Shree Tirumala Udyog Vs. Collector of Customs - Court Judgment

Excerpt:
1. these appeals relate to the importation of "plastic scrap" viz.acrylic plastic scrap and photoframes, polypropylene and ldpe scrap which were imported under the advance licence scheme issued to the appellants. under the advance licence issued, the appellants were required to export garbage plastic bags made out of plastic scraps (other than pvc). the description of the goods as given in the licence allowed the import of remnant plastic scrap material used for the manufacture of garbage plastic bags which were to be exported other than pvc. the import of the material made comprised of predominant acrylic scrap described as above. the importation was made under 59 bills of entries during the period 9-5-1994 to 22-4-1995. the export of the garbage bags took place under the cover of 10.....

Judgment:
1. These appeals relate to the importation of "Plastic scrap" viz.

Acrylic plastic scrap and photoframes, Polypropylene and LDPE scrap which were imported under the Advance Licence Scheme issued to the appellants. Under the Advance Licence issued, the appellants were required to export Garbage Plastic Bags made out of Plastic scraps (other than PVC). The description of the goods as given in the licence allowed the import of remnant plastic scrap material used for the manufacture of garbage plastic bags which were to be exported other than PVC. The import of the material made comprised of predominant acrylic scrap described as above. The importation was made under 59 Bills of Entries during the period 9-5-1994 to 22-4-1995. The export of the garbage bags took place under the cover of 10 shipping bills between 28-3-1994 to 16-5-1994 with the one consignment having been exported to Singapore and the remaining to U.A.E. The product quantity exported was 22,000 Kgs and valued at Rs. 1,68,85,800/-. The foreign exchange in question came to be repatriated between 23-5-1994 to 6-3-1995. On enquiries, the authorities felt that the plastic garbage bags exported had been grossly over-valued while the imported materials i.e. LDPE and polypropylene and acrylic scraps had been undervalued.

The Consignment which arrived during May, 1994 therefore were taken up for examination and the material was found to be acrylic sheets, acrylic plastic sheets and 53,000 pieces of acrylic photoframes and 28,000 MT acrylic scrap. Some acrylic scrap thereof on search of the appellants factory premises was also seized. Along with this scrap plastic garbage bags which were found in the factory were also seized.

After enquiry, the charge framed against appellant were that the plastic garbage bags as exported did not have any component of acrylic plastic material used therefore and the value of the same was also shown to be very high and the evidences gathered from U.A.E. by the Governmental agencies indicated that as against the price of US $ 0.01 (Rs. 0.32 per piece) declared by the importer at that end, the average price of the bag as declared by the exporters (appellants) worked out to Rs. 8.44 per bag. It was alleged that the appellants in view of the nature of the bags exported i.e. without the use of the acrylic material could not have imported acrylic plastic scrap against the licence issued to them and the same therefore could not have been cleared without payment of duty. By reason of over-valuation of exports it was also alleged that their entitlement for duty free clearance under the DEEC scheme would be restricted based on actual value of the goods exported in terms of DEEC scheme. The goods imported were also alleged to have been under-valued taking into consideration the contemporaneous imports of the similar goods as made at different ports. The Acrylic plastic offcuts which had been invoiced US $ 150 per MT were found to have been invoiced at US $ 450 per MT in the case of contemporaneous imports and these scrap materials which were invoiced at US $ 150 per MT were invoiced at US $ 240 per MT in the case of contemporaneous imports. Likewise, the value of the photoframe taken was found to be low. The appellants were therefore alleged to have misutilised the concession of duty free importation under the advance licence issued under the DEEC scheme in terms of Notification 203/92 and duty demanded was therefore in terms of proviso to Section 28(i) of Customs Act, 1962 in respect of importations which had already been made.

2. The learned lower authority in the impugned order demanded the duty in respect of past clearances of plastic goods including those which had been seized for reason of under-valuation and also the violation of the licensing condition and for violation of conditions of Notification No. 203/92. He revised the value of the scrap in view of importation to US $ 240 per MT and for off cuts US $ 450 per MT. He adopted the same value of US $ 450 per MT for the photoframe also.

3. The learned Advocate for the appellants summarising the points which were made in the Show Cause Notice and which had been held against the appellants stated that the appellants are required to answer the charge in respect of the following :- (a) The exporters have exported plastic garbage bags using only LDPE materials and have not used any Acrylic plastic scrap or PP scrap in the manufacture of such plastic garbage bags exported by them under the aforesaid DEEC advance licence. Acrylic and PP scrap are not allowed as per the Import and Export Policy, 1992-97 read with Customs Notification No. 203/92, dated 19-5-1992 as amended.

(b) The exporters have disposed of the goods even before completion of the export obligation, as admitted by them, and before the realisation of the export proceeds, as such, the exporters have violated Condition No. (vi) of the Customs Notification No. 203/92, dated 19-5-1992 as amended and therefore, the exporters are not eligible for DEEC benefits and the goods are liable for confiscation under the provisions of Section 111(o) of the Customs Act, 1962.

(c) The exporters are also liable to pay duty on the past clearances which have been already cleared duty free, by suppression of facts and materials, under the provisions of Section 28 of the Customs Act, 1962.

(d) The exporters have over invoiced the exported plastic garbage bags with a view to avail more import value entitlement and thereby violated the provisions of Section 18 of the Foreign Exchange Regulation Act, 1973 read with Section 11 of the Customs Act, 1962 and therefore, the endorsement in DEEC parts I and II are to be revised to the extent of entitlement.

