Custom, Excise & Service Tax Tribunal
M/S. Avanti Feeds Ltd vs Cc,Ce&St, Guntur on 25 February, 2014
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Court I (DB)
Reserved on: 19/09/2013
Pronounced on:.
Appeal No.C/758/2008; E/844/2008
(Arising out of Order-in-original No.4/2008-Cus/CE(Commr.) dt. 22/05/2008 passed by CC,CE&ST, Guntur)
M/s. Avanti Feeds Ltd.
..Appellant(s)
Vs.
CC,CE&ST, Guntur
..Respondent(s)
Appearance
Mr. B.V. Kumar, Advocate for the appellant.
Mr. Ganesh Haavanur, Addl. Commissioner(AR) for the respondent.
Coram:
Honble Mr. D.N. Panda, Member(Judicial)
Honble Mr. B.S.V. Murthy, Member(Technical)
FINAL ORDER No.
Order per: D.N. Panda
BACK GROUND
OF ADJUDICATION
1. The appellant M/s. Avanti Feeds Ltd. was accorded approval of 100% EOU by the Development Commissioner under LOP No.264 (93) EOB/245/93 dated 28/06/1993, to manufacture shrimp feed falling under Ch. S.H.No.2302.00 of the First Schedule to the Central Excise Tariff Act, 1985. The permission so grated was subsequently amended vide letter No.EO.245/93 dt. 25/11/1997 permitting the unit to process and export prawn and shrimp in addition to the shrimp feed and export entire production thereof.
2. In terms of the Chapter IX of the EXIM Policy 1997-2002, Appellant was permitted to import as well as procure indigenous goods (specified by the notification) duty free, availing the benefits of Customs Notification No.53/97-Cus dt. 03/06/1997 as well as Excise Notification No.1/95-CE dt. 04/01/1995. Entire production of shrimp feed/prawn/shrimp made using the duty free materials and capital goods were required to be exported.
3. As required by LOP, undertaking was given by the appellant executing an agreement on 15/12/1993 to fulfill conditions thereof and started commercial production on 01/11/1994. On 25/11/1997 there was an amendment to the LOP allowing the appellant to manufacture shrimp feed with the annual capacity of 10,000MTs and shrimps and prawn (processed only) 1200MTs annually. Besides that, approval was subject to condition that the appellant shall maintain 57% NFE as against 61% stipulated in the earlier LOP dated 28/06/1993 (Ref: Page 61 of appeal folder).
4. Second amendment to the LOP was made on 24/02/1998 (Ref: Page 72 of the appeal folder) and a revised agreement was executed by the appellant on 26/03/1998 giving undertaking to export shrimp feed, shrimp and prawns (processed) so as to achieve minimum export turnover of USD 632.00 millions in five years as under:
1st year (1998 - 19 99) - USD 32,00,000
2nd year (1999 - 2000) - USD 120,00,000
3rd year (2000 - 2001) - USD 160,00,000
4th year (2001 - 2002) - USD 160,00,000
5th year (2002 2003) - USD 160,00,000
Above approval was subject to the following conditions:
(i) The provisions of the CRZ Act shall be complied with and it shall be ensured that decision of Honble Courts/Supreme Court in Aquaculture cases is not violated.;
(ii) Prior clearance/NOC from the Aquaculture Authority, Chennai shall be necessarily obtained before taking effective steps to implement the project.
5. By the second amendment to LOP on 24/02/1998 (Ref: Page 72 of the appeal folder), Govt. of India allowed the appellant to have additional location of the EOU project at Gopalapuram (Ravulapalem Mandal, East Godavari District, Andhra Pradesh) subject to following conditions:
(i) Premises at both the locations shall be custom bonded;
(ii) Other formalities as prescribed by the Customs and Development Commissioner, VEPZ, Vizag shall be complied with;
(iii) The additional locations does not violate the provisions of CRZ Act.
6. Revenue noticed that the appellant failed to achieve the undertaking given and terms of agreement entered into with the Govt. of India and defeated the object of LOP as amended twice. Adjudication process was initiated to recover the duty exemption granted to the appellant during different years in terms of the aforesaid Notifications. Such adjudication resulted in following consequences by an Order No.4/2008-Cus/CE(Commr.) dated 22/05/2008:
(i) An amount of Rs.14,71,30,951/- was demanded towards customs duty on the imported raw materials in terms of the provisions of Notification No.53/97-Cus read with Section 28(1) proviso of the Customs Act, 1962 with direction to appropriate the amounts paid by appellant on de-bonding of its unit against the demand raised.
