of the notification. The adjudicating authority has rightly confirmed the demand and imposed penalty.
10. We have carefully considered the submissions of both sides and the directions of the Hon'ble High Court in their order dt. 20.10.2011 and perused the records. The issue before us is whether the appellant violated the condition of the Notification No.30/97 dt. 1.4.1997 and 48/99 dt. 29.4.99 as amended and whether they are entitled to the benefit of the said exemption notification availed for import of duty-free materials under Advance Licence as Actual user manufacturer-exporter. The adjudicating authority in his findings discussed the issue in detail and the modus operandi and misuse of Advance Licence and misuse of exemption notification and denied the benefit of exemption notification 30/97 dt. 1.4.97 and 48/99 dt. 29.4.99 on the grounds that the appellants had no manufacturing unit at the declared premises and not used the imported S.S. coils/sheets for manufacture of final product. On the other hand, the appellants relied JDFT's order dt. 10.12.2003 dropping the proceedings in so far as fulfilment of export obligation and cancellation of Bond and the export documents and contended that once the Licensing Authority accepted the export obligation, the Customs has no power to deny the benefit of Advance Licence.
11. The appellants obtained 12 Advance Licences for import of duty free raw material i.e. SS coils. On perusal of Advance Licence No.0410016181/19.7.2001 (annexed at page 33 Vol-I of paper book) we find that the said licence was issued to the appellant with actual user condition. Under the column "Class of Importer:", it is described as "Exporter-Manufacturer-Exporter" and the column "Export Product:", it is mentioned as "Engineering Products". Name of item allowed for import is stated as "Non-magnetic Stainless Steel Sheets/Coils (AISI 304 Grade) Qty-13 MT CIF Value Rs.27,26,000.00 USD 58,000.00. Clause-2 of the said licence stipulates that this licence shall be subject to the conditions contained in clause 6 of Foreign Trade (Regulations) Rules 1993 as amended. On perusal of the condition sheet attached to the said licence, we find the details of export items, quantity and FOB value are described in the condition sheet with 7 conditions: The conditions No.3, 5 and 7 which are relevant to the present dispute are reproduced as under :-
3. The exempt goods imported against this licence shall only be utilised in accordance with the provisions of the Export Import Policy 1997-2002 and the concerned customs notifications No.50/51/2000 dt. 27/04/2000 as amended from time to time.
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5. The licence holder shall maintain a true and proper account of consumption and utilization of imported goods in the proforma given in Appendix-21 of the Handbook of Procedure 1997-2002.
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7. For sensitive items customs to carryout necessary checks.
The DEEC Book No.A 053819 dt.19.7.2001 Part-I (Import) issued to the appellants for the above Advance Licence (Page. 37) bears the condition which reads as under :-
Materials imported against Licence No.0410016181 dated 19.7.2001 issued by JDGFT, Mds-14 to the above licence and covered by the list of materials specified in list (a) Part 'C' of this certificate would be eligible for exemption from duty of Customs specified in the first schedule to the Customs Tariff Act, 1975 (51 of 1975) subject to the conditions specified in the Notification of the Government of India, Ministry of Finance, Department of Revenue No.51/2000/Customs, dated 27.4.2000.
The Part 'A' of the above DEEC contains Names and addresses of factories where the resultant products are manufactured. The address of the factory mentioned as :
"M/s.Ashok Enterprises, No.183, Walltax Road, Chennai-600 003"
The Part-II of DEEC relates to Export product and the name and address of factories where resultant product manufactured is indicated the same address as figuring in Part 'A' of DEEC Book (Import).
The conditions No.3, 5 and 7 of the said licence are mandatory. Condition 3 stipulates that the imported goods shall only be utilised in accordance with provisions of EXIM Policy 1997-2002 and the Customs Notification 50/51/2000.
Condition No.5 mandates that the appellant shall maintain a true and proper account of consumption and utilisation of imported goods as per proforma given in Appendix 21 of Hand Book of Procedures and Condition No.7 stipulates that for sensitive items customs should carry out necessary checks.