(e) The exporters have mis-declared the value and other material particulars, in respect of the nine Bills of Entry, covering the consignments under seizure and therefore the goods are liable to confiscation under the provisions of Section 111(d), 111(m) and 111(o) of the Customs Act, 1962.

(f) The value of the Acrylic scrap already cleared and the acrylic scrap, the acrylic off cuts/strips and the acrylic photoframes under seizure, is to be arrived at US $ 240 per MT, US $ 450 per MT and Rs. 10/- per piece, respectively.

(g) At the exporters appear to have violated the conditions of the DEEC scheme and the Customs Notification No. 203/92, dated 19-5-1992 as amended, they are required to pay the duty on the raw-materials already cleared and which are under seizure, as per the duty work sheet enclosed to the SCN, which comes to Rs. 1,05,77,375/-.

(h) The exporters are also liable to a penalty under the provisions of Section 112(a)(i)(ii) of the Customs Act, 1962, in view of the various violations committed and therefore rendering the goods liable to confiscation under the provisions of Section 111(d), 111(m) and 111(o) of the Customs Act, 1962.

4. The learned Advocate for the appellants at the outset pointed out that the charge of the department regarding the importation of acrylic scrap was based on Para 27(ii) of the Hand Book of Procedure of Import & Export Policy 1992-97 (Page 11 of Hand Book of Procedures corrected up to 31-3-1994). He has pleaded in terms of the relevant import policy the plastic scrap is not allowed to import except against a licence. He has pleaded that the appellants had been issued an advance licence under the DEEC scheme in terms of Import & Export Policy for the period 1992-97 and in this connection, he referred us to Para 47.7 of the Policy. He has pleaded that the appellants could import the relevant plastic material for the exported item of plastic garbage bags and amongst them plastic item so allowed for import the restriction applicable was in respect of sensitive items enumerated in the policy and these could be imported only up to the limits prescribed. He has pleaded that in terms of Para 47 of Import & Export Policy as above while LDPE and Polypropylene have been shown to be sensitive items, acrylic plastic material was not mentioned as one of the sensitive items. He pointed out in the case of appellants licence even in respect of LDPE and Polypropylene no limits as such had been prescribed. He has pleaded that in terms of Para 110 of the Hand Book of Procedure, flexibility has been provided for importation of any one of the items allowed for import except for the sensitive items which had been mentioned in the policy. He has pleaded that the Circular No. 8/94, dated 20-7-1994 applicable to advance licences and also PL Circular No.63/95 clearly provided for flexibility to import anyone of the raw materials specified in the import licences, subject to the condition regarding the sensitive items. He has pleaded once the licensing policy and also ALC licence flexibility was allowed, customs authorities could not impose restrictions on their own as to the quantum of the acrylic scrap which could be imported against the exportation of the plastic garbage bags. In this connection, he referred us to the decision of the Tribunal in the case of Overseas Cycle Co. v. CC reported in 1992 (58) E.L.T. 248. He referred us to Paras 16 and 18 of this judgment and pointed out that the Tribunal while coming to its decision about the role of the licensing authorities relied upon the Hon'ble Supreme Court decision reported in AIR 1971 SC 1558 and also 1983 (13) E.L.T. 1456 in the case of Union of India v. Tarachand Gupta. He has pleaded that the ratio in this connection is laid down in Para 25 of the decision of the Tribunal which is reproduced below for convenience of records :- "In view of the above said decision of the Supreme Court it is clear that what the Collector has to examine is as to whether the imported goods are covered by the licence and he will be going beyond his jurisdiction in deciding whether these materials are capable of manufacturing the bicycle parts which the appellants have already exported. The learned Barrister, therefore, rightly contended that determination by the Collector of this question is not under the statute and therefore does not constitute a decision under the provisions of the Customs Act and hence it is in excess of his jurisdiction." He has pleaded that the appellants in terms of DEEC scheme had discharged their export obligation and the licensing authorities also had accepted the realisation of the export proceeds to the tune of Rs. 1,68,85,800/- and the endorsement to this effect was also issued by the Canara Bank on 22-5-1995 and therefore they complied with all the requirements for export in terms of DEEC scheme and the certificate for the fulfilment of the export obligation including foreign exchange realisation was issued by the Joint Director of Foreign Trade, Bangalore dated 24-5-1995 and the endorsement to this effect was also made in the DEEC Book. He has pleaded once this certificate had been issued, the authorities could not question the importation of the goods and could not demand the duty for violation of the conditions of Notification No. 203/92. In this connection, he referred us to Paras 27 and 35 of the judgment cited supra which are reproduced below for convenience of records :- '27. It is thus clear that when the high-powered committee granting the licence after applying their mind having issued the licence for the import of the materials, it cannot be said that this import had contravened any of the provisions of the Customs Act, 1962. Reliance was also placed on a decision of the Bombay High Court reported in 1990 (49) E.L.T. 190. At Page 193 the Hon'ble High Court held as follows :- "........In my view, the Customs authorities have no jurisdiction whatsoever to sit in appeal over the certificates which have been granted by the Director General of Technical Development or the Director of Industries, as the case my be, and come to their own conclusion. These certificates are binding and conclusive upon the Customs authorities, save and except, when it can be contended that these certificates have been obtained by fraud or under some mistake. In the present case, it is not the case of the Respondents that the certificates which have been obtained by the Petitioners and copies of which are annexed to the Petition and to the affidavit in rejoinder, have been obtained by fraud or under a mistake." 35. It is thus clear that the Supreme Court held that if a Bench of two Judges wanted to differ from earlier view of a Bench of two Judges, they should have referred the matter to a Larger Bench and in that view their Lordships of the Supreme Court approved the decision in Motilal Sugar Mills case.

