Customs, Excise and Gold Tribunal - Mumbai
Shri Durgadatta Mishra And Ors. vs Commissioner Of Customs (Export) on 12 March, 2007
Equivalent citations: 2007(119)ECC122, 2007ECR122(TRI.-MUMBAI), 2007(214)ELT356(TRI-MUMBAI)
ORDER
K.K. Agarwal Member (T)
1. These are 17 appeals arising out of the order of Commissioner holding that export goods totally valued at Rs. 80,20,58,389/- under claim by advance licence were mis-declared in order to get undue benefits for import of raw materials to which the exporter namely M/s B.O.F.L. were not entitled and held them liable to confiscation under Section 113(d) of the Customs Act, 1962 and imposing penalty of varying amounts on M/s B.O.F.L., its Managing Director, Executive Director, Director and other officers and on M/s VPL and its officers who also associated with M.s B.O.F.L. in obtaining advance licence from M/s DGFT by mis-representation and has also exported products on behalf of M/s BOFL and subsequently purchased the advance licenses issued in favour of M/s BOFL. Penalties have also been imposed on the other transferee of the licenses who have imported the goods etc.
2. The brief facts of the case are that the main appellant M/s BOFL is a manufacturer and exporter of de-oiled Soyabean cake (DOC) also described as Soyabean Meal/Toasted Soyabean Extracted Meal/Khali etc. obtained from solvent extraction of soyabean oil from soyabean. The main raw materials used in the manufacture of soyabean oil and De-Oiled Cake are seeds of soyabean, hexane and coal. Coal is used to make steam and hexane is used for oil extraction. Towards the end of 1998 and early 1999 M/s BOFL applied for certain quantity based advance licenses to the DGFT, Pune and DGFT, Mumbai initially against determination of ad-hoc norms by Regional Advance Licence Committee (RALC) or Zonal Advance Licence Committee (ZALC) in respect of export of Indian Toasted Soyabean Meal (ITSM), Indian Toasted Soyabean Extract (ITSE), Pure Yellow Flaker type and subsequently against SION. A1814 of the I-O Norms (Input-Output) of product group "Chemicals and Allied Products" for export of Lecithinised High Protein Oil Seed Based Meal (LHOSBM) containing minimum 0.075% of Vitamin B, C & E. In the applications made to the DGFT, it had declared that in addition to hexane, various other inputs specified against SION A1814 were used or required for use in the manufacture of export product. Based on the applications made, it had obtained 11 Quantity Based Advance Licenses issued by DGFT Pune & Mumbai.
3. In most of the cases, exports were made before obtaining the licenses and in some cases, exports were made after obtaining the licenses towards fulfillment of its export obligation. The exports were made not only by M/s BOFL but also by 3rd party exporters. In the Shipping Bills filed, the export product was described as LECITHINISED HIGH PROTEIN OIL SEED BASED MEAL (LHOSBM) CONTAINING MINIMUM 0.075% OF VITAMINS B, C & D (INDIAN TOASTED SOYABEAN MEAL PURE YELLOW FLAKER TYPE)
4. As a part of shipping bill they have also filed a declaration in the prescribed format stating that besides Hexane, various other specified inputs are required/used in the manufacture of the export product.
5. Five of the advance licenses were made transferable since the export obligation in respect of these licenses was completed. Based on those licenses, the following transferees had made duty free imports of various specified inputs under Notification No. 31/97-Cus dated 01.04.1997:
(i) M/s K. Sevantilal & Co.
(ii) M/s Sevantilal & Sons
(iii) M/s Veekay Products Pvt. Ltd.
(iv) M/s P.B. Enterprises
(v) M/s Park Organic Pvt. Ltd.
(vi) M/s G.C. Chemie Pharmie Ltd.