12. The investigation proved that the so called premises No.183, Walltax Road, Chennai-3 declared by the appellant as the address of factory was actually in possession of one Mr. Krishnan who was running a propriety firm in the name of "Sri Krishna Polishing Works" in the above address. On perusal of statements of the Mr. R. Goutham Chand, Proprietor of the appellant company we find in his statements dt. 10.1.2003 and 25.1.2003 he had clearly admitted the fact that small workshop of 200 sq.ft. at No.183, Walltax Road, Chennai was owned by Mr. Krishnan, and he did not have any rental agreement with Mr.Krishnan nor any profit sharing arrangement. He also admitted that he had no other factory or premises for manufacture of resultant goods and admitted that he procured the utensils in the local market and exported towards fulfilment of export obligation under DEEC Licences. This was corroborated with the statement dt. 13.1.2003 of Mr.Krishnan, Proprietor of "Krishna Polishing Works", wherein he clearly stated that the appellant had obtained SSI Registration by declaring his premises as manufacturing unit and also admitted M/s.Ashok Enterprises never existed or functioned at the said premises No.183, Walltax Road, Chennai. These facts were clearly discussed by the Commissioner, Customs in para 5.1 to 6.2 of the impugned order. The above facts confirm that the name and address of factory declared in the licence belongs to another person and had no machineries for manufacture of resultant products from the imported S.S. coils/sheets. Further, the appellants failed to maintain any records of account of consumption and utilisation of imported raw material. Further, it is evident that the S.S. coils/sheets imported by the appellant under these Advance Licences are sensitive items and the investigation by the DRI proved that the appellants failed to produce any evidence against the charges.
13. The Customs Notifications 30/97, 48/99 as amended by Notfn 50/51/2000-Cus. dt. 27.4.2000 issued under Section 25 of Customs Act, exempts the whole of Customs duty, Additional Customs duty and Anti-dumping duty subject to the conditions. Condition No.(ii) of the said notification mandates that the appellant shall execute Bond with security equal to the customs duty with a binding to pay the duty himself in the event of failure of the conditions of the said notification. The conditions stipulated in the DEEC Advance Licence and DEEC Book are part of the conditions of the notification. The appellant obtained these licences as manufacturer-exporter declaring the factory premises for manufacture of resultant product and it is proved that there is no such factory of the appellant in the said premises. Thus, they failed to comply with the condition of the notification.
14. The appellants relying on Membership certificate issued by FIEO has no relevance to the fulfilment of conditions of notification. Similarly the certificate obtained from the Superintendent of Central Excise has no relevance when the appellant is not registered with Central Excise for manufacture of excisable goods. When these facts were putforth by the Revenue with precision, the department has duly discharged the burden of proof and it is for the appellant to establish with credible evidence and to prove to the contrary.
15. The Hon'ble Supreme Court in the case of CC Madras Vs D.Bhoormal (supra) held that the department would be deemed to have discharged the burden if it adduced evidence direct or indirect. The relevant paragraphs of Supreme Court order are reproduced as under :-
40. In the case before us, the circumstantial?evidence suggesting the inference that the goods were illicitly imported into India, was similar and reasonably pointed towards the conclusion drawn by the Collector. There was no violation of the rules of natural justice. The Collector had given the fullest opportunity to Bhoormull to establish the alleged acquisition of the goods in the normal course of business. In doing so, he was not throwing the burden of proving what the Department had to establish, on Bhoormull. He was simply giving him a fair opportunity of rebutting the first and the foremost presumption that arose out of the tell-tale circumstances in which the goods were found, regarding their being smuggled goods, by disclosing facts within his special knowledge.
