Customs, Excise and Gold Tribunal - Mumbai
Hico Enterprises vs Commissioner Of Customs on 20 September, 2005
Equivalent citations: 2005(189)ELT135(TRI-MUMBAI)
ORDER T. Anjaneyulu, Member (J)
1. This matter has been referred to the Larger Bench for resolving the conflicting views as held in the case of Goodluck Industries v. Commissioner of Customs, Calcutta [1999 (108) E.L.T. 818 (Tribunal)] and in the case of Commissioner of Customs v. Special Steels Ltd. [2004 (163) E.L.T. 242 (Tri.-Mumbai) respectively by the two Division Benches of this Tribunal, over the same issue.
2. The issue, over which the controversy has arisen, is as follows :
(a) Whether the benefit of legal maxim LEX NON COGIT AD IMPOSSIBILIA would be available to a valid recognized transferee to avail the benefit of the DEEC exemption Notification? or
(b) Whether the original licencee is to satisfy the condition of the Notification or the transferee of the licence?
3. The facts involved in the appeal in a nutshell may be stated as follows.
(a) The appellants are a partnership firm, inter alia, engaged in the business of trading and import of various items, including Poly Propylene wide spec. They have acquired and/or purchased transferable Value Based Advance Licences (hereinafter referred to as "VBAL"), including Licence No. PK 2049579, dated 19-1-1993, which was originally issued in the name of M/s. Amar Tara Exports, New Delhi, and which was, inter alia, valid for import of Poly Propylene wide spec. The said Licence was purchased by the appellants vide transfer letter dated 20-4-1994. Accordingly, the appellants have imported a consignment of Polypropylene wide spec vide Bill of Entry No. 881, dated 30-3-1994 against the said Licence and the same was allowed duty free clearance in terms of Notification No. 203/92-Cus., dated 19-5-1992.
(b) By a show cause notice dated 4-3-1999, the appellants were, inter alia, called upon to show cause why an amount of Rs. 16,74,702/-should not be demanded and recovered from them in terms of proviso to Section 28(1) of the Customs Act, 1962 on the ground that the appellants had allegedly contravened condition (v)(a) of the said Notification. Further, the Notice proposed to impose a penalty under Sections 112 and 114 of the said Act.
(c) By a letter dated 20-10-2000, the appellants submitted their reply to the show cause notice, denying the allegations contained therein and submitted that they had not contravened the conditions of the said Notification. They have also submitted a copy of the Bill of Entry and debit note dated 20-4-1994 during the course of enquiry.
(d) The Commissioner of Customs (Import), by an Order dated 1-5-2002, however, confirmed the demand of duty of Rs. 16,74,702/-along with interest @ 24% and further imposed penalty of Rs. 1,00,000/-. The amount of duty along with interest is directed to be paid jointly and severally by original licence holder and the transferee of the licence, who imported the goods. However, it is held that the imported goods were liable to confiscation under Section 111(0) of the Customs Act, 1962 for non-compliance of the condition (v) of the Notification No. 203/92. As the goods were not available for confiscation, both the licencee and the transferee were further penalized at Rs. 3.00 lakhs and Rs. 1.00 lakh respectively under Section 112(a) of the Customs Act, 1962.
(e) Aggrieved by the impugned order, the appellants have preferred the appeal to this Tribunal.
4. Since there exists divergence views of two Division Benches and as the issue involved is highly contentious in respect of fulfilment of conditions of DEEC Notification, the matter has been referred for resolution by the Larger Bench. Hence this reference.
5. The relevant Notification is hereby extracted for the purpose of discussion, better understanding and just decision of the case.
(1) Notification No. 203/92-Cus. reproduced below :
"In exercise of the power conferred by Sub-section (1) of Section 2 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts materials imported in to India, against a value based Advance-Licence (hereinafter referred to as the said licence) issued in terms of para 49 of the Export and Import Policy 1 April, 1992 - 31 March, 1997, from the whole of the duty of Customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and from the whole of the additional duty leviable thereon under Section 3 of the said Customs Tariff Act, subject to the following conditions, namely :
(i) that the materials imported are covered by a Value based Duty Exemption Entitlement Certificate (hereinafter referred to as the said certificate), issued by the Licensing Authority in the form specified in the Schedule annexed to this Notification :
(ii) that the importer at the time of clearance of the imported materials -
(a) produce proof of having executed a bond or a legal undertaking before the Licensing Authority concerned, for complying with the conditions of this Notification, and
(b) makes a declaration before the Assistant Commissioner of Customs being himself to pay on demand an amount equal to the duty leviable but for the exemption, on the imported materials in respect of which the conditions specified in this Notification have not been complied with :
Provided that a bond or a legal undertaking and the declaration shall not be necessary in respect of imports made after discharge of export obligation in full, as evidenced by endorsement of Licensing Authority in the said Certificate;
(iii) that the said licence and the said certificate is produced before the proper officer of customs at the time of clearance of imported goods out of customs control;
Provided that no such imported material shall be permitted clearance under this Notification unless a debit entry has been made, in the said licence and the said certificate, by the proper officer of Customs;
(iv) that the imports and exports are undertaken from sea ports at Bombay, Calcutta, Cochin, Kandla, Mangalore, Marmgoa, Madras, Nhava Sheva, Paradeep, Tuticorin and Visakhapatnam, or through any of the airports at Ahmedabad, Bangalore, Bombay, Calcutta, Delhi, Jaipur, Varanasi, Srinagar, Trivandrum, Hyderabad and Madras or through any of the Inland Container Depots at Bangalore, Coimbatore, Delhi, New Gauhati Goods Shed, Moradabad, Ludhiana and Hyderabad;
Provided that the Collector of Customs may be special under and subject to such conditions as may be specified by him, permit imports and exports from any other seaport, airport, land customs station or inland container depot;
(v) that the export obligation is discharged, within the period specified in the said certificate or within such extended period as may be granted by the Licensing Authority, by exporting goods manufactured in India in respect of which -
(a) no input stage credit is obtained under Rule 56A or 57A of the Central Excise Rules, 1944 (hereinafter referred to as the said rules);
(b) facility under Rule 191A or 191B as in force immediately before the 1st October, 1994, or Rule 121(l)(b) or Rule 13(l)(b) of the said rules, has not been availed; and
(c) drawback has not been claimed either under Section 74 of the Customs Act, 1962 or Customs and Central Excise Duties Drawback Rules, 1971;
(vi) exempt materials shall not be disposed of or utilized in any manner, except for utilization in discharge of export obligation, before the export obligation under the said licence has been discharged in full and export proceed realized;
Provided that Acetic Anhydride in respect of which the benefit of this Notification is claimed shall be utilized by the importer in his own factory or in the factory of any other manufacturer indicated in the said certificate even after discharge of export obligation and realization of export proceeds;
(vii) where benefit of this Notification is sought by a person other than licencee, such benefit shall be allowed against the said licence and the said certificate only if it bears endorsement of transferability by the Licensing Authority;
Provided that benefit of this Notification shall not be allowed to a transferee of the licence for import of Acetic Anhydride except where licence is endorsed for transferability before 24th November, 1993, and is transferred to an actual user who undertakes to use the Acetic Anhydride in his own factory.
