Customs, Excise and Gold Tribunal - Mumbai
Tetra Pak (I) Ltd. And Shri Kumar Iyer vs Commissioner Of Customs on 1 April, 2005
Equivalent citations: 2005(190)ELT257(TRI-MUMBAI)
ORDER S.S. Sekhon, Member (T)
1. These appeals are by a manufacturer of Asceptic packaging materials, herein after referred to as TIPL and the manager of TIPL, against the same order, by which the Commissioner has denied the benefit of notification 30197-Cus dated 1.04.97, 57/2000-Cus dated 27.04.2000 & 43/2002-Cus dated 19.04.2002 availed by TIPL & confirmed a demand duty of Rs. 1,39,98,148/- and imposed penalty of equivalent amount under Section 114A of the Customs Act 1962 along with interest under Section 28AB. Since goods were not available for confiscation & penalty was imposed under Section 114A. The Commissioner refrained from imposing any other penalty. A penalty on the Manager Shri. Kumar Iyer of Rs. 7 Lakhs was imposed under Section 112(a) & (b) of the Customs Act, 1962.
2. After hearing both sides and considering the material it is found -
a) (i) the case of the department is that -
M/s TPIL had imported 275 MTS of Nucrel 3990 valued at Rs. 2,34,46,000/-, free of customs duty under duty exemption Notification Nos. 30/97-Cus. 51/2000-Cus & 43/2002-Cus and under the DEEC Scheme vide Advance Licences as detailed in the Annexure 'A' to the show cause notice by mis-representing the facts while clearing the same through Customs at the time of its original importation with an intention to evade customs duty amounting to Rs. 1,39,98,148/- (Rupees one crore thirty nine lakhs ninety eight thousands one hundred forty eight only).
TPIL had declared and obtained 22 advance licenses but the DEES Scheme for import of Ethylene Acrylic Acid Co Polymer by describing and claiming the same under Gneric terms and knowing fully well the specific brand product Nucrel 3990, for use of which they did not posses blow moulding facility in their factory of production, imported the same and sold the same to M/s. Ecoplast, another company in India, and thus contravention of notification as found by Commissioner and violation of Section 111(c) of the Customs Act, 1962 was attracted and bonds executed at time of import were liable to be enforced.
ii) Shri. Kumar Iyer in his statement has admitted to contravention of notification and that "they have quantified the duly liability and they listed all the invoices under which Nucrel 3990 was sold to M/s Ecoplast From these invoices the quantity of Nucrel 3990 sold was determined. Thereafter from their system they have linked the invoices to the Bills of Entry under which Nucrel 3990 was imported. M/s TPIL took into account landed cost minus duty element for arriving at the assessable value and by applying the effective rate of duty the total duty liability is worked out. Initially they had discharged the duty liability under protest under TR6 challan No. 01 2003-04 dated 16.6.03, TR6 Challan No. 02/2003-04 dated 23.6.03 & TR6 Challan dated 23.6.03. Thereafter vide their letter dated 25.6.03 they lifted protest in respect of entire duly amounting to Rs. 1,39,98,148/- discharged by them under above referred TR6 challan.
iii) Department also alleged that in the light of evidence adduced during investigation it appears that M/s TPIL imported Nucrel-3990 under the generic name Ethylene Acrylic Acid Polymer. It also appeared that they were aware of the fact that Nucrel 3990 was not required to be used in their factory for production of resultant export product i.e. Aseptic Packaging Material. It further appeared that they had deliberately misrepresented the facts and records to the Chartered Engineers with an intention to import Nucrel 3990 without payment of Customs Duty for sale in the local market instead of utilizing the same for manufacture and export of Aseptic Packaging Material, as required under DEEC Scheme. It appeared that TPIL failed to maintain records of receipt and consumption of duty free imported Nucrel-3990 as required under relevant appendices of Handbook of procedures to the EXIM Policy, in force. Further, it appeared that while selling Nucrel 3990 under exciswe invoice indicating the same "as if manufactured", with an intention to mis-lead jurisdictional Central Excise authorities, as well as their buyer viz M/s Ecoplast Valsad, Gujarat that they were selling the inputs on which they have availed CENVAT credit."