(ii) Interest at applicable rates was recoverable on the customs duty levied as above.
(iii) An amount of Rs.1,02,94,164/- was demanded towards the central excise duty on the goods procured indigenously without payment of duty availing benefit of Notification No.1/95-CE read with the proviso to Section 11A(1) of the Central Excise Act, 1944 and amounts paid by appellant on de-bonding was ordered to be appropriated against the demand.
(iv) Interest at applicable rates became payable on the above amount of excise duty demanded.
(v) Penalty of Rs.14,71,30,951/- was imposed under Section 114A of the Customs Act, 1962 and Rs.1,02,94,164/- under Section 11AC of the Central Excise Act, 1944, reduced by the amounts paid by the appellant on de-bonding.
(vi) Penalty of Rs.10 lakhs was imposed on the unit for the various contraventions of the conditions of the respective Notifications and law.
6. Appellant failed to succeed before the learned adjudicating authority raising various pleas as recorded by learned adjudicating authority in Para 4 to 6 of the adjudication order. That authority hearing the appellant on different dates recorded that it failed to satisfy the conditions of Notification No.53/97-Cus. and Notification No.1/95-CE and also violated provision of Chapter No.IX of EXIM Policy 1997-2002 as well as failed to comply with the condition No.2(i), (ii) and (vi) of the LOP and agreement dated 26/03/1998. It was also recorded that the appellant failed to acquire foreign exchange as stipulated by the LOP and as amended from time to time and agreement executed in that behalf.
7. Learned Authority found that the appellant failed to submit quarterly report to the VEPZ authorities and also sold shrimp feed in DTA without permission of the Development Commissioner and no export was made in the years 1999-2000 to 2000-03. Plea of the appellant that it was filing its quarterly returns and annual returns with the Development Commissioner as well as achievement of the minimum NFEP was substituted by positive NFEP did not get appreciation of the learned adjudicating authority. Rather for shortcomings like sales made in DTA, non-fulfillment of export obligation, appellant was imposed penalty of Rs.5 lakhs by the Development Commissioner.
8. Learned adjudicating authority analyzed the mandatory conditions of customs Notification No.53/97-Cus and opined that shrimp feed manufactured using the customs duty free capital goods, raw materials and spares were cleared to DTA without fulfilling export obligation. It was further found that setting up of a processed shrimp/prawn unit in Ravulapalem had no relevance to the manufacture of shrimp feed. Although raw material was imported by the appellant for use in the manufacture of shrimp feed, no such feed was exported. It bought shrimp from open market and processed that for export to earn foreign exchange in order to fulfill the export obligation.
9. When there was no discharge of export obligation by the appellant in respect of shrimp feed, further question that came up before the learned adjudication authority was whether the appellant acquiring a shrimp/prawn processing unit, should avail duty free import of raw material and spares as well as capital goods for manufacture of shrimp feed under EOU scheme. That was decided negatively and against the appellant by the learned adjudicating authority on the ground that the raw material used for manufacture of shrimp feed had no nexus with the processing of shrimp/prawn.
10. Learned Adjudicating Authority specifically held in his order that when the appellant failed to fulfill export obligation and earn foreign exchange and also cleared shrimp feed in DTA without permission for which penalty of Rs.5 lakhs was imposed by Development Commissioner, in terms of an order dated 03/05/2002, it was bound to return back the duty forgone by the State.
11. On examination of the penalty order passed by Development Commissioner, learned adjudicating authority found that the appellant effected DTA sale of shrimp feed of Rs.26342.00 lakhs since inception to 31/03/2001 without obtaining permission from the Development Commissioner of VEPZ and violated the condition of the LOP as well as relevant provisions of EXIM Policy and Hand Book of Procedures.
12. Learned Adjudicating Authority also noticed that in Para 14(b) of the penalty order, Development Commissioner mentioned that the Board of Approvals for 100% EOUs & EPZs in its 2nd (2002 series) in its meeting dated 05/03/2002 held that the Ravulapalem unit of the appellant was not EOU for the period from 01/04/1998 to 19/07/2001. Hence, the FOB value of exports of Rs.5,208.73 lakhs made for the review period i.e. upto 31/03/2001 mentioned in the appellants letter dated 24/03/2002 could not be treated as EOU exports and thereby there was shortfall in fulfillment of minimum NFE while Export Performance/Export Obligation for the period from 01/11/1994 to 31/03/2001 was required to be 100%.
