Custom, Excise & Service Tax Tribunal
Awesome Clothing Co Pvt Ltd vs Bangalore-Ii on 12 June, 2025
C/577-580/2009
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1
Customs Appeal No. 577 of 2009
(Arising out of Order-in-Original No. 8/2009 dated 23.07.2009
passed by the Commissioner of Customs and Central Excise,
Bangalore.)
M/s. Awesome Clothing Co. Pvt.
Ltd.
No. 2/4, Aragini Bhavan, Appellant(s)
Dr. Rajkumar Road,
Rajajinagar,
Bangalore - 560 010.
VERSUS
The Commissioner of Customs &
Central Excise
Bangalore - II Commissionerate
Central Revenue Building, Respondent(s)
Queen's Road,
Bangalore - 560 001.
WITH
(i) Customs Appeal No. 578 of 2009 (Mr. Vijay Lakhani,
President, M/s. Awesome Clothing Co. Pvt. Ltd.)
(ii) Customs Appeal No. 579 of 2009 (Mr. K. Venkatesh
Rao, Manger - Import and Export, M/s. Awesome
Clothing Co. Pvt. Ltd.)
(iii) Customs Appeal No. 580 of 2009 (Mr. S. Sanath
Kumar, Production Executive, M/s. Awesome
Clothing Co. Pvt. Ltd.)
(Arising out of Order-in-Original No. 08/2009 dated 23.07.2009
passed by the Commissioner of Central Excise, Bangalore II
Commissionerate, Bangalore.)
APPEARANCE:
Shri B.V. Kumar, Advocate for the Appellant
Shri K. A. Jathin, Deputy Commissioner (AR) for the Respondent
Page 1 of 19
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CORAM: HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL)
HON'BLE MRS. R. BHAGYA DEVI, MEMBER
(TECHNICAL)
FINAL ORDER NO. 20804 - 20807 /2025
DATE OF HEARING: 18.12.2024
DATE OF DECISION: 12.06.2025
PER: R. BHAGYA DEVI
The Appellants M/s. Awesome Clothing Co. Pvt. Ltd
(ACCPL) are manufacturers and exporters of readymade
garments along with their supporting manufacturer M/s.
Awesome Apparels Pvt. Ltd., Bangalore. The appellant in respect
of 10 Advance Licenses imported 5,79,824 sq. mtrs. of fabric
which was imported duty-free to be consumed for the specific
purpose i.e., for the manufacture and export of garments
towards fulfillment of export obligation. On investigation and
based on evidences recovered, it was found that only 4,15,118
sq. mtrs. were consumed in the manufacture of garments.
Hence, show-cause notice was issued demanding duty on the
differential quantity of fabrics found not to have been consumed
in the manufacture of export goods. Admittedly 76,274 sq. mtrs.
of the imported fabric was used in the manufacture of garments
which were cleared for export under claim for drawback.
Accordingly, the Commissioner denied the benefit of exemption
Notification No.51/2000-Cus. dated 27.04.2000 and confirmed
the demand of duty of Rs.1,48,13,889/- along with interest
under proviso to Section 28(1) of the Customs Act, 1962 read
with Section 28AB of Customs Act, 1962. In addition, total
quantity of 1,33,978 Sq. mtrs. of fabric valued at
Rs.1,85,87,119/- imported duty-free but diverted, was held
liable for confiscation under Section 110(o) of Customs Act,
1962; another quantity of 30,728 Sq. mtrs. fabric was also held
Page 2 of 19
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to be liable for confiscation under Section 111(o) of the Customs
Act, 1962 and quantity of 43,277 Nos. of garments exported
under drawback was also held to be liable for confiscation under
Section 113(i) and (ii) of the Customs Act, 1962. The
Commissioner also imposed penalty equal to the duty and
interest under Section 114A of Customs Act, 1962 and penalty of
Rs.5,00,000/- on Shri Vijay Lakhani, President of ACCPL; penalty
of Rs.3,00,000/- on Shri S. Sanath Kumar, Production Executive
of the Appellant and penalty of Rs.2,00,000/- on Shri Venkatesh
Rao, Import-Export Manager of the appellant under Section
112(a) and 114(iii) of the Customs Act, 1962. Aggrieved by this
order, appellants are in appeal before us.
