By TIOL News Service

MUMBAI, DEC 12, 2012: A Customs duty demand of more than Rs.7.79 Crores was confirmed against the appellant u/s 28 of the Customs Act, 1962 along with interest and an equivalent penalty by the Commissioner of Customs (Export), Mumbai. The ground for such confirmation is that the appellant had not fulfilled the terms and the conditions of the Advance Licenses issued to them and they had removed imported goods ‘as such' thereby violating the conditions of Notification no. 43/2002-Cus dated 19.04.2002.

Incidentally, this is not the first time that the demand was confirmed. In fact, the above order has been passed in remand proceedings.

When the issue had come up earlier before the CESTAT, vide order no. A/233/11/CSTB/C-I dated 19.05.2011, the Bench had remanded the matter back to the adjudicating authority with the following observations:-

“From the show-cause notice it is seen that the ground on which the duty has been demanded is that the cutting and slitting of coils into sheets does not amount to manufacture and, therefore, the imported materials have been diverted as such albeit they have been subjected to the process of cutting and slitting and, therefore, the appellant is not entitled for the benefit of duty exemption under the various Customs notifications applicable to goods imported under the advance licensing scheme. However, while passing the order, the Ld. Commissioner has confirmed the demand on a totally different ground saying that as per the ER-1 returns submitted by the assessee they had cleared the imported materials as such and the documents do not show that what they had sold were only the duty paid imported materials. Thus, we find that there is an dichotomy in the grounds alleged in the show-cause notice and the grounds on which the demands have been confirmed in the adjudication order. The appellant has submitted that they have maintained detailed records, which would clearly reveal that whatever has been imported by them under the advance licensing scheme has been subjected to various process amounting to manufacture as clarified by the Board in Circular dated 07.09.2001. Since the Commissioner has not had the occasion to examine these documents and satisfy himself that the imported materials under the advance licensing scheme have been correctly utilised as per the terms and conditions of the said scheme read with relevant notifications, the matter has to go back to the adjudicating authority for denovo consideration in the light of the additional evidences now raised by the appellants.

The argument of the Ld. Jt. CDR that the Board's Circular was set aside by the Hon'ble Delhi High Court and hence the appellant should have followed the said judgment lacks merit for the reason that the Board itself did not accept the said judgment of the Hon'ble High Court and preferred an appeal before the Hon'ble Apex Court and the said Circular was withdrawn only in 2005 after the Hon'ble Apex Court upheld the Delhi High Court judgment on the matter. Therefore, the appellant cannot be penalized for following the Board's Circular during its currency. As regards the argument that the goods have been transferred from the Indore unit to the Taloja unit, we are not impressed with this argument. To our mind, it appears that the expression “the goods shall not be sold or sold” used in the notification refers to transfer or sale to another person. So long as the goods have been subjected to processes amounting to manufacture and not cleared as such, the substantive compliance to the notification is met with. The scheme also provides that the manufacturer importer can also avail the facility of a supporting manufacturer, if it is so required, which itself shows that manufacturing process can be undertaken not only by the importer but also by others, subject of course to the endorsement to that effect in the advance licence. Therefore, the violation, if at all there is if any, is only a minor technical infraction and is a curable defect and the substantive benefit under an exemption notification should not be denied on such technical grounds, as has been held in a number of judicial pronouncements.

In view of the above, we remand the matter for a fresh consideration by the adjudicating authority. Needless to say, the appellant should be granted a reasonable opportunity to submit their defence along with the evidences to prove the utilization of raw materials imported under the advance licensing scheme for the purposes permitted under the scheme. Accordingly, the impugned order dated 31.01.2008 is set aside and the matter is remanded for denovo consideration. Thus, the appeal is allowed by way of remand.”

Suffice to say that the Tribunal had then held thus – that the activity undertaken by the appellant amounted to manufacture and it was not cleared ‘as such' by the appellant importer; what was required to be verified was the co-relation between the goods imported under the various advance licenses and clearances of the same on payment of excise duty by the appellant after slitting and cutting.

After receiving such a clear direction from the CESTAT the adjudicating authority ought not to have done the unthinkable in the de novo adjudication proceedings. Apart from confirming the demand and imposing equivalent penalty and interest he recorded the following findings -

"Now, in remand proceedings the notices have submitted various records to show that the coils which were sold ‘as such' were imported by them under some other schemes. On examination of the said records, I find this plea of the noticees admissible and hold that the coils which were removed without even cutting and slitting were not covered under the scope of the impugned show-cause notice."

The Bench was not pleased and observed thus -

"3. Once this condition has been satisfied by the appellant from the records maintained by them, the Commissioner should not have gone into other issues which have already been decided by the Tribunal holding that at the relevant time the process undertaken by the appellant amounted to manufacture and the appellant had cleared the same on payment of appropriate excise duty. What the Commissioner has done is to re-consider an issue which has already been settled in favour of the appellant in the previous proceedings by this Tribunal which is not permissible as the Commissioner is subordinate to this Tribunal in judicial matters. Therefore, the impugned order is not sustainable in law."

In fine, the CESTAT allowed the appeal with consequential relief.

In passing : Hopefully, the NACEN includes the above case in its curriculum!

(See 2012-TIOL-1833-CESTAT-MUM)