Applying the principles laid down in the above said decision that when the licensing authority had issued a licence in favour of the appellants for import of CRCA sheet materials and when the appellants acting on that licence altered his position by manufacturing cycle products and by exporting the same to Bangladesh, then the Customs authorities who are also a wing of the Government would be bound by the promise of the licensing authority by issuing the licence for the import of the above said materials and such a licence would be enforceable in view of the above promise (by the issue of a licence). The Customs authorities, therefore, cannot sit on appeal against the licence granted by a High-Powered Committee which itself is a wing of the Government. Therefore, the principle of promissory estoppel applies to the fact of this case and then on that count the confiscation of the goods in question cannot be in accordance with the law. Point No. (ii) is answered accordingly.' 5. He has pleaded since the appellants had complied with the terms of the DEEC scheme and the conditions of the licence the claim of duty free importation could not be denied and duty could not be demanded in respect of the clearances which had been allowed earlier duty free. He drew our attention to Para 31 of the decision cited above which is also reproduced below :- "31. In dealing with the contravention of Section 111(m) of Customs Act, 1962 the learned Collector had stated that the goods imported are not capable of being used in the manufacture of export products and the manufacturer used in the manufacture of export products, of only CRCA sheets of thickness more than 1.25 mm or MS rounds or ERW tubes and, therefore, they have not made a correct declaration that the goods are replenishment of the materials used in manufacture of resultant products. Under Section 111(m) of the Customs Act any goods which do not correspond in respect of value or in any other part with the entry made under the Customs Act, 1962, shall be liable for confiscation. In this case there is no question of value involved. But the learned Collector held that the appellant had given a declaration stating that the goods covered under the invoices are imported for the purpose of manufacturing goods/replenishment of materials used in the manufacture of goods or execution of the export order. The learned Collector held that the CRCA sheets in question could not have been used for manufacture of the bicycle parts which were exported by the appellants. But in the declaration what is stated is that the goods covered by the invoice are imported for the purpose of manufacturing goods/replenishment of the materials used in the manufacture of goods. It is, therefore, clear that the declaration is to the effect that these goods are replenishment of the materials used in the manufacture of goods which are already exported by the appellants. In this case, since the appellants had already exported the bicycle parts in question their using these materials for manufacture for cycle parts does not arise. They have already fulfilled their obligation by exporting the materials and have already earned foreign exchange to the Government. The whole scheme of the Notification No. 116/88-Cus., dated 30-3-1988 is that the Central Government being satisfied that it is necessary in the public interest to do so exempted these goods against advance licence issued under the Import Control Order which are required to be imported for the manufacture of products or replenishment of materials used in the manufacture of resultant products. The appellants have already fulfilled their condition by exporting the cycle parts by manufacturing it out of the indigenous products and these products which are now sought to be cleared are replenishment of the materials used in the manufacture of goods.

When the appellants aver that they have used similar material as the ones which are imported, for manufacturing the exported products, which are already exported, a contrary finding cannot be reached unless it was proved that the appellants did not manufacture the goods from out of the indigenous materials which are not like the imported goods. In such circumstances, there is no question of coming to the conclusion that the imported goods do not correspond in any material parts with an entry made under the Customs Act.

Therefore, the question of confiscating the same under Section 111(m) does not arise and more particularly when the imported goods are already covered under the licence issued by a competent authority which cannot be questioned by the Customs authorities." 6. He further pleaded that in terms of the licence, relevant plastic materials were allowed import and since the appellants had complied with the requirements of the DEEC scheme and the conditions of licence by exporting the requisite quantum of the garbage bags and which had earned the requisite quantum of foreign exchange and which stood repatriated the appellants could import the acrylic plastic scrap under the description of the goods allowed for importation namely plastic material/plastic scrap. He has pleaded that acrylic scrap is technically recognised as a plastic scrap and since it was not a sensitive item, the same could be imported in terms of flexibility provided in the Import & Export Policy, as pleaded by him earlier under this generic heading. He has pleaded that the Hon'ble Bombay High Court in the case of Bussa Overseas and Properties (Pvt.) Ltd. v. Union of India reported in 1991 (53) E.L.T. 165 has allowed the import of consignments under the generic term "Ethylene". He has pleaded therefore the acrylic plastic scrap even though not mentioned by name in the licence was allowable under licence.

7. Arguing further, the learned Advocate pleaded that the learned lower authority merely on assumptions and presumptions without laying any basis has held that the acrylic plastic bags which are exported are made out of LDPE and no acrylic material as such had been used. He has pleaded that this position was contrary to the facts inasmuch as in respect of one shipping bill samples had been drawn and the Chemical Examiner as could be seen from the Chemical Examiner's report filed in the Paper Book at page 292 (Vol. II) vide report dated 2-6-1995 has clearly stated so in answer to the queries raised in the test memo.

After analysing the material of which the plastic garbage bag had been made he has clearly stated that the said bag is composed of Low Density Polyethylene, the upper portion is made of acrylic strip which is used as support for the bag and it is provided with thin polypropylene yarn.

