1. Since a common issue arises in all the above appeals they were taken up and heard together and disposed of by a common order.
2. In all the above three appeals the goods are under detention in the custody of the Department and, therefore, pre-deposit of duty does not arise under Section 129-E of the Customs Act 1962, the 'Act' for short and the issue is only with reference to waiver of penalty. We heard the matter and during the course of extensive submissions a plea in regard to applicability of the bar of limitation under Section 28 of the Act was urged on behalf of the appellants and after being satisfied that there was considerable force in the same we propose to dispose of the appeals themselves as the appeals can be disposed of on that short ground alone and in this view after granting waiver of pre-deposit of penalty we take up the appeals themselves for disposal in accordance with law.
3. The appellants herein are registered importers of gems and jewellery and imported automatic chain making machines under the advance licence scheme and the goods imported were cleared by the Customs authorities after assessment and levy of duty in terms of Notification 159/86 dated 1.3.1986 as amended by Notification 99/87 dated 1.3.1987. Subsequently proceedings were instituted against the appellants by seizure of the goods and issue of show cause notice on the ground that the appellants did not discharge their export obligations under the Act and the proceedings culminated in the respective impugned orders of the Collector of Customs, Madras, appealed against.
4. Shri Habibulla Badsha, the learned Senior Counsel appearing for the ap-pellants'M/s. Nathan Jewellers (Appeal No. C/277/93) and M/s. Renka Links (Appeal No. 278/93) made the following submissions: Three machines were imported on 13.1.988, 3.10.1988 and 28.12.1986 and were cleared by the Customs authorities after due assessment and on payment of duty. Subsequently a show cause notice was issued on 25.9.1992 alleging that the appellants availed the concessional benefit in regard to the import of the machines under the Advance Licence Scheme and did not discharge the export obligations, rendering the goods liable for confiscation under Section 111(o) of the Act and show cause notice was on grounds of non-levy by invoking the proviso to Section 28(1) of the Act. In the absence of any specific condition in the notification in question with reference to the time limit within which the importer should discharge the export obligation and in the absence of any clause prohibiting local sales and permitting only export of the goods manufactured out the machineries imported and in the absence of any time limit for discharging the export obligations the goods are not liable for confiscation under Section 111(o) of the Act. In any event even assuming for the purpose of argument that the proceedings in terms of Section 28(1) of the Act are permissible on grounds of short levy, on the admitted facts the demand is clearly barred by limitation since show cause notice was issued after expiry of the period specified under Section 28 of the Act. When goods were imported and cleared after due assessment and when the appellant did not suppress any fact. The mere fact of non-discharge of certain export obligations, assuming the same to be true, perse would not attract any suppression of facts for invoking the longer period of limitation under Section 28 of the Act.
Even the end-use bonds taken from the appellant have been cancelled.
5. In respect of appellant Renka Links, the machines imported were in a state of repair right from the beginning and they were sent, as per evidence on record, for repair to Bombay and it is not the case of the Department that the appellant effected any local sales. Therefore, in such a situation the question of confiscating the goods under Section 111(o) would not arise, in the absence of any time limit prescribed in the notification and more so the question of invoking the longer period of limitation certainly will not arise. In respect of an identical situation, involving identical imports and identical notification and identical charge as it were, Collector of Customs, Bombay in order No.CAO/No. 11-92 CAC, S/10-21/DRI/BZU/92 SIB DRI/BZU/109/14/91 dated 3rd August, 1992 has held that local sales are permissible and in the absence of total prohibition in local sales in the notification it may be "draconian to confiscate the machines and impose a penalty or demand differential duty." This order has become final without being appealed against. The Department cannot take a discriminatory attitude in respect of similarly placed importers in applying the benefit of the exemption notification. The ratio of the Supreme Court in the case of The State of Haryana v. Dalmia Dadri Cement Ltd., reported in ECR C Cus 1337 S.C. : 1988 (14) ECR 292 (SC), was also relied upon in support of the plea that the exemption cannot be denied if some part of the goods is not actually used. The earned Counsel further urged that whenever an exemption notification specified any condition subject to which the exemption was available express wordings in regard to the same were used and produced before us general exemption No. 15 (Notification No.147-Cus, dated 29.6.1970) General Exemption No. 15A (Notification No.10/90 Cus dt. 1.2.1990) General Exemption No. 23 and 24 etc.