(vii) M/s Haresh Chemicals
6. Based on an information that M/s BOFL was mis-using Advance Licensing Scheme by mis-declaring the export product and inputs which were neither required nor used in the export product, necessary investigations were conducted in the matter. The investigations revealed that M/s BOFL had exported directly or through 3rd party exporter under their letter of authority, goods partly of their own manufacture and partly procured from other manufacturer and suppliers. The goods manufactured or procured from other manufacturer and suppliers by them was nothing but de-oiled cakes variously described as soyabean extract, item, Khali etc. obtained as residue on solvent extraction of soyabean oil from soyabean only. In the production process only hexane is used and other specified input material (mainly vitamin) is neither required nor had been used. M/s BOFL had on their own described de-oiled cake (DOC/Indian Toasted Soyabean Meal (ITSM) as Lecithinised High Protein Oil Seed Based Meal (LHOSBM) (Indian Toasted Soyabean Meal). BOFL in consultation with VPL decided to apply advance license for LHOSBM (ITSM) not under SION-E42 which indicated Soyabean extraction is export product and hexane as import product but for determination of ad-hoc norms listing out various materials in addition to hexane (solvent) as inputs and later as a product of chemical and allied industry under SION-A1814 which indicated LHOSBM as the export product and import items as under:
(1) Hexane (2) Amino Acids (3) Lecithin (4) Antioxidants......
(5) Binders......
(6) Vitamin B, C & E (7) Minerals.
M/s BOFL (Shri Shreyans Daga) and M/s VPL (Shri Devendra Mehta and Shri Viral Mehta) collaborated for making an application for advance licenses through VPL employees (A.K. Shroff & Kumar) pursued with DGFT for grant of licences and obtaining endorsement of transferability on fulfillment of export requirement. M/s VPL and M/s BOFL had a mutual understanding for the sale of transferred licence to VPL. The licenses were obtained on the basis of applications containing mis-declaration and mis-representation as the description of export item was given as Indian Toasted Soyabean Extract, in or Indian Toasted Extracted Soyabean Meal or Oil Seed Based Meal-Pure Yellow Flaker, coupled with a list of items required for use/used in manufacture of export item though they were not used/required in their manufacturing process. Purpose of requirement was suppressed by stating nil against relevant Sr. No. 2.1 of the application form and leaving blank Sr. No. 18 for manufacturing process and flow chart which was also not indicated in the Chartered Engineer certificate attached with the application. It was also found that though purchasers of the export product at no time asked for supply of LHOSBM and has placed order only for Soyabean extractions, goods were still described as LHOSBM containing additional vitamin whereas the orders nowhere indicated the requirement of vitamins etc. It was also found that Chartered Engineer's certificate were all managed. Samples of the product sent for testing revealed that the goods were extraction of natural produce and not chemical formulation and that they have not undergone any blending or mixing of any nutritional functional elements like vitamins, amino acids, minerals etc. and that the sample were of agricultural produce i.e. toasted extracted yellow soyabean meal but were described as LHOSBM. The samples were found to contain minimum of 0.075% of vitamin B, C & E which were present in the soyabean oils in their natural form and were not added subsequently.
7. Based on these investigation, a show cause notice was issued to M/s BOFL VPL, APRL, BIL, VMEL and Shri Shreyans Daga, Shri Vinod Daga, Shri Niraj Daga, Shri D.N. Murli, Shri Surendran of M/s BOFL, Shri Devendra Mehta, Shri Viral Mehta, Shri A.K. Shroff of M/s VPL, Shri Gautam Thapar and Shri C.H. Gopal of M/s APR and M/s BIL and Smt. Kanchan Daga, Shri Durgadatta Mishra of M/s VMTL, Shri Ramesh Kotecha of M/s P.L., Shri N.R. Pavri, Chief Engineer of M/s K. Sevantilal & Co. and Shevantilal & Sons, M/s P.B. Enterprises, M/s Park Organic Pvt. Ltd. M/s G.C. Chemie Pharmie Ltd. M/s Haresh Chemicals asking them to show as to why export goods valued at Rs. 80,20,58,389/- should not be held liable to confiscation under Section 113(d) of the Customs Act, 1962 and benefit of duty exemption scheme should not be denied on exports against impugned licenses and benefit of Notification 31/97 dated 01.04.1997 should not be denied and duty foregone amounting to Rs. 81,13,380/- on the goods already exported should not be recovered and the goods seized from the various premises of the transferees should not be confiscated and penalties imposed on the various noticees. The show cause notice was adjudicated by the Commissioner who held export goods totally valued at Rs. 80,20,58,389/- as liable to confiscation and imposed a penalty of Rs. 5 Crores on M/s BOFL, 1 Crore on Shri Vinod Daga, Managing Director of M/s BOFL, Rs. 2 Crores on Shri Shreyans Daga, Executive Director of M/s BOFL, Rs. 50 Lakhs on Shri Niraj Pavri, Director of M/s BOFL, Rs. 50,000/- on Shri D.N. Murli of M/s BOFL, Rs. 50,000/- on Shri Surendran of M/s BOFL penalty of Rs. 3 Crore on M/s VPL, Rs. 1.6 Crores on Shri Devendra Mehta and Rs. 50 Lakhs on Shri Viral Mehta, Rs. 50,000/- on Shri A.K. Shroff and Shri Kumar of M/s VPL were also imposed under Section 114(i) of the Customs Act, 1962. Similarly penalties of Rs. 50 Lakhs on M/s Apar Ltd., Rs. 4 Lakhs on M/s Ballarpur Industries Ltd., Rs. 1 Lakh on M/s Vision Millenium Export Rs. 10,000/- on Shri Durgadatta Mishra, employee of M/s VMIL, Rs. 4 Lakhs on M/s Producin Ltd., Rs. 20,000/- on Shri N.R. Pavri, chartered Engineer were also imposed. The duty free clearances under Notification No. 31/97 were held to be not permissible and the less charge payment were confirmed.
