DAMODAR NARCINVA NAIK Vs. UNION OF INDIA

JUDGEMENT

(1.) Validity of the clarification issued by the finance Ministry on 28-10-1998 under the Kar Vivad Samadhan Scheme ('kvss' for short) as well as the orders dated 26-2-1999 and 24-3-1999 passed by the Customs Authorities declining to grant the benefit of KVSS in respect of the warehoused raw materials by relying upon the aforesaid clarification dated 28-10-1998 are challenged in this petition.

(2.) The petitioners are all ex-partners of M/s Zuari Stainless Steel industries, a 100% export oriented unit (EOU). The firm was engaged in the manufacture and export of stainless steel utensils. For manufacture of stainless steel utensils the petitioners were entitled to import raw materials such as steel sheets in coils. The imported raw materials were cleared to the bonded warehouse without payment of duty for the manufacture of the final product, namely, stainless steel utensils and the said final product were to be exported directly from the warehouse. The quantity of imported raw materials utilised in the manufacture of final product and exported from the warehouse is exempt from payment of customs duty. The unutilised raw materials were to be cleared from the warehouse within the bond period on payment of duty prevailing on the date of exbonding. If the unutilised raw materials stored in the warehouse were not cleared within the bond period, then it was open to the customs authorities to treat the unutilised raw materials as deemed to be cleared from the warehouse and demand customs duty with interest under sections 72 and 61 of the Customs Act.

(3.) In the present case, it is not in dispute that apart from the imported raw materials the petitioners used to store the indigenously acquired raw materials in the bonded warehouse and utilise the same in the manufacture of the final product. Payment of customs duty with interest under section 61 of the Customs act applies to the imported raw materials and not to the indigenous raw materials stored in the warehouse.