6. Shri Jagadeesan, the earned Counsel appearing for the appellants M/s. Radha Jewellery in Appeal No. C/296/93 submitted that the import took place on 25.4.1987 and in pursuance of an irrevocable Letter of Credit, opened as early as on 31.1.1987, and the goods were duly assessed by the authorities as per law and in terms of notification 159/86 dated 1.3.1986 as evidenced by the assessment order in the Bill of Entry, and no undertaking was taken from the appellant that the appellant would not sell goods manufactured out of the machines locally. The amendment to Notification 159/86 came into operation only on 1.3.1987 under notification 99/87 and there is nothing in the wording of the notification that the same was retrospective in its operation even with reference to goods cleared by the authorities on proper assessment under notification 159/86 as it stood. When the goods were cleared after due assessment on 11.5.1987 when all facts have been clearly set out in the Bill of Entry, the question of suppression would not arise and therefore, the show cause notice dated 5.5.1992 is clearly barred by limitation.
7. The learned SDR adopted the reasoning in the impugned order and mainly contended that suppression can be presumed when the appellants did not discharge their export obligations, and the goods would -become liable for confiscation under Section 111(o) of the Act.
8. We have considered the submissions made before us. On going through the entire records and hearing the submissions made on behalf of the appellants extensively by the Counsels and the learned SDR, we are of the view that the issue could be disposed of on grounds of limitation on the admitted facts of the case.
9. Let us first take appeal No. C/277/93 in regard to appellant M/s.
Nathan Jewellers. On 17.1.1991, the appellants admittedly addressed a letter to the Assistant Collector of Customs, Madras which letter also contains the seal of the Department which reads as under: With reference to your letter dated 9.1.1991 we hereby submit the statements of manufacture/export for the calender years 1988, 1989 and 1990 for your kind perusal.
In addition to this we would like to mention here that we had cleared the above-said machinery after payment of customs duty on 19.1.1988 and the machinery was properly installed in the month of August, 1988. The machinery was kept idle due to non-availability of experts to operate the same and foreign orders for manufacture of ornaments. Only after April 1989 the machine started its full function and manufacture.
We exported two consignments to Dubai during 1989. Apart from this we have also fulfilled the local orders.
We also made seven exports to foreign country through M/s. Alpha Exports, Bangalore during 1990.
Now we ourselves canvassed orders from foreign country, UAE for an amount of Rs. 40,00,000 and received Rs. 1,97,141 as advance (Xerox copy of D.D. enclosed). The manufacture of ornaments are under progress. We hope that we will reach our target in the current year 1991.
A perusal of this letter would clearly indicate that the appellant brought to the notice of the Department about the import and clearance of the machineries on payment of duty on 19,1.1988 and the machinery was idle due to non-availability of export orders and only after 1989 the machinery stated its full function and apart from export of two Consignments to Dubai the appellant also fulfilled local orders. Even though the Department received this letter, if in the opinion of the Department that there was any violation of the post importation condition, rendering the goods liable for confiscation under Section 111(o) of the Act, entitling the Department to initiate proceedings for short levy in terms of Section 28 of the Act, the proceedings should have been taken within six months from the date on which the Department received the communication. The show cause notice was issued only on 25.9.1992. In the entire case records there is absolutely nothing to indicate or suggest that the appellant was guilty of any suppression of any facts. The show cause notice issued is also, therefore, clearly barred by limitation under Section 28 of the Act on the admitted evidence.