8. The learned advocate for M/s BOFL contended that there was no mis-declaration or mis-representative either to the DGFT or to the Customs authorities regarding the export goods or the input material. Export goods had been correctly declared in the shipping bill as LHOSBM as per SION No. A1814 of the I-O norms. This is strictly in accordance with the advance licenses issued by DGFT. Regarding the inputs declaration appended to the shipping bills it was contended that as per various judicial pronouncement, what is to be seen is whether the inputs material are capable of use in the export product. Actual use is no relevant as held by the Tribunal vide its Order No. 959/2003 dated 25.07.2003 in case of Jai Engineering Work Ltd. v. Commissioner of Customs, Chennai. It was stressed that this aspect has been duly examined by the DGFT who are the competent authorities. This apart, at the time or export, a proper officer of customs had accepted the declaration without raising any objection. Even after the exports, the advance licenses and the DEEC books have been duly audited by customs and no irregularity was noticed by them. In this connection he also referred to DGFT's letter dated 14.12.1999 addressed to the Commissioner of Customs (Import), Mumbai at Page 67 of the paper book and submitted that by this letter DGFT has clarified the correct legal position which is binding on the Customs authorities. In this regard reliance was placed on the decisions of the Tribunal in the case of IndusInd Media Communication Ltd. and Ors. v. Commissioner 2006-TIOL-1394-CESTAT-MUM. Reliance was also placed upon the judgment of the Hon'ble Supreme Court in the case of Titan Medical Systems Pvt. Ltd. v. Collector of Customs. New Delhi 2003 (151) E.L.T. 254 (S.C.) wherein it has been held 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 mis-representation.
9. It was further submitted that the goods have been correctly described in the shipping bills as LHOSBM (Indian Toasted Soyabean Meal Pure Yellow Flaker Type Oil content less than 1%) and there has been no mis-declaration whatsoever. In support thereof they referred to the test report of the Chief Chemist Shri Badriprasad and that of Ex. Joint Director (Chemical Laboratory) Shri Khadim Hussain. Shri Khadim Hussain has in his cross examination clearly stated that soyabean meals are highly lecithinised in comparison to other oil cakes. It is highly protein contained and vitamin such as vitamin B-Complex and others. In reply to a specific query as to whether LHOSBM is nothing else but high protein soyabean meal or not Shri Khadim Hussain stated that yes it is an abbreviation of high protein soyabean meal. Similarly, Dr. Badriprasad, former Director CRCL (Central Revenue Chemical Laboratory) has confirmed that high protein soyabean oil seed based meal will be covered in the entry relating to SION A1814 mainly LHOSBM containing minimum 0.075% of Vitamin B, C & E. It was submitted that Dr. Badriprasad was not aware of any technical literature regarding LHOSBM but still gave an opinion that the product was not LHOSBM. In addition while applying for advance licence when no norms were fixed, their product was considered by the RALC/ZALC of DGFT as falling under SION A1814 relating to LHOSBM. All these facts conclusively prove that there has been no mis-declaration on their part whatsoever.
10. It was also submitted that the export goods were not prohibited and the same were not liable to confiscation under Section 113(d) of the Customs Act. Reliance in this regard was placed on the Supreme Court decision in the case of Commissioner of Customs v. Prayag Exporters and Tribunal's decision in the case of Texport India v. Commissioner of Customs, Mumbai 2006 (199) E.L.T. 97.