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44. These fundamental principles, shorn of?technicalities, as we have discussed earlier, apply only in a broad and pragmatic way to proceedings under Section 167(8) of the Act. The broad effect of the application of the basic principle underlying Section 106 of the Evidence Act to cases under Section 167(8) of the Act, is that the Department would be deemed to have discharged its burden if it adduces only so much evidence, circumstantial or direct, as is sufficient, to raise a presumption in its favour with regard to the existence of the fact sought to be proved. Amba Lals case, (1961) 1 SCR 933 = 1983 E.L.T. 1321, was a case of no evidence. The only circumstantial evidence viz. the conduct of Amba Lal in making conflicting statements, could not be taken into account because he was never given an opportunity to explain the alleged discrepancies. The status of Amba Lal viz. that he was an immigrant from Pakistan and had come to India in 1947-before the customs barrier was raised-bringing along with him the goods in question, had greatly strengthened the initial presumption of innocence in his favour. Amba Lals case thus stands on its own facts.
The apex Court's above decision is squarely applicable to the present case as we find the appellant has not adduced any evidence or records against the charges levelled by the revenue either on the receipt of materials in their factory or consumption and manufacture of finished goods in the said premises. Since the appellant declared themselves as actual user manufacturer-exporter, it is mandatory to maintain the production records as per the Hand Book of Policy. Instead of producing valid evidences to prove that they had utilized the imported S.S coils/sheets in the manufacture of resultant product in their above declared factory address, the appellants chose to take shelter under JDGFT's order that they have fulfilled export obligation. 16. In this regard, the Hon'ble Madras High Court order dt. 20.10.2011 reported in 2014 (302) ELT 191 (Mad.) while allowing the Revenue appeal clearly held that the Department is entitled to proceed against the entitlement of duty exemption availed under Customs Notification No.30/97 dt.1.4.1997 and 40/99 dt. 29.4.1999 as amended. The relevant paragraphs of the Madras High Court's order are reproduced as under :-
14. The question that falls for our consideration in? this appeal is as to whether, the assessee is entitled to the benefits of Customs Notifications. The Rate of duty is not in dispute. The entitlement of the assessee to the benefits of the customs notification alone is the issue. Therefore, the appeal is clearly maintainable before this Court. We, therefore, reject the contention raised by the learned senior counsel for the assessee with regard to maintainability.
15. The license issued to the assessee described them? as manufacturers exporters. The address of the factory is also found mentioned in the license. The assessee claimed the benefits of the customs notifications. Advance licenses were used for the purpose of importing raw materials without payment of duty, undertaking to use those raw materials in the manufacture of final products with a clear understanding that such products would be exported. When the assessee availed the advance license with actual user condition, they are expected to prove that the imported raw materials were actually used in the manufacture of final products and it was ultimately exported.
16. The inspection conducted by the officials of the? Customs Department found that there was no such factory manufacturing SS Utensils as indicated in the license issued to the assessee. Even according to the assessee, he purchased utensils of grade AISI 304 and exported the same under DEEC Scheme. Hence the Department produced prima facie materials that the imported materials were not subjected to manufacturing activities in the factory shown in the license. It is for the importer to produce contra materials to prove their case of usage of imported materials for manufacturing utensils and the ultimate export.
17. The issue herein relates to the claim of exemption. The party who makes a claim for exemption should prove his case by producing positive materials that they are entitled to exemption. It is not for the Department to prove otherwise. It is trite that exemption notification should be construed strictly.
18. The customs authorities exercise jurisdiction under? the Customs Act. Section 111 empowers the Customs Department to confiscate the goods improperly imported from the place outside India. Section 111(o) deals with confiscation of exempted goods, in case the conditions under which import was permitted was not fulfilled. The jurisdiction of the Director General of Foreign Trade on this issue is entirely different. The said authority is concerned only with the violation of license conditions, which is relevant for the purpose of cancelling the license. It is only when the assessee is given a license, they would be in a position to import materials without payment of duty. The question is whether the importer has satisfied the conditions laid down in the customs notification, is a matter to be decided by the Customs Authorities. The Director General of Foreign Trade has no jurisdiction in such matters. In case it is made out that the assessee has violated the conditions, necessarily, they will be liable to pay duty.
