GIMPEX LTD. Vs. COMMISSIONER OF CUSTOMS, HYDERABAD

JUDGEMENT

(1.) THESE applications seek waiver of pre -deposit and stay of recovery in respect of the amounts adjudged against the applicants/appellants. The same arises once again before us pursuant to the Honble High Courts remand order dated 4 -7 -2011 in Writ Petition Nos. 15570 and 15571 of 2011 [2011 (274) E.L.T. 12 (A.P.)]. The Honble High Court has directed us to dispose of the stay applications afresh keeping in view the decision of the Honble Supreme Court in case of Commissioner of Customs v. Sayed Ali [2011 (265) E.L.T. 17 (S.C.)].

(2.) M /s. Gimpex Ltd. and M/s. Sree Enterprises are the main appellants/applicants. The adjudicating authority denied the benefit of Notification No. 32/2005 -Cus., dated 8 -4 -2005 to these parties in respect of continuous cast copper rods imported by them during September 2006 to April 2007 and demanded from them duty of Rs. 3,95,68,820/ - and Rs. 1,50,47,618/ - respectively. It also imposed penalties on these parties under Section 114A of the Customs Act. Penalties were also imposed on functionaries of the above parties under Section 112(a) of the Act. All of them have applied for waiver of pre -deposit and stay of recovery in respect of the respective dues adjudged against them.

(3.) WE have examined the records and heard both sides. The aforesaid imports of copper rods were made under Target Plus Scheme laid down in Chapter 3 of the Foreign Trade Policy, 2004 -09. This scheme granted duty credit entitlement based on incremental exports substantially higher than the general export target fixed. M/s. Gimpex Ltd. and M/s. Sree Enterprises were, as Star Exporters, obtained duty free entitlement certificates under the above scheme from the Director -General of Foreign Trade (DGFT). These certificates/licences entitled these parties to duty -free import of inputs, capital goods, etc. subject to the value prescribed therein and within the period prescribed therein, as per paragraph 3.2.5 of the Handbook of Procedures (Vol. 1) 2004 -09. An important condition attached to each of these certificates/licences was that the imports must have broad nexus with the two export product groups viz. (i) Chemicals and allied products (ii) Engineering products. On the strength of such certificates/licences, the aforesaid assessees imported copper rods claiming the benefit of Customs Notification No. 32/2005, which granted exemption from payment of duty on the imported items subject to certain conditions. One of the conditions was that the imported items should not be transferred or sold except in a case where the goods were imported by merchant -exporter having a supporting manufacturer named in the aforesaid certificate/licence. Another condition stipulated in the notification was that the capital goods, office equipment etc. imported under the scheme should be installed and such installation to be certified by the proper officer of Central Excise. In an explanation to the notification, the term goods was defined to mean any inputs, capital goods, including spares, office equipment, etc. freely importable under the Foreign Trade Policy. One of the assessees mainly exported iron ore and the other assessee mainly exported stainless steel products under the above scheme. The department took the stand that, there being no nexus between copper rod and iron ore/stainless steel products, relevant conditions of the notification could not be said to have been complied with. This view made its way in show -cause notices and these notices came to be adjudicated by the same Commissioner. In the impugned orders, the learned Commissioner relied on paragraph 3.2.5 of the Handbook of Procedures read with paragraph 3.7.1 of the Foreign Trade Policy and also relied on Boards Circular No. 21/2007, dated 8 -5 -2007. In the said Circular, CBEC had clarified that, under the Target Plus Scheme, nexus should be established between the imported item and the export product rather than a mere nexus between the imported item and the export product group. This view was reiterated by the Board in subsequent Circular dated 19 -12 -2007 also (which has not been referred to in the impugned orders).