Full Judgment
2. The relevant facts that arise for consideration are that the appellant M/s Ultratech Cement Ltd.,(UCL) are manufacturers of cement/cement clinker and are also exporter of the cement clinker/cement. Another appellant M/s Narmada Cement Company Ltd., (NCCL) is also manufacturer of clinker/cement and is a subsidiary of UCL. Other two appellants are employees of both the companies. UCL applied and got various advance licenses under advance license scheme for import of duty free coal and use the said coal for manufacture of clinkers/cement for export as per the obligation given by them while procuring the advance licenses. The import of the coal was done as per the Standard Inputs and Output Norms (SION) and were cleared from the port under notification No. 43/02- Cus. dated 19.04.2002, as amended from time to time. Appellant UCL utilized the duty free imported coal for the manufacture of final products and exported the same. In addition to the consumption in their own factory, appellant UCL dispatched such duty free imported coal to their subsidiary NCCL for manufacture of clinker/cement based on an agreement. As per the terms and conditions of the agreement NCCL was to utilize the duty free imported coal for the manufacture clinkers/cement and supply the same to UCL for further export only. As per the terms and conditions the imported coal was transferred and debit notes were raised on cost basis without addition of custom duty or profit for accounting purposes and the clinker/cement was transferred to UCL for further export. A show cause notice was issued to the appellants on the following allegations: a. the transfer of the imported coal is in violation of Clause (vii) of the notification No. 43/97 as amended and amounts to sale which is not permitted in respect of the duty free imports b. name of NCCL was not mentioned as supporting manufacture hence transfer/sale of duty free imported coal is liable for confiscation, c. since there is violation of the condition of notification, the provisional assessments are to be finalized without extending benefit of notification 43/97 as amended and the duty has to be paid by UCL d. penalties are to be imposed on all the appellants for all the violations.
The appellant contested the show cause notice on the grounds that the transfer of the duty free imported coal to NCCL is not a sale and in any case the goods manufactured out of the coal is exported by UCL and that the show cause notice is time barred and non inclusion of NCCL as supporting manufacturer is only procedural one. The adjudicating authority held that: a) giving the duty free coal by UCL to NCCL violates condition no.
(vii) of the notification No. 43/02-Cus and condition (10) of Notification No. 93/04-Cus; c) even if the cement manufactured by NCCL is exported by UCL, still condition (ii) of notifications is violated as there was a sale of imported duty free coal by UCL to NCCL; d) as UCL suppressed the diversion/sale of coal by it to NCCL, extended period of limitation under Section 28(1) will apply in respect of demand raised as per Annexure-A to the notice.
The adjudicating authority relying upon the above findings confirmed the demand, confiscated the duty free imported goal found at NCCL and imposed penalties on all the appellants. This appeal is against such findings by the adjudicating authority.
3. The learned advocate appearing on behalf of all the appellants submits that the adjudicating authority has erred in passing the order.
It is his submission that duty free coal imported by UCL was utilized by them for the manufacture of the clinker/cement. It is his submission that all the documents like ARE1, Invoices etc issued by NCCL clearly indicate UCL as the exporter and the documents all show NCCL as a supporting manufacturer. It was also submitted by the advocate that the advance licenses under which the duty free imports were made, most of them were redeemed and few have been submitted for redemption to the authorities. It is his submission that if there were no exports done by the appellant then the DGFT authorities would not have redeemed the licenses and would have taken penal actions and informed the customs authorities. It was also submitted that it is an admitted fact that the duty free coal imported has been utilized in the manufacture of clinker/cement as there is no allegation in the show cause notice that the said coal has been diverted in to local market. He also submitted that the adjudicating authority has not given the details of the compilation made by the authorities as regards to the figures of export, as mentioned in the order. He submits that the adjudicating authority has not considered the exports made by mentioning the file no. on the export documents. It is his submission that if the reconciliation is done then there would be no demand of the duty as the export obligations have been met by UCL. He submits that the decision of the tribunal in the case of Tetra Pak India Ltd. will squarely cover the issue on the interpretation of the Clause (vii) of the notification No. 43/97-Cus as amended. It is his submission that the transaction between UCL and NCCL is not a sale or purchase transaction as envisaged in the notification. It is his submission that NCCL has been registered with the DGFT authorities as supporting manufacturer subsequently. It was also submitted that there was no difficulty in getting the name of NCCL registered as a supporting manufacturer as the appellant is manufacturer exporter and hence is eligible for the getting the finished goods manufactured from a supporting manufacturer. He submits that the imports of duty free coal were made in 2002-03 and hence the show cause notice issued on 18.6.2005 is blatantly time barred. On these grounds he submits that the impugned order is to be set aside and their appeal allowed.