b) It is an admitted fact that 'Nucrel 3990' is required to prepare a product 'K film' which is essential, to prepare the packages TIPL had to export. It was being imported by M/s. ECOPLAST & the supply of the same upto March 2001 of K-film is on principal to principal basis between M/s. ECOPLAST & TPIL. Somewhere in March 2001, TIPL having realised cheaper sources for import of 'Nucrel 3990', they decided to import the same under DEEC Scheme. Nucrel 3990 is a Branded Product manufactured by M/s. DUPONT and the product literature describe the same as Ethylene Acrylic Acid Polymer Resin available for use in conventional extrusion coating, extrusion laminating equipment designed to process polyethylene resins. Therefore there is no case to suspect the bonafides of TIPL, in having declared Ethylene Acrylic Acid Resin in generic terms and imported Nuerel 3990 as is being made out by the department. This Nuerel 3990 was admittedly sold on cost basis to M/s. ECOPLAST. M/s. ECOPLAST in turn have sold back the K-film made by them, out of this resins & have charged on basis of their cost of other material and labour basis. Shri. Kumar Iyers statement dated 03.07.2003 brings out clearly the mechanism of the movement of imported resin from TIPL and receipt back of K film and corroborated by answers to Q.2, 4,5,6,7 in the statement of Shri. M.D. Desai of M/s. ECOPLAST. There is no finding arrived at that any part of Nucrel 3990 sent to M/s. ECOPLAST was not received back in form of K film or and retained by M/s. ECOPLAST or used otherwise Central Excise and Central Sales Tax liabilities have been incurred and procedures followed. K film has no other user customer other than TPIL.
c) TPIL had obtained many Advances licences and have exported the goods, with a much higher value addition then required is not being questioned.
d) It is seen that TIPL vide replies dated 30.12.2003 and 19.02.2004 contested the demand of duty and CVD on diverse grounds. The main submission was that the transaction between Them and Ecoplast was in the nature of 'principal to job worker', even though there was a sale of the imported goods by Terra Pak to Ecoplast. The following documents were submitted in support :
Sr. No. Particulars
a) Affidavit in original executed by Shri. Mahadev Desai,
General Manager, Finance of Ecoplast Ltd affirming that
whatever quantity of Nucrel received from Terra Pak has
been converted into K-film and K-film has been sent back to
Tetra Pak. He has also affirmed that K-film has no use for
manufacture of his other products ;
b) Few invoices issued by Tetra Pak for supply of Nucrel to
Ecoplast Ltd.
c) Few illustrative invoices issued by Ecoplast for supply of K-
film to Tetra Pak.
d) Worksheet establishing that Nucrel was made available to
Ecoplast on cost basis
e) Issue slips for primacore and K-film to establish that these
items have been used within the factory of the production for
the manufacture of asceptic packaging material.
f) Modvat declaration dated 18.01.97 declared K-film and
prima facie core as inputs for the manufacture of aseptic
packaging materials.
g) Modvat declaration dated 11.07.97 declaring K-film and
prima facie core as inputs for the manufacture of asceptic
packaging material.
h) Clarification dated 19.02.2004 by Shri. Abhay D. Joshi of
M/s. A.D. Joshi & Associates;
i) Correspondences exchanged with DGFT by Tetra Pak with
regard to fixation of input output norms, the export of
aseptic packaging material manufactured by Terra Pak
j) Application dated 04.04.2000 to the DGFT for grant of
advance licence.
k) Advance Licence No. 3110001063 dated 20.04.2000, one of
the licences in question, issued by the DGFT against the
aforementioned application, together with DEEC Books.
i) Application dated 23.02.2003 made to DGFT for issuance of
advance licence.
m) Advance licence No. 3110010040 dated 03.03.2003 issued
by DGFT.
n) Details of sale of aseptic packaging material within India as
well as outside India as well as outside India for the period
from 1997 till November 2003.
o) Statement showing the export obligation status in respect of
22 licences in question. From this statement it is evident
that in respect of 22 licence in question, the export
obligation have been completed by Terra Pak.
p) Letters dated 19.03.2004 of Terra Pak addressed to Shri.
A.D. Joshi, Chartered Engineer.
q) Statement showing the export obligation status in reset of 58
licences. From this statement it is evident that in respect of
58 licences, the export obligations have been completed by
Tetra Pak
e) The terms 'sold or transformed' used in the notification numbers 30/97 51/2000, 43/2002, issued, have been used to convey the intent; and for implementation of the Export Import Policy. They cannot but be interpreted in harmony to bring about the purpose of the policy. The apex court in the case of Aphali Pharmaceuticals v. State of Maharashtra [1989(44)ELT 613 SC] have held
37..... Ex praecedentibus el consequentibus optima fit interpretation. The best interpretation is made from the context. Injustum est nisi tota lege inspecta, de una aliqua ejus particula proposita judicare Vel respondence. It is unjust to decide or respond as to any particular part of a law without examining the whole of the law. Interpretare et concordare leges legibus, est optimus interpretendi modus. To interpret and in such a way as to harmonize laws with laws, is the best mode of interpretation. Every clause of a statute is to be construed with reference to the context and other clauses of the Act so as to make, as far as possible, a consistent enactment of the whole statute...
f) This Tribunal in the case of Enjoy Hotel P Ltd.(emphasis supplied) [2000(119)ELT108] in context of imports under EPCG not 1/10195 & the EPCG policy held as -
"18. One must not, in my views, lose sight of the fact that the notification and the import policy go hand, and both of them sub serve the same purpose. It does not follow from this that meaning to he attributed to the particular term in the notification must be identical with the meaning attributed to that term in the import. It would however be perfectly legitimate, and indeed required to construe the term occurring in the notification in the context of the Policy."