10. So far as appeal No. C/278/93 relating to appellant M/s. Renka Links is concerned, it is not the case of the Department that the appellant effected any local sales. It is a consistent case of the appellant that since import the machineries developed repair and were sent to Bombay for effecting repairs. In such a situation we are at loss to understand as to how and under which provision of law one.
could allege suppression against the appellant and more so invoke the longer period of limitation and apply Section 111(o) of the Customs Act, 1962. Therefore, the demand here also is clearly barred by limitation on the admitted facts of the case.
11. So far as appeal No. C/296/93 of appellant M/s. Radha Jewellers is concerned, admittedly the appellant had opened an irrevocable Letter of Credit on 31.1.1987 in pursuance of Notification 159/86 which was in force at that time and which did not stipulate any end-use condition.
End-use bond was also not taken from the appellant. There was absolutely no suppression on the part of the appellant since all facts are clearly set out in the Bill of Entry filed for clearance of the goods imported, which was also duly assessed by the authorities in terms of Notification 159/86 dated 1.3.1986. The subsequent notification is operative only prospectively and not retrospectively.
There is no prohibition in the notification in regard to local sales, nor there is any time limit in the notification for discharging export obligation. In the absence of end-use bond, when the appellant has not suppressed any fact, the question of instituting proceedings under Section 111(o) of the Act will not arise and likewise the demand for short levy by invoking longer period of limitation under Section 28 is also not tenable. The ratio of the ruling of the Supreme Court in the case of Mangalore Chemicals & Fertilisers Ltd. v. Deputy Commissioner, reported in 1993 (49) ECR 23 (SC), relied upon by the earned Counsel can also be relied upon in support of the plea of the earned Counsel against the retrospective operation of the subsequent notification cited supra.
12. As we have already stated, in respect of identical issue, the Collector of Customs, Bombay, has taken a view in favour of the importers, who were similarly placed as those of the appellants, and the Department has not filed any appeal against the same. Therefore, on the simple ground of limitation, in the admitted facts and circumstances of these cases we are inclined to think that the impugned orders are not sustainable and in this view of the matter we set aside the impugned orders and allow the appeals.
13. Per Shri V.P.Gulati.--I have perused the order recorded by my learned Brother. While I agree with the conclusions that action taken against the appellants under Section 111(o) of the Customs Act, 1962 and the duty demanded under Section 28(1) of the Customs Act invoking the longer period of limitation for reason of suppression are not maintainable in law, I am recording a separate order giving my reasons therefor.
14. I observe the importation in all the three cases was made under OGC and clearance allowed after extending the benefit of Notification 159/86 dated 1.3.1986 as amended by Notification 99/87 dated 1.3.1987.
The proceedings have been initiated against the appellants for violation of the conditions of this Notification. For convenience of reference the operative portion of the Notification is reproduced below: In exercise of the powers conferred by Sub-section (1) of Section 25 of the Customs Act. 1962 (52 of 1962), and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 44/84-Customs, dated the 1st March, 1984 the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in column (2) of the Table hereto annexed and falling within Chapters 82 or 84 or 85 or 90 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and designed for use in the manufacture of gem and jewellery by the registered exporters of gem and jewellery and co-operative societies of goldsmiths and artisans, when imported into India, from-- (a) so much of that portion of the duty of customs leviable thereon, which is specified in the said First Schedule as is in excess of the amount calculated at the rate of twenty five per cent ad valorem; and (b) the whole of the additional duty leviable thereon under Section 3 of the said Customs Tariff Act, 1975.
____________________________________________________________________ SI. No. Description of goods ____________________________________________________________________ (1) (2) _____________________________________________________________________ 1 ............................
to 74 ...........................
______________________________________________________________________ The amending Notification 99/87, among the other amendments it made in the above Notification, also provided for an undertaking to be given by the importer as set out below: Provided that the importer furnishes an undertaking to the effect that the said imported goods shall be used for the purpose specified above and in the event of his failure to comply with the aforesaid conditions, he shall be liable to pay an amount equal to the difference between the duty leviable on the said imported goods but for the exemption contained herein and that already paid at the time of importation.