4. The learned SDR on the other hand submits that there is violation of the conditions of the notification that granted exemption from payment of duty. It is his submission that the duty free imported coal should have been consumed by UCL for the manufacture of clinker/cement for exports. It is his submission that in the absence of NCCL being added as supporting manufacturer on the advance licenses and from the fact that UCL was raising debit notes for the cost of the imported coal it is a clear indication that there was sale of the imported coal. It is his submission that it is irrelevant whether UCL completed the export obligations are not. He reiterates the detailed findings of the adjudicating authority.
5. We considered the detailed and lengthy submissions made by both sides and perused the records. The fact that NCCL is a subsidiary of UCL is not disputed by revenue. It is also undisputed that the appellant UCL was holding valid advance licenses for import of duty free coal as per the norms of SION. It is also undisputed that UCL had committed export obligations against the said advance licenses to DGFT.The conditions of advance licenses are to be met by the UCL being the holder of such licenses. It is on record that UCL had met with the most of the export obligations in respect of most of the advance licenses and have also redeemed the same and in respect of balance licenses they have submitted the details of export obligation to the DGFT authorities. It is also undisputed that UCL had transferred such Imported duty free coal to NCCL and raised debit notes for the cost of the coal without inclusion of the customs duty and other duties. It is also seen from records that NCCL had returned back clinker/cement back to UCL alter adjustment of the debit notes for the cost of coal.
Revenue has taken a view that such transfer and raising debit notes would amount to sale and violation of notification. The question, which arises for our consideration, is that whether the transfer of imported coal duty free by UCL to NCCL could be considered as violation of the condition No. (vii) of Notification No. 43/97 - Cus grants exemption from customs duties and other duties subject to the fulfilling of the conditions in the notification. We are concerned only with Clause (vii) of the said notification, which we read: (vii) that the said licence and the materials shall not be transferred or sold; It can be noticed that above reproduced clause of notification No.43/97 - Cus lays down a condition that duty free imported goods should not be sold or transferred, The restriction of Clause (vii) has to be viewed from the intention of this condition being incorporated in to notification. To our mind this condition was to discourage the importers from importing duty free goods and divert the same to local market and try to misuse the advance license scheme. In the case before us it is seen from records that appellant UCL has met with export obligations and have redeemed the licenses by exporting clinker/cement manufactured by themselves and NCCL. In such a situation it cannot be said that by transferring duty free imported coal to NCCL there was violation of notification by UCL. We find that the very same clause in the earlier notification was in dispute before the Tribunal in the case of Tetra Pale India Ltd., (supra) Relevant paragraphs are read: (g) Whatever quantity of goods were so transferred, for conversion into K-film, have been accounted & received back. That fact is not in dispute. The subsequent use in Tetra Pack Asceptic Packagings and Export with the value additions being met on the 22 Advance licences also is not doubted. The Standard Import Output norms (SION for short) do not stipulate an exclusive actual user condition in the importers/Licence holders premises. The conditions of notifications No. 31/97, 48/2000 & 46/2002 have been met. That notifications do not exempted CVD is not material since Tetra Packs attract excise duty & are covered by MODVAT Scheme & imports under that notification are exempt from SAD. There is no anti-dumping duty on Ethyl Acrylic Copolymer, the SION norms not violated. Then the proposed demand of Customs Duty and CVD duty made on Nucrel 3990 imported and which was sold to ECOPLAST and repurchased as K-film and brought to appellants premises and consumed cannot be upheld. (h) The words "sold or transferred" as used in the notifications will not cover a situation where duty free imported material is Out Sourced for conversion amounting to manufacture or otherwise emergence of intermediate products which are returned to a Licence holder for further use/export. The entire DEEC is a schedule to the Customs notifications and an integral part thereof. Part B of the same relates to an ancillary of export product manufactured and if the words "Sold/transferred" are literally construed, even compliance to Part B would be then a violation of condition (VII) of the notification & of Paras 4.16 & 4.17 of the Policy. Such an interpretation cannot therefore be accepted, since a harmonized reading would be required in these matters as stipulated in Aphali Pharmaceutical case . Therefore, giving of the by the Commissioner, has been suitably distinguished by the Id.