(viii) Notwithstanding anything contained in conditions (vi) and (vii) above, the endorsement or transferability or disposal of materials shall be allowed in respect of licences issued for the export of alt kinds of writing instruments (including gift sets and refills/nibs) on fulfilment of export obligation only in favour of manufacture of writing instruments.
Explanation. - In this Notification -
(i) "Export and Import Policy April, 1992 - March, 1997" means the export and Import Policy 1st April, 1992 - March, 1997, published vide Public Notice of the Government of India in the Ministry of Commerce No. 1-ITC (PN)/92-97, dated 31st March, 1992 as amended from time to time.
(ii) "Licensing Authority" means an authority competent to grant a licence under Imports (Control) Order, 1955 made under the Imports and Exports (Control) Act, 1947 (18 of 1947).
(iii) "Materials" means -
(a) raw materials, components, intermediates, consumables and parts required for manufacture of export product;
Provided that in the case of electronic goods and all kinds of writing instruments (including gift sets and refills/nibs), all export items covered by one serial number m the Standard Input Output and Value Addition norms as contained in Handbook of Procedures, 1992-97, Volume-II, published vide Public Notice No. 121(PN)/92-97, dated the 31st March, 1993 of the Government of India in the Ministry of Commerce, shall be deemed to be single export product;
Provided further that nothing contained in this Notification shall apply to import of Acetic Anhydride against licences issued after 24th November, 1993, except where such licences together with the quantity required for manufacture of the export product mentioned therein have been issued with the approval of Advance Licensing Committee in the office of the Director General of Foreign Trade;
(b) spares and mandatory spares, within a value limit of 5% of the value of the licence issued up to 31st March, 1993, which are required to be exported along with the export product; and
(c) packing materials required for packing of export product."
6. Condition (i) of Notification No. 203/92-Cus requires that the material imported are covered by Value Based Duty Exemption Entitlement Certificate (referred to as the certificate) issued by the licensing authority in the form specified in the Schedule to the Notification.
7. (a) Condition (ii)(a) of the Notification requires the importer to produce proof of having executed bond and LUT before the licensing authority. Condition (ii)(b) of the Notification provides that the importer should make a declaration before the Assistant Commissioner of Customs binding himself to pay on demand an amount equal to the duty leviable on the imported goods but for the exemption Notification, if the conditions of the Notification are not complied with.
(b) The proviso to condition (ii) states that the requirement of execution of bond and LUT is not applicable if the imports are made after the discharge of export obligation.
(c) Generally the goods are imported and thereafter the export obligation is discharged. In such a situation, Condition (ii) has to be complied with.
(d) Condition (ii)(a) need not be satisfied if the goods are imported after the discharge of export obligation imposed by the advance licence. In other words, the moment the export obligation is discharged, by virtue of the proviso to condition (ii), condition (ii)(a) and (ii)(b) are dispensed with.
8. (a) Conditions (iii) of the Notification No. 203/92-Cus. requires the production of the DEEC at the time of import of the goods. The proviso to the said condition states that the benefit of the Notification shall be extended only after a debit entry in the said certificate.
(b) Condition (iv) of the Notification states that the goods are to be imported through specified ports.
9. Condition (v) of the Notification requires the fulfilment of export obligation within the period specified in the DEEC or within the extended period as may be extended by the licensing authority. It also provides that the export obligation is undertaken without availing of the input credit under Rule 57A or 56A of the Central Excise Rules, 1944.
10. Condition (vi) of the Notification states that the exempt material shall not be used or disposed of in any manner except for utilization of export obligation. This condition is not applicable if the materials after the fulfilment of the export obligation by the original licence-holder.
11. Condition (vii) of the Notification No. 203/92-Cus. states that if the benefit of Notification is sought by a person other than a licencee, such benefit shall be allowed only if the licence bears the endorsement of transferability by the licensing authority.
12. Condition No. (viii) Irrespective of fact as to what is contained in condition (vi) and (vii), the endorsement of transferability or disposal of materials shall be allowed in respect of licences issued for the export of all kinds of writing instruments on fulfilment of export obligation only in favour of manufacture of writing instruments.
13. (a) The certificate to be issued by the licensing authority in the form appended in the Schedule to the Notification is in 2 parts. Part-1 deals with imports and Part-2 deals with exports.
(b) Part-2 consists of Part-A to I. Part-E provides details of export obligation to be fulfilled by the original licence-holder. Part-F provides details of actual exports made by the original licence-holder. Part-H provides summary of imports and exports made against the licence/certificate. Part-I contains the endorsement of transferability by the DGFT.
(c) As can be seen from Part-F and H of the Part-1 of the certificate, the exports made by the original licence-holder are verified by the Customs Department to the effect that the exports are made in terms of the Notification No. 203/92-Cus. That the export obligation is discharged in terms of the Notification No. 203/92-Cus. is also verified by the Excise Department, when the goods are exported under cover of ARE forms.
(d) Based on these factors, the licensing authority arrives at the satisfaction that the export obligation is fulfilled by the original licence-holder and thereafter makes the endorsement of transferability on the licence.
(e) Hence, the satisfaction arrived at in the above manner is final and binding on the Customs Department. The Customs Department cannot compel the appellants-importer, who are the transferee, to once again prove that the export obligation has been fulfilled by the original licence-holder in accordance with the Notification and without availing input stage credit.
(f) Thereafter, when the transferee imports the goods on the basis of the transferred licence/certificate, the condition (v) is deemed to be satisfied.
14. If the Customs Department alleges that the endorsement of transferability has been obtained by fraud or misrepresentation, then, it must be proved by them. It is a settled law that the onus is on the person who alleges fraud has been committed.
15. The principle that fraud vitiates everything is not applicable in respect of third party rights created by bonafide transaction".
16. Notification No. 203/92-Cus. grants complete exemption from payment of basic customs duty and additional duty of customs (CVP) in respect of goods imported against Value Based Advance Licence (VABAL) issued by the Director General of Foreign Trade (DGFT).
