Judgment:
1. The applications for waiver of pre-deposit of duty of Rs. 9,34,88,183/- on finalization of certain bills of entry filed by M/s.
Ultratech Cement Limited (hereinafter referred to as the importer) plus Rs. 4,60,83,141/- and penalty of Rs. 9,43,88,183/- under Section 112(a)(ii) of the Customs Act, 1962 and penalties of Rs. 1 crore (Rupees one crore only) on M/s. Narmada Cement Company Ltd. (hereinafter referred to as NCCL) and Rs. 1,00,000/- each (Rupees one lakh only) on Shri K.P.Y. Kulkarni, Vice President of the importer company and Shri S.K. Shah, Manager (Materials) of M/s. Narmada Cement Company Ltd. arise out of the order of the Commissioner of Customs, Jamnagar. The demands have been confirmed by denying the benefit of DEEC Scheme and benefit of exemption in terms of Notification No.43/2002-Cus. and 94/2004-Cus to the importer on the ground that during the period in dispute viz April 2002 to October 2004, the importer had transferred/sold Rs. 413145.360 MTs of non-coking coal imported duty free by availing benefit of exemption under DEEC Scheme to NCCL who was not shown as a supposing manufacturer in the licence and NCCL returned part of the quantity of clinker manufactured by it out of the coal so supplied and such clinker was exported by the importer, but part of the quantity of coal was utilized by NCCL to manufacture clinker which was sold in the domestic market, thus resulting in contravention of Notification No. 43/02-Cus and it successor notification. The extended period of limitation has been applied against the importer on the ground of suppression of fact of sale/transfer of imported coal to NCCL in contravention of the provisions of EXIM Policy and Customs Notification governing duty free import.
2. We have heard both sides. In the case of Tetra Pak India Ltd. 2005 (190) ELT 257, it has been held that giving the imported duty free material to the supporting manufacturer whose name is not appearing in the licence does not amount to sale or transfer, and that it is not mandatory to get the name of the supporting manufacturer endorsed in the licence, and this is a optional requirement, having regard to the legislative history of the Policy relating to supporting manufacturer.
The Tribunal has held that when an importer/licence holder gives imported duty free material to another manufacturer with a stipulation that the duty free material shall be used for further production and the resultant product shall be returned to the licence holder, such a transaction will not be hit by the expression "sale or transfer" occurring in the notification. It has also been held that the proviso to Section 28(1) of the Customs Act, will not apply to duty demand in such circumstances since non-inclusion of the name of the supporting manufacturer is only an error or omission and cannot amount to wilful mis-statement or mis-declaration. The Tribunal has considered paras 120 & 121 of the Handbook of Procedures of 1992-97 (April 1993 Edition) and para 120 as it read with effect from 1.4.1994. Para 120 & 121 of the Handbook (April 1993 Edition) read as under: 120. The licence granted under this scheme shall be subject to Actual User condition till redemption of BG/LUT. The Advance Licence holder may, however, transfer the duty free imported materials to his supporting manufacturer whose names are entered in the DEEC for the purpose of export production.
121. The duty free licence holder may issue a letter of authority to his supporting manufacturer, whose name is endorsed in the DEEc to open letters of credit, make remittances for importing the goods, arrange movements and to clear the imported goods through Customs according to the Customs Act, 1962 or any other matter connected with the operation of the licence. In case of violation of any of the conditions of the licence, the responsibility shall be that of the licence holder.
The licence granted under this scheme shall be subject to actual user condition till redemption of BG/LUT" Para 121 was deleted.
3. Para 120 as introduced in the April 1995 Edition of the Handbook of Procedures reads as under: 120. The licence granted under this scheme shall be subject to the Actual User condition till redemption of LUT. The licence holder is free to have the material processed through any other manufacturer including a jobber. However, the licence holder under the scheme shall be solely responsible for the imported items and fulfillment of export obligation. If the applicant desires to have the name of any manufacturer or jobber added to the licence, he may apply for such endorsement. Upon such endorsement made by the licensing authority, they shall both be regarded as co-licenses and the obligation of the licence holder shall become the joint and several obligation of the co-licences. Anyone of the co-licences may import the goods in his name or in the joint names. The BG/LUT shall also be furnished in their joint names.