Advocate on facts of exports having been made by independent manufacturer and the fact of the history of EXIM Policy & Orient at Experts decisions was not before that bench of the Tribunal. We find substance in this submission to hold that Sehgal Knitwears decision cannot apply in the facts herein. The Customs Notifications have to be interpreted to advance the Policy Directions of EXIM Policy. The Commissioners finding in para 6 of the impugned order page 20 thereof that History of notification & Policy are irrelevant when the language of the notification is Plain & the existing notification has to be read misses the point of interpreting the reason for granting the manufacturing/processing. Out Sourcing condition relaxed as evident from the History. History is a good teacher and those who ignore the same do so at their own risk. We cannot ignore the lessons from the History in this case. The ld. Advocate has demonstrated how History in this case is relevant to advance the interpretation being arrived and ignoring the same would defeat the Export Incentive Policy, which is to be understood in its totality and not in a manner isolated with blinkers on to interpret any the Customs Notifications.
6. As against this revenue relied upon the case law of Sehgal Knitwear and it can be seen that the decision in that case was taken in respect of the provisions of the policy during the relevant time, there is strong force in the arguments of the learned advocate that the division bench in the case of Tetra Pak India Ltd., impliedly overrules the Sehgal Knitwear case. The other two case laws of viz Macnair Exports (P) Ltd. and Akai Impex Ltd. relied upon by the revenue may not help the case for the reason that in those two cases there was a categorical finding that the imported duty free goods were diverted and by the assesses in violation of the clauses of notification. Whilst in this case before us, there is neither an allegation nor a whisper that appellant UCL had diverted the duty free imported coal in local market.
7. In view of this and in the facts and circumstances of the case, respectfully following the decision of the tribunal in the case of Tetra Pak India Ltd, we hold that in this case there is no violation of the Clause (vii) of notification No. 43/97 - Cus as amended from time to time. Accordingly the appeal of the appellant on this issue is allowed.
8. As regards the claim of the appellant that the adjudicating authority had not divulged the working as to how he had come to conclusion that appellant had not consumed the duty free imported coal for the purpose of export, we feel that this issue needs to be verified from the voluminous records. We find that the statement prepared by the adjudicating authority to come to conclusion that the appellant UCL has not exported goods manufactured from imported coal may have to be re-looked in to for the reason that on test check we find the adjudicating authority has not considered all the details as regards the mentioning of the file no. on the export documents and co-related the same to the imports of coal made by them, as claimed by the advocate. Further the claim of the advocate that all almost all the advance licenses are redeemed has to be looked in to by the adjudicating authority. Learned advocate submits that, if needed, they are ready and willing to demonstrate all the details of duty free imports made and corresponding exports, to the lower authorities, if the appeal is remanded for this limited purpose. Learned SDR has also no objection to this proposition. We find strong force in the contention of the advocate on this point. As we have already noted that on test check we found that the lower authorities did not consider the facts in correct perspective and were carried away by the interpretation of the Clause (vii) of the notification no. 43/97 - Cus.
It is also not clear whether the appellant redeemed all the advance licenses after fulfilling the export obligations. This factual aspect has also to be gone in to by the lower authorities, as, if the appellant UCL has fulfilled all the export obligations then there would be no violation or infringement for demand of the duty and other consequential actions. We are of the view that, only for this limited issue the matter has to be remanded back to the original authority.
9. Accordingly, in the facts and circumstances of the case, holding the appellants have not violated the condition No. (vii) of notification No. 43/97-Cus as amended from time to time, we allow the appeal by way of remand to the original adjudicating authority to look in to the claims of the appellants that they have utilized the duty free imported coal as per SION in the manufacture of the clinker/cement exported by them, in totality. The adjudicating authority will afford a reasonable opportunity of personal hearing before deciding the issue and the appellants will be at liberty to marshal all the evidences in their support.