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21. In? Sheshank Sea Foods Pvt. Ltd. v. Union of India [1996 (88) E.L.T. 626 (S.C.)], the issue before the Supreme Court was whether the Customs Authorities were right in initiating proceedings for the alleged violation of the terms of advance licenses. The licensee in the said case contended that the Licensing Authority [Director General of Foreign Trade] alone had the jurisdiction to investigate the alleged violations. The Supreme Court negatived the said contention and observed that the breach is not only of the terms of the license, it is also a breach of the conditions incorporated in the Exemption Notification, upon which the assessee obtained exemption from payment of Customs Duty and therefore, the terms of Section 111(o) enable the Customs authorities to investigate the matter.
22. A Division Bench of this Court had an occasion to? consider a similar matter in M/s. South India Exports v. Joint Director of Foreign Trade and Another in (W.A. No. 1884 of 2003 etc. batch) [2004 (177) E.L.T. 57 (Mad.)]. In the said case, the assessee contended that the violation of the license could be dealt with only under the Foreign Trade (Development and Regulation) Act, 1992 and that too by Licensing Officer and the Customs Department has no authority to take up the matter. The Division Bench considered the authorities on the point and observed thus :-
23?The basic issued in the proposed enquiry by the Customs authorities appears to be as to whether there at all was a manufacturing factory or manufacturing unit for utilizing the imported stainless steel sheets and if such manufacturing unit was not there, how the imported stainless steel sheets were actually utilized. It is also true that the further question in that enquiry is going to be as to whether it was the imported material alone which was used in the manufacturing activity. Now, if there was no manufacturing unit available or any such manufacturing unit as would have the capacity to manufacture the goods worth crores of rupees, how was the imported stainless steel utilized. The question would not only be misrepresentation while getting the Advance License but also about the utilization of the imported material, which would squarely fall under Sec. 111(o) of the Customs Act.
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24. The issue? regarding utilization of the imported materials would fall under Section 111(o) of the Customs Act, When the Customs Department is given independent authority to decide the question regarding the claim of exemption and as to whether the assessee has complied with the conditions so as to enable them to claim exemption, it cannot be said that they are not entitled to proceed in case the Joint Director General of Foreign Trade decides the matter in favour of the assessee.
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26. The claim of the assessee was on the basis of? exemption notifications. Therefore, it is for the assessee to prove that they are entitled to the exemption.
27.In? Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal, 2010 (260) E.L.T. 3 (S.C.), the Supreme Court observed that the exemption clause should receive strict construction. The Supreme Court said :-
Exemption clause Strict construction The law is well settled that a person who claims exemption?22. or concession has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. In Novopan India Ltd. this Court held that a person, invoking an exception or exemption provisions, to relieve him of tax liability must establish clearly that he is covered by the said provisions and, in case of doubt or ambiguity, the benefit of it must go to the State. A Constitution Bench of this Court in Hansraj Gordhandas v. CCE and Customs held that such a notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification i.e. by the plain terms of the exemption.
28. The CESTAT proceeded on the premise that only the? Director General of Foreign Trade has authority to decide the issue regarding misuse of advance licenses. While quashing the order passed by the Commissioner of Customs, CESTAT ignored the basic fact that the proceedings in question was initiated only under the provisions of the Customs Act and more particularly under Section 111(o) of the Act. The Customs Authorities have nothing to do with the order passed by the Joint Director General of Foreign Trade. Entitlement of duty exemption is a matter to be decided by the Customs Authorities. Joint Director General of Foreign Trade is concerned only with the Import License. The conclusion arrived at by the Director General of Foreign Trade in the matter of alleged violation of Advance License has absolutely no bearing on the question to be decided by the Customs Department under Section 111(o) of the Customs Department. This aspect was not considered by the CESTAT.