In view of the above provisions the Tribunal concluded that words "sold or transferred" occurring in Notification No. 43/2002-Cus (the same notification which is under consideration in the present case) will not cover a situation where duty free imported material is Out Sourced for conversion amounting to manufacture which are returned to a licence holder for further use/export. The Commissioner has therefore prima facie erred in distinguishing this decision on the ground that no part of the material imported duty free by M/s. Tetra Pack (I)Ltd. was used for manufacture of goods sold in the domestic market as the entire quantity of K.Film converted by M/s. ECOPLAST (supporting manufacturer) out of imported duty free Ethyl Acrylic Acid Copolymer supplied to it by the importer M/s. Tetrapack India Ltd. was exported while in the present case M/s. NCCL did not return the entire clinker manufactured by it out of coal imported duty free by the importer and supplied to NCCL, but also sold part of such clinker. Prima facie the importer has satisfied us, with reference to the figures of export and SION norms that they have fulfilled their export obligation in respect of all the advance licences issued to them and this submission, although made before the adjudicating authority in the reply to the show cause notice has not been rebutted and prima facie the error in calculation of quantity of export of clinker made by the Commissioner in the impugned order is by taking into account only those export made by the importer under cover of shipping bills showing M/s. NCCL as supporting manufacturer and against a particular licence against which coal was imported and given to NCCL, and not taking into consideration the quantity of clinker manufactured by NCCL and exported by the importer against a particular licence against which no coal was given by the importer to NCCL.
4. Since prima facie the export obligation has been fulfilled, prime facie no demand can be raised even if the resultant product is sold in the domestic market in the light of the Tribunal's decision in the case of Jay Engineering Works Ltd. v. Commissioner of Customs, Chennai it has been held that in the case of replenishment licences, once the export obligation has been fulfilled, there is no ban on the sale of final products made out of raw material imported duty free in the domestic market. This decision follows the earlier order of the tribunal in Cheminor Drugs Ltd. 5. With regard to the case law relied upon by the Ld. SDR, we note that those decisions are distinguishable. In the case of Pooja Exporters , Mulberry raw silk imported duty free by availing benefit of Notification No. 44/87-Cus was sold by the importer in the Bangalore market and seized from the purchasers. The case of Sehgal Knitwears 2002 (143) ELT 653 was decided in the context of para 120 of the Handbook of Procedures 1992-97 as it stood after April 1995, making it mandatory for endorsement of the name of a supporting manufacturer in the licence which condition was violated and export products were got manufactured by the importer availing benefit of duty free import under DEEC Scheme in terms of Notification No. 204/92-Cus dt. 19.5.1992 from other manufacturer without getting their names endorsed in the advance licences issued under such scheme (the Tribunal's decision in the case of Tetra Pak (India) Ltd. distinguishes this decision). In the case of Commissioner of Customs, Mumbai v. Macnair Exports (P) Ltd. 2002 (143) 167 (Tri. Mumbai), the imported duty free material itself was sold by the importer in contravention of Notification No.159/90-Cus and the same is the situation in the case of Akai Impex Ltd. v. Commissioner of Customs, Mumbai wherein imported duty free materials were sold in contravention of notification No.203/92-Cus.
6. In the light of the above and applying the ratio of the Tribunal's order in Tetra Pak (I) Ltd. and Jay Engineering Works Ltd. cited supra which are prima facie applicable to the facts of the present case, we hold that a strong prima facie case for total waiver has been made out and accordingly dispense with the pre-deposit of duty and penalty and stay recovery thereof pending the appeals.