11. In the last it was submitted that based on the allegations made in these proceedings as referred to by the Customs authority, DGFT had issued a show cause notice dated 19.12.2005 for cancellation of advance licences but the same has now been dropped by Additional DGFT vide order-in-original dated 03.04.2006. In view of the same the question of confiscation of the goods and denying the benefit of Notification 31/97 and imposition of penalties does not arise.
12. On behalf of other noticees being officers of M/s BOFL and VPL the basic charge against them is that they have assisted M/s BOFL in obtaining the advance licenses by mis-representation of facts and have signed certain declarations and documents submitted to the customs and the DGFT authorities. It was submitted that once there has been no mis-representation or mis-declaration as has been contended in the case of the main appellant M/s BOFL and once this charge has been dropped by the additional DGFT the question of imposing any penalty does not arise. Similar is the situation in respect of the noticees who have authorized M/s BOFL to export on their behalf wherein the plea taken was that firstly there had been no mis-representation and mis-declaration and was if there has been a mis-representation or mis-declaration it has been on the part of M/s BOFL who were only authorized to export the goods on their behalf but were given no authority to mis-declare the goods.
13. On behalf of the transferee importer it was submitted that they were a genuine transferee of the licenses which are still valid and the show cause notice issued for canceling them has been dropped and in that case they cannot be penalized for the some misdeed if any committed by the person procuring the advance licenses. Reliance in this regard was placed on the Larger Bench decision of the Tribunal in the case of Hico Enterprises v. Commissioner of Customs, Mumbai .
14. The learned consultant for the revenue submitted that broadly two issues are involved in this group of appeals. These are:
(i) Whether the exporters have mis-declared the goods exported attracting the provisions of Section 113(d) of the Customs Act, 1962 and inconsequence thereof, whether they are liable to penalty under Section 114(i) of the said Act;
and
(ii) Whether the behalf of exemption under Notification No. 31/97-Cus can be denied to the input materials imported duty free by various transferees of the Advance Licences for the reason that the same are not required for manufacture of the export product.
Submissions on the 1st issue:
1.1 In the Shipping Bills filed by M/s BOFL and third party exporters, the export goods have been described as follows:
Lecithinised High Protein Oil Seed Based Meal (LHOSBM) containing Minimum 0.075% of Vitamins B, C & E (Indian Toasted Soyabean Meal Pure Yellow Flaker Type) At the foot of the Shipping Bills, the exporters have declared that particulars given herein are true & correct. They have also attached a declaration of various materials required/used for manufacture of goods covered by the shipment.
1.2 The product 'LHOSBM' is covered by Sr. No. A1814 of the I-O Norms - Chemicals & Allied Products. Against this export product, various import items have also been indicated along with the quantity allowed. The import items indicated are:
1. Hexane
2. Amino Acids
3. Lecithin
4. Antioxidants
5. Binders
6. Vitamins B, C & E &
7. Minerals 1.3 Admittedly, what is exported is Soyabean Extraction, i.e. Soyabean De-Oiled Cake (D.O.C.) which is also known as Soyabean Meal, toasted Soyabean Extracted Meal, etc. 1.4 Export Item 'Soyabean Extraction' is covered by Sr. No. E42 of the I-O Norms-Food Products. Against this export item, import item is only 'Hexane' in the I-O Norms.
1.5 There is no dispute that in the manufacture of 'Soyabean Extraction, the raw materials used are only Soyabean Seeds, Haxane & Coast. No other raw materials are required or used in the Soyabean Extraction. In this connection, statement of Shri Niraj Daga, Director of M/s BOFL may be referred to in Para 11 of the Show cause notice.
1.6 It was submitted that from the foregoing facts, it is quite evident that the exporters have mis-declared the description of the export goods by suppressing the correct nature of the goods by using false and deceptive descriptions whereby they have attempted to equate 'LHOSBM' with Soyabean Extraction by adding the words in bracket as "Indian Toasted Soyabean Meal Pure Yellow Flaker Type". This apart, they have also given false declaration regarding the use of various materials in the export product with the sole motive to obtain Advance Licenses for duty free imports. Para 30 of the Show cause notice may please be referred to in this connection.