13. Violation of law made by the appellant became patent from penalty order passed by the Development Commissioner. Appellant cleared entire quantity of shrimp feed manufactured by it in DTA in violation of the LOP norm. So also when the appellant expressed difficulties as to no export for shrimp feed, it should not have imported or indigenously procured raw materials duty free under aforesaid notifications. Its continuous imports as well as indigenous procurement established deliberate violation of law.
14. It was further observed by learned adjudicating authority that when the appellant failed to satisfy the Development Commissioner on its plea that Ravulapalem shrimp/prawn processing unit was EOU for the period from 01/04/1998 to 19/07/2001, it failed to succeed before Board of Approvals and there was shortfall of minimum NFEP/export performance and export obligation for the period from 01/04/1994 to 31/03/2000.
SUBMISSIONS
ON BEHALF OF APPELLANT
15. It was submitted on behalf of the appellant that show-cause notice dated. 18/07/2003 at page 78 & 79 does not allege that the appellant had not made deemed export nor there is allegation that it had violated the norms of EOU. The only allegation in the SCN was that there was violation of provision of Notification No. 53/97-Cus. The appellant was granted LOP on 28/06/1993 for manufacture of shrimp feed as an 100% EOU establishing a new undertaking at Kovvuru, West Godavari District, Andhra Pradesh with the annual capacity of 10000MTs. That licence was amended twice. The first amendment was made on 25/11/1997 granting broad-band permission to include shrimp/prawn processing unit at Gopalaprum, Ravulapalem Mandal, East Godavari District, Andhra Pradesh and thereafter by a further amendment in terms of letter dated 24/02/1998 taking into consideration of the additional location of the appellant EOU and also the terms of agreement dt. 26/03/1998, NFEP requirement was revised. Therefore foreign exchange earning of both units were required to be considered by learned adjudicating authority,
16. According to the appellant, first permission for DTA sale of shrimp feed was granted to it on 14/05/1999 and second permission was granted on 11/02/2000. Inviting reference to page 162 of the paper book, it was also submitted that the DTA clearance was allowed by letter dated 11/02/2003 which finds place in the return filed by the appellant with the Central Excise Authority.
17. Similarly inviting attention to page 178 of the appeal folder, it was submitted that the return submitted to the Central Excise Authority shows that there was DTA clearance permission by letter dated 11/04/2002. Such clearance was informed to the Adjudicating authority as per Para 27 of the reply to show-cause notice at page 113 of the appeal folder.
18. Referring to page 134 of the appeal folder, appellant submitted that for the period from 01/04/2002 to 31/03/2003, there was export of shrimps and shrimp feed of the value of USD 90,46,146.58 and that satisfied the export obligation as well as foreign exchange earnings. It was also submitted that for the period 01/04/1999 to 31/03/2000, State Bank of India has certified that the appellant received USD 31,60,603.59 from sale of shrimp feed. Further, the SBI certificate at page 128 shows export of shrimp value of USD 3,952,901.07 for the period April 19998 to 30/10/1998 (Reference page 128 of appeal folder). Page 129 of he appeal folder exhibits that USD 39,52,901.07 was received by the appellant during the period 1998-99 and export documents were negotiated through SBI. It was accordingly submitted that foreign exchange earnings made by the appellant exhibited by page 128 to 135 of the appeal folder were as under:
PERIOD
Foreign exchange earned from deemed export
Deemed export of supply of feed against dollar
Export of shrimp
Foreign exchange earnings not mentioning the goods exported
Foreign exchange earning from shrimp feed
Foreign exchange earning from export of shrimp
1998-20/10/1998
USD 3952901.07
1998-99
USD 3952901.07
1999-2000
USD 3160603.59
2000-2001
USD 3846563.49
USD 739080.48
2001-2002
USD 246207.10
USD 7407904.50
2002-2003
USD
179605.18
USD
8082.20
USD 9038064.38
19. Appellant further submitted that summary of foreign exchange earnings was made known to the Revenue as per page 48 of the appeal folder as under:
YEAR
Physical exports
shrimps
(in USD)
Deemed exports
Shrimp feed
(in USD)
Total foreign exchange earned
(in USD)
1998-1999
39,52,901.07
--
39,52,901.07 1999-2000
--
31,60,603.59 31,60,603,59 2000-2001 7,39,080.48 38,46,563.49 45,85,643.97 2001-2002 74,07,904.50 2,46,207.10 76,54,111.60 2002-2003 90,46,146.58 1,79,605.18 92,25,751.76 Grand total 2,11,46,032.63 74,32,979.36 2,85,79,011.99
20. Further submission of the appellant was that there was deemed export of shrimp feed made by the appellant. The revised permission granted to the appellant on 25/11/1997 shows that against the foreign exchange earnings stipulated for different years, following earnings were made by the appellant showing corresponding excess and shortfall thereof as under:
Year USD (FOB) stipulated USD(FOB) actual earning Excess/shortfall 1998-1999 32,00,000 39,52,901.07 +7,52,901.07 1999-2000 120,00,000 31,60,603.59
- 88,39,396.41 2000-2001 160,00,000 45,85,643.97
- 114,14,356.03 2001-2002 160,00,000 76,54,111.60
- 83,45,884.40 2002-2003 160,00,000 92,25,751.76
- 6774,248.24 Grand total 632,00,000 285,79,011.99
- 346,20,984.01
21. The appellant relied on following decisions to submit that when export obligation was discharged by it, Custom cannot open a case under Section 28 of the Customs Ac, 1962:
Titan Medical Systems Pvt Ltd V. CC, New Delhi [2003(151) ELT 254 (SC)] Centwin Vs. CC, Chennia [2002(149) ELT 573 (Tri. Chennai)] Raja Imports & Exports Vs. CC, Bombay [2000(119) ELT 346 (Tri.)]
22. The appellant further relied on the following decisions to submit that DTA sale against foreign exchange is treated as physical export being deemed export:
Virlon Textile Mills Ltd. Vs. CC, Mumbai [2007(211) ELT 353 (SC)] Juned Bilal Memon Vs. CCE, Surat-II [2008(221) ELT 45 (LB)]
23. Further reliance was placed by the appellant on the following decisions to submit that once the unit of the appellant was de-bonded by the exit order dated 21/08/2003 (Ref: page 145 of the appeal folder), Department cannot reopen a case:
Sudhan Spinning Mills (P) Ltd. Vs. CCE, Madurai [2008(227) ELT 142 (Tri.)] Mphasis Ltd. Vs. CC, Bangalore [2007(218) ELT 587 (Tri. Bang.)] CCE&C, Surat Vs. Amitex Silk Mills P. Ltd. [2007(216) ELT 589 (Tri. Ahmd.)]
24. It was also submitted that the appellant was entitled to the exemption benefit under Notification No. 196/94 dated 08/12/1994 in instead of Customs Notification No. 53/97 dated 03/06/1997.
25. On the aforesaid grounds it was prayed by the appellant that adjudication having been made contrary to the facts and evidence on record remand of the matter may be made to examine the permission of the Development Commissioner relating to DTA sales and foreign exchange earnings and pass appropriate order.
ARGUMENT ON BEHALF OF REVENUE
26. Learned AR inviting attention to the Bills of Entry called for by Tribunal for examination submitted that those documents exhibits that imports were made by the appellant duty free under Customs exemption Notification No.53/97-Cus dated 03/06/1997. Similarly indigenous goods were procured duty free under Central Excise Notification No. 1/95-CE dated 04/01/1995. Present stand of the appellant that it is entitled to the exemption under Notification No.196/94 dt. 08/12/1994 is inconceivable when all along till the appellant reached to Tribunal, has claimed customs duty exemption under Notification No. 53/97-Cus dt. 03/06/1997, before Customs and learned Adjudicating Authority. This is detrimental to the interest of Revenue and such belated plea of appellant is untenable as well as malafide. Customs Authority bona fide believed the appellant to allow duty free import. But benefit of the said notification was abused by the appellant for which its appeal is liable to be dismissed.
27. It is an admitted fact by the appellant that it was not a acquacultural farm at the time of import of goods free of duty. But Customs Authority was made to believe that benefit of Notification No.53/97-Cus was available to the appellant. Which is fraud designed by the appellant against Revenue. It cannot make out a new case before the Tribunal nor Tribunal entertain above belated plea of appellant which has not met scrutiny of the learned adjudicating authority. There should not be misplaced sympathy on the appellant for which its appeal should be dismissed and interest of Revenue protected.