He has pleaded that another test report of the Chemical Examiner dated 30-5-1995 filed at page 294 of the paper book bearing No. S/9/95 ICD which is in respect of shipping bill Nos. 2630, 2631, 2632, 2633 and 2634 in which the queries were (i) whether it is made of Acrylic Plastic Scrap, (ii) composition of the Bag, i.e. materials used in the manufacture of Bag; and (iii) whether it is made of PP/LDPE scrap. He has pleaded again the Chemical Examiner has given the composition of the bag as also the HDPE Bag is 78.7%, HDPE thread-1%, Acrylic-23.3% when an endorsement sample used. He has pleaded the department never got the samples re-tested and this would clearly go to show that acrylic plastic material was used for the export of the garbage bags.

He has pleaded the learned lower adjudicating authority in his order has relied upon the samples which were drawn from the factory, after the export of these goods, which were found lying in the factory meant for the local market. He has pleaded, in his order, the learned Commissioner has made a mention that the sample was re-tested. He has pleaded the question of any re-testing in respect of the goods which had been tested in terms of the Chemical Examiner's report dated 21-4-1995 would not arise as the sample which had been sent for test had been used up and there was no remnant sample. He further pleaded in any case when Commissioner talks of remnant samples he should have come on record to say from where these remnant samples were obtained. In this connection, he referred us to Para 18(c) of the Commissioner's order which is reproduced for convenience of reference as under :- "18(c) I find that there are two types of samples, one weighing around 11.0 gms. and the other one weighing around 75.0 gms. Both these sample have been tested by the Central Institute of Plastic Engineering & Technology, Mysore and as per the Report No. TS/95-96/60B, dated 26-7-1995, they do not test positive for Acrylic. This was indicated in the show cause notice at Page 39 and Para 28. The exporter claimed that he has put Acrylic strips pressed with 2 holes at the top portion of the plastic garbage bags on either side to save on handles with PP thread which loops through the holes in Acrylic strips. Further, as per the shipping bills, it is found that the average weight of the plastic garbage bags based on the total weight and the quantity declared by the exporter, works out to 11.00 to 11.44 gms. per bag. Therefore, I am inclined to discard the samples weighing around 75 gms. The concerned Customs Appraiser, the Customs Inspector and the agent for the Exporter, had examined the plastic garbage bags mentioned above during the course of investigation and had confirmed that the plastic garbage bag weighing around 11.00 gms could be the probable export sample and not the one weighing around 75.0 gms. Further, they have also clarified that the plastic garbage bags seen by them at the time of export did not contain any handles. Shri Ra-jesh Jain of M/s. Shree Thirumala Udyog, in his statement dated 6-11-1995 had admitted that the average weight of the bags exported was 11.00 gms. and all were of uniform shape and size; that they measured 16' x 24' in size and of 80 micron gauge in thickness. But he claimed that he had put acrylic strip of rectangular shape approx. 4 inches in length and 2 inches in width and thickness ranging from 1.5 to 3 mm. If the weight of this acrylic strip is added to the weight of the plastic garbage bags, then, the weight of the plastic garbage bags will not be certainly 11.00 gms. and it will be much heavier. But the shipping documents and the examination report suggest that there was no discrepancy with regard to the weight and quantity declared in the shipping bills. This has been further corroborated by the statements of the concerned Customs Appraiser dated 6-11-1995, Inspector vide statement dated 6-11-1995 and the Agent vide statement dated 7-11-1995 and the exporter himself. Therefore, the weight of the plastic garbage bags exported must be around 11.00 gms. and this is in conformity with the sample recovered from the factory of the Exporter and tested. The supporting manufacturer, during his statement had admitted that the samples weighing around 11.00 gms. recovered from the factory of the exporter to be representative samples of the plastic garbage bags exported by the exporter. It is argued by the exporter that the plastic garbage bags seized from the factory were manufactured for local market and that reliance need not be placed on the statement of Shri P.V.K. Saikumar, This, I am unable to accept as it is clear after thought considering the circumstances of the case. In this case, the circumstances clearly indicate to the samples recovered from the factory to be the representative samples of the exported plastic garbage bags." 8. His plea is that the learned lower authority has drawn wrong conclusions and on assumption decided that plastic acrylic material would not have been used on the bags. He has pleaded that the Commissioner has discarded the samples which weighed 75 grams which according to the show cause notice as per Para 19 were supposedly drawn at ICD, Customs. He relied upon the result of the test done on the sample drawn from the lot which were lying in the appellant's factory and which were drawn after one year. He has pleaded that reliance has been placed on the Collector to say that these bags are the ones which were exported. He pointed out that Shri Saikumar, employee of the appellants had joined only 6 months back and he could not have had any knowledge about the nature of the bags exported. He has pleaded that the learned lower authority in his findings at Para 18(c) has merely stated that acrylic had been used on the bags the weight would have much higher than 11 grams, the weight which were found average weight of the bags exported taking into consideration the weight of the consignment which was exported and the number of bags exported. He has pleaded that the learned lower authority merely stated that the weight would have been much more by reason of use of the acrylic strip and has come to the conclusion without taking into consideration the size of the strip and its possible weight. He has pleaded therefore the evidence relied upon by the Commissioner was totally on wrong premises.

