Customs, Excise and Gold Tribunal - Mumbai
Philips (India) Ltd. vs Commissioner Of Customs on 5 May, 2003
ORDER
G.N. Srinivasan, Member (Judicial)
1. The above application has been filed by the assessee, the Applicant in Application No. C/ROM/360/02 recalling our Order No. C1/4307/WZB/2000 dated 27.11.2000 whereunder the order of the Commissioner of Customs, demanding the duty for violation of Notification No. 160/92 was upheld.
2. In the said Appeal it was contended that the exemption claimed was to the tune of Rs. 75% of the duty if the importer undertakes an export obligation equal to three times of CIF value of the capital goods over a period of 4 years, and 85% of the export obligation is four times the CIF value spread over 5 years. The export obligation was not complied with. The duty was paid in September, 1998. The notice in December, 1998 was issued by customs authorities for the duty along with interest, penalty and confiscation. The Tribunal by the said order partly allowed the appeal holding that no penalty and confiscation is called for. In the said order the Tribunal has further held that there was no provision for interest under the law or under the notification.
3. The application for rectification of mistake has been filed on the following grounds:
"2. This Hon'ble Appellate Tribunal, in paragraph 8 of its aforesaid order, was pleased to hold as follows:
"It is not possible for us to agree that the public notice has the effect of amending paragraph 38 of the Policy. Paragraph 38 specifically mentions four or five years for fulfilling the export obligation. These are the same periods that are specified in the Table to the Notification. Paragraph 105 of the Handbook of Procedures, which deals with the EPGC procedures, provides for a maximum extension by a year by the Committee of Secretaries of the period for fulfilling the export obligation. Under what provisions of the Policy, the public notice has been issued, extending the period for fulfillment of the export obligation upto the period specified therein, is not clear. In any event, we are not able to see that the change made by the licensing authority for fulfilling the export obligation impinging upon the notification in any manner. The notification doubtless refers to paragraph 38 of the Policy. However, it specifically mentions the period of four or five years (four years in the appellant's case) within which the export obligation was to be fulfilled. If the intention were to so word the notification as to provide for the contingency for extension in the export period, the Table to the Notification would have incorporated such a provision, by using such words as 'such extended period as the policy may provide.' The provisions of the notification have to be construed strictly and by doing so, we do not find that it possible to say that it has been wrongly invoked why the Commissioner in demanding duty."
3. It can be seen from the above paragraph that this Hon'ble Appellate Tribunal confirmed the demand for duty on the basis that there is no provision in the Notification No. 160/02 providing for the contingency for extension in export obligation period.
4. By Section 115 of the Finance Act, 2001, inter alia, Notification of Government of India, Ministry of Finance (Department of Revenue) No. G.S.R. 423 (E) dated 20 th April, 1992 (160/92-Customs dated 20 th April, 1992) issued under Sub-section (1) of Section 25 of the Act, by the Central Government shall stand amended and shall be deemed to have been amended in the manner as specified in the Schedule, on and from the date mentioned in column 4 of that schedule against each of such notification respectively and accordingly, notwithstanding anything contained in any judgment, decree or order of any Court, Tribunal or other authority any action taken or anything done or purported to have been taken or done under the said notifications, shall be deemed to be, and always to have been, for all purposes, as validly or effectively, taken or done as if the notifications as amended by this sub-section had been in force at all material times. Schedule Eight, which is relevant for the purpose of this application is reproduced below:
THE EIGHTH SCHEDULE [See section 115(1)] SI. No. Notification No. & date Amendment Date of effect of amendment
1..
2.
G.S.R.423 (E), dated the 20th April, 1992 (160/92-CUSTOMS, dated the 20* April, 1992).
(i) In the said notification, after condition (iii), the following condition shall be inserted, namely, -"(iv) where the licensing authority grants an extension of the period for fulfillment of export obligation or regularization of shortfall in export obligation not exceeding 5% of such export obligation, in terms of, and subject to satisfaction of such conditions as may be specified in a Public Notice of the Government of India in the Ministry of Commerce in this regard, the said period of fulfillment of export obligation may be extended, but shall in no case be extended, beyond the 31* March, 2002, and the said shortfall in export obligation condoned by the Assistant commissioner of Customs or the Deputy Commissioner of Customs, as the case may be.