1.7. Regarding the plea that input declaration was just an additional information given along with the Shipping Bill which was really not necessary, it was submitted that this submission is unacceptable for the reason that in the DEEC Shipping Bill, use of inputs in the export goods is required, to be declared mandatorily under the Shipping Bill and Bill of Export (Form) Regulations, 1991.
Regulation 2 specifies the form of Shipping Bill in Annexures I to III. Annexure III which is relevant for the present purpose may please be perused. One of the declarations required to be given in the DEEC Shipping Bill is regarding the use of the raw materials in the manufacture of the export goods under the relevant shipment. A copy of the aforesaid Regulations is submitted herewith for favour of perusal and ready reference.
1.8 From the above, it is quite clear that declaration as to the use of raw-materials in the export goods is a part & parcel of the DEEC Shipping Bill. Viewed from this angle, it has to be held that the contents of the Shipping Bills have been mis-declared in contravention of the provisions of Section 50(2) of the Customs Act, 1962.
1.9. As regards the plea that mis-declaration of description of the export goods does not make it prohibited and hence Section 113(d) of the Customs Act will not be attracted as per Hon'ble Supreme Court in the case of Prayag Exporters , it was submitted that is not acceptable for the reasons that
(a) There is a clear prohibition against any incorrect declaration of import or export goods with respect to their value, quantity and description under Rule 11 of the Foreign Trade (Regulation) Rules, 1993. Rule 11 is reproduced below for the sake of proper appreciation and judicious consideration:
Rule 11: Declaration as to value and quality of imported goods - On importation into, or exportation out of, any customs ports of any goods, whether liable to duty or not, the owner of such goods shall in the Bill of Entry or the Shipping Bill or any other documents prescribed under the Customs Act, 1962, state the value, quantity and description of such goods to the best of his knowledge and belief and in case of exportation of goods, certify that the quality and specification of the goods as stated in those documents, are in accordance with the terms of the export contract entered into with the buyer or consignee in pursuance of which the goods are being exported and shall subscribe a declaration of the truth of such statement at the foot of such Bill of Entry or Shipping Bill or any other documents.
1.10 It has been consistently held by various Courts including the Hon'ble Supreme Court that violation of Rule 11 of the Foreign Trade (Regulation) Rules, 1993 makes the export goods prohibited, thereby attracting the provisions of Section 113(d) of the Customs Act, 1962. In this connection, the following decisions may be usefully referred to and relief upon:
(i) Om Prakash Bhatia v.
C.C. New Delhi
-
(Para 18)
(ii) Collector of Customs v.
Pankaj V. Sheth
-
(Para 19 to 21) (in) Sanjeev Kumar Gupta v.
Commissioner of Customs
-
(Para 13)
(iv) Aditya Mills Ltd.
v.
Union of India
-
(Para 5)
(v) G.K. Lath v.
Commissioner of Customs, Madras
-
(Paras 18 & 19) 1.11 It was submitted that in view of the afore-cited decisions, reliance of the appellant-exporters on the judgment of the Apex Court in Prayag Exporters' case cannot help them in any manner. This has also been made clear by the Hon'ble Apex Court itself in the case of Commissioner of C. Ex. & Customs v. Suresh Jhunjhunwala, it has been observed by the Apex Court that the decision in Om Prakash Bhatia's case cannot be brushed aside merely on the ground that it related to a different section relating to drawback.
1.12 In view of the afore-cited decision, the Commissioner has correctly held that the export goods are liable to confiscation under Section 113(d) of the Customs Act, 1962 and consequently imposition of penalties on the exporters is required to be upheld.
1.13 He thereafter referred to the plea of appellant that the Customs authorities cannot question the action of the DGFT Authorities in matters of grant of licenses and endorsement of the transferability thereon. It was pointed out that on a reference from the Commissioner of Customs, DGFT has clarified the position by its letter dtd. 14/12/99 (at page 67 of the Paper Book) that the licenses issued prior to 15/10/99 were issued on the basis of SION or on the recommendation of SALC or concerned ZALC/RALC and fulfillment of the following conditions have to be ensured before bond waiver and transferability is granted by the licensing authority:
(a) the product actually exported should strictly conform to the description of the resultant product at the relevant SION under which the licence has been issued;
(b) if the licence has been issued on the basis of ad-hoc norms fixed by the SALC or the concerned ZALC/RALC the quantity of each item allowed for import (minus the wastage allowed) which is required to be physically present in the export product should be accounted for the Customs audited DEEC (Exports).