2. The Learned Counsel at the outset submits that the
Customs Authorities have no jurisdiction to re-open or question
the export performance of the Appellants against three Advance
Licenses after they have fulfilled the Export Obligation and
obtained the Export Obligation Discharge Certificate (EODC)
from the JDGFT, particularly in the light of the decisions of the
Hon'ble Supreme Court and other judicial forums. Hence
Advance License No. 0710007077 dt. 22.1.2001; Advance
License No. 0710007206 dt. 01.2.2001; Advance License
No. 0710016027 dt. 06.9.2002 where export obligation has been
discharged based on which JDGFT, Bangalore issued the Export
Obligation Discharge Certificate, the demand cannot be
sustained. He also submits that Notifications 51/2000-Cus dt.
27.4.2000 and No.43/2002-Cus dt.19.4.2002 would indicate that
the Customs Authorities have not been conferred with powers to
question the actions or the powers of the Licensing Authority, to
fix the Input Output Norms in a particular Advance License,
based upon the data submitted by the appellant to the JDGFT,
after the scrutiny of which, the JDGFT grants an Advance
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License. The details of the quantity (sq. mtrs.) and value of
fabrics for which the Advance License was applied for, the
quantity (sq. mtrs.) and value of fabrics permitted to be
imported, the Export Obligation fixed by the DGFT, the quantity
(sq. mtrs.) and value of fabrics actually imported and the
quantity (pieces) and value of fabrics exported is as per the
licenses issued.
Table - 1
Sl. Advance Date Export Obligation Fixed by DGFT Export Obligation Fulfilled
No License No.
Qty. Value in Value in Qty. Value in Value in
PCS Rs. USD PCS Rs. USD
1. 0710016027 06.9.02 34703 5872615.18 121460.50 35514 8340136.10 173299.60
2. 0710007077 22.1.01 48656 14835336.04 318696.80 47870 14800122.89 315994.04
3. 0710007206 1.12.01 25748 8581888.50 184358.50 26534 8153855.70 174617.03
4. 0710007192 01.2.01 63226 19277765.46 414130.30 63364 19600444.79 418370.16
5. 0710007191 01.2.01 41257 13141933.81 282318.66 43584 10044758.38 218087.28
6. 0710015308 01.8.02 16600 2427750.00 49800.00 15756 2283220.44 47268.00
7. 0710015309 01.8.02 24650 5450250.00 111800.00 22524 5620605.48 116431.20
* 0710015309 21150 4639781.25 95175.00 18960 4762394.28 98611.20
8. 0710013156 26.3.02 34600 5453825.00 112450.00 35754 7704097.72 158527.50
9. 0710014290 01.6.02 35430 6443831.25 132862.50 40310 8809443.02 191654.60
10. 0710007971 04.4.01 1415 530973.63 9268.25 Nil Nil Nil
Total 326285 82016168.87 1737145.51 331210 8,53,56,684.52 1814249.41
* The Export obligation fixed and fulfilled includes export obligation fixed and fulfilled at Chennai is adjusted.
2.1 The Learned Counsel further referring to the 10 Advance
Licenses against which the Imports / Exports were made at
Bangalore, which are part of the dispute and reproduced above
submitted that in respect of the 10 impugned Advance Licenses
as against the 3,26,285 Pcs of garments to be exported in terms
of the export obligation fixed by the JDGFT, the Appellants have
actually exported 3,31,210 Pcs. Similarly, as against USD
17,37,145.51 (Rs.8,20,16,168.87) to be realized in terms of the
Export Obligation fixed by the JDGFT, the Appellants have
actually realized USD 18,14,249.41 (Rs.8,53,56,684.52). In
addition, the performance of the appellant against the 5 Advance
Licenses, (against which exports were made through Chennai)
are given below:
Page 4 of 19
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Table - 2
Sl. Advance Date Export Obligation Fixed by DGFT Export Obligation Fulfilled
No. License No.
