Customs, Excise and Gold Tribunal - Mumbai
Fresh Labs And Ors. vs Commissioner Of Customs, ... on 19 August, 2003
ORDER Shri Krishna Kumar, Member (J)
1. Shri. V.S. Nankani, Ld. Advocate appeared on behalf of M/s. Fresh Labs, Shri. B.J. Shah, M/s. Prakashal Exports, M/s. Alpine Chemicals, M/s. Amee Agency and M/s. Ratilal Hemraj. Shri J.C. Patel, Ld. Advocate appeared on behalf of M/s. Orbit International. Shri Anil Balani, Ld. Advocate appeared on behalf of Shri Yogesh Korani, M/s. Mahavir Export & Import Co. and M/s. Nikita Packaging Pvt. Ltd. Shri Virag Gupta, Ld. JDR appeared for the Revenue. Briefly stated the facts of the case are that M/s. Fresh Labs are engaged in the business of manufacture of tooth paste (TP and shaving cream (SC) which the appellants export either directly or sell the same to merchant exporters. The appellants alia, entered into contracts to manufacture TP/SC with merchant exporters' viz. U.K. Paint Industries Ltd., Vam International Ltd., Dolphin International Pvt. Ltd. and Phoenix Overseas Ltd., (the Licensees). The Licensees were issued six Advance Licenses as under:-
Name of the Exporter Lincense No. ,& Date.
U.K.Paint Industries P/W/05/3996d/13.7.1992 Vam International P/K/20133 d/17.I2.1991
-do-
P/K/201 13190/17.12.1991 Dolfin International P/K/3346394d/23. 1.1991
-do-
P/K/2149041 d/1 1.6.1992 Phonix Overseas P/K/3529035d/18.03.1992
2. The Licensees completed the export obligation, by export of the said goods manufactured by the appellants. The Licensees issued letters of authority in favour of the appellants for import of items mentioned in the said Licenses which were permissible for import of duty free items in terms of Notification No. 159/90-Cus dated 30.3.1990 or Notification No. 204/92 Cus dated 19.5.1992 (Notifications). Out of the said six licenses, four lienses were issued in terms of Import-Export Policy for 1990-1993 and the two licenses are Quantity Based Advance Licenses under the Export-Import Policy for 1992-1997. The appellants imported various consignments of items permissible for import under the said licenses and cleared the same as duty free items under the said Notifications on the strength of the Letters of Authority issued by the Licensees. As regards the said goods exported by the appellants, the appellants procured the raw material from the local market and partly for manufacture out of imported raw materials as well. In the present case, the appellant used about 30 MTs of imported Glycerine and about 906 kgs. of imported Irish Moss/Viscarine. As regards indigenous raw materials, the appellants had initially availed modvat credit in respect of duty paid on Sorbital, Glycerine and Sodium Laurel Sulphate (SLS for short) but subsequently not only reversed the modvat credit availed by them but also paid interest thereon as per the Amnesty Scheme introduced by the Ministry of Finance, Government of India, vide Circular dated 10.1.1997. the goods imported by the appellants were sold by them in accordance with Notice No. 191 of ITC (PN)/90-93 dated 14.8.1991 read with paragraph 250(2) of the Export-Import Policy for 1990-1993 and in terms of paragraph 126 read with para 127 of the Hand Book of Procedures for 1992-97.
In the Show Cause Notice dated 17.10.97 it is alleged as under:-
(a) that the appellants were not entitled to sell the goods imported by them under the said Licenses on account of having availed modvat credit;
(b) that the appellants could not import glycerine when they had used sorbitol in the manufacture of the export goods;
(c) that 3 out of said licenses were sold by them to one Yogesh Korani.
The appellants were called upon to show cause that why the said goods imported by the appellants under the said Licenses should not be held liable for confiscation under Section 111(d) and (o) of the Customs Act 1962. They were also called upon to show cause whey penalty should not be imposed on them under Section 112(a) and (b) of the said Act.
It is alleged that the appellants utilized "Sorbital" for making export product and imported "glycerin thereafter. They imported 588 MT of glycerin under DEEC scheme and sold the same in the market. Further, they disposed off raw materials such as Sodium Lauryl Sulphate (SLS), Irish Moss/Viscarane, Sodium Mono Phloro Phosphate and flavouring component imported under the said licenses on replenishment basis without obtaining permission of the licensing authority. It is also alleged that M/s Fresh Laboratories and Shri B.J. Shah had misrepresented to the Customs at the time of clearance of goods for compliance with conditions of the Notification No. 204/92 dated 19.5.92 and 159/90 dt. 30.3.90.
2. Shri V.S. Nankani, Ld. Advocate inter alia contended that the appellant were supporting manufacturer of all the export houses. Out of all the six advance licenses five licenses related to the export of Tooth Paste and one license related to the export of shaving cream. Export obligations have been fully completed under the said six advance licenses. After completing the export obligations M/s. Fresh Laboratories have imported sorbitol/sodium sulphate. His submission is that the imports of the items in question is fully permissible. He also drew our attention to page 109 to 112 showing the reversal of modvat credit and the said reversal have been fully accepted by the Commissioner. He also contended that while reversing the credit the appellants have also paid the interest thereon within the time which fact is also admitted by the Commissioner. He emphatically submitted that no restrictions on sale of imported items will apply on the appellants.