28. When the appellant failed to fulfill the export obligation, clearance of shrimp feed were made in DTA without any permission of the Development Commissioner for which it faced penalty of Rs.5 lakhs by order dated 03/05/2012 of that authority, its appeal is liable to be dismissed for violation of norms of LOP, terms of agreement entered into with the Government and under taking given to export entire shrimp fed manufactured and earn foreign exchange discharging the export obligation. No DTA clearance permission was placed by appellant before learned adjudicating authority for his scrutiny. Similarly non-fulfillment of export obligation is evident from Para 14 of the adjudication order.
29. It was further submitted by Revenue that the Board of Approval in its second (2002 series) meeting held on 05/03/2002 decided that the Ravulapalem Unit of the appellant was not at all EOU from 01/04/1998 to 19/07/2001. In such circumstances the appellant cannot be said to have made any deemed clearance for that period. In view of the penalty imposed by Development Commissioner, no deemed export is proved and appellant failed to fulfill its export obligation as well as failed to achieve NFEP requirement. Accordingly, the FOB value of export for the relevant period cannot be considered towards fulfillment of NFE obligation.
30. The appellant having failed to fulfill the basic condition of the notification as to its eligibility, it is not entitled to any benefit under law. It was further argued that Notification No.53/97-Cus. was an incentive given to aquaculture farms and appellant not being so, made undue gain. Therefore undue benefit availed by the appellant is required to be restored back to the treasury with interest and penalty to protect interest of Revenue.
31. It was further argued by Revenue that merely filing the return and showing DTA clearance in page 61 & 62 of the appeal folder, it shall not get immunity from the levy without real permission letter produced before learned Adjudicating Authority. Section 28 of the Customs Act, 1962 was rightly invoked when Revenue was defrauded and adjudication was completed lawfully dismissing plea of bar of limitation made by the appellant.
32. It was further argued by the Revenue that the appellant having defrauded Revenue, making undue gain of the benefit of custom Notification No.53/97-Cus and excise Notification No.1/95-CE procuring foreign as well as indigenous goods duty free, the adjudication made lawfully, does not call for any interference.
FINDINGS AND CONCLUSION BY TRIBUNAL
33. Heard both sides and perused the Record.
34. When Revenue noticed that the appellant failed to make export of the shrimp feed manufactured by it using duty free raw materials and spares, but cleared entire production thereof in Domestic Tariff Area (DTA) without any permission from Development Commissioner of Visakhapatnam Export Processing Zone, as well as failed to discharge export obligation and earn foreign exchange, show-cause notices were issued to it to recover customs duty of Rs.14,71,30,951/- forgone against duty free imports made by appellant under Notification No.53/97-Cus dated 03/06/1997 and excise duty of Rs. 1,02,94,164/- forgone in terms of Notification No.1/95-CE dated 04/01/1995 allowing duty procurement of indigenous raw materials and spares etc.
35. Revenues concern was that NFE was not achieved by the appellant even though lot of foreign exchange had gone out of country to make duty free imports by the appellant. It violated terms of LOP, undertaking and agreement made with the Government of India.
Very strangely for the first time, Appellant says before the Tribunal that it is governed by the Notification No.196/94-Cus. dt. 08/12/1994 as against duty exemption claimed at the time of import under customs notification No.53/97-Cus without being and acquacultural farm. It is trite that a judgment or decree by the first court or by the highest court-obtained by paying fraud on the Court is a nullity and non est in the eye of law. (See S.P. Chengalvaraya Naidu v. Jagannath - (1994) 1 SCC 1 and India Household and Healthcare Ltd. v. LG Household & Healthcare Ltd. - (2007) 5 SCC 510).
36. Value goods imported by appellant during different periods and amount of duty forgone by the Government was as under:
Period Assessable value of imports Basic Customs Duty Addl. Customs Duty Total duty payable by the Unit From To Rs.
Rs.
Rs.
Rs.
01/08/1999 31/03/2000 13,51,42,830 2,47,24,760 72,52,923 3,19,77,683 01/04/2000 31/03/2001 32,99,01,845 5,28,11,877 1,77,92,681 7,06,04,558 01/04/2001 31/03/2002 16,26,40,330 2,56,13,827 1,09,26,399 3,65,40,226 Total 62,76,85,005 10,31,50,464 3,59,72,003 13,91,22,467 IMPORTED RAW MATERIALS IMPORTED SPARES Period Assessable value of imports Basic Customs Duty Addl. Customs Duty Total duty payable by the Unit From To Rs.