Qty. Value in Value in Qty. Value in Value in
PCS Rs. USD PCS Rs. USD
1. 0710008328 9.5.02 1824 779340.56 16706.12 1062 320625.49 6810.90
2. 0710015309 1.8.02 21150 4639781.25 95175.00 18960 4762394.28 98611.20
3. 0710016026 6.9.02 2640 606309.00 12540.00 2232 592317.00 12276.00
4. 0710020830 28.4.03 3900 795600.00 16575.00 798 207726.96 4552.80
5. 0710021402 28.5.03 34480 7195180.00 150039.60 29592 5192616.30 113139.60
Total 63994 14016211.00 291035.72 52644 11075680.03 235390.50
If the total performance against the 15 Advance Licenses are
taken together, the Export Obligation fixed by the JDGFT,
Bangalore, and the Export Obligation fulfilled against the said 15
Advance Licenses would be as follows.
Table - 3
Export Obligation Fixed by DGFT Export Obligation Fulfilled
Imports made Qty. Value in Value in Qty. Value in Value in USD
PCS Rs. USD PCS Rs.
At Chennai
against 5 63994 14016211.00 291035.72 52644 11075680.03 235390.50
Advance
Licenses
At Bangalore
against 10 305135 77376387.62 1641970.51 312250 80594290.24 1715638.21
Advance
Licenses
369129 91392598.62 1933006.23 364894 91669970.27 1951028.71
2.2 Thus, in respect of the 15 Advance Licenses issued to the
Appellant as against the 3,69,129 Pcs of garments to be
exported in terms of the export obligation fixed by the JDGFT,
the Appellant actually exported 3,64,894 Pcs, which is marginally
short by 4,235 Pcs. As against USD 19,33,006.23 /
Rs.9,13,92,598.62 to be realized in terms of the export
obligation fixed by the JDGFT, they have realized
USD 19,51,028.71 / Rs.9,16,69,970.27, which is higher than the
Export Obligation fixed by the JDGFT. Thus, having achieved the
Export Obligation as stipulated by the JDGFT, left to themselves
they would have approached the JDGFT for regularization in
terms of Para 4.20.1 of the Handbook of Procedures (HBP)of the
Exim Policy 2002-07 which permits clubbing of all Imports and
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Exports of more than one Advance License for the purposes of
redemption and regularization. Accordingly, the Appellants vide
their letter dated 19.9.2006 approached the Regional JDGFT to
facilitate the clubbing of the 10 Advance Licenses issued to them
and thereafter, approached DGFT, New Delhi vide their letter
dated 4.8.2008 requesting for the facility of clubbing of
clearances in respect of all the 14 Advance Licenses issued to
them. In response the DGFT, New Delhi, vide letter dt. 2.3.2009
informed as follows:
"In this connection, I am directed to say that the request was
considered in the Policy Relaxation Committee (PRC) Meeting No.
10/AM'09 held on 19.2.2009 (Case No. 19) under the
Chairmanship of Shri. R. S. Gujral, DGFT, office of DGFT, New
Delhi. The Committee has accepted your request and necessary
instructions have been issued to concerned Regional Authority.
Accordingly, you are requested to approach concerned Regional
Authority for further necessary action. As regards request for
clubbing of the licenses, you are advised to apply to the Regional
Authority concerned".
As advised by the DGFT, New Delhi, the Appellants approached
the Regional JDGFT, Bangalore vide their letter dated 29.8.2009
and submitted the required documents in respect of 11 Advance
Licenses issued to them which is yet to be decided.
2.3 Without prejudice to the above, the Appellant submitted
that the Commissioner mis-directed himself in demanding duty
in respect of all goods exported against all the 10 Licenses,
ignoring the fact that the resultant products viz., ladies garments
have been exported. It is stated that these demand cannot be
sustained in view of the fact that the Hon'ble Tribunal in the case
of 4R Health Care Products vs. CCE Vapi - 2004 (166) ELT
469 (Tri. - Mumbai ) and Kansal Knitwears v. CCE -
Page 6 of 19
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2001(136) ELT 457 (T), held that once goods are exported,
the question of demanding duty on such goods does not arise. It
is also stated that the Commissioner mis-directed himself in
demanding Customs duty in respect of those fabrics (imported
under the Advance Licenses), a part of which were utilized in the
manufacture of garments and which were exported under claim
for drawback where the demand of duty should have been
limited to the drawback claimed amounting to Rs.15,68,943/- in
terms of the second proviso to Rule 3 of the Customs & Central
Excise Duties Drawback Rules, 1995.