17. The DGFT makes the licence transferable by endorsing on the licence, after the licence-holder discharges the export obligation as stipulated in the licence, by exporting the goods mentioned in the licence within the time specified in the licence or within the time limit extended by the DGFT and without availing the input credit.
The appellants have raised the following propositions for consideration by the Larger Bench :
1. The rights of the transferee are governed by Clause (vii) of Notification No. 203/92 or Clause (viii) of Notification 204/92, both of which read as under :
"Where the benefit of the Notification is sought by a person other than the licencee, such benefit shall be allowed against the said licensee and the said certificate only if it bears endorsement or transferability of the Licensing Authority".
2. Where the Notification applies to more than one person, which, in this case, means the original licencee end the transferee thereof, the conditions of the Notification must be read independently. Accordingly, Clauses (ii), (v), (vi) and (vii) would not apply to transferee. As such, Clause (v) of these two Notifications would apply only to the original licencee and not to the transferee.
3. Special conditions prevail over general conditions and since Clause (vii)/Clause (viii) (as the case may be), are special clauses applicable only to the transferee, the same shall prevail over the general conditions of the Notification. It, therefore, follows that where the transferee is able to show that the licence has been endorsed as "transferable" and the licence has been duly transferred in his name, the transferee is eligible for the benefit of the said Notification.
4. Where the law requires something to be done, it is presumed that all things or pre-conditions necessary for the purposes of doing such an act have been done. It, therefore, follows that where the grant of transferability pre-supposes non-availment of Modvat credit, the fact that the licence has been endorsed as being transferable presupposes that Modvat credit was not availed by the transferor-licencee, unless it is shown by way of independent and cogent evidence that Modvat credit was availed.
5. There is no material or evidence on record to show that the licencee in the present case did avail itself of Modvat credit and hence the demand cannot be raised in the absence of any evidence or material on record to show that the licencee did not avail the Modvat credit.
6. The burden to show that the Modvat credit was availed by the licencee is on the Department, particularly when the Department initially at the time of assessment of the Bill of Entry, had extended the benefit of the said Notification, which benefit is subsequently sought to be denied by the Department.
7. The proviso to Section 28(1) of the Customs Act is applicable only when there is a suppression of facts Or wilful mis-statement by the importer or his agent. So long as there is no suppression of facts or wilful mis-statement, the proviso to Section 28(1) cannot be invoked against the transferee. Hence, the demand is barred by limitation where notices have been served beyond six months from the relevant date.
18. The following are the contentions raised by the Customs Department :
(a) the benefit of the exemption is available only on fulfilment of the conditions stipulated in the Notification;
(b) the conditions have to be fulfilled by the importer who is claiming the benefit of the exemption;
(c) the condition (v)(a) of the Notification No. 203/92-Cus. is not fulfilled.
(d) the exporter (i.e. the original licence-holder, to whom the licence has been issued by the DGFT) has availed the Modvat credit on the inputs used in the manufacture of goods exported. Hence, the imports effected by the present importer (who is not the exporter of the goods mentioned in the licence) is not eligible for the benefit of Notification No. 203/92-Cus;
(e) the exemption is available to the present importer only when the importer produces evidence that no credit was taken on the inputs used in the goods exported by the original licence-holder;
(f) the importer cannot be given the exemption if the 'endorsement of transferability' is obtained by the original licence-holder from DGFT by mis-representation, even if importer is not party to the said misrepresentation.
19. It is not the argument of the importer that customs authorities, cannot go into the aspect whether the condition (v)(a) of the Notification No. 203/92-Cus. is satisfied or not as the importer is not the exporter of the goods mentioned in the licence. The arguments/submissions of the importer is entirely different, as explained in the following paragraphs :
Customs Notification itself specifies different authorities for conferring the benefit under the Notification. DGFT is designated or specified by the Notification as the authority for satisfying the condition relating to discharge of export obligation in terms of the Notification. Thus, in the present case, DGFT functions as the customs authority and does not discharge the function under the FTDR Actg.
The proper authority who has to arrive at the satisfaction for conferring the exemption is specified in the Notification itself. E.g. in condition (ii), Assistant Commissioner or Dy. Commissioner of Customs is specified as the proper authority. Similarly, DGFT has been designated or specified in the Notification as the proper authority for arriving at the satisfaction regarding discharge of export obligation by the licence-holder. This is made clear by the following :
(a) the proviso to condition (ii) of the Notification No. 203/92-Cus. The said proviso reads thus -
"Provided that a bond or a legal undertaking and the declaration shall not be necessary in respect of imports made after discharge of export obligation in full, as evidenced by endorsement of Licensing Authority in the said certificate".
(b) granting of extension to the export obligation period, by specifying in condition (v) of the Notification No. 203/92-Cus.
(c) The Schedule to the Notification No. 203/92-Cus. contains the Duty Exemption Entitlement Certificate issued by the DGFT. Part-2 (Export) of the Certificate provides that the endorsement of the licensing authority is required for waiving the requirement of executing the bond if the licence-holder has completed the export obligation. Part-2 is re-produced below :
PART - 2 (EXPORT) (This consists of... pages) SI. No... (EXP) Date of issue, Port of Registration ...
Issued to ...
... (name and full address of the licencee) ...
Materials imported against Licence No. ... dated ... issued by... to the above importer and covered by the list of materials specified under part 'C' of this certificate would be eligible for exemption from Customs duties subject to the conditions specified in the Notification of the Government of India, Ministry of Finance, Department of Revenue No. 203/92-Customs, dated 19th May, 1992.
The importer shall make the exports in terms of the said Notification within ... months from the date of clearances of the first consignment of import.
A Bond/Legal Undertaking, in terms of the said Notification, for Rs. ... shall be executed with ... (licensing authority), before clearances of the goods from the Customs.
Signatrure Seal of licensing authority Date Bond/Legal undertaking executed on ... for Rs. ... (Rs...) and registered under SI. No... with this office. It has been verified that the export obligation has been discharged in full. Therefore requirement of Bond/Legal undertaking is waived. (Strike off inapplicable portion) Signatrure Seal of licensing authority Date
(d) Similarly, Parts F, H and I of the DEEC relating to discharge of export obligation and endorsement of transferability by the DGFT.
