1. After hearing both sides and considering the issues involved, this appeal is being disposed off after waiver of pre deposit, as the plea made in the appeal and the issues involved & prayers made are lying in a narrow compass.
2. The appellants herein, M/s Pennar Industries Ltd (hereinafter referred to as 'PIL'), imported hot rolled ncn alloy steel wide coils against an Advance Licence issued under the DEEC Scheme. The quantity of such import was 2018.6 MTs. The imports were made on 3.3.1999 and 12.4.1999 and the goods were taken to their Isnapur Unit and there they were entered in the relevant raw material register. The imports were made under Notification 30/97 as amended on 1.4.1997 which allows actual users to import raw materials duty free to be converted into specified finished products and exported as per export obligations given in the advance licences. They were therefore to effect export of 1000 MTs cold rolled "non alloy steel (hard) coils and 1500 MTs of CRCA skin based steel strips/coils totalling 2500 MTs. The values pertaining to these exports were specified in the licence. The exports were to be effected in the original time limit which after including extension for discharging of export obligation by M/s PIL was 2.9.2001 extended up to 2.9.2004.
3. However, officers of the DRI visited the unit on 9.1.2002 and conducted search operations as they wanted to locate the imported material, they recovered certain documents and conducted enquiries and issued a Show Cause Notice alleging that the imported duty free raw material was not put to production of finished goods as per the licence requirements and the finished goods obtained from imported were never exported thus violation of Notification 30/97 was alleged and duty demands were made under the condition of the said notification.
4. It is on record that M/s PIL had made M/s Steel Co, Gujarat as its supporting manufacturer. M/s PIL could not fulfil their export obligation under the licence so they arranged for the export performance through M/s Steel Co, Gujarat who arranged the export performance through their agents M/s Shirdi Industries Ltd, Mumbai (hereinafter referred to as 'SIL'). SIL in turn arranged for third party exports of cold rolled non alloy steel coils through M/s Essar Steel Ltd, Hazira, Surat, a merchant manufacturer and a quantity of 558.865 MTs and 176.5 MTs were exported vide Shipping Bill Nos 1000051316 dated 17.5.2000 and 1000048872 dated 10.5.2000. These exports were made to Bangladesh via Mumbai Port. Further a quantity of 510.515 MTs was exported to Nepal by M/s Steel Co, Gujarat vide Shipping Bill No. 68/DEEC/2000 dated 23.2.2000. These exports were credited in the book against the export obligations as of M/s PIL. The exports made through third party were as per Exim Policy and the third party exporters did not avail of any export incentives. However, the Show Cause Notice issued alleged that by not utilising the material imported and sending the same to M/s Steel Co Gujarat, M/s PIL had violated the actual user condition and as the Chartered Engineers were requested by third party exporters to certify that duty free materials has actually been used in the resultant export product and such certificates obtained without application of mind were not genuine and thus an attempt was made to show duty free nature of raw material was used in making exports by third party exporter. The Commissioner after hearing the appellants on adjudication and passed an order confirming the demand of Customs duty and imposed a penalty on M/s PIL and individual penalties on Shri Anantha Reddy, Shri Rakesh Aggarwal, Shri Manohar Deep Chand Punjabi, Shri Anil Narayan Pande and Shri N.M.Mohnot. Aggrieved by this order, the present appeals have been filed by the assessee.
5. (a) It is admitted by the appellant that raw materials as described in quantity and nature were imported and goods were cleared under Notification 30/97-Cus during the process, it was submitted that they noticed that the imported material was not suitable for manufacturing export quality products and due to technical shortcomings observed in the material so they had to off load in the domestic market the products obtained from the raw material after payment of appropriate duty thereon.
(b) PIL applied to the licensing authorities i.e. DGFT for a change in the profile as the export of CRCA skin based steel snip/coil was not possible due to prevailing marker scenario. The DGFT was kind enough to pass orders making amendments in the licence and the summary of the amendments are as follows: 6. As per Exim Policy, & Boards orders, the petitioner company preferred third party export to fulfil the Export Obligations as per the amended condition and exports were effected. The export performances by third party exporters i.e. M/s essar Gujarat, Merchant Exporters were endorsed in the DEEC books of PIL towards fulfilment of export obligation by proper officers of Customs Department. The D.R.I.officers however did not accept that situation. They, have prematurely before the export obligation period was over took over DEEC books and brought in the allegation that the appellants have suppressed the angle of third party export. It is submitted by the appellants that the authority competent to determine the eligibility of export performance vis a vis the DEEC imports. Exim Policy Scheme would be the licensing authority & DGFT whose decisions would be found the center. There was a valid import licence and subsequent to the amendment in the licence which effectively changed the products and also the nature of exports to be effected viz third party exports, would clearly accept the position that when an importer was not able to fulfil export obligations, the changed/altered positions have to be reckoned.
7. On a consideration of the Exim Policy provisions & the fact that not 30/97 has been issued to implement & effect the said Policy Provisions, the eligibility and or violation of the not 30/97 would be caused & duty demands etc would be called for only after the export obligations are not met. The final authority to determine what should be on export obligation & when it is not met or met would be DGFT whose verdicts on that issue cannot be questioned. The findings in the impugned order to the following effect- 35".............. .The argument of Pennar that third party exports were sanctioned in terms of Circular No. 120/95 does not stand the test of law.........
cannot be upheld since Circular No 120/95 was issued by the Board. A Commissioner is not required to arrive at the above view about the circular being as per law or not. All that was required was to arrive at a finding how the circular, if at all, was not applicable in this case. The order does not indicate the same cannot be upheld on the reasons as advanced by the Ld DR. The order is not upheld & as required to be set aside.
9. The Ld Advocate has relied upon the decision of this Tribunal in the case of Anmol jewellers (2000 (124) ELT 102 Tribunal ) on third party exports; decision of Vax Institute Laboratory Ltd (1993 (68) ELT 162 Tribunal on Third party exporters to be endorsed in DEEC books; & the decision of Bombay High Court in case of Paradip Poly Files (P) Ltd (2Q04 (173) ELT 3 (Bombay) which lays the jurisdiction in case of DEPB Scheme (another Exim Policy Export Entitlement Scheme) out of bounds of Customs Authority & within the DGFT authority. Nothing contrary has been shown to us. There is no reason therefore before us to come to a conclusion that third party exports made upto the extended time of meeting the Export obligation ie upto 2.9.2004 or such further extension, if any, to be granted by DGFT should be disallowed to be effected in the DEEC books once such period is over the exports entered. Thereafter the matter could be taken up for recovery action by the Customs authority to enforce the provisions of Customs laws provided the exports, so made & entered are not accepted as Export obligation by DGFT. There is no merits found in the place of Ld DR the violation of condition of notification 'as regards transfer bases of raw material' that clause as read does not bar transfer/parting off goods obtained from such material, which in this case in not even to be the issue arrived at in the impugned order. Action initiated is premature & high handed in taking away the DEEC books that cannot be upheld.10. Consequent to the findings, the impugned order demanding the duty is set aside, without going into the question of no demand being made under Section 28 of the Customs Act 1962.
11. Since no duty demands are being upheld, there is no case or cause for any penalty under the provisions, of Customs Act 1962.
12. Appeals consequently allowed granting the plea of return of DEEC books & for entry of any exports made but not entered. Appeals disposed in above terms