With regard to the reversal, he also drew our attention to the page 34 of the Order-in-Original. He submitted that with regard to both the items in question, the Commissioner has failed to deal with the Amnesty scheme. Relying on Para 12 of the decision in the case of Metro Tyres Ltd. v. Collector of Central Excise, Chandigarh - 1994 (74) E.L.T. 964 (Tribunal) he contended that the appellants were entitled to avail exemption in respect of both the items in question. Similarly he also relied on the following decisions and contended that the imported goods need not have the same specifications and technical characteristics as those used in the export goods. The decisions are as under:-
(a) Kitply Industries Ltd. v. Commissioner of Customs, New Kandla - 2001 (135) ELT 786.
(b) Sidhartha Tubes Ltd. v. Commissioner of Customs, Mumbai - 2001 (137) ELT 269.
The Ld. Counsel had also furnished detailed calculation of work sheet of the Customs duty payable on glycerine and contended that the same has been fully ignored by the Ld. Commissioner. The Ld. Counsel contended that the demand is fully time barred.
3. The Ld. JDR appearing on behalf of the Revenue has forcefully submitted that in view of the decision in the case of Usha International (India) v. CC, Mumbai reported in 2001 (44) RLT 367 (CEGAT-Del.), Commissioner of Customs, Bombay v. Bharat Pulverising Mills Ltd. - 1999 (111) ELT 193 (Tribunal) and Fresh Laboratories v. Commissioner of Customs II, Mumbai - 2000 (39) RLT 881 (CEGAT), the appellants are not entitled to avail benefit of exemption under Notification 159/90 - CUS dated 30.3.1990 and 204/92 - Cus dated 19.5.92. The Ld. Counsel in the rejoinder submitted that out of six licenses, three were sold to Mr. Y Korani and as such the duty if any must be demanded from them. In this regard he drew our attention to para 37 and 38 at page 100 of the reply to the show cause notice and contended that the Ld. Commissioner had failed to record any finding thereon. He also contended that the Ld. Commissioner has miserably failed to deal with the books of account as he has not recorded any finding thereon. The Ld. Commissioner has also not recorded any finding on the calculation chart submitted by the appellants. He forcefully contended that the Commissioner has also failed to record with regard to the exemption benefit under Notification 204/92 - Cus dated 19.5.92. Shri Anil Balani and J.C. Patel appeared on behalf of other noticees submitted that this is a case of double jeopardy and the Order has been passed without affording reasonable opportunity of being heard to the appellants and as such there is a clear cut violation of the principles of natural justice and the impugned order is liable to be set aside on this ground alone.
4. We have carefully heard the rival submissions, pursued the records and the case laws. It is seen from the decision of Kitply Industries Ltd. that the appellant shad discharged the export obligations. The Customs authorities and the Licensing Authorities were satisfied about the fulfillment of obligations on the part of appellants. The Licensing authorities had waived the conditions of legal undertaking and the licenses were made transferable in fulfillment of export oblations. He had correctly noted that the actual use of the imported goods and the goods already exported were not relevant. Therefore, the import is permissible. Extracts of para 12 and 13 from the recent decision of Supreme Court in the case of Titan Medical Systems Pvt. Ltd. v. Collector of Customs, New Delhi - 2003 (151) ELT 254 (S.C.) are reproduced as under.
"12. Thus, it is clear that ultrasound scanners have been manufactured. The further submission is that manufacture in the ordinary sense is not enough but that there must be "substantial manufacture". It is submitted that the term "substantial manufacture" necessarily implies that not only the final product but a substantial amount of its components must also be manufactured by the party. We are unable to read any such requirement into the words "substantial manufacture". The words "substantial manufacture" appears to indicate that there need not necessarily be manufacture, but that any activity, including activities like assembling, which result in a new product, which is commercially a different product from what is imported, would be sufficient. The words "substantial manufacturing" do not indicate in any manner that a substantial amount of the components must also be manufactured. If that were required the policy would have said so. Of course, as set out in the case of M/s. Rattan Exports Ltd., Delhi v. Collector of Customs, Calcutta reported in {1987 (4) SCC 174} mere fixing of a part or two on a fully assembled product would not be considered to be manufacture. But that is not the case here. Therefore, the finding that manufacturing activity had not been undertaken cannot be sustained.
13. As regards the contention that the appellants were not entitled to the benefit of the exemption notification as they had misrepresented to the licensing authority, it was fairly admitted that there was no requirement, for issuance of a license, that an applicant set out the quantity or value of the indigenous components which would be used in the manufacture. Undoubtedly, while applying for a licence, the appellants set out the components they would use and their value. However, the value was only an estimate. It is not the respondents' case that the components were not used. The only case is that the value which had been indicated in the application was very large whereas what was actually spent was a paltry amount. To be noted that the licensing authority having taken no steps to cancel the licence. The licensing authority have not claimed that there was any misrepresentation. Once an advance licence was issued and not questioned by the licensing authority, the Customs authorities cannot refuse exemption on an allegation that there was misrepresentation. If there was any misrepresentation, it was for the licensing authority to take steps in that behalf."
As per the calculation sheet submitted by the Ld. Advocate Shri V.S. Nankani, a total custom duty of Rs. 39,04,628/- has been worked out. In view of the facts and the legal position, it is not possible for us to express our opinion on merits on each of the issues involved at the stay stage without going into the details which will be possible at the time of final hearing. Moreover from the recent decision of the Supreme Court as mentioned above in the case of Titan Medical Systems Pvt. Ltd., primarily it appears that the benefit under the Notifications cannot be denied by the Customs authorities on the ground of misrepresentation. Keeping in view the above, we find it reasonable to direct M/s. Fresh Lab to deposit a sum of Rs. 20 lakhs towards the duty amount within 30 days from the date of receipt of the copy of this order. On deposit of this amount, we dispense with the requirement of pre-deposit of balance amount of duty and penalty from M/s Fresh Lab vis-a-vis other appellants. The matter shall be posted for compliance on 07.10.2003.