2.4 It is further stated that in terms of the Standard Input
Output Norms (SION) J270 for the manufacture of one piece of
Ladies Shirt (Full Sleeve) the fabric permitted to be imported for
the garment is 2.75 Sq. Mtrs. Under J271 and for Ladies Shirt
(Half Sleeve) the fabric permitted to be imported for the
garment, is 2.20 Sq. mtrs. As against the above SION, the
Appellants imported on an average only 1.97 Sq. mtrs.(total
fabrics imported 7,18,325.75 Sq. mtrs. divided by total
garments exported 3,64,894 Pcs = 1.97 Sq. mtrs. per garment).
The Appellants are entitled to import fabrics for the manufacture
of garments in terms of SION J270 and J271 for the manufacture
of ladies shirts, full sleeve and half sleeve respectively. The
higher margin has been given by the Licensing Authorities to
cover wastage of fabric in terms of Para 4.1.1 of the Exim Policy,
which clearly permits 'normal allowance for wastage' during
manufacture, rejection of garments during quality control,
defects in the fabrics imported and other contingencies such as
colour variations etc., which has been totally ignored by the
investigating agency as well as the Commissioner. Further, it is
submitted that Advance License for garments, the fabric that
required is based upon an estimate that is given by the Master
Page 7 of 19
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Designer/Pattern Maker of the overseas buyer and the
specifications mentioned therein and such estimates take into
account the wastage of fabrics at the time of importation,
storage, manufacture and storage of finished garments before
export and considering these factors the DGFT while fixing the
Standard Input-Output Norms (SION) provides for certain extra
allowance. In the instant case, since garments are customer
specific, no SION is fixed in each case, the Licensing Authority
fixes and approves the SION after evaluating the information
given in the individual applications. There is a possibility of
excess or shortage in such circumstances and this cannot be
treated as mis-declaration. Relies on the decision by the Hon'ble
Supreme Court in the case of Titan Medical Systems Pvt. Ltd.
vs. Collector of Customs, New Delhi: 2003 (151) ELT 254
(SC).
2.5 It is also submitted that in terms of Para 4.20 of HBP
2002-2007, Para 4.28 of the HBP provides for regularization of
bona fide default, if the export obligation is fulfilled in terms of
value, but there is a shortfall in terms of quantity, the license
holders shall pay Customs duty for the regularization on that
unutilized value of the imported material along with interest at
the rate of 15% per annum and an amount equivalent to 3% of
the CIF value of unutilized imported material. If the export
obligation is not fulfilled in terms of quantity but there is short
fall in terms of value, no penalty shall be imposed if the license
holder has achieved positive value addition. If it all, the demand
has to be sustained, it has to be only on the unutilized 8,943.80
sq. mtrs of fabrics for the manufacture of 4,540 Pcs on which the
proportionate duty works out to Rs.8,04,495/-. It is also
submitted that no duty is payable on the quantity of fabric that
is not proved to have been sold, transferred or utilized these
Page 8 of 19
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fabrics for a purpose other than for which the Advance Licenses
have been issued by the JDGFT. Relies on the decision of the
Hon'ble Tribunal in the case of Commissioner of Customs,
Hyderabad vs. Cheminor Drugs Ltd.: 2003 (160) E.L.T. 649
(Tri. - Bang.).
3. The Authorized Representative for the Revenue reiterating
findings of the Commissioner relied upon the judgment in the case
of Sheshank Sea Foods Pvt. Ltd. Vs. Union of India 1996 (88)
ELT 626 (S.C.) and Kamath Packaging Ltd. Vs. Union of India
1992 (61) ELT 548 (Kar.).
4. Heard both sides. The major issue in this appeal is whether
the appellant had fulfilled the export obligation in respect of 10
advance licenses valid for 18 months issued under Customs
Notification No.51/2000-Cus. dated 27.04.2000 and Notification No.
43/2002-Cus dated 19.04.2002 and the relevant provisions
applicable are of the Export/Import Policy 1997-2002 and 2002-
2007 and the demands as per the impugned order are as follows:
Table-4 (as per the SCN)
Page 9 of 19
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As against the above demands in the show cause notice, we
find that based on the DEEC license details placed on record that
the export obligation fixed by DGFT vis-à-vis the export obligation
fulfilled by the appellant is as follows:-
Table - 5 Details as seen from the DEEC Book placed on record
Sl. Advance Date Export Obligation Fixed by DGFT Export Obligation Fulfilled
No License No.