It is well settled that Schedule appended to a statute is part of the statute as per para 24 of the Constitution Bench decision of the Supreme Court in Ujagar Prints - . Thus, reading of the Notification (including the Schedule) as a whole, makes it clear that the conditions upon which the exemption is granted are to be satisfied at various points of time and subject to the satisfaction of authorities specified in the Notification itself namely DGFT (licensing authority) and Dy. Commissioner or Assistant Commissioner of Customs,
20. For the purposes of the present case, the DGFT functions as the authority (or the proper officer) and arrives at the satisfaction about the discharge of export obligation by the licence-holder in terms of the DEEC Scheme. The DGFT does not function under the FTDR Act, 1992 for the purposes of the Notification.
This view is also supported by the decision of the Gujarat High Court in Mahendra Petrochemicals Ltd. v. UOI - , affirmed by the Supreme Court in 2004 (174) E.L.T. A35. The question before the High Court was whether the assessee can file an application under Section 127B of the Customs Act, 1962 before the Settlement Commission, against a notice of demand issued by the DGFT directing payment of customs duty on unutilized raw material imported under the advance licence. The department contended before the High Court that the requirement of Section 127B of the Customs Act, ,1962 are not fulfilled by the assessee as there was no show cause notice issued by the proper officer of Customs demanding Customs duty from the assessee. Rejecting the contention of the Revenue, the High Court held as under :
It is in view of the aforesaid statutory provisions and the conditions of the licence that the Joint Director General of Foreign Trade issued the demand notices dated 12-10-2001 advising the petitioners to pay to the (Customs Department customs duty on the unutilized imported materials along with interest thereon. If the Joint Direct General of Foreign Trade is not treated as the proper officer for the levy, assessment and collection of customs duty and if the letters dated 14-2-2001 (Annexure "B" colly.) written by the Deputy Commissioner of Customs calling upon the Bank for encashment of the bank guarantee are not treated as show cause notices or demand notices from the proper officer for the purpose of levy, assessment and collection of Customs duty, there would be no outstanding demand from the Customs Department to the petitioner, which is not the case of the respondent authorities.
The term "proper officer" has to be read in conjunction with the definition of "case" which includes proceeding under the Customs Act as well as under any other Act. Since the Import Policy framed under Section 5 of the Foreign Trade Act and Sections 7 to 9 of the Said Act also provide for is- suance of licence, which enables the licence holder to avail of exemption from payment of Customs duty on import of materials to be used as raw materials for manufacturing finished products to be exported, it has to be held that the officer under the Foreign Trade Act is also a proper officer concerned with the collection of Customs duty.
Once DGFT arrives at the satisfaction that the export obligation is discharged by the licence-holder and consequently certifies in Part-F, H and I of Part-II of the DEEC, the satisfaction of the DGFT is binding and cannot be reviewed by the Customs Department.
21. It is submitted that after the DGFT certifies that the export obligation is discharged by the original licence-holder and makes the licence transferable, the satisfaction or certification of the DGFT that the export obligation has been discharged by the exporter cannot be reviewed by the Customs Department. This is for the reason that the satisfaction arrived at by the DGFT in certifying that the original licence-holder has discharged the export obligation by exporting the goods mentioned in the licence without availing the credit, is an irre-buttable presumption to the effect that exporter has not availed the benefit of Modvat credit on the inputs used in the goods exported.
22. The principle laid down by the Supreme Court and by other High Courts in decisions in the context of Sales Tax Law will apply to the present case:
(a) In Chunni Lal Parshidai Lal v. CST - 1986 (2) SCC 501 (page 55 of compilation), the selling dealer was exempted from paying sales tax on the cotton yarn in respect of sales made against Form IIIA, furnished by the purchasing dealer certifying that the yarn has been resold by him.
(b) The contention of the assessee, as recorded by the Supreme Court in para 8 reads thus -
8. It was contended on behalf of the dealer that he was not liable to pay sales tax as he had fulfilled all the conditions laid down under the provisions of Section 3-AA of the Act read with Rule 12-A of the U.P. Sales Tax Rules (hereinafter called the "Rules) inasmuch as he had sold the cotton yarn to registered dealers and had also obtained from them the certificates of resale on Form III-A and it was not possible nor was it his business to find out what the purchasers of the cotton yarn subsequently did.
(c) The contention of the assessee was rejected by the High Court, in the following words, as recorded in para 2 of the decision.
2. The Division Bench of the Allahabad High Court was of the opinion that the controversy raised in the reference was covered by the decision of the Full Bench of the said High Court in CST v. Shankar Lal Chandra Prakash where it was held that the certificate in Form III-A was only a prima facie evidence of the fact that the goods had not been sold to a consumer. The Division Bench of the Allahabad High Court was further of the opinion that certificate was not conclusive evidence and the department could go behind the certificate and if it found that the goods had not been resold in accordance with the certificate given in Form III-A and had been consumed, in such a case the department could ignore the certificate and levy tax on the selling dealer
(d) Accepting the contention of the assessee and setting aside the decision of the High Court, the Supreme Court held as under :
"25. The questions involved in this case are whether by furnishing certificate in Form III-A and the details of such certificate given in Form IV, the selling dealer got exemption and Rule 12A created an ir-rebuttable presumption i.e. that no further evidence is required in this matter to prove that the goods were sold to a dealer for resale in the same condition and not to be consumed by the purchasing dealer.
29. ... But the question is whether it raises an irrebuttable presumption i.e. presumption which cannot be rebutted by the relevant assessing authority. In other words, even if the assessee had furnished a certificate in Form III-A, and the details as stipulated in Form IV, can the selling dealer be called upon to prove further show the purchasing dealer has dealt with the goods after purchasing the goods.
32. But it was contended by counsel for the dealer that in order to make the provisions of the Act operative and effective, this was the intention in the instant case and though the rule did not say so that it raised an irrebuttable presumption, we are of the opinion that this submission has to be accepted. After all the purpose of the rule was to make the object of the provisions of the Act workable i.e. realization of tax at one single point, at the point of sale to the consumer. The provisions of rule should be so read as to facilitate the working out of the object of the rule.
33. ... The genuineness of the certificate and declaration may be examined by the taxing authority but not the correctness of the truthfulness of the statements. The sales tax authorities can examine whether certificate is 'farzi' or not, or if there was any collusion on the part of selling dealer - but not beyond - i.e. how the purchasing dealer has dealt with the goods...".