The Hon'ble High Court clearly discussed the merits of the case and relied apex Court judgements in the case of CC Vs Harichand Sri Gopal (supra) and relied Navin Chemicals Mfg. & Trading Co. Ltd. Vs Collector (supra), Sheshank Sea Foods Pvt. Ltd. Vs Union of India (supra) and also relied Madras High Court's decision in South India Exports Vs JDFT (supra) and held that mere discharge of export obligation per se cannot put an end and customs authorities has right to initiate proceedings against the importer for breach of condition of the exemption notifications. It is clearly established from the facts discussed in preceding paragraphs that the appellants had not utilised the quantity of S.S. coils imported under the DEEC Advance Licences and cleared duty free under the said exemption notification and failed to comply the condition of the notification and the adjudicating authority rightly denied the benefit of exemption notification.
17. In this regard, the Hon'ble Supreme Court judgement in the case of Seshank Sea Foods Pvt. Ltd. Vs UOI (supra) held the powers of customs under Section 110 and Section 111 (o) and Section 124 of the Customs Act for breach of condition of exemption notification. The relevant paragraphs are reproduced as under :-
9. Section 111(o) states that when goods are? exempted from Customs duty subject to a condition and the condition is not observed, the goods are liable to confiscation. The case of the respondents is that the goods imported by the appellants, which availed of the said exemption subject to the condition that they would not be sold, loaned, transferred or disposed of in any other manner, had been disposed of by the appellants. The Customs authorities, therefore, clearly had the power to take action under the provisions of Section 111(o).
10. We do not find in the provisions of the Import?and Export Policy or the Hand Book of Procedure issued by the Ministry of Commerce, Government of India, anything that even remotely suggests that the aforesaid power of the Customs authorities had been taken away or abridged or that an investigation into such alleged breach could be conducted only by the licensing authority. That the licensing authority is empowered [to] conduct such an investigation does not by itself preclude the Customs authorities from doing so.
18. Further the Hon'ble High Court of Madras in the case of CC Vs CESTAT Chennai/Gaur Impex 2009 (240) ELT 166 (Mad.) set aside the Tribunal order and allowed the revenue appeal on the identical issue of Advance Licence obtained under Actual User Condition and the importer mis-represented of having manufacturing unit. The relevant paragraphs are reproduced as under :-
4.?The allegation against the second respondent was that they were not entitled to the benefit of Notification No. 48/99 and therefore were liable for payment of duty for the goods imported. A show cause notice dated 6-3-2003 was issued by the Deputy Director, Directorate of Revenue in Intelligence, Chennai, (hereinafter referred as DRI), calling upon the second respondent to show cause within thirty days of receipt of the notice as to why the benefit of Notification No. 48/99-Customs dated 29-4-1999 should not be denied for 86.963 metric tonnes of copper scrap valued at Rs. 48,73,614/- imported by the second respondent for under the annual Advance Licence dated 10-7-2001, in view of the fact that the licence was obtained by giving a false information that they have a factory for manufacture of the export product, which was according to the Department a non-existing factory and hence they are not eligible to obtain the Annual Advance licence in question.
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31.?We are entirely in agreement with the law laid down by the Division Bench of this Court as stated above, which has followed the decision of the Honble Supreme Court in the case of Sheshank Sea Foods and we are inclined to accept the contention of the Appellant-Department. Admittedly in the present case the misrepresentation made by the importer has not been denied while submitting the explanation to the show cause notice and the importer look a technical stand that because the licences were seized by the DRI prior to the period of expiry, it has disabled them from discharging the export obligation. Though the past conduct of the importer is not the subject matter of the show cause notice/adjudication in question, we cannot be asked to turn a blind eye to the allegations made in the show cause notice which remains unrebutted to the following effect.
(vii) M/s. Gaur Impex has not made any export so far even though they have already made imports of 445.162 mts., of Copper Scrap free of duty by availing benefit of Customs Notification No. 48/99 during the period from September, 2001 to November, 2001;
(viii) Since the Copper Scrap totally weighing 445.162 mts., imported duty free and already cleared against the licence in question was not actually used by the importer for manufacture of resultant export products, it appears that they have diverted the said goods for the purpose other than for manufacture of resultant export products and thus violated the conditions of the aforesaid Customs Notification and DEEC Scheme (Annual Advance Licence). Hence the said 445.162 mts, of Copper Scrap appears to be liable for confiscation under Section 111(o) of Customs Act, 1962.
