Judgment
1. The brief facts of the case are that the factory premises of the respondents herein was searched by officers of the Directorate of Anti-evasion and officers of the Central Excise Collectorate and it appeared that M/s. Royal Cushion Vinyl Products Ltd. had illegally transferred raw material imported duty free under advance licence/DEEC scheme to its sister concern, M/s. National Leather Cloth Mfg. Co.Statements of Shri Jayesh A. Motasha, director of M/s. Royal Cushion Vinyl Products Ltd. and partner of its sister concern, were recorded wherein he inter alia stated that M/s. Royal Cushion Vinyl Products Ltd. had to take on loan basis, indigenous duty paid and imported duty paid materials mainly PVC and DOP from M/s. National Leather Cloth Mfg.
Co. in Order to enable it to fulfil export commitment within a short period, that this loan arrangement was with the permission of the DGTD.The details of loan arrangement showed that during the period January 1990 to February 1991, 930 tons of PVC resin and for the period January 1990 to December 1990, 563785 kgs. of DOP were taken on loan by M/s.
Royal Cushion Vinyl Products Ltd. and they transferred 811 tons of PVC resin and the entire quantity of DOP on return of loan. Out of the PVC resin, some quantity was duty free imported material and the entire DOP was duty free imported material. The PVC resins taken on loan and used in manufacture of goods for export by M/s. Royal Cushion Vinyl Products Ltd. were of particular grades and the duty free imported PVC resins which they returned to M/s. National Leather Cloth Mfg. Co. were of different grades. It thus appeared to the department that an improper exchange of raw materials particular PVC resin, had taken place in violation of Notification 159/90 dated 30-3-1990 which stipulates that goods imported duty free against advance licences covers replenishment of material having identical specifications and identical technical characteristics as those actually used in the manufacture of the resultant products exported and that DGTD had given permission for exchange of imported raw materials only, that prior permission of the licensing authorities had not been taken and that the transfer of imported duty free material from M/s. Royal Cushion Vinyl Products Ltd. to M/s. National Leather Cloth Mfg. Co. violated the condition of the notification. Investigation also showed that the transport company named by M/s. Royal Cushion Vinyl Products Ltd. and M/s. National Leather Cloth Mfg. Co. as having been used for transfer of material, was fictitious. Since M/s. Royal Cushion Vinyl Products Ltd. had not obtained permission of the licensing authorities for transfer of material and further since they had availed Modvat credit, it appeared to the department that they were liable to pay appropriate customs duty chargeable on 676.5 MT of PVC resin and 563.785 MT of DOP imported under advance licence/DEEC scheme which were transferred to M/s.
National Leather Cloth Mfg. Co. as return of loan in contravention of the ITC policy and customs notifications 116/88 and 159/90. For these reasons, show cause notice was issued in November 1991 proposing confiscation of offending goods under Section 111(o) of the Customs Act proposing recovery of duty on PVC resin and DOP and proposing penal action under Section 112(a) of the Customs Act. The notice was adjudicated by the Commissioner of Customs who found that vide letter dated 3rd June, 1994 addressed to DGFT, asking for comments with reference to ex post facto permission granted for regularisation of loan transaction between the respondents and advance licence granted to M/s. Royal Cushion Vinyl Products Ltd. the Joint Director, DGFT, enclosed a copy of letter dated 8-4-1994 wherein he stated that the ex post facto permission had been issued by the competent authority vide its letter dated 31-8-1992 and that the respondents had informed them about availment of Modvat credit which was reversed by them. The Commissioner, therefore, found on the basis of the ex post facto regularisation of the actions of the respondents that there were no ground for sustaining the charges. He accordingly dropped the proceedings initiated against the respondents. We have gone through the correspondence exchanged with the DGFT and find that all facts were disclosed to the DGFT prior to the grant of expost facto regularisation of the transactions between M/s. Royal Cushion Vinyl Products Ltd. and M/s. National Leather Cloth Mfg. Co. No satisfactory reason/ground has been adduced by the learned SDR for holding that the Commissioner should not have accepted the regularisation of the transaction by the DGFT which is the concerned authority. We, therefore, see no reason to interfere with the impugned Order and accordingly uphold the same and reject the appeals.