He has pleaded that he could not discard the result of the Chemical Examiner who has clearly come on record as to the use of the acrylic material and this was in respect of the samples which were drawn from the consignments exported as per the endorsement on the test memo. He has pleaded that the learned lower authority had not taken the appellants into confidence while drawing the samples and had done this exercise on their own. Therefore, in the proper procedure for drawal of sample as prescribed by the department and in respect of which he has filed before us a write-up and the department not having followed this procedure, the results of these test reports could not have been relied upon by the learned lower authority. He has pleaded that in respect of the sample which were sent to the CIPET requirements of Section 144 of the Customs Act were not complied with. He has pleaded that the appellants have taken objections in this regard at Paras 16 and 22 which are reproduced below but the ld. lower authority has not adverted to the same :- "The Noticees would like to point out and wish to emphasize the fact that these three sets of samples were not drawn in their presence either at the time of import or at the time of export of the impugned goods covering the DEEC Book. They would like to further state that, the samples were not drawn in their presence at the time of import of the relevant raw materials or at the time of export of resultant products and the procedure prescribed for the drawal of samples under Section 144 of the Customs Act, 1962 was not followed.

Section 144 clearly stipulates that "the proper officer may, on the entry or clearance of any goods or at any time while such goods are being passed through the customs area, take samples of such goods in the presence of the owner thereof, for examination or testing, or for ascertaining the value thereof, or for any other purposes of this Act". In other words while drawing the samples which were allegedly sent to CIPET the statutory conditions prescribed under Section 144 have not been followed.

22. In the light of the above facts, it is not understood as to how the Test Reports conducted by the Chemical Examiner, Customs House, Madras can be disregarded. It is also submitted that both Test Reports of the Chemical Examiner has stated that "samples destroyed in test" and "sample used up".

9. He has pleaded that the last exportation had been completed on 16-5-1995. He has pleaded a mention has been made that the sample had been drawn which weighed 75 grams and there is nothing to say where the sample came from in the show cause notice as the sample was supposedly drawn at ICD, Bangalore. He has pleaded there is nothing on record of test memo or any other evidence to show that this relates to the appellants consignment. He has pleaded that the learned lower authority no doubt has disregarded this as representative of the appellants goods but this shows as to how the investigation had been done and how the charge had been framed and how in the absence of any reliable evidence as to the bags which had been exported, the learned lower authority had tried to catch on to something to hold against the appellants. He has pleaded that the appellants last export to meet the export obligation were made on 16-5-1994 while the sample had been drawn from the factory when some workers were present in the factory which was drawn on 20-5-1995. He has pleaded that there is detailed procedure prescribed with a view to establish the identity of the sample and also as to in whose custody it should be kept and he referred us to the extract from the book which he himself had authored which is present before us and the procedure which is prescribed for testing the remnant samples. He has pleaded no such prescribed procedure had been followed the test of the samples which were sent to CIPET. In this connection, he was asked to refer to the shipping bill under which the exports had been made to ascertain what happened at the time the exports were made. One of the consignments which was shipped to Singapore under Shipping Bill No.001676 which is filed at Page 131 (Vol. I) of the Paper Book shows the endorsement by the authorities wherein certain bags have been opened for examination and these were found to contain plastic bags of black colour and the stuffing supervised by the authorities. Again in the case of Shipping Bill No. 2727 for export to UAE the goods were examined and 5% of the cargo was opened and these have been, on examination, found to contain garbage plastic bags and the stuffing supervised by the authorities. Same is the position in respect of Shipping Bill No. 2728 and S.B. Nos. 2729 and 2730. His plea is that the appellants have not held back any information and the cargo was examined and answered to the description of the goods as exported. He has therefore pleaded that the learned lower authority was in error having drawn the inference that the plastic bag which have been exported did not have any acrylic material used therefor.

10. He has pleaded no connection of the samples sent to CIPET of the exported goods had been established and mere reliance has been placed on some workers' statement viz. Mr. Saikumar etc. who was not there at the time when exports were made. He had no knowledge about the export of the goods and no details in regard to the same were also elicited.

His plea is that once the goods were examined and the samples were also got tested by the Chemical Examiner, and the test result by him confirms the use of the acrylic material, it should be taken that acrylic plastic material had been used in the exported product and therefore in terms of flexibility provision, the appellants could import without restrictions the acrylic plastic materials in terms of the Import & Export Policy and the licence issued under the DEEC scheme.

11. Arguing on the eligibility to the benefit of Notification 203/92, the learned Advocate pleaded that the violation held against the appellants is of condition (vi) of the said notification. This condition (vi) is reproduced below for convenience of reference (sic) :- 12. He has pleaded subject to the satisfaction about the value of the goods exported, the appellants could not be denied the benefit of this notification in terms of this condition above. He has pleaded that the appellants had imported the acrylic scrap partly before the export of the goods as per the licence issued under the DEEC scheme and they had completed the export during the period from 18-3-1994 to 16-5-1994. The Acrylic scrap, he pleaded, along with the LDPE and polypropylene scrap was imported by them during the period from 9-5-1994 to 22-9-1995. He has pleaded that in terms of condition (vi) above, the appellants could have imported the acrylic scrap subject to the export as stipulated in the licence. He has pleaded that they had not sold any goods prior to 16-5-1994 when the export obligation for export of the goods was completed. In any case, he pleaded, no evidence has been cited regarding the sale of the goods in question. He has pleaded that while a statement had been recorded from the Power-of-Attorney holder regarding the sale of the goods having been made before fulfilling the export obligation no facts in that regards were elicited from him. On going by the actual imports made, on a query from the bench, he clarified that about 44.99 MT of the acrylic scrap had been imported prior to 16-5-1994, the date on which the last consignment, with regard to export obligation, was exported. He further pointed out that so far as the realisation of the sale proceeds are concerned, the same in terms of conditions (vi) should not be read simultaneously with the obligation for full export. His plea is that if the exports are made it takes some time for the sale proceeds to be realised depending on the terms of export i.e. whether the export has been made against the L/C or on credit basis or based on the time allowed for credit which could be anything up to 120 days or so. He has pleaded while the imported goods in terms of condition (vi) could not be so sold till the full export obligation had been fulfilled, the benefit could not be denied when the appellants ultimately repatriated the full foreign exchange and had in the meantime sold the goods pending receipt of the sale proceeds in foreign exchange.