Qty. Value in Value in Qty. Value in Value in
PCS Rs. USD PCS Rs. USD
1. 0710016027 6.9.02 *35990 5872615.18 121460.50 35514 8340136.10 173299.60
2. 0710007077 22.1.0 *53580 14835336.04 318696.80 47870 14800122.89 315994.04
1
3. 0710007206 1.12.0 *43538 8581888.50 184358.50 26534 8153855.70 174617.03
1
4. 0710007192 1.2.01 *67644 19277765.46 414130.30 63364 19600444.79 418370.16
5. 0710007191 1.2.01 *45416 13141933.81 282318.66 43584 10044758.38 218087.28
6. 0710015308 1.8.02 16600 2427750.00 49800.00 15756 2283220.44 47268.00
7. 0710015309 1.8.02 24650 5450250.00 111800.00 *22524 5620605.48 116431.20
*
8. 0710013156 26.3.0 *45800 5453825.00 112450.00 35754 7704097.72 158527.50 2
9. 0710014290 1.6.02 35430 6443831.25 132862.50 40310 8809443.02 191654.60
10. 0710007971 4.4.01 1415 530973.63 9268.25 Nil Nil Nil Total 326285 82016168.87 1737145.51 331210 8,53,56,684.52 1814249.41 * Figures do not match with the figures of show cause notice and the appellants claim.
4.1 As submitted by the appellant with regard to advance license No. 710007077, 710007206, 710016027, the appellant has fulfilled the export obligation and discharge certificate has been issued vide letter dated 09.03.2005 and 22.03.2005 which are reproduced below. Hence, having fulfilled the export obligation which is accepted by the DGFT authorities, the question of demand cannot be sustained. However, as seen from the above Table-1, we find that 2,986 garments in respect of license No.710007077; 16,921 garments in respect of license No.710007206; and 977 garments in respect of license No.710016027 have been exported under claim for drawback which is not disputed and hence, the appellant has to necessarily reverse the drawback claimed on these garments.
Page 10 of 19C/577-580/2009 4.2 Now to examine the remaining licenses for verification of whether the appellant has fulfilled the export obligations as required by DGFT in terms of DEEC License, one needs to examine the relevant Notifications along with the provisions of the Foreign Trade Policy (FTP) read with procedures laid down by the DGFT, which are reproduced below:
Page 11 of 19C/577-580/2009 Notification No. 51/2000-Cus., dated 27-4-2000 Materials imported under Duty Exemption Entitlement certificate issued in respect of the value, quantity, description, quality and technical characteristics -- Exemption In exercise of the powers conferred by sub-section (1) of section 25 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 into India, against an Advance Licence issued in terms of paragraph 7.2 of the Export and Import Policy 1997-2002 notified by the Government of India in the Ministry of Commerce vide notification No. 1/1997-2002, dated the 31st March, 2000 (hereinafter referred to as the said licence), 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, safeguard duty and anti-dumping duty leviable thereon respectively under sections 3, 8 and 9A of the said Customs Tariff Act, subject to the following conditions, namely :-
(i) that the materials imported are covered by 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, in respect of the value, quantity, description, quality and technical characteristics;
(ii) that the importer at the time of clearance of the imported materials executes a bond with such surety or security and in such form and for such sum as may be specified by the Assistant Commissioner of Customs or Deputy Commissioner of Customs binding himself to pay on demand and 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, together with interest at the rate of twenty four per cent per annum from the date of clearance of the said materials;Page 12 of 19
C/577-580/2009 Provided that the bond shall not be necessary in respect of imports made after the discharge of export obligation in full.