Applying, the above ratio to the present case, it is to be held that the Customs Department can certainly insist on the production of certification or endorsement by the DGFT for granting the exemption to the importer that the obligations have been discharged by the licence-holder in terms of the DEEC Scheme/Notification i.e. the exporter did not avail credit of duty paid on the inputs used in the goods exported. However, the Customs Department cannot go into the correctness or otherwise and sit in judgment of the certification or satisfaction arrived at by the DGFT when the certificate or endorsement creates an irrebuttable presumption that the exporter has not availed input credit. The exemption, consequently, cannot be denied to the importer. This principle was once again reiterated by the Supreme Court in a recent decision of Ashok Leyland Ltd. v. State of Tamil Nadu - 2004 (3) SCC 1, in Paras 59 and 61, the Supreme Court held as under:
"59. In the case at hand, a statutory authority that had jurisdiction to pass such an order has passed the order. In addition there is no provision for appeal, which goes to show that this is part of the substantive law and now procedural law.
This order is conclusive for all purposes, as the above two stated elements clearly go out to show. No appeal has been provided for depicting the will of the legislature to make the order of such authority final.
61. In State of Madras v. Radio and Electricals, it has been held that satisfaction once reached in absence of any provision, review of such an order is not permissible".
The above legal position laid down by the Supreme Court has been consistently followed by the various High Courts as in the following judgments :-
(a) Bangalore Motor Accessories v. DCCT -1981 (47) STC 54 (Kar.)
(b) Tilakraj Mediratta v. State of Orissa -1992 (86) STC 543 (Ori.) .
"6. ...According to the department, if the goods have not been utilized for the purpose indicated in the declarations, deductions to the selling dealer is not to be allowed. In our view, the stand is fallacious. It is not for the selling dealer to go after the purchasing dealer to find out as to in what manner the latter utilizes the goods which it has purchased on the strength of the declaration forms in order to be entitled to the deduction. Such a requirement would fasten an impossible burden on the selling dealer".
(c) Premier Electro-Mechanical Fabricators v. The State of Madras - 1968 (22) STC 269 (Mad.)
(d) State of Tamil Nadu v. Madras Petro Chem Ltd. - 1993 (89) STC 438 (Mad.)
(e) CST v. General Electric Co. of India Ltd. -1992 (84) STC 78 (MP)
(f) The Dy. CST v. Bharat Refineries Ltd. -1978 (42) STC 225 (Ker.)
(g) Star Paper Mills Ltd. v. CST - 2005 (139) STC 245 (All)
23. The submission of the importer in the present case, based on the ratio of the above decision of the Supreme Court and High Court is that no review procedure is laid down under the Customs Act or under the Foreign Trade (Development & Regulation) Act, 1992 to challenge the satisfaction arrived at by the DGFT that the licence-holder or the exporter has discharged the export obligation in terms of the Notification by not availing the input credit. Similarly, no machinery is provided to challenge the endorsement of transferability granted by the DGFT after his satisfaction about the discharge of the export obligation by the exporter in terms of the Notification. Hence, the satisfaction arrived at the DGFT on the finding arrived that the exporter has discharged the export obligation without availing the input credit is binding on the customs department at all times.
24. If the DGFT finds that the satisfaction or endorsement has been obtained by the exporter by mis-representation, then DGFT may, perhaps, take appropriate action against the exporter for the misrepresentation, under the FTDR Act or the Rules framed thereunder.
25. The ratio of sales tax decisions will apply even while construing exemption Notification under the Central Excise or Customs. In Central Excise, effective rate of duty for cigarettes is prescribed by exemption Notification. The effective rate of duty is prescribed with reference to the MRP declared on the cigarette packs. The excise department demanded differential excise duty from ITC on the ground that a higher price than indicated in the pack has been charged by the retailer. The argument of the ITC was that sale of cigarettes by the retailer at a higher price cannot make the manufacturer (ITC) liable. The decision of the Tribunal in ITC is reported in 1998 (104) E.L.T. 151. The Tribunal in paras 31 and 34 held as under :
"31. ...it would be open to the Department to go behind the printed prices and find out the effective prices at which the retailers may sell the packages to consumers and treat such prices as the printed prices for the purpose of determining the slab applicable for the purpose of determining the rate of duty applicable.
34. This interpretation, according to the Learned Counsel for the appellant, involves substitution of words of the Notification. We have already indicated that there is no substitution of words as alleged. It is only a question of fully comprehending the language of the Notification in the light of the scheme of the Notification. The view we have taken of the intendment and import of the Notifications is in accordance with the prima facie view expressed by the High Court of Calcutta in the Writ Petition filed by ITC challenging the show cause notice."
The view taken by the Tribunal was reversed by the Supreme Court in ITC v. CCE - . After referring to the decisions of Radio & Electricals and Chunni Lal Parshadi Lal in para 45, the Supreme Court in para 48 held as under:
"... Similarly, in terms of the Notification we are called upon to construe, the Excise Authority is required to act on the basis of the printed MRP. The Notification does not envisage an inquiry into the correctness of the MRP printed on the packages by the Excise Officer. As far as he is concerned, he is limited to satisfying himself that there is a declaration in the prescribed form. To hold otherwise would not only defeat the object with which the Notification was introduced but lead to a reversion to the earlier mode of assessing the value of the manufactured commodity, the uncertainty associated therewith and an impossibly chaotic situation as we shall subsequently indicate. The reliance on the Rules and forms by the Revenue appertaining to assessments does not therefore carry its case any further."
The Supreme Court in CCE v. Maruti Udyog Ltd. - 2001 (127) E.L.T. A169 affirmed a similar view taken by the Tribunal in Maruti Udyog Ltd. v. CCE - 2000 (124) E.L.T. 1175 (T). SI. No. 6 of Notification No. 162/86 granted partial exemption to saloon cars subject to the condition that the Assistant Collector is satisfied that "such saloon cars are required for use solely as taxis" and a certificate from the State Transport Authority is furnished to the effect that "each such saloon car has been registered for use solely as taxi". The Revenue, inter alia, demanded duty from Maruti Udyog on the ground that the vehicles cleared on concessional rate of duty were converted into other vehicles after some time and in some cases on the very same day. The Tribunal in its order reported at 2000 (124) E.L.T. 1175 (T) concluded that once the manufacturer has produced a certificate from the State Transport Authority and that certificate is not a forged document or produced by collusion, demand cannot be raised on the manufacturer on the ground that the vehicle has not been found to be used as taxi. While holding so, the Tribunal applied the principle laid down by the Supreme Court in Radio & Electricals.
In view of the above decisions, it is to be held that the Customs Department cannot raise an alibi if the condition (v)(a) is not fulfilled by the exporter.
26. As observed by the Supreme Court, the Department can resort to any remedy ordinarily available under the law and proceed against the exporter, e.g., the Customs Department can proceed under Section 132 of the Customs Act, 1962 against the exporter for misrepresentation, but cannot demand duty from the importer/transferee.
