Customs, Excise and Gold Tribunal - Delhi
Surekha Coated Tubes And Steels Ltd. vs Collector Of C. Ex. on 21 March, 1995
Equivalent citations: 1995(79)ELT625(TRI-DEL)
ORDER K. Sankararaman, Member (T)
1. This is a Stay Application filed by M/s. Surekha Coated Tubes & Steels Ltd. seeking waiver of predeposit of a sum of Rs. 94,86,306 adjudged as customs duty payable by them vide Order-in-Original No. 11/94 CAC, dated 29-10-1993 passed by Collector of Customs, Bombay. The duty has been demanded on the ground that for the goods imported by them against an Advance Licence and DEEC Book they did not satisfy the conditions of exemption Notification No. 116/88, dated 30-3-1988 as the goods imported by them did not have the same characteristic techincal specfication as those used in the "resultant product" exported by them. The amount was held to be recoverable from them in terms of the undertaking furnished by them at the time of clearance of the goods. Confiscation of the goods in terms of Section lll(d) of Customs Act, 1962 and penal action under Section 112 ibid was however held to be not warranted.
2. We have heard exhaustive arguments on the prima facie merits of the case advanced by Shri G.L. Rawal, learned Senior Advocate on behalf of the applicants and Shri K.N. Gupta, learned Senior Departmental Representative on behalf of the respondent Collector. Shri Rawal submitted that the law is quite clear on the question as it has been held by the courts that in matters of imports under Advance Licence Scheme and DEEC Pass Book it is for the licensing authorities to issue the licence after satisfying themselves about the goods to be imported under the scheme which is designed to promote exports by enabling such exporters to obtain inputs exempted from "duty. In this case when the Custom House did not release the goods to them they had to approach the Bombay High Court and then the Supreme Court. It was ordered by the Supreme Court that if the goods were covered by the import licence produced, the goods should be released. There is no dispute at all on this issue and the department has accepted the position that their licence covered the goods. The question of duty liability, submitted the learned counsel, cannot be delinked with the question of importability of the goods under the Advance Licence and DEEC Pass Book scheme. The Collector has also held that the provisions of Section lll(d) of Customs Act were not attracted in this case. This provision relates to post-importation non-fulfilment of conditions relating to exemption from duty. Shri Rawal, learned counsel then submitted that apart from their case being strong on merits as explained by him, the demand is also barred by limitation. No notice under Section 28, Customs Act had been issued. He then wound up his argument with the plea of extreme financial hardship as the appellants are a sick unit due to heavy losses incurred by them. He pleaded for waiver of the amount demanded.
3. Shri K.N. Gupta, learned Senior Departmental Representative submitted in reply that the plea of limitation has no merit. The demand is pursuant to their undertaking to pay the duty on demand by the department. They have not fulfilled the conditions laid down under the relevant notification as held by the Collector and duty is payable. On merits, duty is leviable as the exemption is not available due to the goods imported being of different specifications with different characteristics from the goods used in the exported goods. Shri Gupta relied upon the Tribunal decision in Zenith Tin Works Ltd. v. Collector of Customs, Bombay reported in 1994 (2) RLT 350. As held by the Collector in his impugned order, the imported goods were of a type, and specifications and characteristics which were not suitable for the manufacture of the goods exported. He, therefore, supported the order and opposed the plea for stay.
4. Shri Rawal, learned counsel gave a brief rejoinder and pointed out that the Joint Chief Controller of Imports and Exports, New Delhi had, vide his letter dated 31-1-1989, confirmed that they had exported 1704.716 M.T. of coated steels scaffolding Tubes for Rs. 1,27,73,965 and accordingly they were eligible for duty free import of 1664.47 M.T. of secondary sheet/coils/ strips/ coated-uncoated for Rs. 1,52,421/-...and zinc ingots 119.32 M. Tonnes for Rs. 22091944 allowing duty exemption for total CIF value of Rs. 10202640 i.e. U.S. $ 6,74,394 only and no bond was required to that extent. He reiterated his plea that exemption could not be denied. He submitted a copy of the judgment of Honourable Madras High Court in writ Appeal Nos. 1043 to 1049 and others dated 9-9-1988 in Union of India v. Oceanic Export Corporation.