(iii) that the said licence and the said certificate are produced before the proper officer of customs at the time of clearance for debit;
(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 resultant products manufactured in India which are specified in Part 'E' of the said certificate (hereinafter referred to as a resultant products) and in respect of which facility under rule 12(1)(b) or rule 13(1)(b) of the Central Excise Rules, 1944 has not been availed in respect of materials permitted under the said licence;
(vi) that the importer produces evidence of discharge of export obligation to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs within a period of 30 days of the expiry of period allowed for fulfilment of export obligation, or within such extended period as the said Assistant Commissioner of Customs or Deputy Commissioner of Customs may allow;
(vii) that the said licence and the materials shall not be transferred or sold;
(viii) that in relation to an Advance Licence issue to a Merchant Exporter,
-
(a) the name and address of the supporting manufacturer is specified in the said licence and the said certificate and the bond required to be executed by the importer in terms of condition (ii) shall be executed jointly by the Merchant Exporter and the supporting manufacturer binding themselves jointly and severally to comply with the conditions specified in this notification; and
(b) exempt materials are utilised in the factory of such supporting manufacturer for discharge of export obligation by the said merchant exporter.
Page 13 of 19C/577-580/2009
2. Where the goods are found defective or unfit for use, the said goods may be re-exported back to the foreign supplier within 3 years from the date of payment of duty on the importation thereof:
Provided that at the time of re-export the goods are identified to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs as the goods which were imported.
Explanation. - In this notification, -
(ii) "Export Import Policy" means the Export and Import Policy 1997-
2002, published vide notification of the Government of India in the Ministry of Commerce No. 1(RE-99)/1997-2002 dated the 31st March, 2000;
(iv) "Materials" means -
(a) raw materials, components, intermediates, consumables, catalysts, computer software and parts required for manufacture of resultant product and which are incorporated in the said resultant product specified in Part E of the said certificate;
(b) mandatory spares within a value limit of 10% of the value of the licence which are required to be exported along with the resultant product;
FTP policy 1997 -2002 Duty Exemption/Remission Schemes 7.1 The Duty Exemption Scheme enables import of inputs required for export production. The Duty Remission Scheme enables post export replenishment/ remission of duty on Inputs used in the export product.
7.2 An Advance Licence is issued under Duty Exemption Scheme to allow Import of Inputs, which are physically incorporated in the export product (making normal allowance for wastage). In addition, fuel, oil, energy, catalysts etc. which are consumed in the course of their use to obtain the export product, may also be allowed under the scheme. Advance Licence can be Issued for: -
a) Physical exports
b) Intermediate supplies
c) Deemed exports.Page 14 of 19
C/577-580/2009 Advance Licenses can also be Issued on the basis of annual requirement for exports/supplies as mentioned at (a) to (c) above in accordance with the conditions given in Handbook (Vol.1).
Duty Remission Scheme consists of (a) Duty Free Replenishment Certificate and (b) Duty Entitlement Passbook Scheme. The scheme allows drawback of Import charges on Inputs used in the export product (making normal allowance for the wastage).
7.3(a) Advance Licence is issued for duty free Import of inputs, as defined in paragraph 7.2, subject to actual user condition. Such licences (other than Advance Licence for deemed exports) are exempted from payment of basic customs duty, additional customs duty, anti-dumping duty and safeguard duty, if any. However, Advance Licence for deemed export shall be exempted from basic customs duty and additional customs duty only. Such licences are Issued to: -
(i) Manufacturer exporter or Main contractor in case of deemed exports.
(ii) Merchant exporter where the merchant exporter agrees to the endorsement of the name(s) of the supporting manufacturer(s) on the relevant DEEC Book and In the case of deemed exports, sub-
contractor(s) whose name(s) appear in the main contract.
Such licences and/or materials Imported thereunder shall not be transferable even after completion of export obligation.
Such licences shall be issued with a positive value addition. However, for exports for which payments are not received in freely convertible currency, the same shall be subject to value addition as specified in Appendix- 39 of Handbook (Vol.1), 1997-2002.
Advance Licence shall be issued in accordance with the Policy and procedure in force on the date of issue of licence and shall be subject to the fulfilment of a time bound export obligation as may be specified.
Page 15 of 19C/577-580/2009 7.13 The value addition for the purposes of this chapter shall be:
VA = A-B× 100, B where VA is Value Addition A is the FOB value of the export realised /for value of supply received. B is the CIF value of the imported inputs covered by the licence, plus any other imported materials used on which the benefit of duty drawback is being claimed.