Rs.
Rs.
Rs.
01/08/1999 31/03/2000 28,88,046 9,18,563 6,72,908 15,91,471 01/04/2000 31/03/2001 75,67,872 21,01,075 19,97,107 40,98,182 01/04/2001 31/03/2002 43,32,679 11,80,562 11,37,933 23,18,495 Total 1,47,88,597 42,00,200 38,07,948 80,08,148
37. The foreign exchange earned by the appellant as appears at page 136 of the appeal folder is as under:-
Period Direct exports made Feed supplies against USD Total exports made In USD Rs. In lacs In USD Rs. In lacs In USD Rs. In lacs 01/04/1994 to 31/03/1995 Nil Nil Nil Nil Nil Nil 01/04/1995 to 31/03/1996 Nil Nil Nil Nil Nil Nil 01/04/1996 to 31/03/19957 Nil Nil Nil Nil Nil Nil 01/04/1997 to 31/03/1998 Nil Nil Nil Nil Nil Nil 01/04/1998 to 31/03/1999 3,952,901.07 1,671.96 Nil Nil 3,952,901.07 1,671.96 01/04/1999 to 31/03/2000 Nil Nil 3,160,603.59 1,589.02 3,160,603.59 1,589.02 01/04/2000 to 31/03/2001 739,080.48 341.08 3,846,563.49 1,7333.31 4,585,643.97 2,074.39 01/04/2001 to 31/03/2002 7,407,904.50 3,528.26 246,207.10 115.74 7,654,111.60 3,644.00 01/04/2002 to 31/03/2003 9,046,146.58 4,377.71 179,605.18 87.26 9,225,751.76 4,464.97 Total 21,146,032.63 9,919.01 7,432,979.36 3,525.33 28,579,011.99 13,444.34
38. It is an admitted fact on record that the appellant did not produce DTA sales permission before learned adjudicating authority nor satisfied that authority about earning of foreign exchange making exports. Some of the figures of the foreign exchanged claimed to have been earned by the appellant could not be justified by it as to whether such earning was from export of shrimp feed or from any other source. Neither appellant showed export evidence except merely relying on state Bank Certificate nor learned adjudicating authority examined the source of foreign exchange if any earned as certified by State Bank of India. It should be ruled out that no hawla transaction had occurred. The appellant had already faced penalty for the patent violation of terms of LOP, undertaking and agreement entered into with the Government, but made sale of shrimp feeds without permission of Development Commissioner. There was no nexus of shrimp/prawn processing unit with shrimp feed unit which was expected to export entire product manufactured. The plea of broad banding of the activity of the appellant did not find support of Board of Approvals to treat the shrimp/prawn processed unit as EOU. Development Commissioner held that there was violation of conditions of EOU by the appellant.
39. Appellant relied on Titan Medical Systems Pvt Ltd., V. CC, New Delhi - 2003 (151) ELT 254 (SC) to submit that when export obligation was discharged, no proceeding can be reopened. It was noticed in the reported decision that while applying for a license, the appellants set out the components they would use and their value and such value was only an estimate and the value which was indicated in the application was very large whereas what was actually spent was a paltry amount. Licensing authority did not take steps to cancel the licence. The licensing authority also did not claim that there was any misrepresentation. Apex Court 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. If there was any misrepresentation, it was for the licensing authority to take steps in that behalf. Present case of the appellant is that it had defrauded the Customs claiming exemption of Customs duty at the time of export and later on says that it is governed by a different notification which has not met scrutiny of Customs.
40. Appellant relied on the decision in the case of Centwin V. CC, Chennai 22002 (149) ELT 573 (Tri Chennai), where the fabrics imported by the appellants under two Bills of Entry were originally allowed clearance by the Customs Authorities after accepting the licence. It was not in dispute that the appellants used the same fabrics which was imported for export production and exported the goods. Correlation between imported goods and the exported goods was established. The imported fabrics were arranged by the buyers of the finished garments and the buyer has also accepted the exported garments as produced from the fabrics which they arranged to send. The appellant had fully satisfied the DEEC criterion, i.e. use of the imported materials for export production and export of the goods. The dispute came before Tribunal was as to whether the description of the goods tallied in the various documents. Accordingly it was held by Tribunal that the benefit of DEEC scheme is not deniable in cases where the export obligation was met.