The allegation against the appellants is that they had used the machines for manufacture of jewellery for local sales. The allegation against appellant M/s. Nathan Jewellers is that they had used the machine both for the manufacture of gold jewellery for export as also for local sales and in respect of the other two appellants is that they had not used the machines for the manufacture of jewellery for export.
15. The learned Sr. Advocate for appellants M/s. Nathan Jewellers (A.No. C/277/93) and M/s. Renka Links (A.No. C/278/93) has urged as under: Three machines were imported on 13.1.1988, 3.10.1988 and 28.12.1988 and were cleared by the Customs authorities after due assessment and on payment of duty. Subsequently a show cause notice was issued on 25.9.1992 alleging that the appellants availed the concessional benefit in regard to the import of the machines under the Advance Licence Scheme and did not discharge the export obligations, rendering the goods liable for confiscation under Section 111(o) of the Act and show cause notice was on grounds of non-levy by invoking the proviso to Section 28(1) of the Act. In the absence of any specific condition in the notification in question with reference to the time limit within which the importer should discharge the export obligation and in the absence of any clause prohibiting local sales and permitting only export of the goods manufactured out of the machineries imported and in the absence of any time limit for discharging the export obligations the goods are not liable for confiscation under Section 111(o) of the Act. In any event even assuming for the purpose of argument that the proceedings in terms of Section 28(1) of the, Act are permissible on ground's of short levy, on the admitted facts the demand is clearly barred by limitation since show cause notice was issued after expiry of the period specified under Section 28 of the Act. When goods were imported and cleared after due assessment and when the appellant did not suppress any fact, the mere fact of non-discharge of certain export obligations, assuming the same to be true, per se would not attract any suppression of facts for invoking the longer period of limitation under Section 28 of the. Act. Even the end-use bonds taken from the appellants have been cancelled.
In respect of appellant Renka Links, the machines imported were in a state of repair right from the beginning and they were sent, as per evidence on record, for repair to Bombay and it is not the case of the Department that the appellant effected any local sales. Therefore, in such a situation the question of confiscating the goods under Section 111(o) would not arise, in the absence of any time limit prescribed in the notification and more so the question of invoking the longer period of limitation certainly will not arise. In respect of an identical situation, involving identical imports and identical notification and identical charge as it were, Collector of Customs, Bombay, in order No.CAO/No. 11-92 CAC, S/10-21/DRI/BZU/92 SIB DRI/BZU/109/14/91 dated 3rd August, 1992 has held that local sales are permissible and in the absence of total prohibition in local sales in the notification it may be "draconian to confiscate the machines and impose a penalty or demand differential duty". This order has become final without being appealed against. The Department cannot take a discriminatory attitude in respect of similarly placed importers in applying the benefit of the exemption notification. The ratio of the Supreme Court in the case of the State of Haryana v. Dalmia Dadri Cement Ltd., reported in ECR C Cus 1337 S.C. : 1988 (14) ECR 292 (SC), was also relied upon in support of the plea that the exemption cannot be denied if some part of the goods is not actually used. The earned Counsel further urged that whenever an exemption notification specified any condition subject to which the exemption was available expresss wordings in regard to the same were used and produced before us general exemption No. 15 (Notification No.147-Cus. dated 29.6.1970) General Exemption No. 15A (Notification No.10/90-Cus dated 1.2.1990) General Exemption No. 23 and 24. etc.
16. The learned Advocate for appellant M/s. Radha Jewellery (A.No.C/296/93) has submitted as under: The import took place on 25.4.1987 and in pursuance of an irrevocable Letter of Credit opened as early as on 31.1.1987 and the goods were duly assessed by the authorities as per law and in terms of Notification 159/86 dated 1.3.1986 as evidenced by the assessment order in the Bill of Entry and no undertaking was taken from the appellant that the appellant would not sell goods manufactured out of the machines locally. The amendment to Notification 159/86 came into operation only on 1.3.1987 under Notification 88/87 and there is nothing in the wording of the notification that the same was retrospective in its operation even with reference to goods cleared by the authorities on proper assessment under Notification 159/86 as it stood. When the goods were cleared after due assessment on 11.5.1987 when all facts have been clearly set out in the Bill of Entry, the question of suppression would not arise and therefore, the show cause notice dated 5.5.1992 is clearly barred by limitation.
