1. Heard both sides at length. There is a demand of Rs. 3,37,17,073/- and penalty of Rs. 20 lakhs against the appellants. The appellants have not admittedly fulfilled the export obligation against the advance licences issued to them under which they have imported Low Ash Metallurgical (LAM) Coke duty free. According to the appellants they have exported 4,182 MT of Pig Iron and 2,046 MT of castings as against the export obligation of 20,000 MT of Pig Iron and 20,000 MT of castings. The appellants have paid duty amount of Rs. 1,66,18,563/- subsequent to issue of show cause notice (Rs. 84,74,128/- towards Basic Customs Duty and Rs. 81,44,435/-towards Special Additional Duty and Special Customs Duty). The break-up of demand confirmed against the appellants is as follows : -(i) Basic Customs Duty (BCD) Rs. 1,01,37,819/-(ii) Anti-dumping Duty (ADD) Rs. 1,33,14,373/-(iii) Special Customs Duty (SCD) Rs. 50,68,909/-(iv) Special Additional Duty (SAD) Rs. 51,95,971 /- -------------------- (i) Rate of ADD should be nil in terms of Notification No. 69/2000-Cus., dt. 26-5-2000.
(ii) Pro-rata relief should be granted to the extent exports have been already made.
(iii) In the absence of any bond for SCD and SAD and any post importation machinery for SCD and SAD, the demand for the same is not maintainable.
(iv) Rate of interest can be only 12% and not 24% in view of retrospective amendment introduced to Notification No. 30/97 by Section 127(1) of the Finance Act, 2003 read with SI. No. 7 of the Third Schedule thereof.
(vii) Since BCD has been paid, there is no violation of condition of notification and Section 111(o) is not applicable and no penalty is imposable under Section 112.
3. We find that the appellants were allowed duty free clearance of imported LAM Coke under the advance licence scheme on the condition that they shall export specified quantities of pig iron and castings.
The advance licence scheme is a public policy for promotion of exports.
When the export obligation is not met, the appellants do not have a choice but to pay the duty amounts along with interest. The appellants cannot take the plea that they will only pay the BCD in terms of the bond and not the other duties and plead that there is no machinery for collection of other duties. We have seen the copy of impugned Bill of Entry at P79 of the paper book filed by the appellants. It is clearly indicated therein that the assessment is provisional as it is ought to be so under the advance licence scheme till the export obligation is fulfilled. The duty free imports are subject to exports to be made. We find nothing irregular in the Department demanding all the duties foregone when the appellants have failed to fulfil the export obligation. We are of the view that the department is correct in demanding not only BCD but all other duties ordinarily applicable on such imports.
4. The appellants have claimed that they have made some exports and hence, the duty demands on imported LAM Coke should be proportionately reduced. We find that the relevant Notification No. 30/97, dated.
1-4-97 makes no such concession. It requires export obligation in full.
It is settled law that notifications must be strictly interpreted.
However, we find that in the case of another export promotion scheme namely the EPCG Scheme, Board's letter F. No. 607/14/2000/DBK, dt.
13-3-2000 allows payment of differential duty and interest only in respect of unfulfilled portion of export obligation. Taking into account the said circular, we are of the view that it would be just and proper to allow the appellants to produce necessary proof regarding partial exports made by them and to charge only the differential duty and interest from them in respect of unfulfilled portion of the export obligation by allowing proportionate reduction.
5. The appellants have claimed that they are not required to pay ADD on the ground that Notification No. 69/2000, dt. 26-5-2000 prescribes Nil rate of ADD for metcoke imported by a manufacturer of pig iron or steel using a blast furnace. It is their contention that this notification issued pursuant to CESTAT's order-in-appeal against the final ADD determination is retrospectively applicable to their imports during the period June 1998 to August 1998. We find that no such exclusion from payment of ADD is available under the provisional ADD Notification No.22/98, dt. 6-5-98 or the final ADD Notification No. 81/98, dt.
