BHARATH STEEL CORPORATION Vs. CC

JUDGEMENT

(1.) The appellants had imported Stainless Steel Coils (SS Coils, for short) under Advance Licences issued by the DGFT under the DEEC scheme and had cleared the goods duty -free under Customs Notifications No. 30/97 dated 1.4.97 and No. 48/99 dated 29.4.99. The said licences had been obtained by the appellants as manufacturer -exporter on actual user condition. The duty -free clearances of the goods were effected on the strength of Duty Exemption Entitlement Certificates (DEECs) of the DGFT, wherein the appellants' factory address was shown as M/s. Bharath Steel Corporation No. 213/4, Sydenhams Road, Appa Rao Garden, Chennai 600 112. As per actual user and other conditions, the appellants were liable to utilize the imported raw material for the manufacture of Stainless Steel Utensils (SS Utensils, for short) and to export the entire production of utensils. On apprehension of misuse of the advance licences by the appellants, the department through DRI made investigations into the above imports and reached a finding that the appellants did not have any factory at the aforesaid address and hence violated the condition of having to manufacture utensils out of imported raw material in their declared factory; that they had diverted the imported raw material to the domestic market and had used bought -out utensils for export in violation of the conditions of above Customs Notifications read with relevant provisions of the EXIM Policy 1997 -2002; and that, on account of these violations, they were not entitled to the benefit of exemption under the Notifications and were, consequently, liable to pay duty on the imported raw material. On this basis, a show -cause notice was issued to the party demanding duty of Rs. 73,38,846/ - on 154.523 MTs of SS Coils imported, proposing to confiscate the said quantity of SS Coils and also proposing to impose a penalty on the appellants. In adjudication of the show -cause notice, the Commissioner of Customs passed the following order : -

(2.) The results of investigations conducted by the DRI had also been intimated to the DGFT who was requested to cancel the advance licences. The DGFT's office, acting upon DRI's request, issued a show -cause notice [SCN] to the appellants under Section 13 and 14 of the Foreign Trade (Development and Regulation) Act, 1992 asking them to show cause as to why the advance licences should not be cancelled and penalty should not be imposed. After considering the appellants' reply to this SCN, and after hearing them, the Jt. DGFT (Enforcement -cum -Adjudication) passed Order No. 30 of 2004 dated 5.1.2004 in favour of the party. Referring to this order of the JDGFT, the Commissioner of Customs, in the impugned order, observed that the former had exceeded his jurisdiction. The Commissioner, further, held that, in the matter of extending the duty exemption benefit, the Customs authorities were liable to verify whether the conditions and procedures prescribed under the Customs Notifications and those prescribed under the EXIM Policy and the advance licences were fulfilled. According to the learned Commissioner, the procedures and conditions prescribed under the EXIM Policy and the Customs Notifications were to be strictly enforced. He observed that the licensing authority had wrongly waived some of the procedures and conditions prescribed under the EXIM Policy.

(3.) Heard both sides. Ld. Consultant submitted that as per the definition of "Actual User (Industrial)" in terms of the EXIM Policy 1997 -2002, the importer of raw material under the DEEC scheme could either utilize the goods for manufacturing export product in his own factory or get the export product manufactured out of such material in job workers' premises. Prior to 1999, the appellants were manufacturing SS utensils out of the imported raw material in their own (declared) factory at 213/4, Sydenhams Road. From 1999, they used to send the raw material to job workers for manufacture of the export goods as there was no electricity supply to the declared factory premises during the period. There were seven job workers who manufactured the export goods for the appellants during the said period. This fact was intimated to the investigating officers, who however did not choose to gather evidence of this fact from any of the job workers whose names and addresses were specifically furnished by the appellants. There was also no evidence of any part of the raw material having been diverted to domestic market. No buyer of the material had been named by the investigators, let alone any evidence of the alleged domestic sale. The entire raw material imported by the appellants were utilized in the manufacture of SS utensils either in the declared factory or in the job workers' premises and the product was duly exported in full discharge of export obligation under the advance licences and the Customs Notifications. The Commissioner's finding that the appellants had procured utensils from the domestic market and exported the same was also not supported by any evidence. Nobody who, allegedly, sold SS utensils to the appellants had been named by the DRI, nor was any evidence of purchase of such utensils by the appellants from anybody in the domestic market available in the case. On the other hand, test results pertaining to samples of the export goods showed that the utensils conformed to the imported raw material specifications. Ld. Consultant, further, referred to the JDGFT's order and submitted that the licensing authority had certified full discharge of export obligation and that the exports had been duly logged in the DEEC book. All the conditions of DEEC import and export thus stood satisfied. Referring particularly to the condition of "Actual User (Industrial)", learned Consultant argued that the appellants, despite being a manufacturer -exporter, were entitled to get the manufacture of export goods done in a jobbing unit, which was actually done by them during the period when electricity supply was not available to their factory. Ld. Consultant also challenged to Commissioner's finding that the appellants had no factory at the declared address. It was claimed that, during the entire period of dispute, the appellants were in possession of the premises at No. 213/4, Sydenhams Road, Appa Rao Garden, Chennai 600 112. The letter dated 23.1.2003 of Smt. Yesodha, owner of the premises, did not rule out physical possession of the premises by the appellants. Ld. Consultant also relied on dated 4.6.96 of the Superintendent of Central Excise, Range III -D, Anna Salai, which, inter alia, indicated that the appellants were manufacturing SS utensils at No.213/4, Sydenhams Road, Appeal Rao Garden, Chennai 600 112. He also referred to the permanent SSI Registration Certificate issued by the Department of Industries and Commerce, Govt. of Tamil Nadu, wherein also the factory address had been shown as 213/4, Sydenhams Road, Appa Rao Garden, Chennai 600 112. In any case, according to learned Consultant, the licensing authority, to which the factory address was declared by the appellants, was satisfied vide the JDGFT's order that the appellants had a permanent manufacturing facility at No. 213/4, Sydenhams Road, Appa Rao Garden, Chennai 600 112. The JDGFT's order was a quasi -judicial order appealable under Section 15 of the Foreign Trade (Development and Regulation) Act, 1992, but nobody in the department had chosen to prefer any appeal against that order. The JDGFT's order had become final and binding on the department and, therefore, the Commissioner's findings contrary to those recorded in the said order were not sustainable.