17. The questions to be examined in the context of the notification and the submissions made are as under: (1) Whether the demand under Section 28(1) could be made holding that there has been suppression on the part of the appellants.
(2) Whether action under Section 111(o) could be taken against the appellants for violation of the conditions of the notification.
I observe that so far as the Notification 159/86, as amendment by Notification 99/87, is concerned, it envisages an exempted rate for assessment in respect of the specified items of machinery which are designed for use in the manufacture of gem and jewellery and imported by the registered exporters of gem and jewellery and co-operative societies of goldsmiths and artisans. There is no dispute that the importation of the machines of the type mentioned in the notification and by the persons specified therein has been made. The only dispute is with reference to the actual use of the machines in violation of the undertaking prescribed in the notification. Under the notification the machinery is required to be used in the processing and manufacture of gem and jewellery for the purpose of export. I observe that the show cause notice has been issued holding that the appellants had not conformed to the conditions of the notification and for that reason, therefore, there has been a suppression on the part of the appellants and, therefore, the duty has been demanded invoking the longer period of limitation under Section 28(1) of the Customs Act. The first question to be examined is whether the provisions of Section 28(1) and the proviso thereunder providing a longer period of limitation could be invoked in the context of the clearance of the goods under the said notification. I observe at the time when the goods were cleared the appellants were qualified for the import of the goods by virtue of their being registered exporters of gem and jewellery. Nothing has been brought on record nor there is any allegation that at the time when the appellants cleared the goods they had any mala fide intention of not manufacturing the jewellery for export on the machines imported by them or suppressed any fact which was in their knowledge with regard to their future conduct as to their manufacture of jewellery and the sale thereof. The stipulation regarding the use of the machinery for the manufacture of gem and jewellery and export thereof was a post-importation activity and in the absence of any allegation or evidence that the appellants at the time of clearance of the goods had the intention to violate the conditions of the notification subsequent to their clearance. The allegation of suppression of any fact in regard to the clearance of the goods, therefore, does not arise. In this context it is pertinent to examine the scope of Section 28(1). This Section for convenience of reference is reproduced below: 28. Notice for payment of duties not levied, short-levied or erroneously refunded.-- (1) When any duty has not been levied or has been short-levied or erroneously refunded, the proper officer may,-- (a) in the case of any import made by any individual for his personal use or by Government or by any educational, research or charitable institution or hospital, within one year; (b) in any other case, within six months, from the relevant date, serve notice on the person chargeable with the duty which has not been levied or which has been so short-levied or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: Provided that where any duty has not been levied or has been short-levied or has been erroneously refunded by reason of collusion or any wilful misstate -ment or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, the provisions of this sub-section shall have effect as if for the words "proper officer", the words "Collector of Customs'' and for the words "one year" and "six months" the words "five years" were substituted.