41. Appellant further relied on the decision in the case of Raja Imports & Expots V. CC, Bombay 2000 (119) ELT 346(Tri). It was noticed in that case that the Textile Committee had certified that the exported goods were made out of 100% acrylic fibre and there was no reason for Tribunal to disagree with that report. The appellant was allowed to import the goods to fulfil the export obligation and the licence issuing authority held that the appellant had fulfilled the export obligation. Duty was only demandable for that portion of the inputs which might have not been used in the export product. Tribunal noticing that the export obligation having been fulfilled, there was no question of demand of either duty or penalty.
42. Appellant s reliance on the civil appeal, in the case of Virlon Textiles Ltd. V. CC, Mumbai 2007 (211) ELT 353 (SC), Court was to submit that when DTA sale was made that became deemed export. In that case, Apex Court was concerned with the law as it stood prior to 11-5-2001 and explained that examination of the Exim Policy throws light that the said Policy as a rule stated that every 100% EOU was obliged to manufacture or produce from duty free imported raw materials capital goods etc., finished products/articles and as a rule every 100% EOU was obliged to export its entire production and earn foreign exchange. This was what was called as Physical Exports. However, this rule had certain exceptions. There existed two types of DTA sales under the said Policy, namely, DTA sales against rupee and DTA sales against foreign exchange which was similar to physical exports. This latter category was known as Other Supplies in DTA. Therefore, to put it in brief, Other Supplies in DTA was equated with physical exports which, as stated above, was the general rule for 100% EOU. In other words, the general rule was physical exports and other supplies in DTA was equated to physical exports. This equation was necessary because other supplies in DTA gave certain benefits to the economy like preservation of foreign exchange, import substitution, savings of transportation costs and to provide competitiveness and level-playing field for Indian exporters. According to the Revenue, the expression occurring in the second proviso to Section 3(1), namely, allowed to be sold in India was applicable only to DTA sales against rupee and not DTA sale against foreign exchange. But Honble Court held that DTA sale against foreign exchange was covered by the expression allowed to be sold in India and, therefore, such sale fell under the proviso to Section 3(1) of the 1944 Act. In the circumstances, the duty liability of the assessee was required to be determined after allowing to it the benefit of Notification No. 2/95-CE. That notification granted partial exemption to the assessee from duties in respect of goods manufactured in 100% EOU and allowed to be sold in India under para 9.9 (a), (b), (c) and (d). Once DTA sales against foreign exchange are held to be covered by the proviso to Section 3(1) of the 1944 Act then the whole difference between DTA sales against rupee and DTA sales against foreign exchange, for the purposes of Notification No. 2/95-CE would stand eliminated. This would be, however, subject to the compliance of other conditions of Notification No. 2/95-CE. Therefore, the Court held that Tribunal had erred in relying on para 9.9(b) for limiting the benefits of exemption under Notification No. 2/95-CE by imposing a new condition to the effect that the benefits would be admissible only in respect of 50% of such DTA sales against foreign exchange. Secondly, once the permission was granted by the competent authority under the Exim Policy to make DTA sales against foreign exchange, the assessee was entitled to the benefit of concessional rate of duty under Notification No. 2/95-CE. If DTA sales against rupee were allowed the benefit of Notification No. 2/95-CE, then DTA supplies against foreign exchange, which were at par with physical exports, cannot be denied the same benefits and they cannot be subjected to a higher duty. Thirdly, once DTA sales against foreign exchange are covered by the above expression allowed to be sold in India, all issues relating to calculation of the duty payable in terms of notification No. 2/95-CE will have to be decided afresh by the adjudicating authority and accordingly, matter was remand to the Commissioner for calculating the duties payable by the assessee in terms of Notification No. 2/95. It was further held that that there is no fundamental difference, as far as the exemption notification No. 2/95-CE is concerned, between DTA sales against foreign exchange and DTA sales against rupee. Once DTA sales against foreign exchange fall within the expression allowed to be sold in India, the Department cannot deny to such sales the exemption under Notification no. 2/95-CE, since DTA sales against foreign exchange will come under para 9.9. One cannot ignore the fact that DTA sales in foreign exchange provides for better money value as compared to DTA sales in rupee. Therefore, if DTA sales against rupee are allowed the benefits of Notification No. 2/95-CE, DTA supplies, which are at par with physical exports, cannot be denied the same benefits. This decision of Apex Court was followed by Larger Bench of Tribunal in the case of Juned Bilal Memo V. CCE, Surat II 2008 (2210 ELT 45 (LB). When appellant failed to prove lawful DTA clearance, it fails to gain from the apex Court judgment.