13. He has pleaded the obligation for export and the realisation of sale proceeds showed in condition (vi) above read separately. His plea is that it could not have been the intention of the framers of the policy under the DEEC scheme to deny the exporters who sold goods pending the receipt of the foreign exchange remittance when they had already made the export in full as required under the DEEC scheme as otherwise, after the export obligation the exporters would be burdened with the load of the imported goods for long periods for reason of non-receipt of the foreign exchange for one reason or the other. He has pleaded that in terms of notification for the purpose of benefit of duty free import the appellants had executed a bond with a Bank Guarantee as prescribed and that would take care of the interest of the Revenue for demand of duty in case the foreign exchange was not ultimately realised and the goods came to be sold. In the present case for the exports made the full foreign exchange was realised by the appellants by 24-5-1995 and necessary certificate in this regard issued by the Joint Director of Foreign Trade, Bangalore and he referred us to page 90 of the Paper book to show that this was so. He also pleaded necessary endorsement in this regard was also made in the DEEC book. At this stage, he pleaded, the licences became transferable and in terms of endorsement made by the Joint Director of Foreign Trade, the respondents could transfer the licence for importation of goods as per the licence issued. Adverting to the charge that the appellants had overvalued the exported goods, he has pleaded that the learned lower authority has taken into consideration the cost of production method.

He held that the cost of production has been reckoned to about Rs. 0.32 when the goods had been sold for over Rs. 8 per export. He has pleaded that the value of the goods in India cannot form basis for arriving at the export price. He has pleaded what has to be satisfied is that the value of the goods to be exported satisfy the criterion of the value at the time and place of exportation. He has pleaded that the department had made enquiries abroad and had relied upon the so-called invoice which was produced to the Dubai customs at the time of clearance of the goods there. He has pleaded that the copy of the documents furnished clearly shows that there was some manipulation by the importer in U.A.E. and the invoice is not the one which was issued by them even though at the bottom in the photocopy the signature appeared to be tallying with that of the authorised signatory of the appellants. He has pleaded that they had raised a plea before the adjudicating authority to get copies of the invoices under which documents were sent through the Canara Bank to verify the position and it has not been done. He has pleaded that the photocopy of the invoice which was produced is a manipulated document and the importer at the other end might have resorted to the use of a manipulated document to save duty in U.A.E. He has pleaded that the enquiries made by the department through their officers with the importers at the UAE clearly show that he has received the goods exported and thereafter paid the full export value for the same. In this connection, he referred us to the documents which have been filed at Page Nos. 372 and 375 in Volume II of the paper book wherein the Indian Council (Economic) has addressed a letter to M/s. Caliper Trading Inc. at Dubai who have imported the goods from the appellants asking them to confirm that clearance of the 9 shipments of the goods which had been despatched by the appellants. He has pleaded that M/s. Caliper Trading Inc. in their reply have confirmed this and have indicated the details of the prices at which the same were imported and the particulars of payment of the amounts to the bankers. They have also confirmed the clearance of the goods. They had also obtained the invoice and the purchase order and had asked them for the samples of the garbage bags. M/s. Caliper Trading informed them that no samples were available with them and purchase order was sent to the Counsel. He has pleaded that enquiries of the department reveal that goods and the value as declared by them had been received in U.A.E. and cleared and payment had been made by the importing company in that regard. He has pleaded, as it is, the department has not come on record in regard to any manipulation regarding value of the goods and the learned lower authority has misdirected himself in arriving at his conclusions on cost construction method to hold that there was gross overvaluation of the exported goods. He has pleaded for fixation of the value, the learned lower authority should have followed the norm as has been laid down under Section 14 of Customs Act, 1962. The point, he has made, is that the learned lower authority should have gone by the norm of price the goods could have fetched in the ordinary course of international trade where the seller and the buyer have no interest in the business of each other. He has pleaded that an exporter is interested to get the price the goods based on what he can get in the course of international trading irrespective of his cost of production.

He has pleaded he has no objection to the fixation of the value for the exported goods in terms of Section 14 of Customs Act, 1962.

14. Arguing further for the appellants, the learned Advocate pleaded that the demand as it is in respect of past clearances has been made beyond a period of 6 months and it has not been shown that how longer period of limitation could be invoked when there was no suppression on the part of the appellants in respect of any item. He has pleaded that under the DEEC scheme the imports are allowed free of duty subject to meeting the export obligation in future or after the export obligation has been made. The goods as covered by the licence in terms of the DEEC scheme could be imported without payment of duty. He has pleaded that the appellants had done no suppression of facts in regard to any one of the elements under the DEEC scheme and had imported the goods based on the licence produced after coming on record as to the exportation of the goods made by them. He has pleaded in this background the longer period of limitation could not have been invoked for the purpose of demanding the duty.