A reading of this section shows that so far as the conduct of the appellants at the time of clearance of the goods is concerned, nothing can be read from the order of the learned lower authority or from the allegation made in the show cause notices or from the evidence on record to show that the appellants had by reason of collusion or any wilful misstatement or suppression of fact had tried to defraud the Revenue. The next question to be seen is whether after the clearance of the goods the appellants had suppressed or misstated any facts in regard to the goods cleared by them. It is observed that so far as Notification 159/86 as amended by Notification 99/87 is concerned, all that it envisages is that the machinery shall be used for the purpose of manufacture of the jewellery for export on the machines imported at a concessional rate under the said notification and for fulfilment of this condition an undertaking has to be given by the importer as extracted above. In terms of this undertaking the importer undertakes to use the said machinery for the specified purposes of manufacture of jewellery for export and in the event of its failure to comply with this condition he is liable to pay the amount equal to the difference between the duty leviable on the said imported goods but for the exemption given in terms of the Notification 159/87 and that already paid at the time of importation. There is no provision in the notification nor any procedure has been prescribed for any periodic statement in regard to the use of the machinery, the goods manufactured and the disposal of the goods. In the absence of any periodic statement, therefore, it cannot be said that the appellants had suppressed any fact in regard to the goods in question with reference to the notification 159/87. Viewed from any angle no case for suppression can be said to have been made out under Section 28 (1) against the appellants. I, therefore, hold that the duty could not have been demanded from the appellants under Section 28(1) invoking the extended period of limitation. The next question that arises, therefore, is whether the Revenue authorities are helpless when a person has cleared the goods and does not comply with the conditions of the notification. I observe where any post-importation conditions have been specified and the Government revenues are at stake, necessary bond or security will have to be taken to ensure that the requirements of notification are violated on the pain of punishment in terms of the bond. In the notification before us an undertaking has been provided for paying the differential duty in case the importer does not utilise the machinery for the purpose specified in the notification viz. for the manufacture of gem and jewellery for the purpose of export.
Therefore, the only avenue that is available is for recovery in terms of this undertaking of the difference of duty. The present proceedings as drawn cannot be taken to have been drawn in terms of this undertaking. As it is we find in the case of appellants M/s. Nathan Jewellers, the undertaking taken has also been cancelled and in the case of appellants M/s. Radha Jewellery no undertaking at all was taken from the appellants. In case the goods were allowed clearance at the exempted rate without taking the undertaking from the appellant, the Revenue authorities are themselves to be blamed and the recovery of differential duty could be made in the circumstances only under Section 28(1) within a period of six months and not by invoking the extended time of five years. As mentioned earlier, there cannot be any suppression of fact by the appellants at the time of clearance of the goods. It is open to the Revenue now to go ahead to take an undertaking if it is permissible under law and then seek the compliance with the conditions of the undertaking given later. I find in the case of appellants M/s. Renka Links, the appellants could not make their machinery operational and the plea is they had sent the same for repairs and they could not manufacture any jewellery on the same for export purposes. Here again it has to be seen that as such no action can be taken under Section 28(1) invoking the longer period of limitation and that unless it can be proved that the appellants have misutilised the machinery, the action that can be taken is only on the basis of the undertaking given by the appellants and for that a separate necessary proceedings will have to be drawn.
18. 1 like to observe that so far as the action under Section 111(o) is concerned, no doubt it provides for penal action for confiscation of the goods where the exempted goods have been allowed clearance at exempted rates subject to any condition and which condition has not been observed. The question that arises is whether in the context of the notification before us such an action is warranted. I observe that in Notification 159/86 read with Notification 99/87 the penalty far non-fulfilment of the condition of the notification is built into the notification itself and that penalty is for payment of differential duty in case the conditions of the notification are not fulfiled. In such a situation, therefore, where the notification itself provides for the quantum of punishment, the question of proceeding to go beyond that by invoking Section 111(o) simultaneously in my view, is not warranted.
Section 111(o) can be brought in only as an alternative or only where the notification itself does not incorporate any provision for payment in case of failure to comply with the terms and conditions of the notification.
19. The next question that we have to consider is whether in terms of the undertaking given recovery can be made for the differential duty even where there has been export of the part of the jewellery manufactured on the machines and part is locally sold or where the manufacturer for reason of breakdown of machinery has not been able to produce any jewellery. I observe that the exemption notification as such does not provide for very rigid conditions and it appears that when it was first issued and before the amendment by notification 99/87, the machinery was allowed to be imported on payment of exempted rate of duty and there was no stipulation even for export built therein so long as the import was by the registered exporter of gem and jewellery. It appears that a liberal provision had been made to provide for necessary infrastructure in the country for the manufacture of jewellery to encourage exports. Later on, however, the notification incorporated the stipulation that the jewellery manufactured should be for export purposes but still it did not provide for any execution of a bond or a bank guarantee for fulfilment of the post-importation conditions. It is pertinent to note that the notification did not provide for the quantum of the jewellery to be exported or the value thereof or the period within which certain quantum of jewellery of certain value was required to be exported. All that is stated therein is that the jewellery in question manufactured should be exported.