43. Reliance of the appellant was on Sudhan Spinning Mills (P) ltd. V. CCE, Maduriai 2008 (227) ELT 142 (Tri) which was a stay order which has no precedential value.
44. Appellant further relied on the decision in the case of Mphasis Ltd. V. CC, Bangalore - 2007 (218) ELt 587 (Tri Bang). Tribunal in that case was given to understand that the goods which were in the premises shared by the customer of the appellants had already been de-bonded on payment of appropriate duty. The Adjudicating authority had demanded duty foregone on the entire goods imported and procured locally. While the Show Cause Notice had invoked the Notification issued in 2003, it was seen that the Adjudicating authority had given a finding on violation of condition 15 of Notification No. 106/2001. The goods in question were imported in the year 1999 and without availing the benefit of Notification issued in 2003 for which there was a fundamental flaw in the Show Cause Notice. Even on merits, there was no justification for demand of duty as the appellants had de-bonded the said goods and paid the appropriate duty. Accordingly it was held by Tribunal that the impugned order had no merit for which appeal was allowed. In the present case, duty liability was discharged by the appellant before de-bonding.
45. Appellant also relied in the case of CCE&C, Surat V. Amitex Silk Mills P. Ltd. 2007 (216) ELT 589 (Tri Ahmd). The issue before Tribunal in that case of was as to where the deemed exports has to be included for the purpose of determining entitlement in the DTA. It was held that the clearances made by the respondent were clearly within the permissible limit of DTA sales as permitted by the Development Commissioner. Raw materials were admittedly issued for manufacture in the 100% EOU and no raw material as such was diverted. Accordingly demand of duty on the raw materials was not sustainable on the ground that the raw materials which have gone into manufacture of finished products/wastes and rejects, were sold in DTA with the permission of the Development Commissioner.
46. Keeping in view earnest prayer of the appellant to satisfy learned Adjudicating Authority on various allegations made against it and also noticing certain materials facts borne by record requiring fresh examination granting fair opportunity of hearing to the appellant, matter is remanded to that authority to examine following aspects and appellant shall cooperate for the same without seeking adjournments:
(A). Appellant to produce all DTA sale permission letters in original issued by Development Commissioner and satisfy on the quantity and sale value if any stipulated (B). Appellant to explain year wise foreign exchange earnings from export of shrimp feed, shrimp and prawn (processed) as stipulated by Development Commissioner in the LOP, undertaking AND agreements fr om time to time. Genuinity of the export is to be established by appellant to rule out hawla transactions not made. (C). Appellant to satisfy that the capital goods, raw materials and spares imported and indigenously procured were used in manufacture of shrimp feed and such shrimp feed exported to earn the foreign exchange as stipulated in the LOP, undertaking and agreements from time to time. (D). Bank realization certificate in respect of export of shrimp feed, shrimp and prawn (processed) be produced with all export details including the identity of importers. (E). Appellant to produce evidence relating to DTA sales against foreign exchange if any with all details thereof. (F). Appellant to satisfy the authority as to which notification applies to its imports and what was the notification quoted in the bills of entries and the reason why plea of application of different notification was taken before Tribunal for the first time. (G). Year wise import as per bills of entry, export of shrimp feed, shrimp and prawn (processed) be furnished to adjudicating authority for his examination with foreign exchange details.
47. Above list of examination is comprehensive but not exhaustive. Appellant shall be required to furnish such evidence as may be required by learned adjudicating authority to satisfy him that appellant was not enriched at the cost of Revenue availing duty exemption under respective notification and complete the re-adjudication by 31/10/2014. Burden of proof lies on the appellant. Under no circumstances adjournment shall be allowed to the appellant since the matter is already 10 (ten) years old and show cause notice was issued on 18.7.2003 demanding customs duty for the period from 01/08/1999 to 31/03/2002 and excise duty for the period from 01/04/1999 to 31/03/2002. Day to day hearing shall be carried out recording the proceeding beginning from the month of April 2014 for which appellant shall make application to the learned adjudicating authority within a week of receipt of this order to fix the date of hearing and cause appearance with the required evidence.
(Pronounced on /03/2014) (B.S.V. MURTHY) TECHNICAL MEMBER ( D.N. PANDA ) JUDICIAL MEMBER *Nr 24 24 C/758/2008 with E/844/2008