15. In regard to valuation of the imported goods, he has pleaded that while the scrap had been invoiced at US $ 150 per MT the off cuts had been invoiced at US $ 240 per MT. He has pleaded that the learned lower authority has raised the value of the scrap from US $ 150 to US $ 240 per MT. So far as the revision of the value for the scrap from US $ 150 to US $ 240 is concerned, the appellants have accepted the same and they are contesting only on the enhancement of the value from US $ 240 to US $ 450 per MT in respect of Off cuts and the frames. He has pleaded what the appellants had imported was only strips in the length of 8 cms to 132 cms. The learned lower authority adopted the prices in respect of off cuts which had been imported through the customs by others and which had been invoiced at US $ 450 per MT. He, however, could not produce any evidence before us as to the basis on which the price as invoiced in respect of the appellants had been arrived at and the only plea made is that the goods imported in different sizes as off cuts could be valued differently. He, however, did not seriously contest the revision of the value from US $ 240 to US $ 450 per MT. He has, however, pleaded that the appellants should not have been penalised for undervaluation of imports as no foreign exchange remittance etc. has been held against the appellants. Further, he pleaded there was no warrant for levy of penalty on the firm or the appellants in view of the pleas urged by him. In any case, he pleaded, the importing firm being a partnership concern, both the partner and the firm could not have been penalised and the penalty could be levied only on either of them. In this connection, he referred us to the following decisions :- 1995 (78) E.L.T. 87 (T) (page No. 376 of paper book-Vol. II) and another decision reported in 1995 (78) E.L.T. 88 (T).

He also pleaded at the time the authorities proceeded against the appellants there was a balance of Rs. 49,27,381/- available with them in the licence issued under the DEEC scheme and it could not be utilised. He has pleaded while the action has been taken against the appellants for misdeclaration and confiscation of the goods, the licences also have been seized in respect of the quantities which were confiscated and this, he pleaded, has resulted in double jeopardy.

16. In reply, the learned SDR for the department, Shri Victor Thiagaraj pleaded that the points raised relate to (1) validity of the licence; (2) availment of duty free exemption under the Notification No. 203/92; (3) over-valuation of the goods exported (under-valuation of the imported goods).

16.1 Arguing on the first point, he has pleaded that as per the description of the licence (Page 34 of Vol-I of paper book) the goods which could be imported are 'relevant plastic scrap', related to the export product of garbage plastic bags made out of plastic scrap other than PVC. He has pleaded that the items imported i.e. Acrylic Plastic Scrap had no nexus with the item exported unless the nexus could be shown to be there, the import of the acrylic plastic scrap could not have been allowed. In this connection, he referred us to the Board's Circular No. 1/94 reproduced in 1994 (72) E.L.T. T44 and 45 (Page No.296 of Vol. II of the paper book). He has pleaded, before the goods could be allowed for importation it is to be established that the goods imported were capable of being used for export product and also that the same had been used so. In this connection, he referred us to the decision of the Tribunal in the case of Zenith Tin Works v. CC, Bombay reported in 1995 (75) E.L.T. 865 (T). He has pleaded in that case, it has been held that the Tin plates which could be imported could be only those which were used in the manufacture of the export product. He, however, fairly concedes that in the present case, in case it was established that the garbage bags exported had a rib of acrylic material attached to it, the material of acrylic plastic scrap would be permissible and in case this rib was not found to have been used the material could not be allowed to be imported. This, he pleaded, after taking into account the flexibility for import allowed in respect of materials covered by the description of the licence in terms of various paragraphs of the Import & Export Policy and Hand Book of Procedures for the period 1992-97. In regard to use of acrylic plastic material, he referred us to the findings of the learned lower authority in Paras (c) and (e) which are reproduced below for convenience of reference :- "(c) I find that there are two types of samples, one weighing around 11.0 gins, and the other one weighing around 75.0 gms. Both these sample have been tested by the Central Institute of Plastic Engineering & Technology, Mysore and as per the Report No. TS/95-96/60B, dated 26-7-1995, they do not test positive for Acrylic. This was indicated in the show cause notice at Page 39 and Para 28. The exporter claimed that he has put Acrylic strips pressed with 2 holes at the top portion of the plastic garbage bags on either side to save on handles with PP thread which loops through the holes in Acrylic strips. Further, as per the shipping bills, it is found that the average weight of the plastic garbage bags based on the total weight and the quantity declared by the exporter, works out to 11.00 to 11.44 gms. per bag. Therefore, I am inclined to discard the samples weighing around 75 gms. The concerned Customs Appraiser, the Customs Inspector and the agent for the Exporter, had examined the plastic garbage bags mentioned above during the course of investigation and had confirmed that the plastic garbage bag weighing around 11.00 gms could be the probable export sample and not the one weighing around 75.0 gms. Further, they have also clarified that the plastic garbage bags seen by them at the time of export did not contain any handles. Shri Ra-jesh Jain of M/s. Shree Thirumala Udyog, in his statement dated 6-11-1995 had admitted that the average weight of the bags exported was 11.00 gms. and all were of uniform shape and size; that they measured 16' x 24' in size and of 80 micron gauge in thickness. But the claimed that he had put acrylic strip of rectangular shape approx. 4 inches in length and 2 inches in width and thickness ranging from 1.5 to 3 mm. If the weight of this acrylic strip is ''added to the weight of the plastic garbage bags, then, the weight of the plastic garbage bags will not be certainly 11.00 gms. and it will be much heavier. But the shipping documents and the examination report suggest that there was no discrepancy with regard to the weight and quantity declared in the shipping bills. This has been further corroborated by the statements of the concerned Customs Appraiser dated 6-11-1995.