There could be cases where a person may not have any orders for export and may not be able to even use the machinery. In that case they may lie idle for a long time and there is nothing that the authorities can do about it. Further, it cannot also be read into the notification that the appellants are totally barred from selling even a small portion of the jewellery manufactured to the local market. In all the Schemes framed in the case of Export Oriented Units, Manufacture in the Free Trade Zones and also in the case of imports under Advance licences, some component of goods manufactured is allowed to be sold in the internal market. It, therefore, cannot be the intention of the Government to make the import by the registered exporters subject to more rigorous conditions than in those cases more so when the notification issued, when read, clearly show that these have been worded, as mentioned above, providing for a liberalised regime.
20. The learned Senior Advocate has cited before us the decision of the Collector of Customs, Bombay, and which decision has not been shown to have been appealed against. In this order in a case where similar contravention was indicated and the appellants had not exported the jewellery manufactured on the machines, the learned Collector has dropped the action and has entered the following findings in this regard: The condition which is claimed to have been breached in this case is that imported chain manufacturing machine was used in the processing and manufacturing of Gem & Jewellery not only for export production but also for domestic production. Here also I am of the view that there is no clear cut evidence cited to show how much of the jewellery fabricated out of the machine was exported and how much of it was diverted to domestic tariff area. I doubt whether the importer has maintained such clear cut records to verify the fact.
Investigating agency also seems to have failed to unearth clear cut evidence to establish this charge. In view of the fact that party has exported substantial quantum of gold jewellery and their quantum of export has been increasing during the last three years, I am of the view that the purpose behind extending the concessional levy for import of chain making machines has been satisfied and therefore benefit of doubt has to be extended to the party as otherwise we shall be penalising genuine exporters for minor breach of the provisions. Further, it is nowhere stated in the related ITC Policy book nor in the Customs exemption notification that machinery shall not be used at all for fabrication gold jewellery for the domestic tariff area or for job work done other merchant exporters. In the absence of such a total prohibition, it may be draconian to confiscate the machines and impose a penalty or demand a differential duty.
Therefore, any action to be taken has to be in the total scheme of the export promotion. When nobody is allowed import of machinery, what the country is expending is the precious foreign exchange and any exemption given is only in the hope that the benefit given will have a multiplied effect in the form of the export earnings. Therefore, before any action is taken the fact to be borne in mind is what is the foreign exchange expended on the goods imported, what is the benefit of the exemption given and how much of foreign exchange can be expected to be earned from the benefits given to the importers. Therefore, any obligation for exporting the goods has to be related to a basis to be laid in the above context. In a case like this the Revenue, should, therefore, first lay down the basis, asking for the purpose and the quantum of export expected from importers. This can be (1) by mark up on the foreign exchange spent as in the case of goods allowed import against Advance Licences for export purposes and (2) in case of machineries over the length of the life of the machinery the quantum of the export of goods that is required to take place or by providing an annual export based on the value of the machinery imported for a period of 5 to 10 years. In case where an import has been allowed based on an undertaking, a realistic approach has to be made to ensure that while the purpose of the notification are carried out, there are no impossible conditions placed on the importers also. The Revenue authorities, therefore, should work out the basis for effectuating the purposes of the notification before they initiate any action in terms of the said undertaking given by the appellants in the context of this notification or under Section 111 (o) of Cus Act. It is not possible to agree that the appellants cannot at all sell even a portion of the goods manufactured on the machinery in the local market and also at the same time it is also not possible to agree that without providing for any stipulation as to the quantum of exports to be made within a particular span of time and certain specified value, the importer can be hauled up for action. There can be cases where for 6 months or one year a person may not be able to get an export order or may not be able to work the machinery and in such a situation any action under the Customs Act would not be justifiable.
21. In the above view of the matter, therefore, the appeals of the appellants are allowed.