GIMPEX LTD. Vs. COMMISSIONER OF CUSTOMS, HYDERABAD

JUDGEMENT

(1.) THE main appeals, No. C/249/09 & C/399/09 filed by M/s. Gimpex Ltd. (hereinafter referred to as 'GL') and M/s. Sree Enterprises (hereinafter referred to as 'SE') respectively, are directed against demands of duty confirmed against them under Section 28(2) of the Customs Act and penalties imposed on them under Section 114A of the Act. Appeal No. C/363/09 was filed by the Commissioner of Customs, Hyderabad -II praying for enhancement of the quantum of penalty imposed on GL under Section 114A of the Act. The appellant wants penalty equal to the sum of duty and interest, to be imposed on the assessee. The remaining appeals were filed by the persons aggrieved by the penalties which were imposed on them by the adjudicating authority under Section 112 of the Act. The particulars of the party -appeals are as tabulated below:

(2.) M /s. Gimpex Ltd. are engaged in the export of industrial minerals like iron ore, bentonite, feldspar, granite slabs etc. The raw material/machinery required for export of the said goods are packing materials like PP bags and machines like dozers, dumpers, generators, excavators, tippers, crushing and screening systems, etc. GL had exported iron ore fines valued at Rs. 142.3 crores and other minerals valued at Rs. 31 crores totalling to Rs. 173.3 crores during the period from 1 -4 -2004 to 31 -3 -2005. These exports helped GL attain sufficient incremental growth when compared to the exports made in the previous year (2003 -04), to make them eligible for duty credit certificates under Target Plus Scheme (TPS) for a total amount of Rs. 7,08,12,793/ -. GL applied in the prescribed format to the Director -General of Foreign Trade (DGFT) for grant of such certificates and obtained 7 such certificates for a total amount of Rs. 7,08,12,793/ -in the month of May, 2006. These duty credit certificates/licences under TPS, which were granted by the Joint DGFT, Chennai, enabled GL to import canalized items as per para (3.2.5) of the Handbook of Procedures (Volume -I) 2004 -09 and subject to actual user condition. The 'Conditions Sheet' attached to each certificate/licence specified two export product groups viz. "CHEMICAL AND ALLIED PRODUCTS" and "ENGINEERING PRODUCTS" and also carried an endorsement: "Import will have broad nexus". As these licences were registered at Chennai Port Customs and GL wanted to make imports through ICD Hyderabad, they obtained Transfer Release Advices (TRAs) from Chennai Customs for imports through ICD Hyderabad. GL used these TRAs for importing 'continuous cast copper rods' (a canalized item) (hereinafter, also, referred to as "c.c. copper rods") in 14 consignments (total weight 427.383 MTs and value Rs. 13,53,94,741/ -) through ICD Hyderabad during the period from September, 2006 to April, 2007 [These imports were made under High Sea Sale Agreements concluded between GL and M/s. MMTC Ltd.], Notification No. , dated 8 -4 -2005 issued by the Central Government under the TPS in terms of paragraph (3.7) of the Foreign Trade Policy (FTP), 2004 -09 granted full exemption from payment of basic customs duty and additional customs duty (CVD) on goods imported into India against duty credit certificates/licences issued under the TPS. Any inputs, capital goods (including spares, office equipments etc.) and agricultural products, which were freely importable under the FTP, could be imported duty -free under the Notification subject to actual user condition. GL claimed this benefit of exemption in respect of the c.c. copper rods imported by them, and the relevant Bills of Entry were accordingly assessed and the goods allowed to be cleared without payment of duty. Subsequently, the DRI launched investigations into the manner in which GL had availed themselves of the benefit of TPS. The relevant documents related to the purchase of c.c. copper rods by GL from MMTC under High Sea Sale Agreements, import documents related to duty -free clearance of the goods under TPS, documents related to export of iron ore fines and other goods, correspondence between GL and MMTC and others, etc., were recovered and scrutinized by the DRI. Statements were recorded from functionaries of M/s. Gimpex Ltd., M/s. Mangalchand Alloys and Refineries Pvt. Ltd. (MARPL), M/s. Shah International Travels (CHA) and others under Section 108 of the Customs Act. The relevant provisions of the FTP, 2004 -09 and of the Handbook of Procedures (Volume -I) were examined. The provisions of Customs Notification No. , dated 8 -4 -2005 were also examined. On the basis of the results of investigations, the Department issued a show -cause notice to GL and others (a) denying exemption under the above notification in respect of the imported copper rods and demanding duty under the proviso to Section 28(1) of the Customs Act, (b) holding the said goods liable to confiscation under Section 111(o) of the Act and holding GL liable to penalty under Section 114A of the Act, (c) demanding interest on duty under Section 28AB of the Act, and (d) proposing penalties on other notices S/Shri Samir Goenka, Anil Goyal and Ranjit S. Chaudhari under Section 112 of the Act. The demands and other proposals were contested. In adjudication of the dispute, the Commissioner of Customs passed order -in -original No. 7/2009. The operative part of this order reads as follows :

(3.) HEARD both sides. The learned counsel for GL and co -appellants referred to the relevant provisions of the Target Plus Scheme under the Foreign Trade Policy, 2004 -09 and submitted that the imports made by GL were in accordance with the Policy provisions as interpreted by the Hon'ble High Courts of Delhi and Mumbai and hence the benefit of Notification No. , dated 8 -4 -2005 was not deniable to the importer. In this connection, the learned counsel referred to the following judgments :