27. At this stage, the following observation of the decision of Bombay High Court in Bombay Chemicals Pvt. Ltd. v. Union of India - is relevant and reproduced below :
"17. ...The Directorate General is a high powered Officer familiar with the production of various articles in the country and has issued the certificate after ascertaining the requisite facts. The certificate cannot be brushed aside merely because the petitioners have made a tall claim in their advertisement. In the elucidation supplied by the Directorate General, it is made crystal clear that the pyrethrum flowers ate grown on the small scale in the country on the hill slopes of Kashmir and Nilgiri and that production is for the purpose of research and is not commercially used. In view of the clarification, it is impossible to accept that the claim made by the petitioners in their advertisement was correct and, therefore, the certificate given by the Directorate General was vitiated. In my judgment, it was not open for the authorities below to ignore the certificate by placing reliance upon what was stated by the petitioners in their advertisement. The Customs authorities were bound to accept the certificate issued by the Directorate General and it is not permissible to go behind it merely because the Customs authorities feel that the contents of the certificate were disproved by some other material. There is a great danger in accepting the submission of the Department that the authorities can brush aside the certificate and determine whether the assessee is entitled to the exemption or not. In case this principle is accepted, then it would open floodgates of false and frivolous claim by the assessee who have been denied the certificate by the Directorate General by claiming that the Directorate General has ignored certain facts and the Customs authorities should independently consider whether the requirement or the conditions of the Notification are complied with. Surely that could not have been the intention of the Government of India and it is clear that the Government desired that the exemption should be granted once the conditions of the Notification including the condition of a certificate from the Directorate General are complied with. In my judgment, the decision of the Customs authorities to go behind the certificate and determine whether goods imported were chemicals is incorrect. The Customs authorities were bound and concluded by the certificate and were not justified in refusing the refund claim of the petitioners. Shri Teleyarkhan relied upon the decision of the Supreme Court in the case of M.G. Abrol, Additional Collector of Customs, Bombay and Anr. v. Shantilal Chhotelal and Company reported in A.I.R. 1966 Supreme Court 197. In support of the submission that the certificate given by D.G.T.D. cannot be challenged by the Customs authorities and, in my judgment, the reliance on this decision is very appropriate.
The importer importing the goods against the transferred licence cannot be asked to prove whether the export obligation has been discharged by the original licence-holder without availing the Modvat credit since the importer has no means to verify the same and he has to rely on the certification of the DGFT."
28. In Sulekh Ram and Sons v. UOI - 1978 (2) E.L.T. 525 (Del.) the issue was whether the assessee was entitled to the exemption under Notification No. 206/63-C.E. This Notification granted exemption to iron and steel products falling under 26AA(ia) of the old tariff, if such items are made from re-rollable scrap on which appropriate amount of excise duty has been paid. The excise department contended that the assessee is not entitled for the exemption since the re-rollable scrap has been purchased by the assessee from Hindustan Steel Ltd., who has not paid excise duty on the re-rollable scrap. The High Court while holding that assessee is entitled to the exemption, held as under :
"13. It would be intolerable if the purchasers of manufactured goods were to be required to ascertain whether Excise Duty on the manufactured goods had already been paid by the manufacturer before the sale of such goods or not. Purchaser would have no means of knowing it. Hundreds and thousands of purchasers of such goods are made and in no case can any attempt be made by the purchaser to know this fact from the manufacturer. ..."
14. ... The exemption was, therefore, available to the petitioner even if by the mistake of the Hindustan Steel and/or of the Excise Officer, the duty on re-rollable scrap had not actually been paid by the Hindustan Steel and recovered by the Excise Officers."
29. An issue came before the Supreme Court whether the assessee is entitled to exemption under Notification No. 125/75-C.E. granting exemption to textured yarn made out of duty paid based yarn. The department denied the exemption to textured yarn on the ground that the assessee has to prove that the base yarn which he purchased from the market is duty paid.
The Tribunal held that any goods purchased from the market is deemed to be duty paid since no excisable goods can be removed from the factory without payment of duty. The Supreme Court approved the decision of the Tribunal in CCE v. Decent Dyeing - . While holding so, the Supreme Court also approved the decision of Delhi High Court in Sulekh Ram & Sons - 1978 E.L.T. J525 and held as under :
"5. ... Reference was also made before the Tribunal and our attention was also drawn to the decision of the Delhi High Court in Sulekh Ram & Sons v. Union of India and Ors. [1978 E.L.T. ( 1525)], where under Rule 9 of the Central Excise Rules, it was held by the Delhi High Court that under excise system, no goods can be removed from the place of manufacturer without first-paying the excise duty, therefore, a purchaser can presume, that goods are duty paid. It would be intolerable if the purchaser were required to ascertain whether excise duty had already been paid as they have no means of knowing it. It has to be borne in mind that duty of excise is primarily a duly levied on a manufacturer or a producer in respect of the commodity manufactured or produced. See the observations of Lord Simonds in Governor General in Council v. Province of Madras [72 Indian Appeals 91]. In a situation of this nature, the Delhi High Court held that the processor was in the similar position as a purchaser of the goods. In that view of the matter, we are of the opinion that the Tribunal was right in the view it took."
The ratio of the above decision will apply to the present case also inasmuch as the transferability is granted by the DGFT only after the export obligation is discharged by the licence-holder in terms of the DEEC Scheme/Notification i.e. including that exporter/licence-holder has not availed the Modvat credit on inputs. Therefore, the appellants who had purchased the licence from the market and got the transfer endorsements from DGFT, can legally presume that the export obligation had been fulfilled without availing of input credit and consequently the condition (v)(a) of Notification No. 203/92-Cus. has been fulfilled and therefore he is entitled for the exemption.
30. (a) Assuming that the original licence-holder has committed fraud and obtained the transferability by mis-representation, even then the rights created by the licence in favour of the present importer is valid.
(b) Generally there is a finality attached to every transaction - whether under a contract or otherwise. The general principle is 'fraud vitiates everything' affects the finality attached to a transaction. However, such a transaction is voidable and not void ab initio. In other words, the person on whom fraud is committed i.e. the person who is defrauded has the option of treating the transaction as binding or disown the same.
(c) In East India Commercial Co. Ltd. v. CC - , the contention of the Revenue was that the licence has been obtained by the importer by mis-representation and hence, the licence issued to him was nonest in the eyes of law. This contention of the Revenue was rejected by the Supreme Court. It was also held by the Supreme Court, erring in favour of the Revenue, that even if principles enunciated under the law of contract are applied and the licence is treated as a contract between the Government and the licence-holder, the licence is voidable at the instance of the licensing authority and the licence does net become void ab initio. Therefore, the transferred licence and transferee has the option and they do not hold a licence which is void.