1.14 From the above clarification of the DGFT, two things are very clear. One is that the product actually exported should strictly conform to the description of the resultant product at the relevant SION and the other is that the quantity of each item allowed for import is required to be physically present in the export product. In the present case, it cannot be disputed that the product actually exported is 'Soyabean Extraction' which does not confirm to 'LHOSBM' covered by SION A-1814. Further, except for hexane, none of the other inputs permitted for Import against A1814 is required for Soyabean Extraction.
1.15 From the above, it will be quite clear that the clarification given by the DGFT supports the contention of the revenue and not that of the exporters. Further, their reliance on the Order-in-Original dtd. 3/4/2006 passed by the Addl. DGFT dropping the Show cause notice is also not helpful to them inasmuch as the same is not only inconsistent with the afore-mentioned clarification of the DGFT itself but also contrary to the provisions of para 7.2 of Chapter 7 of the Exim Policy, 1997-2002 which also provides that the inputs are required to be physically incorporated in the exported product.
1.16 In any event, Addl. DGFT's Order-in-Original is not binding on the Tribunal which is competent to take its own independent view on consideration of relevant facts and provisions of law.
Submissions on the 2nd issue:
In regard to Larger Bench decision in the case of Hico Enterprises v. Commissioner of Customs, Mumbai learned Advocates for the transferees also relied upon the decision by the Hon'ble Apex Court in the case of Titan Medical Systems Pvt. Ltd. v. Collector of Customs, New Delhi wherein it has been held 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 misrepresentation it was submitted that consideration of grant of exemption under a notification issued under Section 25(1) of the Customs Act, 1962 is the exclusive domain of the Customs authorities, Before grant of any exemption from duty, the Customs authorities are required to see whether the claimant can really fulfil the conditions of the notification. In the present case, admittedly except for hexane, no other inputs items as specified against Sr. No. A1814 of the I-O Norms are required for use in the manufacture of Soyabean Extraction. In the circumstances, the Customs authorities cannot extend the benefit of exemption to other input items such as, Vitamins, Mineral, Amino Acids, etc. Merely because the import items are covered by and Advance Licence, exemption will not be automatic. The Customs authorities will still have the jurisdiction to question as to whether the benefit of exemption is available to the claimant. In this connection, the judgment of the Hon'ble Supreme Court in the case of Sheshank Sen Foods Pvt. Ltd. v. Union of India which still remains a good law can be usefully referred to and relied upon. In this judgment, it has been held by the Apex Court that while the Licensing authorities are empowered to conduct investigation into the breach of terms of the licence, the Customs authorities can conduct investigation into the breach of condition of the exemption notification. In this connection, provisions on the existing policy vide Para 7.26 of the Handbook of Procedures Vol.-1, 1992-2002 may also be referred to. As per provisions of this para, even after redemption of LUT, it will be open to the Customs authorities to take action against the licence holder for any mis-representation, mis-declaration and default detected subsequently. In view of this legal position, it cannot be contended that the Customs authorities are bound to give the benefit of exemption once the import items are covered by the Advance Licence.
2.2 In so far as the Larger Bench decision in Hico Enterprises is concerned, it was stated that if the original licence holders are not eligible for benefit of the exemption, the transferees who have stepped into the shoes of the original licence holders cannot have better rights to get the benefit of exemption. In this connection, the judgment of the Hon'ble Bombay High Court in the case of Rico Gems Corporation v. Chief Controller of Imports & Exports may be usefully referred to and relied upon. IN para 15 of the judgment, it has been held that the transferee steps into the shoes of the transferor and if the transferor cannot escape his obligations, the transferee cannot be over ambitious of getting over them.
