1. M/s. Vijeta International (hereinafter referred to as ' the exporters') applied for Advance Licences for import of certain inputs including polyester filament yarn for use in fabrics to be exported and were issued the following three Advance Licences: for import of certain quantities of polyester filament yarn which were quantified on the basis that if polyester filament yarn used in the exported fabrics was 1 kg, the import entitlement under Advance Licence would be 1.1. kg Another Advance Licence No. 2071825 dtd 12.1.95 was also issued to the exporters. Under the belief that the quantum of exports and/or the composition of the exported fabrics was mis-declared to the Office of the Director General of Foreign Trade for the purpose of obtaining Advance Licences for a higher quantity, Customs officers carried out certain investigations resulting in issue of show cause notice dated 21.3.1997 proposing recovery of duty of Customs of Rs. 40,92,873 under Section 28 of the Customs Act, 1962 by denial of the benefit of Notification No. 204/92 dtd 19.5.92 covering imports under advance licences , proposing confiscation of goods imported under the first three advance licences under Section 111(d) and (o) and proposing confiscation of the exported fabrics under Section 113, and proposing penal action under Section 112(a), Section 114, and 114(A) of the Customs Act. The notice proceeded on the basis that the actual weight of the exported consignments was less than the weight shown on the Export Promotion copies of Shipping Bills and that this resulted in the DGFT granting Advance Licences for quantities higher than the entitlement of the Exporters. The notice also alleged that the polyester filament content of the exported fabrics as shown in the Shipping Bills was in excess of the actual polyester filament content of the fabrics, thus resulting in endorsement of higher quantum of polyester filament yarn in the Advance Licences than the quantum to which the exporter was entitled. The notice relied upon certain test reports of the samples of exported fabrics to substantiate the charge that the actual polyester filament content of the exported fabrics was less than that declared. The notice also relied upon cancellation of Advance Licence No. 2071767 dated 6.1.95 and Advance Licence No.2147509 dtd 17.8.94 due to mis-declaration and also referred to the fact that the 3rd Licence No. 2147508 dated 17.8.94 was also liable to be cancelled as it was obtained by mis-representation. The notice was adjudicated by the Commissioner of Customs who confirmed duty demand of Rs. 25,37,223/- against the exporter (partnership firm) under the proviso to Section 28(1), imposed a penalty of Rs. 25 lakhs upon its partner Shri Arun D. Mehra in addition to imposing penalty of Rs. 13 lakhs and penalty of Rs. One lakhs on the proprietor and employee respectively of the CHA, M/s. Amol Shipping Agency. Hence, these appeals by the exporter and Shri Arun D. Mehra.
2. We have heard both sides. The first issue is, whether the duty demand can be raised on the original holder of advance licence even when he is not the importer. The Commissioner holds that the appellants are the Deemed importers in order to sustain the duty demand against them. We find that this issue has been decided against the Revenue by the Tribunal's order in Dharam Exports v. CC, Nhava Sheva (Order No.A/333 to 335/WZB/2005-C.II dated 20.5.05) wherein the earlier order in the case of Jupiter Exports v. CC(Genl.) Mumbai rejecting the concept of "Deemed Importer" was rejected, has been relied upon. The Bench in the case of Dharam Exports noted the decision of the Hon'ble Gujarat High Court in Suresh Dhansiram Agarwal (2002(53)RLT 25) which had referred to the decision in Jupiter Exports and held that the reasoning adopted by the CEGAT in Jupiter Exports does not commend to the Bench and held that the Gujarat High Court decision is not a binding decision for the reason that (a) it is not a decision rendered either in writ or in appeal against the Tribunal's order in Jupiter Exports The Tribunal held that the decision in Jupiter Exports has become final as it has not been challenged in appeal, and following the decision in Jupiter Exports, the demand of duty on the goods imported by others, cannot be sustained against M/s. Dharam Exports. The ratio of M/s.
Dharam Exports case decision is squarely applicable to the facts of the present case and hence, following the same, we set aside the duty demand confirmed against M/s. Vijeta International.
3. Ld.D.R's reliance on the Tribunal's order in Indian Potash Ltd. v.CCE to support his contention that filing of Bills of Entry by some person would not in itself be conclusive of their status as importers, is misplaced as in that case it was conclusively found that the import of muriate of potash by canalising agency was they MMTC and although some Bs/E had been filed by M/s. Indian Potash Ltd, they cannot be treated as the importers as the evidence on record undisputedly points to their status as handling agents, while in the present case, Bs/E for import of goods were filed by transferee of the advance licence and therefore, they have held themselves out to be importers and were to be treated as importers within the meaning the definition ascribed thereto under Section 2(26) of the Customs Act, 1962 and therefore, duty demand is to be raised against them.
4. There is yet another reason why the duty demand is not sustainable - the demand has been confirmed on the ground that the exporters deliberately mis-declared the composition of export consignments with regard to the percentage of polyester filament yarn, so as to obtain endorsement in advance licences of a higher quantum of polyester filament yarn than what the exporter was entitled to. This charge and finding regarding mis-declaration of composition is based upon test reports. There are only two test reports in respect of the 24 consignments, neither of which are authenticated by SASMIRA, although they are held to be reports by SASMIRA on samples drawn from the export consignments. The results of the test reports are applied across the board to all the export consignments which is not sustainable in law.
Further, the test reports are not even relied upon in the show cause notice as seen from the fact that neither the test report is shown as relied upon document in the list which is annexed to the show cause notice. The further finding that the exporter inflated the weight of the fabrics in the E.P. copy of the Shipping Bills (the weight of the finished export products declared on the original/duplicate copy of the Shipping Bill is less than that declared in the E.P.copies of the Shipping Bill) so as to get higher input output entitlements, is also not sustainable as the Shipping Bills are not relied upon in the list of documents annexed to the show cause notice and also for the reason that DGFT's cancellation of licence has been subsequently set aside and the issue as to whether the licences were correctly issued to the exporters has been remanded. The goods are therefore, not liable to confiscation and not liable to duty.
5. Penalty imposed upon the partner of the exporter is also not sustainable as the goods in question are not prohibited for export and hence not liable to confiscation under Section 113 of the Customs Act, giving rise to penal action under Section 114, in the light of Supreme Court judgment in Shilpi Exports [2000(115)A 219] upholding Tribunal's order in a case relating to the DEEC scheme as in the present case. The decision of the Apex Court in the case of Om Prakash Bhatia 2003 (115) ELT 423 (S.C.) relied upon by the ld. DR on the issue of imposition of penalty under Section 114 is distinguishable as in that case exports were under the Draw back scheme while the decision of the Apex Court in the case of Shilpi Exports is directly on exports under DEEC scheme.