31. (a) The general principle is that no one can give what he has not got. However there are exceptions to this principle. This general principle and the exceptions are provided in Section 29 of the Sale of Goods Act, 1930. Section 29 of the Sale of Goods Act reads as under :
"29. Sale by person in possession under voidable contract. - When the seller of goods has obtained possession thereof under a contract voidable under Section 19 or Section 19A of the Indian Contract Act, 1872 (9 of 1972), but the contract has not been rescinded at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith and without notice of the seller's defect of title."
Reference may also be made to the commentary on Sale of Goods by P.S. Atiyah, 8th Edition wherein it has been stated as under :
"The great practical importance of this rule is that, if a person buys goods by fraud and disposes of them before the other party avoids the contract, a buyer in good faith from the fraudulent party acquires a good title."
(b) The principle contained in Section 29 of the Sale of Goods Act will apply to the present case since licence has been held to be goods by Supreme Court in Vikas Sales Corporation v. CCT - . The Supreme Court held that transferable REP licence is 'goods', for the purposes of Section 2(7) of the Sale of Goods Act.
Though Section 29 of the Sales of Goods Act refers to the buyer acquiring a title under a voidable contract, this principle has been applied by the Supreme Court in 1968 (2) SCR 797 in the case of Ningawwa v. Byrappa Shiddappa Hireknrabar.
Therefore, it is to be reiterated that the transferee-importer has attained a good title to the licence and the endorsement of transferability cannot be held to be not valid in the hands of the importer, who is a bona fide purchaser of the licence.
32. The issue referred to the Larger Bench is covered by the decision of Bombay High Court in Taparia Overseas -
(a) The very issue has been decided by the Bombay High Court in Taparia Overseas (P) Ltd. - . After referring to various decisions and the book titled 'Keer on Law of Fraud and Mistake', it is held as under :
"It is thus no doubt true that as a general rule, if a transaction has been originally founded on fraud, the original vice will continue to taint it, and not only is the person who has committed fraud is precluded from deriving any benefit under it, but an innocent person is so likewise, unless there has been some consideration moving from himself. In the cases at hand, it is not in dispute that all the petitioners had obtained licences for valuable consideration without any notice of the fraud alleged to have been committed by the original licence holders while obtaining licences. If that be so, the concept that fraud vitiates everything would not be applicable to the cases where the transaction of transfer of licence is for value without notice arising out of mercantile transactions, governed by common law and not by provisions of any statute."
(b) This decision was followed by the Bombay High Court itself in San-jay Sanwarmal Agarwal v. UOI - 2004 (169) E.L.T. 261 (Bom). In this case, it has been held in respect of advance licence under EXIM Policy. The licence of the transferee was suspended by the Licensing Authority on the ground of initiation of enquiry by Customs authorities against the transferor and imported goods of the transferee were seized. The licence was transferred on completion of export obligation and after audit of DEC books by Customs authorities. In such circumstances, it is observed that the Customs authorities were wrong in not accepting the licence and goods were not liable to duty entitling the petitioner to claim refund of duty paid under protest.
33. Where transfer has been effected without notice to the transferee of alleged fraud, the concept of fraud vitiate everything is not applicable as licence was transferred for value arising out of importable transaction governed by any law.
34. The Id. DR. has relied upon a decision in the case of Nawab Sir Mir Osman AH Khan v. Commissioner of Wealth Tax, Hyderabad, . That appeal was filed by the assessee under Wealth Tax Act, 1957 before the Hon'ble Supreme Court, which called for answers on two questions -
"(i) Whether, on the facts and in the circumstances, the properties in respect of which registered sale deeds had not been executed, but consideration had been received, belonged to the assessee for the purpose of inclusion in his net wealth within the meaning of Section 2(m) of the Wealth Tax Act, 1957?
(ii) Whether, on the facts and in the circumstances of the case, the assessee's right to receive the sum of Rs. 25 lakhs O.S. from the State Government was an asset for the purposes of inclusion in his net wealth under the Wealth Tax Act, 1957?".
In respect of first question, the Court made the following observation :
"The position is that though all statutes including the statute in question should be equitably interpreted, there is no place for equity as such in taxation laws. The concept of reality in implementing a fiscal provision is relevant and the Legislature in this case has not significantly used the expression "owner" but used the expression "belonging to". The property in question legally, however, cannot be said to belong to the vendee. The vendee is in rightful possession only against the vendor".
Ultimately, the question was answered in favour of the Revenue holding that the property belonging to the assessee for the purpose of inclusion in his net wealth. In the instant case, the transfer of licence has been effected for valid consideration and following the procedure laid down under the Notification. This is not a case of transfer of immovable property so as to apply the aforesaid decision relied upon by the Department. The decision would not help Revenue.
35. It is already noted in the preceding paragraph that a licence is to be treated as goods as held by the Hon'ble Supreme Court in the case of M/s. Vikas Sales Corpn.
Nothing remains there to be performed by the transferor in effecting the transfer in favour of the transferee since it bears the endorsement of transferability by the Licensing Authority.
36. The Id. JDR further relied upon the following decisions :-
(a) Air Control & Chem Engg. v. CCE [1994 (72) E.L.T. A73 (S.C.)]
(b) Creative Cosmetics v. CCE [1993 (63) E.L.T. 348)] To stress on the point that fresh evidence is known to the Department only after detailed enquiry and investigation, as such, the claim is not time barred. The proposition laid down in the two rulings relates to the period of limitation. We do not want to probe on this aspect since it does not contain any reference made by the Referral Bench. This question may be agitated before the concerned Division Bench.
37. The Referral Bench has raised the question about the availability of benefit of legal maxim LEX NON COGIT AD IMPOSSIBILIA to the transferee of advance licence. This maxim means -
"the law does not compel a man to do that, which he cannot possibly perform".
It is noted in the book written on legal maxim that a general rule, which admits an ample practical illustration that an impotentia excusat legem, where the law creates a duty or charge, and the party is disallowed to perform it, without any default in law, and has no remedy over there the law will in general excuse him. In the case of Special Steel Ltd. , it is noted that the quantity based advance licence scheme under Notification No. 204/92 is either a compulsory scheme or that it compels anyone to do the impossible. This maxim is to be read from the point of view of performance of an act by the transferee of licence to fulfil the condition, which is allegedly not discharged by the transferor but certainly not from the point of view of the applicability of Notification. Therefore, from that point of view it is an impossible act on the part of the transferee where fraud is subsequently detected by the authorities concerned. Therefore, the phrase cannot be used with reference to the Notification, which do not compel either of the original licence holder or subsequent purchaser to come under the scheme. Even if the scheme is not compulsory as held in the above decision and it is optional, it cannot compel the transferee to do an act, which is not in his limit.