4.3 As seen from the above Notification read with the license provisions, we find that the export obligations are to be fulfilled in terms of the value addition as specified at para 7.13 of the Foreign Trade Policy during the relevant period. The claim of the appellant is that they have overall met the export obligation as per the details provided to the DGFT and the investigations by the customs was premature, seems to be justified, inasmuch as the export obligation is to be discharged within the period specified in the said certificate or within such extended period as may be granted by the Licensing Authority by exporting resultant products manufactured in India which are specified in Part 'E' of the said certificate as shown below:
Part-E Resultant products 1 2 3 4 5 6 7 Sl. Description Quality Technical Quantity FOB value S. No. of the No. Characteristics in Rs./US$ material in Part - C In fact, the DGFT while issuing the Export Obligation Discharge Certificates (EODC) for the purpose of Customs Authorities that takes into account the CIF value of the license and the FOB value based on the formula at Para 7.13 of the FTP policy to check the value addition achieved and accordingly, in terms of Page 16 of 19 C/577-580/2009 para 4.26 of the Handbook of Procedures issued the discharge certificate for the 3 licenses as discussed at para 4.1. wherein the Export Obligation Discharge Certificate had already been issued by the authorities concerned. Therefore, the question of looking into the actual consumption of fabric in square meters does not arise unless there is an evidence to prove that the imported materials have not been utilized in the export product or diverted in the open market. We do not find any such evidences placed on record except to state that in certain quantity of exports claimed towards discharge of export obligation have actually being cleared under drawback, which is clearly inadmissible. This fact of availing drawback wrongly has been admitted and to that extent the appellant has accepted to reverse the ineligible drawback claimed by them.
4.4 We also find that show-cause notice Nos. 413, 414 dated 05.06.2006 for license No.0710007191 and No.0710007192 both dated 01.02.2001; show-cause notice dated 04.09.2006 for license No.0710014290 dated 11.06.2002 and No.0710013156 dated 26.03.2002 and No.0710007971 dated 04.04.2001, No.0710015308 and No.0710015309 both dated 01.08.2002 were issued by DGFT only in the case of 7 licenses since export obligations were already fulfilled under the other 3 licenses as discussed supra. With regard to these show-cause notices, the appellant had submitted that the export obligations were overall fulfilled and hence requested to grant them the facility of clubbing in terms of para 4.20 of the Handbook of Procedures 2004-09 in respect of all the above advance licenses. In response to the request the DGFT New Delhi vide letter dated 02.03.2009 had stated that the Committee had accepted their request for revalidation and extension; and directed the appellant to approach Page 17 of 19 C/577-580/2009 the concerned Regional Authority for clubbing. The letter is reproduced below:
4.5 Accordingly, vide letter dated 29.08.2009, the appellant had approached the Regional DGFT Authority requesting for clubbing and issue of EODC against number of licenses, which we understand is still pending with the DGFT. Since, DGFT Delhi has accepted their request for revalidation/extension in export obligation against the disputed advance licenses and has directed the appellant to approach the Regional Authority for clubbing of the same, we find that any demand of duty will be pre-mature. The appellant had also placed on record Public Notice No. 34/2015-2020 dated 24.10.2017 issued by Department of Commerce, wherein it had allowed facility of clubbing of advance licenses as one-time Page 18 of 19 C/577-580/2009 relaxation and for regularization of exports. Accordingly, in the interest of justice, the matter needs to be remanded to the Commissioner to verify with the DGFT with regard to the clubbing of the exports in respect of the other licenses and whether any EODC has been issued by DGFT and only to the extent of export obligation not fulfilled the question of liability arises. It is also on record that the appellant had simultaneously claimed drawback on some of the quantity which admittedly amounts to Rs.15,68,943/-
as claimed by the appellant and to this extent, the appellant is liable to reverse the drawback. These facts having not been verified, the same also stands remanded.
5. Accordingly, the demand with regard to 3 licenses No.710007077, No.710007206 and No.710016027 where EODC is submitted, the demand stands set aside minus the drawback claimed on these exports. All other demands on 7 licenses stands remanded for verification of clubbing/EODC and amount of drawback to be reversed. The penalty stands set aside in view of the fact that the claim of the appellant for clubbing pending before DGFT, the liability itself stands undetermined. Penalties on all other appellants are also set aside.
Appeals are disposed of.
(Order pronounced in Open Court on 12.06.2025.) (D.M. MISRA) MEMBER (JUDICIAL) (R. BHAGYA DEVI) MEMBER (TECHNICAL) rv Page 19 of 19