20th April, 1992
5. It is submitted that the effect of Section 115 of the Finance Act, 2001 read with 8 th Scheduled is that the said Notification 160/92 date 20 th April, 1992 had Clause (iv) incorporated in it on and from 20 th April, 1992. It is submitted that the effect of insertion of Clause (iv) with effect from 20 th April, 1992 is that the said Notification No. 160/92 always had a provision for extension of period for fulfillment of export obligation. This Clause (iv) has been deemed to have been inserted in the notification with effect from 20 th April, 1992."
5. The contention raised in the application, in short, is that the confirmation of the duty demanded was on the basis that the Notification No. 160 of 1992 did not provide for extension of time to discharge export obligation. But, Section 115(1) of the Finance Act, 2001 amended the Notification No. 160/92 dated 20.4.1992 retrospectively as mentioned in Eighth Schedule of the Finance Act, which, inter alia, provides for extension upto 31.3.2002 for fulfillment of the export obligation. The contention of the assessee in the rectification application is that when the law has been amended from 1992 onwards by means of retrospective amendment made in the Finance Act, 2001, full effect of the legal provisions contained in the Finance Act, 2001 has to be given. The Tribunal has proceeded on the basis that there was no provision for extension of time to discharge export obligation. It is emphasized by the learned counsel for the assessee that the basis has been changed. The retrospective amendment made by the Finance Act, 2001 has to be given full effect and he relies on the judgment of the Supreme Court in M.K. Venkatachalam ITO v. Bombay Dyeing and Manufacturing Company Ltd., AIR 1958 SC 875. He also invited our attention to the judgment of the Tribunal in Binani Zinc Ltd. and Ors. v. C.C.E., Cochin 2001 (47) RLT 586, wherein it is held that ROM is maintainable in case of retrospective amendment. He read through the judgment of the Supreme Court in the case of Venkatachallam v. Bombay Dyeing Manufacturing Co. Ltd. and said that the effect of the retrospective application of the Amendment Act is that the amended provision made by Finance Act, 2001 would have for all legal purposes to be deemed to have been included in the Notification as and from April 20, 1992 itself. He therefore, pleads that a full-fledged legislative intend has to be given and order passed by the Tribunal in November 2001 should be recalled.
6. As against this, learned Senior Counsel for the department would state that even though the Act ahs been amended, it will not affect the order made on 27.11.2000. He stated that amendment act should not be given greater retrospective operation on the basis of its language and general scheme of EPCG render if necessary. He also stated that unless the party aggrieved against any order passed by any authority viz. Tribunal is agitated before the superior forum and such proceedings are kept alive, the party cannot take advantage of the completed proceedings. In other words, Mr. Sethna, the learned Sr. Counsel for the Department said that once the order becomes final it cannot be revived by means of legislative process in the form by retrospective amendment made in the Finance Act, 2001. he therefore, states that invocation of jurisdiction of the Tribunal by means of rectification of mistake does not arise.
7. In reply to the said argument learned counsel for the applicant relies upon the last sentence of the 4 th paragraph of the judgment of the Hon'ble Supreme Court of India in the case of Venkatachalam, ITO v. Bombay Dying and Mfg. Co. Ltd. In paragraph 4, it is stated that the principle of the finality of orders or the sanctity of the existing rights cannot be effectively invoked by the department in the present case.
8. We have considered the rival submissions. The assessee has imported capital goods and availed 75% benefit of the duty exemption under Notification 160/92. It ought to have exported three times value of the imported material within four years. It could export only to the extent of 16 per cent of the CIF value of imported goods. It applied for extension under the provisions of the Import Policy to the Licensing Authority. The Licensing Authority did not extend the time. Subsequently after the amendment made to the Finance Act, 2001, the Licensing Authority had power to extend the time for fulfillment of the export obligations. The Appellant initiated certain legal proceedings in Delhi High Court vis-a-vis Licensing Authority for not granting extension of time. Finally, it received a letter dated 18.2.2002 from Licensing Authority which reads as follows:-
I refer to your letter dated 28.01.2002 on the subject mentioned above. The evidence submitted by you as proof of ownership of the capital goods imported under the subject EPCG licence any lying with PALI has been examined. It has been decided to accept the same.
In view of the above, the Adjudication order dated 03.01.2002 passed by the Additional Director General of Foreign Trade stands withdrawn. You are, therefore, granted extension in Export Obligation period till 31.03.2002 under Ministry of Commerce's Public Notice No. 3(R-.01)/1997-2002, dated 31.03.2001. In addition to fulfillment of Addl. Export Obligation imposed on the subject EPCG Licence, you are also required to maintain Av. Export Obligation for the entire period of exports till 31.03.2002.