27-10-98. Notification No. 22/98 imposed provisional ADD @ Rs. 1800 per MT. Notification No. 81/98 imposed final ADD of an amount equal to the difference between Rs. 4673 and the landed value of metcoke per MT. On appeal, CESTAT modified the ADD to specific amounts in US dollar terms in respect of specific exporters. We also find that while notifying these modified rates under Notification No. 69/2000, dt. 19-5-2000; imports by manufacturers of pig iron and steel were excluded from the purview of ADD. There is no material to show that such exclusion was as a result of final order of CESTAT passed while deciding on the final ADD determination. In fact Paragraph 5 in Notification No. 69/2000 records the orders of CESTAT which is limited to modifying final ADD rates only. We, therefore, conclude that while such modified rates as ordered by CESTAT and notified under Notification No. 69/2000 are applicable to the impugned imports made by the appellants, the exemption from ADD granted to imports by manufacturers of pig iron and steel in the last paragraph of the said Notification No. 69/2000, being a fresh exemption, is applicable only prospectively with effect from the date of the notification, i.e. from 19-5-2000. Hence, we order that the quantum of ADD be re-calculated applying the exporter-wise rates specified in Notification No. 69/2000.
6. The appellants have claimed that the lower authority has applied 24% interest whereas it should be 15% without taking into account the fact that Notification No. 30/97 has been retrospectively amended by Section 127(1) of the Finance Act, 2003 read with SI. No. 7 of the Third Schedule thereto. The learned Advocate for the appellants, however, f ly states that the amendment was not brought to the notice of the adjudicating Commissioner. We take note of the retrospective amendment to the rate of interest and allow the appellants to pay interest at the rate of 15% instead of paying @ 24% as demanded.
7. The appellants have claimed that ADD and SCD cannot form part of the value for levy of SAD. The learned Advocate for the appellants has tried to make a distinction between the phrase "as an addition to" and the phrase "in addition to" in this regard. He claims that ADD is levied in addition to BCD and hence cannot be included in the value for calculating SAD. He also refers to Budget Circulars of 2002 and 2003 and the retrospective amendments made through the Finance Bill, 2003 to exclude ADD from calculation of value for SAD. We note that the amendment has been given retrospective effect only from 1-3-2002 to give validity to the clarification given through Budget Circular of 2002. As such, the amendment cannot be read into law for the impugned period June 1998 to August 1998 which is well beyond the date 1-3-2002.
ADD has the sole purpose of preventing injury from dumped imports. SAD being equal to a domestic levy, it must be imposed on a f value of imports, hence ADD must be added to the dumped value to arrive at the fair value for calculation of SAD. The law as it stood before the amendment has to be interpreted to allow addition of ADD for arriving at the value. The Government appears to have decided to specifically exclude ADD in 2002, but obviously it was realised this cannot be done through a clarification, hence the legal amendment in the next budget was necessary with retrospective effect from 2002. There is no warrant to read the law as if the amendment existed even prior to 2002. We, therefore, hold that for the impugned period, ADD is includible in the value for calculating SAD. As regards SCD, the same is includible as there is neither any clarification nor any amendment.
8. The appellants have challenged liability to penalty under Section 112 on the ground that they have paid BCD subsequent to the issue of SCN. However, it is not in dispute that they have violated conditions of the notification under which the impugned goods were imported duty free. The learned SDR has cited the decisions of the 3 Judges Bench of the Hon'ble Supreme Court in the case of C.C. (Imports), Mumbai v.Jagdish Cancer and Research Centre - 2001 (132) 257 (S.C.) in this regard. The ratio of the said decision clearly allows imposition of penalty for post-importation violation of the conditions of an exemption notification.
9. The appellants have also raised the issue of interest liability on SCD, SAD and ADD. The lower authority has rejected the appellants' claim and demanded the interest @ 24% in terms of Notification No.30/97. We note that the exemption from BCD under Notification No. 30/97 is conditional upon fulfilling export obligation, and subject to payment of duty and interest on failure to export. The other duties are exempt subject to BCD being exempt. As such, conditions which apply to exemption from BCD automatically apply to exemptions from other duties.
Under such conditions, when interest of BCD become payable, it is just and proper that other duties should also be recovered with interest.
However, considering the retrospective amendment to the interest rate, we order that interest be recovered @ 15% only and not at the rate of 24% as demanded.
10. We, thus partly allow the appeal by remanding the matter to the original authority to recalculate the duty and interest amounts in the light of our directions above. Consequently, the penalty is also set aside with the direction that the same be redetermined commensurate with the recalculated duty liability. The appellants shall be allowed reasonable opportunity of hearing to enable them to show authenticated proof of exports made by them.