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33.?It is to be noted that the Division Bench of this Court in a case of South India Exports as referred above held that even the discharge of the export obligation per se cannot put an end to the whole matter. The facts in the present case is worse, in the sense that the importer made a false statement for the purpose of securing an advance licence with Actual User Condition. The fact that the time within which he had to discharge his obligation has not come to an end, does not advance the case of the importer. The basis for his discharge of the export obligation is existence of a factory. The basis does not exist, the address given is a false address, so the whole edifice falls. The fact that the importer could affect his export obligation through job workers and the existence of a factory is not a sine qua non, does not advance his case either. The importer claimed he had a factory when he had none. So, whether he could have completed the manufacture otherwise hardly matters. For the purpose of obtaining such licence with Actual User Condition, it is mandatory that the importer should be a Manufacturer-Exporter. The importer made a false declaration of being one. Having made such a false declaration and obtained a licence, the importer cannot be permitted to now say that the imported material is freely importable under OGL and therefore should be allowed to be clear on merit rate. The Tribunal fell in error in permitting the clearance of the goods on merit rate. By doing so the Tribunal has virtually set at naught the purpose behind issuance of an exemption notification. If the Respondent is not an actual user he would not be entitled to utilise the licence. The licence having been secured by adopting fraudulent method would not confer any right on the importer and as such he cannot be allowed to plead any equity. Therefore we find that the order passed by the Tribunal is not sustainable and liable to be set aside.
34.?In the result the questions which have been framed in the above appeal are answered in favour of the Revenue. It is has been represented that the goods have been cleared on payment of duty at merit rate and in respect of the Bank Guarantee furnished 50% has been released pursuant to interim orders of this Court and that the Department is retaining Bank Guarantee to the tune of Rs. 15,00,000/-. In view of the order passed by us in this Appeal, the Department shall be entitled to appropriate the said sum of Rs. 15,00,000/- towards the duty and penalty demanded and initiate appropriate proceedings for recovery of the balance amount from the 2nd Respondent in accordance with law.
The Hon'ble Supreme Court had upheld the above Madras High Court's order and dismissed the SLP filed by M/s.Gaur Impex as reported in Gaur Impex Vs Commissioner (supra) The above Hon'ble High Court decision and the Court's judgements are squarely applicable to the facts of the present case.
19. The appellants relying on the Tribunal decision in the case of Hy-Grade Pellets Ltd. Vs CC Visakhapatnam (supra) and King Exports Vs CC Amritsar (supra) in support of fulfillment of export obligation is no longer applicable in view of the apex Court judgements of Seshank Sea Foods Pvt. Ltd. Vs UOI (supra) and M/s.Gaur Impex Vs CC (supra) discussed above. The appellants relying on JGFT's order is already negated by the Hon'ble High Court while allowing the revenue appeal in their own case and the ratio of apex Court decisions referred above supports the denial of customs notification.
20. In view of the foregoing discussions and findings and by respectfully following the Hon'ble High Court's order and apex Court's orders discussed above,
(i) we hold that the appellants had no factory for manufacturing finished goods at the declared premises at No.183, Walltax Road, Chennai-600 003 and have not used the SS coils/sheets imported under DEEC Advance Licences and cleared without duty under customs exemption Notfn 30/97 as amended by 51/2000, 48/99 as amended for manufacture of finished goods exported.
(ii) We hold that the appellants are not eligible for the benefit of exemption notifications 38/97, 51/2000 and 48/99 as amended on the goods imported under the said advance licences.
(iii) The demand of customs duty and interest and confiscation, and penalty ordered by the adjudicating authority in the impugned order is upheld.
21. Accordingly, we uphold the adjudication order dt.31.3.2004 passed by the Commissioner of Customs, Chennai and reject the appeal filed by the appellant.
(Pronounced in open court on 25.2.2016)
(P.K. CHOUDHARY) (R. PERIASAMI)
JUDICIAL MEMBER TECHNICAL MEMBER
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