Custom, Excise & Service Tax Tribunal
Commissioner Of Customs, Chennai vs M/S. Base Corporation Ltd on 11 May, 2009
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal No. C/404/2004
(Arising out of Order-in-Original CAU/CHENNAI (SEA) No.961/2003 dated 29.8.2003 passed by the Commissioner of Customs (Exports), Chennai)
For approval and signature:
Honble Smt. Jyoti Balasundaram, Vice President
Honble Shri P. Karthikeyan, Member (T)
1. Whether Press Reporters may be allowed to see the Order for Publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether the Members wish to see the fair copy of the Order?
4. Whether Order is to be circulated to the Departmental authorities?
Commissioner of Customs, Chennai Appellant
Vs.
M/s. Base Corporation Ltd. Respondents
Appearance Shri V.V. Hariharan, Jt. CDR For the Appellants Shri Habibullah Basha, Senior Counsel Shri Dayaleeswaran, Advocate, For the Respondent CORAM Honble Smt. Jyoti Balasundaram, Vice-President Honble Shri P. Karthikeyan, Member (T) Date of Hearing: 11.05.2009 Date of Decision: 11.05.2009 Final Order No. ____________ Per P. Karthikeyan M/s. Base Corporation Ltd., Bangalore (BCL) imported Sealed Lead Acid Maintenance Free Batteries (SLAMFB) during 31.7.1997 to 29.2.1998 against transferred Value Based Advance Licences availing exemption from Customs duty extended under Notification No. 79/95-Cus. & No. 203/92-Cus. After detailed investigation into the eligibility of the impugned imports to the exemption in terms of Notification Nos. 79/95 and 203/92, the authorities arrived at a tentative conclusion that BCL had not paid duty due of Rs.3,13,96,571/- in respect of imports of the impugned batteries through Chennai Customs House and duty of Rs.26,38,862/- in respect of such imports made through Calcutta Customs House. Accordingly, a Show Cause Notice was issued by the Additional Director General, DRI, to BCL proposing to demand the above amounts of duty, to impose fine in respect of batteries imported and cleared and to impose penalty on BCL under Section 112(a) and 114A of the Customs Act. Adjudicating the Show Cause Notice the Commissioner of Customs (Exports) Chennai passed the impugned order dropping the proposal to demand duty not paid and to penalize the importer. He found that the appellants had not mis-declared the description of the imported batteries as alleged in the Show Cause Notice. The demand was on the basis that the batteries imported were not covered by the advance licences produced for obtaining the exemption from customs duty for the reason that the batteries imported could not be used in the export product namely, personal computers (PC). The Commissioner found that in response to queries raised by the officers of Chennai Customs House in connection with imports of such batteries, the officers of Customs had perused a certificate issued by the Senior Technical Officer of National Informatics Centre (NIC) to the effect that the batteries under import had the same characteristics as of those used in UPS, medical equipment, video camera, computers and other scientific equipment. He had also seen a catalogue of Sunray Computers Pvt. Ltd. which supplied PCs with built-in battery back-up. The test report of Electronics Test and Development Centre, Department of Electronics, dated 15.9.98 produced before the adjudicating authority also confirmed that the personal computer was with built-in UPS. The Commissioner found that the Notifications involved allowed import of materials such as raw material, components, intermediates, consumables, computer software and parts required for the manufacture of export product specified in Part-E of DEEC. The certificate issued by the Senior Technical Officer and test report of Electronics Test and Development Centre showed that the batteries under import were materials required for manufacture of the export product, namely, personal computers. Relying on case law he accepted the submission made by the learned counsel for the appellants that the impugned batteries were capable of being used in the export product and they qualified for the exemption under Notifications 79/95 and 203/92. He also noted that as per the ratio of the case law cited by the learned counsel there was no need to have a nexus between the goods exported and the goods imported as inputs by a transferee of advance licence.