You are required to furnish export statement in the Appd. 10C of Handbook of Procedures, Vol.I, 1997-2002 (Revised Edition 01.04.2001 to redeem the licence.
9. The argument of the Department is that the extension of time was not granted to the applicant by the Licensing Authority b its order dated 3.1.2002. The Licensing Authority's letter dated 18 th February, 2002 states that has been signed by Foreign Trade Development Officer that nullified adjudication order dated 3.1.2002. Mr. Devashish Bose, signatory of the letter is junior in rank to the Adjudicating Authority.
10. It is true that Mr. Devashis Bose's letter dated 18 th February, 2002 states that the adjudication order dated 3.1.2002 passed by the Additional Director General of Foreign Trade stands withdrawn. This letter does not state that such a decision has been taken by DGFT who is the superior authority to the Additional DGFT. But fact remains tat the Department does not challenge the letter of Foreign Trade Officer issued on 18.2.2002. The same cannot be challenged before this Tribunal. They ought to have challenged the same before DGFT in terms of Section 16 of the Foreign Trade Development and Regulations Act, 1992. The said section provides that the Central Government, in the case of any decision or order, not being a decision or order in Appeal made by Director General or the Director General in case of any decision or order made by any officer subordinate to him, may on its or his own motion or otherwise, call for and examine the records of any proceedings in which a decision or an order was made. Therefore, the contention of the learned senior counsel on behalf of the department cannot be accepted.
11. As far as the facts of the ROM is concerned, the said judgment of the Supreme Court in Venkatachellam's case is concerned it has been held in the paragraphs Nos. 3 and 4 as follows:-
3. In deciding this question it would be necessary to determine the true legal effect of the retrospective operation of the Amendment Act. Section 1, Sub-section (2) of the Amendment Act expressly provides that subject to the special provisions made in the said Act @ page SC 878 it shall be deemed to have come into force on the first day of April, 1952. The result of this provisions is that the amendment made in the Act by Section 13 of the Amendment Act must, by legal fiction, be deemed to have been included in the principal Act as from the first of April, 1952, and this inevitably means tat, at the time when the Income-Tax Officer passed his original order on October 9, 1952, allowing to the respondent credit for Rs. 50,603-15-0, the proviso added by Section 13 of the Amendment Act must be deemed to have been inserted in the Act. As observed by Lord Asquith of Bishopstone in East End Dwellings Co. Ltd. v. Finsbury Borough Council 1952 AC 109 at p. 132(A).
"if you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed must inevitably have flowed from or accompanied It. One of those in this case is emancipation from the 1939 level of rents. The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs".
4. But it is urged for the respondent that the retrospective operation of the relevant provision is not intended to affect completed assessments. It is conceded that, if any assessment proceedings in respect of the assessee's income for a period subsequent to the first of April, 1952 were pending at the time when the Amendment Act was passed, the proviso inserted by Section 13 would govern the decision in such assessment proceedings: but where an assessment proceedings has been completed and an assessment order has been passed by the Income-tax Officer against the assessee, such a completed assessment would not be affected and cannot be reopened under Section 35 by virtue of the retrospective operation of the Amendment Act. In support of this contention, reliance is placed on the observations of the Privy Council in Delhi Cloth and General Mills Co. Ltd. v. Income-tax Commissioner, Delhi 54 Ind App 421 : (AIR 1927 PC 242) (B). Lord Blanesburg who delivered the judgment of the Board referred to the Board's earlier decision in the Colonial Sugar Refining Company v. Irving 1905 AC 369 (C), where it was in effect laid down that, while provisions of a statute dealing merely wit matters of procedure may properly, unless that construct on be textually inadmissible, have retrospective effect attributed to them, provisions which touch a right in existence at the passing of the statute are not to be applied retrospectively in the absence of express enactment or necessary intendment. The learned Judge then added that "Their Lordships have no doubt that the provisions which, if applied retrospectively, would deprive of their existing finality order which, when the statute came into force, were final, are provisions which touch existing rights". The argument for the respondent is that the assessee has obtained a right under the order passed by the Income-tax Officer to claim credit for the specified amount under Section 18-A(5) and the said right cannot be taken away by the retrospective operative of Section 13 of the Amendment Act. The same argument is put in another form by contending that the finality of the order passed by the Income-tax Officer cannot be impaired by the retrospective operation of the relevant provision. In our opinion, this argument does not really help the respondent's case because the order passed by the Income-tax Officer under Section 18-A(5) cannot be said to be final in the literal sense of the world. This order was and continued to be liable to be modified under Section 35 of the Act. What the Income-tax Officer has purported to do in the present case is not to revise his order in the light of the retrospective amendment made by section 13 of the Amendment Act alone, but to exercise his power under Section 35 of the Act; and so the question which falls to be considered in the present appeal centres round the construction of the expression "mistake apparent from the record" used in Section 35. That is why we think the principle of the finality of the orders or the sanctity of the existing rights cannot be effectively invoked by the respondent in the present case. @ page -SC879
12. It will be clear that the amendment made by Section 115 of the Finance Act 2001 referred to in application that Notification No. 160/92 was retrospectively amended providing for extension of time for fulfillment of export obligation upto March 2002. When that is the situation the argument of finality of the orders which was emphasized by the learned counsel of the Department has been answered by the Supreme Court itself in paragraph 4 of the said judgment. The last sentence of the said paragraph 4 of the judgment clearly answers the argument of the senior counsel for the department.