15. We have considered the submissions. We find that the basic issue to be decided is whether the appellant in this case have obtained advance licenses by mis-declaration and mis-representation about the use of inputs in the manufacture of export product which were never used and whether the product which was essentially soyabean extraction or soyabean oil and de-oiled cake has been mis-declared as LHOSBM containing minimum 0.075% of vitamin B, C & E (Indian Toasted Soyabean Meal Pure Yellow Flaker type) and a wrong declaration has been given about the use of inputs in the manufacture of export products. We find that revenue has laid a great stress on the fact that the inputs permitted under SION A1814 for manufacture of LHOSBM were never used by the appellant as they were existing in the natural form in the high protein soyabean seed used by them. This matter has been referred by them to the DGFT and the additional DGFT after going through the entire evidence forwarded by the Customs authorities has come to the conclusion that there has beer no mis-representation or mis-declaration and has therefore dropped all the proceedings against the appellant M/s BOFL. Additional DGFT has taken note of the fact that initially the appellant has applied for some of the licence under no norms category showing the product as Indian Toasted Extracted Soyabean Meal Pure Yellow Flaker type showning minimum 0.075% of vitamins. ZALC after consideration of the case, in consultation with the technical expert and the representative of the custom authorities came to the conclusion that the export product to be exported s covered under the norms and description of export product as mentioned under SION A1814 and therefore allowed to issue the advance licence on the basis of lower of the applied quantity and the quantity allowed under SION A1814. Had there been any mis-declaration or mis-representation it would, have been noticed by the technical authorities as well as customs representative and the applications would have been rejected. It has been further held by him that as per para 7.2 of Export-Import Policy for the year 1997-2002 i.e. date of issue of advance licence there was no requirement of imported inputs being physically incorporated in the export product and that as per general note for all export product group in the Hand-Book Procedure-Volume II it has been stated that the norms has been published in this book with a view to facilitate determination of the proportion of various inputs which can be used or are required in the manufacture of the different resultant product. As on the date of issue of advance licence it was not the actual use that was deciding factor for import of the particular input but even its requirement entitled exporters to import the input if allowed under the SION. A reference was also made to the clarification issued by the Central Board of Excise and Board vide letter no. 506/373/96/DNK dated 16.01.1997 which clearly spells out that the interpretation of words raw material required for use does not mean that the raw materials must by physically incorporated. Inputs may be allowed even if they are not exactly thus used in the export product but provided that inputs were commonly known to be usable in the product exported.
16. The above finding of the additional DGFT who have final say on the interpretation of the policy makes it abundantly clear that the inputs imported may not necessarily be used but may be required for use. In present can it may be required if soyabean seed do not contain the vitamin to the extent required under SIGN A1814. This is also supported by the CBEC circular and therefore it has been clearly held that there has been no mis-declaration or mis-representation in obtaining the advance licence.
17. The above principle would also equally apply with regard to the declarations made to the customs. Here we find that the product is alleged to have been mis-described as LHOSBM whereas it was a simple soyabean extraction falling under SION E 42. Here we must say that if the product is capable of being covered under two categories, applicant is entitled to choose the category which is beneficial to him and since A 1814 was more beneficial to him, he applied for the same. We further note that there has been no mis-description of the product as both Dr. Badriprasad, Chief Chemist and Shri Khadim Hussain, Joint Director have in their cross examination admitted that soyabean meal are highly lecithinised in comparison to other oil cake and that LHOSBM is nothing but high protein soyabean meal and are duly covered by SION A1814. It has been also been brought on record that Dr. Badriprasad could not indicate any product which would be covered by SION A1814 but still chose to state that the product was not LHOSBM. It is also not denied by either that the product did not contain 0.075% vitamin B, C & E and the test memos required them to uncertain only the contents of vitamin. The product is also known as India Toasted Soyabean Meal Pure Yellow Flaker type. Therefore the appellants cannot be charged of mis-declaring the product. As regards the declaration regarding use of inputs filed along with the shipping-bill, we find that the some of the declaration the word used are (required/used) whereas in some its (used) only. Since as per the policy used and required for use stand on the same footing and has been so interpreted by the additional DGFT, the appellant cannot be charged with mis-declaration on this count also.
18. In view of above, we hold that the import under the licenses have been correctly made and the goods are covered by the licenses and entitled to exemption under notification No. 31/97 dated 01.04.1997 and there has been no mis-declaration in respect of the expert goods already exported and therefore those goods cannot be held liable to confiscation. Since there has been no mis-representation or mis-declaration either to custom authorities or to DGFT and both the import goods and the export goods have been held as duly covered by the advance licence, the question of demand of any duty on the goods imported against the advance licence does not arise nor is there any occasion for imposition of penalty on any of the appellants either for importing the product or exporting product or for aiding and abetting M/s BOFL in procuring advance licenses and for various declarations made to customs and DGFT authorities and consequently the demand of the duty and the penalty imposed on all the appellants are set aside.
19. In the result the Commissioner's order is set aside and all the appeals are allowed.
(Pronounced in Court on 12.3.07)