2. The Revenue is in appeal against the above order of the Commissioner of Customs (Exports) Chennai. The following grounds have been taken in the appeal. The SLAMF batteries imported by BCL were not capable of use in the export product namely, PC/AT and PC/XT, personal computers. Therefore, they were not eligible for the benefit of exemption availed on their import. The Commissioner had followed a certificate issued by the Electronics Test and Development Centre, Bangalore which referred to PC System with built-in UPS battery whereas the export product relevant to the issue was personal computer. In common parlance, computer system never included UPS; UPS was an add-on facility. After in-depth investigation the DRI had explained in the Show Cause Notice as to how the batteries under import did not have any nexus with the export product and were not capable of being used in the export product. The respondents had cleared similar batteries imported in the year 1996 on payment of duty after tailing to get them cleared under exemption. They had subsequently succeeded in obtaining inadmissible exemption on the strength of a certificate issued by the Senior Technical Officer, NIC. The certificate did not state that the batteries in question were capable of use in PC/AT and PC/XT computers. It was established by DRI that the importers were aware while purchasing the advance licences that the batteries in question were capable of being used in UPS only and not in computer, PC/AT and PC/XT.
3. We have heard both sides. We find that in the impugned order the Commissioner has noted that BCL had declared the description of the batteries imported correctly as per the invoice; that there was no mis-declaration and that the assessing authorities had examined the eligibility of the impugned goods to exemption in connection with clearances against some Bills of Entry filed by BCL. The description of the batteries entered in the two Bills of Entry filed on 15.10.1997 was found to be sealed batteries. The consignments were allowed clearance granting exemption against DEEC licences after the importers produced a certificate from the Senior Technical Officer, NIC. As the certificate was to the effect that the batteries could find use in the manufacture of, among others, computers, the authorities consciously allowed the exemption. Therefore, the adjudicating authority rightly held that larger period could not be validly invoked to recover exemption availed by the importer. The adjudicating authority rightly held that there were PCs with built-in UPS on the basis of catalogue of Sunray Computers Pvt. Ltd. which supplied PC with built-in battery back up and the certificate of Department of Electronics dated 15.9.98 to the effect that the PC was with built-in UPS. The Notifications in question allowed duty-free import of inputs which are capable of use in the export product. Relying on certificates issued by the technical experts in the field, the adjudicating authority concluded that the impugned batteries were capable of use in personal computers which were the export products specified in the advance licences transferred in the name of BCL and used for clearance of the impugned consignments of batteries.
4. The DEEC licences used by the importers to make duty-free clearances of the batteries had been issued to the exporters who had completed export obligation. The respondents were transferees of such licences. When imports are made against licences issued after completion of export obligation, benefit of duty-free import of inputs was available without the importer having to establish nexus between the imports and the export product. In a similar case of import under transferred advance licences in the case of Commissioner of Customs, Chennai Vs. Salem Stainless Steel 2001 (131) ELT 30 (Mad.) a Division Bench of the Honble High Court of Madras upheld the decision of a learned Single Judge that when all the goods were imported under valid licences and when there was no obligation of export, which was already discharged, there was no question of the authorities to insist on nexus between the goods imported by the petitioner and the goods exported by the original licencee. Their lordships in holding so had observed that the goods under import were covered by valid advance licences.
5. In the case of Commissioner of Customs, Kandla Vs. Gujarat Small Indus. Corporation Ltd. 2007 (207) ELT 703 (Tri. Mumbai), this Tribunal followed the ratio of the judgment of the Madras High Court and held that a transferee of an advance licence was not required to establish nexus between the goods imported and the licensed final product. We find that the input allowed to be imported for the export product personal computers AT/XT is battery as per the Standard Input Output Norms (SION) in force at the material time as recorded in the impugned order. The impugned goods are undisputedly batteries. As per the ratio of the judicial authorities cited by BCL, who imported batteries against advance licences purchased by it after the original importer had fulfilled the export obligation was under no obligation to establish nexus between the batteries and the export product to avail the exemption extended under Notification Nos.79/95 and 203/92. In the circumstances we find that the appeal filed by the Revenue is devoid of merit. The appeal is rejected.
(Operative portion of the order was pronounced
in open court on 11.5.2009)
(P. KARTHIKEYAN) (JYOTI BALASUNDARAM)
Member (T) Vice President
Rex
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