Customs, Excise and Gold Tribunal - Mumbai
S.D. Bakhai And Co. vs Cc on 14 July, 1998
Equivalent citations: 2000(92)ECR204(TRI.-MUMBAI)
ORDER
K.S. Venkataramani, Vice-President
1. The appellants herein imported Polyester filament yarn of 50 deniers against duty free Advance Licences as replenishment for the export of Polyester filament shirting fabrics containing Polyester filament yarn of 84 deniers. These licences were valid for import of Polyester filament yarn of denierage below 350D in one case, and the other licence did not specifically indicate the denierage of Polyester filament yarn allowed to be imported. Proceedings were initiated against the appellants by the Customs House on the ground that in terms of Notification 159/90 and para 231 of Import-Export Policy 1990-93, the import allowed in case of prior export against Advance Licence is to replenish the material actually used in the exported product which should be of identical specifications and technical characteristics as those actually used in the resultant product exported. The appellants chose to have the case adjudicated without written show cause notice. After hearing them in the matter the Addl. Collector of Customs, Mumbai passed the impugned order confiscating the goods under Section 111(d) of Customs Act levying fine of Rs. 20,000/- in lieu of confiscation. A penalty of Rs. 5000/- was also imposed on the appellants.
2. Shri J.C. Patel, learned Counsel argued the case for the appellants and ld. D.R. Shri S.V. Singh for the Revenue. The Customs notification allows import duty free of goods being materials required to be imported for the purpose of manufacture of products, or replenishment of materials used in the manufacture of resultant product exported, on condition that the materials imported are covered by Duty Exemption Entitlement Certificate issued by the licensing Authority. The notification defines "materials" to mean raw materials, components, intermediates, consumables, required for the production of export product. Learned Counsel drew attention to Custom House Public Notice 59/95 dated 6.4.1995 and another Department clarification based on Central Board of Excise & Customs circular No. 1/94 dated 5.1.1994. We find that these relate to the requirement of nexus between inputs and export product under duty exemption scheme. It has been clarified that the word "required" which occurs in the customs notification and in the Import Export Policy does not mean that the goods imported must be physically incorporated in the export product as export product, could be manufactured from material procured outside DEEC scheme. What is to be ascertained is whether the goods are those which would find use/application in the export product; they should be such or of a kind which are commercially known to be used in the export product and are covered by the description of inputs in the licence. The clarification also gives examples, as for instance, in cases where inputs allowed for the manufacture of fabrics is polyester filament yarn, the export product is required to be manufactured from filament yarn and not spun yarn. The instructions say that it is not necessary to go into minute details to establish close nexus between the imported inputs and export product and what is necessary is to establish link between the two keeping in view the commercial use of the inputs imported and the normal manufacturing process for the product exported.
3. The above clarification given by the notification issuing authority, we feel, is relevant as indicating the intention behind the exemption, and hence can be a reasonable basis for interpreting the scope of the exemption. In the present case, there has been prior export of polyester filament shirting fabric and the import is of polyester filament yarn of 50D as replenishment. The Addl. Collr. has held that the yarn actually used in the export product was 84 deniers and hence the yarn of 50D imported is not of same character and specification so as to be permitted clearance as replenishment. However, it is seen that the impugned order itself records product exported is similar. The import licence covers the goods as the description of the inputs therein is polyester filament yarn below 350D and the imported goods answer that description. The character of imported goods as polyester filament yarn is same as that used in export product, and it is not the case of a different type of yarn, like spun yarn, being imported, as indicated in the example given in the Dept. clarification referred to above. Admittedly, imported filament yarn finds commercial use in production of fabrics. Hence the objection taken that input polyester filament yarn imported is not of the same denierage as that of the yarn actually used in the exported shirting fabric, appears to us, in the circumstances of the Dept. understanding of the scope of the exempted material noted above, to be the result of going into minute detail as regards specification of the material so as to establish a 'close nexus' between input and export product. It has been seen that it is not the intention behind the exemption to establish such a close nexus. In the result, it is held that the imported polyester filament yarn is 50D is eligible for clearance against the Advance licences produced. The impugned order is set aside. The appeal is allowed.