UNIMARK REMEDIES LTD Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) KEEPING in view the nature of dispute it was decided to hear the main appeals themselves. The appellants are manufacturers of bulk drugs such as Cephalexin, Cefaclor, 7ACCA, Ampicillin Trihydrate, Amoxycillin Trihydrate etc. For the manufacture of the said bulk drugs, appellants require various inputs such as Pencillin -G, Ethyl Aceto Acetate and various other chemicals. The appellants manufacture the said drugs and are selling the same in the domestic market and also exporting the same. Some of the inputs are procured locally and majority of the inputs are imported. For the manufacture and thereafter export of such bulk drugs various inputs are being imported under Advance Licence Scheme which permits import of such inputs free of Customs duty.

(2.) ADVANCE Licensing Scheme was introduced with a view to encourage the export and leave the exporter of the duty burden at the time of import of raw material. Thus the Scheme primarily envisaged import of raw material free of Customs duty against specific export order. The term 'Advance' denotes import before export. These materials are expected to be used in the manufacture of goods to be exported against the export order. After few years of the introduction of the Scheme, the Scheme was liberalized wherein it was permitted to manufacture the export products using the raw materials procured domestically and fulfill an export order and import identical raw materials free of Customs duty later on. However such raw materials were not permitted to be disposed of or sold in the domestic market but were required to be used for production of goods and the goods so produced were permitted to be exported or sold in the domestic market after completion of the export obligation etc. It is important to note that at no point of time the Scheme envisaged import of duty free raw material and either sell the same in the domestic market or use the same for production of goods to be sold in the domestic market before completion of the export obligation.

(3.) IN the impugned order a demand of Rs. 4,42,98,312/ - is confirmed on the ground that during the period 2003 -04 and 2004 -05 the appellants had disposed of a part of the export products, namely 7ACCA, Cefaclor, Cephalexin, 7 ADCA etc made out of raw material 'Pencillin -G' which was imported free of Customs duty under Customs Notification No. dated 19.4.2002 and No. dated 10.9.2004 against the Advance Licences/Advance Authorizations issued by the DGFT. In the said demand, 15 Advance Authorizations are covered. According to the Revenue, imported raw materials should have been used in the manufacture and thereafter export of goods for fulfilment of export obligation and before fulfilling the export obligation, the goods so produced could not have been cleared to the domestic market. During search operation on 30.08.2007, neither pencillin -G nor the final products (bulk drugs) were found in the manufacturing units even though export obligations were yet to be fulfilled.