13. In view of the above, rectification application filed by the applicant allowed. Our order made in November 2000 is recalled. The Show Cause Notice issued to the assessee on 9.12.1998. Paragraph 15 is extracted below:-
"From the investigations, it appears that the Company has not fulfilled export obligation which was to realize free foreign exchange to the extent of US$ 88,85,560/- upto 31.12.96. The Company could apparently fulfil export obligation and realize foreign exchange only for US $ 909811.38."
14. From the reading of the Show Cause Notice, it will be clear that the company has not fulfilled the export obligation upto 31.12.1996. In the order dated November 2001 we have stated that extension for fulfillment application was made in 1998. After the amendment of Finance Act, 2001, the DGFT authorities issued public notice dated 31.3.2001 (Public Notice 3 (RE-01)97-2002) in exercise of power conferred under paragraph 4.11 of the Export and Import Policy 1997-2002, which provides as follows:
"In cases where the Bank Guarantee already executed covers the Customs duty in proportion to the unfulfilled export obligation together wit 24% simple interest thereon and the same is valid till 31.3.2003, no separate Bank Guarantee shall be insisted and the licence holder shall be required to make a request on or before 29.6.2001 along with details of the Bank Guarantee already executed. In cases where the Bank Guarantee has been executed with the Customs authority, the licence holder shall be required to furnish a certificate to this effect on or before 29.6.2001 from the concerned Assistant Commissioner of Customs and the Central Excise with whom the Bank Guarantee has been executed.
In cases where the Bank Guarantee already executed in terms of Public Notice No. 5 dated 06.04.1999 and valid upto 30.3.2002, it may be extended upto 31.03.2003 covering the Customs duty and interest upto 30.09.2002 in proportion to unfulfilled E.O. and proof thereof may be submitted on or before 29.06.2001.
In cases where the licence holder applies for export obligation extension for a period prior to 31.3.2002, the same shall also be granted by the licensing authority and in such cases, the BG shall be required to be valid for a period of one year in addition to the period of export obligation sought for. However, in such cases, no further extension in EO period beyond the period already applied for shall be allowed."
15. The extension shall be granted by the licensing authority. Therefore, all the EPCG licence will automatically get extended. Therefore, the basis of the Show Cause notice dated 9.4.1998 is removed by the amendment made to the Finance Act, 2001. We are not acting as a Court of appeal or exercising what is known as power of review under Order 47 of CPC. It is therefore held that, the appeal of the Appellants which was allowed in part by our earlier order dated 17.11.2000 has to be recalled and allowed in full.
The confirmation of the payment in respect of the duty will have to be changed with a declaration that the Show Cause Notice issued in this case in premature. Consequently the appeal stands allowed with consequential relief if any. Ordered accordingly.
16. As far as the miscellaneous application filed by the department for stay of the operation of the order made on 27.11.2000 is concerned that application is dismissed as infructuous as we have recalled our order dated 27.11.2000. Hence the application filed by the Department has been dismissed as infructuous. As far as the other applications filed by the applicant assessee is concerned in view of what we have held it stands disposed of in favour of the assessee.