5. We have considered the submissions. Shri Gupta, Learned Senior Departmental Representative cited the Tribunal decision in Zenith Tin Works Ltd. v. Collector of Customs, Bombay reported in 1994 (2) RLT 350. The finding of the lower appellate authority in that case was that the goods imported should be identical, as far as specfications are concerned as those actually used in the manufacture of the resultant product. Since the goods in question had a thickness of 019 mm and goods with such thickness had not been used in the resultant product the imported goods were held to be not covered as replenishment material under Notification 159/90-Cus., dated 30-3-1990'. This finding was upheld by the Tribunal. A significant factor in this order was that while passing the order the Tribunal followed their earlier decision in the case of the present petitioners themselves where the imports in dispute were the very goods which are the subject-matter of the present case. That order bears No. C. 139/93-B2, dated 22-11-1993. The order of the Collector in that case holding that the imported goods being admittedly different in terms of specification and technical characteristics from the material used in the resultant products exported by the appellants were not eligible for exemption under Notification No. 116/88-Cus., dated 30-3-1988 was upheld by the Tribunal. The confiscation of goods which had been allowed clearance free of duty under Notification No, 116/88-Cus. but which were found to be of different characteristics and specfication for the material used in the export product under Section 111(o) of Customs Act as also the imposition of penalty were upheld. In the present case, the impugned order has been passed by the Collector of Customs for recovery of an amount of Rs. 94,86,306/- as demanded in the show cause notice while conceding that confiscation of the goods in terms of Section lll(d) of Customs Act, 1962 and penal action under Section 112 ibid were not warranted. It was held by him that in terms of Notification No. 116/88-Cus., dated 30-3-1988 it is mandatory that the imported material should have the same characteristics and technical specifications as those used in the resultant product exported, and the goods in question having not complied with the conditions of the said Notification; they were not eligible for the benefit of exemption thereunder. As the goods had already been cleared without payment of duty, the duty became payable in terms of the undertaking given by them at the time of clearance of the goods. The Collector ordered for recovery of the same. Before the Collector, the appellants had pleaded that the goods in question being covered by the licence produced by them, which position had been conceded by the department before the Supreme Court when the appellants had moved an SLP and a contempt petition thereafter, the demand of duty will not arise the Collector has, however, observed in his order that the question whether any duty is leviable on the goods in accordance with law is to be determined on merits. As the exemption under Notification No. 116/88 was subject to certain conditions which had not been complied with in respect of the imported goods as they were not of the same description as well as technical characteristics of the inputs consumed in the manufacture of the resultant product, he held that the benefit of exemption under the said Notification was not available to them.
6. It was strenuously argued by the learned counsel for the applicants, Shri G.L. Rawal that a Division Bench of the Madras High Court had held clearly in Writ Appeal Nos. 1013 to 1049,1062 to 1067 and others of Union of India v. Oceanic Export Corporation on the liability to pay customs duty for imports made under advance licences, where the importer fails to fulfil his export obligation that the obligation of the licensees are under the control of the Controller of Imports and Exports and the liabiltiy to pay customs duty would be dependent upon the nature of performance by the Importer relating to the export obligations in respect of goods imported under the Scheme till the contingency arises for payment of duty as provided in the import licences. The Customs authorities will have no jurisdiction to demand payment of Customs duty unless and until the coordinating authority constituted under another enactment which had issued the licence takes a decision as to whether Customs duty had become payable or not, the Customs authority cannot entrench upon the powers of the Controller. Once a decision is taken by the constituted Authority under the Imports and Exports Control Act in respect of recovery of Customs duty then the authorities of the Cutoms Department will have the power to exercise the powers under the Customs Act.
7. We find from a perusal of the impugned order of the Collector that this judgment of the Honourable High Court was cited by the applicants before him. He had observed that as against this judgment, the Honourable Karnataka High Court had held in the case of Kamat Packaging that the Customs and Trade (Control) Authorities have concurrent jurisdiction and the exemption of goods from payment of duty is given by jurisdiction which certainly is the jurisdiction of the Customs Officer. The Customs Officer will, therefore, be within his jurisdiction to take follow-up action and recover duty in case the goods are found to contravene the conditions subject to which the exemption was granted. It was submitted by the counsel for the applicants, before the Collector that the order of the Karnataka High Court in Kamat Packaging had been stayed by the Supreme Court and therefore, the judgment of the Madras High Court and Bombay High Court and the Tribunal decision in Overseas Cycle v. Collector of Customs is the law applicable at the moment namely that unless the licensing authorities have carried out verfication and reached the conclusion that the imported material did not meet the requirement of the licencee and they are not the goods utilised in the manufacture of the goods exported under the advance licence, Customs authorities did not have the jurisdiction for demand of duty. The Collector went by the conditions contained in the exemption notification in question as stated earlier and held that the exemption was not admissible.
8. We find that the issue on merits is covered by conflicting decisions of the Tribunal and court judgments. The judgment of the Karnatka High Court which would support the impugned decision of the Collector has reportedly been stayed by the Supreme Court and what holds the field is the contrary judgment of the Division Bench of the Madras High Court, relevant observations from which had been referred to by us earlier in this order. Till in the Supreme Court, the Katnat Packaging (P) Ltd. matter is decided by them, the Madras High Court judgment will have to be considered as applicable. We find that the judgment was not considered by the Tribunal while the applicants' own case was disposed of vide Order No. C 139/93-B2, dated 22-11-1993. In view of this position and the financial hardship pleaded by the applicants in view of the Balance Sheet submitted by them which shows a loss of Rs. 1,52,00,409.00 for the year ending 31-3-1993, the carried forward loss being Rs. 5,84,23,629.00, we grant waiver of predeposit of the duty in question for the hearing of the appeal subject to the applicants executing a bond with the Collector for the amount in dispute backed by two solvent sureties.