38. The Bench in the case of Special Steel Ltd. relied upon the decision of Commissioner of Customs v. Bharat Pulverizing Limited reported in 1999 (111) E.L.T. 193 (Tri.), wherein it is held that once licence has been transferred by the Licensing Authority, the importability of goods cannot be questioned by the Customs Authorities, but as far as levy of duty is concerned, it is for the Customs Authorities to look into it. The decision in the case of M/s. Goodluck Industries, which is earlier to Bharat Pulverizing Ltd.'s case, has not been referred either in the Special Steel Limited or in Bharat Pulverzing case. The case in Bharat Pulverizing Ltd. has been stayed by Mumbai High Court.
39. In Goodluck Industries v. Commissioner of Customs, Calcutta, reported in 1999 (108) E.L.T. 818 (Tri.), a similar issue as in the case on hand confronted the Bench and the same has been resolved by construction of the words in the Notification as well as in the conditions by giving effect of the literal meaning. The observations of the Bench with regard to the Notification No. 203/92 and its conditions are extracted hereunder :
"Bond/Legal undertaking of the declaration has to be executed by the person (importer) who is to discharge the export obligation i.e. it has to be a person in whose name the licence stands i.e. before the licence is made transferable to another person. In other words, condition No. (ii) of the Notification does not concern a transferee i.e. the appellant herein. Condition Nos. (iii) & (iv) are purely procedural and not in controversy as well. Condition No. (v) is to be fulfilled by original licence holder in whose name the licence stands because he has to fulfil the export obligation and he alone is in a position to know whether Modvat credit/proforma credit or facility of Rule 191B has been taken on inputs in respect of export: goods fulfilling export obligation. Transferee of a VBAL, as the appellant is, in no position to that. Therefore, it is not correct to hold that the appellant has not been able to discharge the burden of proof case on him to claim the benefit of the Notification. Here in this exemption Notification the expression 'importer' applies, to two persons - One is a licencee in whose name the VBAL has been originally issued and the other is a transferee of the licence. Various conditions of the Notifications may be required to be fulfilled by one, or other person or both. Condition No. (vii) alone governs the import made by a transferee licencee which is not disputed by Revenue to have been satisfied. Similarly, the nexus between the imported material and export produce is not required to be proved afresh by a transferee licencee, once the material is otherwise covered by VBAL/or DEEC. There is no doubt about it inasmuch as PS granules/moulding powder are covered by VBAL. Therefore, benefit of Notification is available [1996 (63) ECR, 111 (Tribunal) relied on (para 5.3.1)]."
The aforesaid decision of the Tribunal has also been confirmed later by the Hon'ble Supreme Court [2000 (120) E.L.T. A66)] and followed in several decisions viz. Plastchem [2000 (120) E.L.T. 775)] and Avni Dyechem Industries [2001 (137) E.L.T. 1316 (Tribunal)].
The Id. Commissioner, however, did not consider the Order of the Hon'ble Supreme Court on the ground that it is a non-speaking order and non-declaratory in nature while relying on other judgment of the Supreme Court. In the above case, Department went in appeal against the Order passed by the Tribunal and after hearing the counsel for the appellants, the order made is as follows :
"We find no merits in the appeal and they are dismissed. No order as to costs".
The Id. Commissioner apparently erred in his view in not considering the same. There is no other issue involved in the above appeal except extending the benefit to the transferee of licence under conditions (v) and (vii) of the said Notification. Mere non-discussion of the Notification and its conditions at the cost of repetition or elaboration, where the point is understood and consequently an operative order is made by the Apex Court, it is deemed that all the issues involved in the case have been considered and the finality reached, the same is enforceable.
40. The similar issue came before the Supreme Court once again in the case of Titan Medical Systems Pvt. Ltd. v. Collector of Customs, New Delhi [2003 (151) E.L.T. 254 (S.C.)]. It is observed that "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 any misrepresentation. If there was any mis-representation, it was for the Licensing Authority to take steps in the behalf".
41. In the case of Marmo Classics v. Commissioner of Customs , the Tribunal, while examining the scope of DEEC Scheme under the EXIM Policy in respect of advance licence, has held that the Commissioner has no right to go beyond the licence and sit in judgment over the Licencing Authority. Further, it is observed that a licence issued is valid till it is cancelled. It is confirmed by the Supreme Court vide its judgment .
42. As seen from the material on record, the Duty Exemption Scheme, which is part of the EXIM Policy 1992-97, is administrated by the Directorate General of Foreign Trade, Notification No. 203/92-Cus. has been issued to effectuate the exemption scheme laid down in Chapter 7 of the EXIM Policy. For this reason, issuing VBAL or QBAL, DEEC, execution of bond, legal undertaking, monitoring of import and export item, fulfilment of export obligation, realization of export proceeds, discharge of bond and legal undertaking have all been vested with the licensing authority. Certain special powers have been given to the DGFT/or the licensing authority to exercise the same in public interest. The Customs officers, while implementing the Notification 203/92-Cus., cannot question or appear to question the decisions and actions of the competent authority in the said Directorate unless it is strictly permitted by the terms of the Notification. The plain reading of condition (vii) makes it abundantly clear that benefit of Notification is to be extended to a person other than a person to whom the licence has been issued, if there is an endorsement of transfer by the licensing authority both on the VBAL and the DEEC. Benefit of Notification, cannot, therefore, be denied to the transferee on the ground of breach of condition (va). The Customs Authorities cannot question the powers of the licensing authorities unless it is mentioned in the Notification.
43. Thus, in view of the aforesaid discussion, we are of the considered opinion that the principles evolved in the case of Goodluck Industries and upheld by Apex Court and followed subsequently in other cases, is to be made applicable to the case on hand, since it is based on sound principle of law. Consequently, we uphold the contentions raised by the appellants while negating the contentions raised by the Department. Therefore the legal maxim LEX NON COGIT AD IMPOSSIBILIA can be invoked and benefit of the same be given to the transferee of the licence for claiming exemption under the Notification. The transferee cannot be called upon to fulfil the condition (v)(a) of the Notification No. 203/92-Cus. It is the original licencee, who has to satisfy the above referred condition, but not the transferee of the licence. In the result, the reference is answered accordingly.
(Pronounced in Court on 20-9-2005)