The Third Member, agreed with the above view in paragraph 27 as under:
"27. ... ..the notification and a policy serves the same purpose. The term in the notification has to be construed in the context of the Policy.....The purpose for which the notification is issued with condition has to be complied to get the benefit of concessional rate of duty has to be borne in mind in interpreting it..... "
In view of the above, the submissions that the notification Nos. 30/97-Cus and other notifications in question have to be interpreted in harmony, to achieve the object of the Government in promoting the exports out of India. The Ld. Advocate has force and when read with paras 120 & 121 of the Hand Book of Procedure of 1992-97 (April 1993 Edition) reads as under:-
"Duty free Licences Subject to Actual User Condition
120. The licence granted under this scheme shall be subject to Actual User condition till redemption of BG/LUT. The Advance Licence holder may, however, transfer the duty free imported materials to his supporting manufactures whose names are entered in the DEEC for the purpose of export production.
Letter of Authority."
121. The duly free licence holder may issue a letter of authority to his supporting manufacturing, whose name is endorsed in the DEEC to open letters of credit, make remittances for importing the goods, arrange movements and to clear the imported goods through Customs according to the Customs Act, 1962 or any other matter connected with the operation of the licence. In case of violation of any of the conditions of (he licence, the responsibility shall be that of the licence holder.
Para 120 of the Hand Book stipulated that the licence is subject to actual user condition. While laying down such a stipulation. It is however, stated that the licence holder might transfer the duty free material to a supporting manufacturer whose name appears in the DEEC for the purpose of carrying out processes for export production. Therefore, it is clear from the above paras of the Hand Book of Procedures, Vol. 1, that giving of the imported material to the supporting manufacturer whose name figures in the DEEC Book will not amount to violation of 'actual user' condition. Since Changes made in April 1994 edition of Hand Book of Procedure 1992-1997-As a matter of procedural simplification, stipulation that name of supporting manufacturer should be specified in the licence has been relaxed / dispersed with. When read with para 2 of ..........to the Hand Book of Procedure of April 1994 edition of the Policy would indicate that the legislature consciously dispensed with the requirement to furnish the name and address of the supporting manufactures in the application for advance licence, and consequently in the licence. To achieve the objective, with effect from 1.4.1994, in contrast to old para 120 & 121 (see paragraph 27.1 supra), para 120 & 121 of the Hand Book read as under:-
"Duty free Licences subject to actual user condition
120. The licence granted under this scheme shall be subject to the actual user condition till redemption of BG/LUT.
121. Deleted."
A combined reading of objects and reasons of the amendments made in April 1994 as set out in the preface to the Hand Book and amended para 120 & 121 of the Hand Book establishes that giving of the material to the supporting manufacturer for further manufacture is not violation of the actual user condition imposed by the advance licence. Amendments made in April 1995 edition of the Hand Book- No need to mention the other manufacturer in the advance licence, if the licence holder takes upon himself the entire obligation - If he, the licence holder wants the other manufacturer also to be responsible, the other manufacturer's name will be added to advance licence and both have to furnish bond / undertaking jointly and severally. New Para 120 as introduced in the Hand Book of Procedure in April 1995 Edition reads as under:-
"Actual user Condition and facility of con-manufactures
120. The licence granted under this scheme shall be subject to the Actual User condition till redemption of LUT. The licence holder is free to have the material processed through any other manufacturer including a jobber. However, the licence holder under the scheme shall be solely responsible for the imported items and fulfilment of export obligation. If the applicant desires to have the name of any manufacturer or jobber added to the licence, he may apply for such endorsement. Upon such endorsement made by the licensing authority, they shall both be regarded as co-licenses and the obligation of the licence holder shall become the joint and several obligation of the co-licences. Anyone of the co-licenses may import the goods in his name or in the joint names. The BG/LUT shall also be furnished in their joint names."
The second portion of Para 120 of the Hand Book is crucial. This provides that the name of the supporting manufacturer or job worker would be endorsed added to the licence at the request of the licence holder.
