CC Vs. LOTUS CHOCOLATE CO. LTD.

JUDGEMENT

(1.) THE Revenue by this appeal challenges the Order -in -Original No. 151/97 dated 22.9.97 passed by the Commissioner of Customs, on a direction issued by the Central Board of Excise & Customs vide their Order No. 200 -R/9B dated 15.9.98.

(2.) The Commissioner by the impugned order had dropped the charges levelled against the respondents herein who are manufacturers and exporters of Cocoa and Chocolate products. The assessee -respondents had obtained import licence No. P/CG/2127114 dated 6.3.91 under para 197 of the Import Export Policy 1990 -93 read with Public Notice No. 101/PN/ITC -90 -93 dated 26.4.90 as amended from time to time from the then Chief Controller of Imports and Exports New Delhi for importation of capital goods viz. machines forming cocoa beans processing line and chocolate making, finishing and packing line valued at Rs. 3,53,57,072 under concessional rate of duty of 25% with an obligation to export Cocoa and Chocolate products valued at Rs. 10,60,76,215 manufactured out of the said imported machinery within a period of four years from the date of first importation. The importation was in February 1992 through the Madras port. In terms of para 197 of the Import & Import policy for the period 1990 -93 read with Notification No. 169/90 -Cus dated 3.5.90, Registered manufacturers and Exporters are eligible to import capital goods at concessional rate of customs duty of 25% subject to the condition that the licence holder undertakes to fulfil the export obligation equal to three times the value of capital goods permitted for import within a periods of four years from the date of first import of capital goods by exporting the final products manufactured through the capital goods permitted to be imported. They have imported capital goods valued at Rs. 3,53,57,072 and out of this sum, the value of the imported chocolate making machinery alone works out to Rs. 2,42,97,852. At the time of importation the respondents -importers made a declaration/executed bonds before the Assistant Commissioner of Customs, Madras as under:

(3.) BASED on intelligence that the importers had mis -utilized the provisions of para 197 of the Import Policy, and not discharged the export obligations, the DR I officers visited the office and factory premises of the respondents -importers and it was observed that the importers had sought for import of two distinctly different sets of machinery i.e. one for the cocoa bean processing plant and another for chocolate making, finishing and packing plant. As per the condition (i) of Annexure A attached to the licence granted to the respondents, the export obligation has to be discharged by exporting cocoa and chocolate products. However, on a study of the process of manufacturer of cocoa and derivatives and chocolate products and the layouts of both the plants at the factory it was found that both plants are independent of each other and are able to function separately. Cocoa butter and cocoa powder are the finished products that come out of cocoa beans processing plant which are being utilized for discharging export obligation by the importers -respondents. These cocoa butter and cocoa powder are also the raw materials for the chocolate making plant which are taken manually from cocoa plant to chocolate plant. As against the export obligation to export within four years from the date of first importation of capital goods in February 1992, the importers had to export cocoa butter and cocoa powder manufactured through the imported cocoa beans processing plant to the tune of Rs. 10.71 crores i.e. cocoa products worth Rs. 3.50,00,000 and Chocolates worth Rs. 7,21,00,000). The importers were making representation to DGFT for extension of export obligation from time to time and their request was rejected. However, after repeated requests DGFT agreed to consider their request provided they agreed to increase the value of export obligation by 10% and extend the validity period of Bank Guarantee by one year i.e. till 30.11.1997.