It is therefore apparent that the licence holder is free to get the material processed though any other manufacturer including through a job worker. However, export obligation is entirely of the licence holder only. Thus, it is not obligatory, for a licence holder, to set aside the supporting manufacturers name & or to not get the goods partially/fully processed outside his own factory premises. Out sourcing cannot be objected to and be insisted to be conducted only on challans and such sale movements as in this case are not permitted is a view that cannot be upheld. It is found & to be held that, goods sold, when re-purchased, after conversion on transfer on such conditional sales, will not cause you infringement of the Exim Policy.
g) Whatever quantity of goods were so transferred, for conversion into K-film, have been accounted & received back. That fact is not in dispute. The subsequent use in Terra Pack Aseptic Packagings and Export with the value additions being met on the 22 Advance licenses also is not doubted. The Standard Import Output norms (SION for short) do not stipulate an exclusive actual user condition in the importers / Licence holders premises. The conditions of notifications No. 31/97, 48/2000 & 46/2002 have been met. That notifications do not exempted CVD is not material since Terra Packs attract excise duty & are covered by MODVAT Scheme & imports under that notification are exempt from SAD. There is no anti dumping duty on Ethyl Acrylic Copolymer, the SION norms nor violated. Then the proposed demand of Custom Duty and CVD duty made on Nucrel 3990 imported and which was sold to ECOPLAST and repurchased as K-film and brought to appellants premises and consumed cannot be upheld.
h) The words "sold or transferred" as used in the notifications will not cover a situation where duty free imported material is Out Sourced for conversion amounting to manufacturer or other wise emergence of intermediate products which are returned to a Licence holder for further use /export. The entire DEEC is a schedule to the Customs Notifications and an integral part thereof. Part B of the same relates to an ancillary of export product manufactured and if the words "Sold /transferred" are literally construed, even compliance to Part B would be then a violation of condition (VII) of the notification & of Para 4.16 & 4.17 of the Policy. Such an interpretation cannot therefore be accepted, since a harmonized reading would be required in these matters as stipulated in Aphatic Pharmaceuticals case (1989 (44) ELT 613 (SC)). Therefore, giving of the material to ECOPLAST and its receipt back cannot be a violation.
i) The decision in Sehgal Kuntiwar case, relied by the Commissioner, has been suitably distinguished by the Ld. Advocate on facts of exports having been made by Independent manufacturer and the fact of the history of EXIM POLICY & Orient at Experts decisions was not before that bench of the Tribunal. We find substance in this submission to hold that Sehgal Kuntiwar decision cannot apply in the facts herein. The Customs Notifications have to be interpreted to advance the Policy Directions of EXIM POLICY. The Commissioners finding in para 6 of the impugned order page 20 thereof that History of notification & Policy are irrelevant when the language of the notification is Plain & the existing notification has to be read misses the point of intetpreting the reason for granting the manufacturing / processing. Out Sourcing condition relaxed as evident from this History. History is a good teacher and those who ignore the same do so at their own risk. We cannot ignore the lessons from the History in this case. The Ld. Advocate has demonstrated how History in this case is relevant to advance the interpretation being arrived and ignoring the same would defeat the Export Incentive Policy, which is to be understand in its totality and not in a manner isolated with blinkers on to interpret any the Customers Notifications.
j) In view of the findings, no findings are being arrived at on the other alternative submissions made on DFRC Scheme eligibility in this case.
k) Considering the plea on limitation, it is found, if ECOPLAST was mentioned as Supporting Manufactures in the Advance Licences and was included as such and the fact that ECOPLAST was entitled to obtain Advance Licences and import Nucrel duty free, there would therefore be no case or cause for duly demands. The ingredients of 'mens-rhea' to invoke the larger period for duty demands is therefore missing and wilful suppression or misstatement cannot be established. Once the entire production emanating from Nucrel has been exported, at higher than value enhancement, provided the charge of duty demands made by invoking larger period should not survive. CEGAT in the case of Mahindra & Mahindra (2000 (125) ELT 477) have held.
".....it cannot be said that suppressions of facts was wilful.... There was nothing to be gained by the appellants by suppressing the fact..... "
Hence, technical omissions, cannot be a reason to invoke the larger period of duty demand, if interest is lacking.
l) The liability to confiscation under Section 111(o) cannot be upheld, since the imported item Nucrel has been established, that is not being contested, has been used in the goods exported, the provisions of the DEEC Scheme have been met. Confiscation therefore cannot be upheld. Reliance on the decision of Maruti Udyog Ltd (2001 (132) ELT 340 by the Ld Advocate is well founded.
m) In the view the findings, we do not propose to apply the "Strict Interpretation of notification" ruling relied by the Ld DR. We would consider the passage and reliance by Ld. Advocate on the passage from Principles of Statutory Interpretation by Guru Prasad Singh (Ninth Edition 2004) Chapter 4 page 266 ... Evolution of statute is relevant to interpret the provisions to be well founded and applicable in the facts of this case.
n) When duty demands, confiscation are not being upheld, and there is no cause or case for a penalty on any appellant herein.
3. In view of the findings, the order is set aside & appeals allowed.
(Pronounced in Court on 1/4/2005)