Inspector vide statement dated 6-11-1995 and the Agent vide statement dated 7-11-1995 and the exporter himself. Therefore, the weight of the plastic garbage bags exported must be around 11.00 gms. and this is in conformity with the sample recovered from the factory of the Exporter and tested. The supporting manufacturer, during his statement had admitted that the samples weighing around 11.00 gms. recovered from the factory of the exporter to be representative samples of the plastic garbage bags exported by the exporter. It is argued by the exporter that the plastic garbage bags seized from the factory were manufactured for local market and that reliance need not be placed on the statement of Shri P.V.K. Saikumar. This, I am unable to accept as it is clear afterthought considering the circumstances of the case. In this case, the circumstances clearly indicate to the samples recovered from the factory to be the representative samples of the exported plastic garbage bags.

(e) The above sample weighing around 11.0 gms recovered from the factory and tested by CIPET tested positive only to LDPE and not to Acrylic. As per the Import-Export Policy, 1992-97 read with Input-Output norms made under the said policy, in respect of plastic garbage bags, the norms prescribes that for the export of garbage bags, (other than PVC) made out of plastic scrap, the import entitlement is 'Relevant Plastic scrap material'. That is to say, that if the plastic garbage bags are manufactured of LDPE, only LDPE scrap is allowed duty free under the advance licence and if it is made out of combination of any other plastic scrap material, only those scrap plastic materials are allowed duty free. In the case of subject export, the plastic garbage bags have been found to be manufactured out of LDPE only and only LDPE plastic scrap is allowed as relevant plastic scrap subject to fulfilment of other conditions.

Therefore, the claim of the Exporter that he has utilised the Acrylic Plastic and PP Material in the exported plastic garbage bags is not correct and substantiated and I do not accept the declaration made in the shipping bills in this regard." 17. Even otherwise, he pleaded the appellants were not entitled to duty free import of the acrylic sheets as they had not complied with the condition (vi) of Notification No. 203/92, He has pleaded that while the physical export had been completed as claimed by the appellants, by 16-5-1994, the export obligation came to be fulfilled only on 24-5-1995 after realisation of full sale proceeds when the transfer of licence was allowed in terms of Para 127 of the Import & Export Hand Book Procedure and Para 67 of the Import & Export Policy applicable at the relevant time. He has pleaded the stipulations in condition (vi) above should be read harmoniously with the conditions regarding transferability of the licence as above and therefore this condition could be taken to have been fulfilled only with the repatriation of the full foreign exchange in respect of the exports made and which requirement was fulfilled only on 24-5-1995. In this connection, he referred us to the judgment of Hon'ble Madras High Court reported in 1994 (70) E.L.T. 559 (Mad.) and also the judgment of Hon'ble Supreme Court reported in 1996 (88) E.L.T. 626 (S.C.) = 1997 (68) ECR 17 (SC).

He has pleaded that the appellants had sold the imported materials before 24-5-1995 before the repatriation of the foreign exchange and therefore the benefit of Notification 203/92 could not have been availed of by the appellants. He has pleaded that for demand of duty longer period of limitation has been rightly invoked against the appellants, as they had suppressed the fact regarding the sale of the goods before the repatriation of the foreign exchange relatable to the exports which had been made. He has pleaded that the show cause notice was issued on 11-11-1995 in respect of imports which were made from 9-5-1994 to 22-4-1995. In this connection, he referred us to the findings in para (I) of the learned lower authority's orders which is reproduced below for convenience of records :- "(j) It is contended by the Exporter that he had complied with the conditions of Customs Notification 203/92, dated 19-5-1992 as amended, but I find from the Bank realisation certificate and the statement of Shri Rajesh Jain, that the exporter had sold the duty free imported goods in the local market even before completing the full export obligation and realisation of the foreign exchange. The exporter has not produced any evidence to discard the allegations made in the show cause notice in this regard and, therefore it is well established that the Exporter has violated the conditions of the said Customs notification. Here, I would like to reiterate that the duty exemption scheme operated by the Exporter is covered under Paras 47 to 49, 51, 52, 63 and 67 of the Import Export Policy 1992-97. Further, the conditions of the said licence is not only governed by the said paras of the Import Export Policy, but also by the conditions of the Customs Notification No. 203/92, dated 19-5-1992, as amended, and its compliance is controlled by the Customs authorities. Further, the explanation to the said Customs Notification defines the 'Materials' as raw materials, components, intermediates, consumables, computer software and parts required for the manufacture of Export produce. I find that these conditions had also not been complied with by the exporter in addition to the conditions No (vi) of the said notification, in view of the position discussed above, except with regard to LDPE imported prior to 24-5-1995, the date of transfer of the licence. Therefore, I find the exporter has not fulfilled the conditions of the DEEC licence as also the conditions of Customs Notification referred to above, and therefore they are not eligible to the benefit of Duty Free Imports of acrylic plastic scrap, acrylic plastic off-cuts, acrylic photoframes and polypropylene scrap which had not been found to be used in the manufacture of the export articles, namely, plastic garbage bags. However, taking into account the fact that LDPE was used in the manufacture of bags exported, I am inclined to allow the 214.75 MTs of LDPE scrap cleared vide 6 Bills of Entry imported between 29-12-1994 and 11-14995 extending the benefit of Duty free Imports." 17.1 In regard to overvaluation of the exports made, the basis in that regard, he pleaded, had been laid down in the show cause notice and referred us to Para 32 of the show cause notice which is reproduced below :- "Whereas consequent to the reference made to the Dubai Customs, through the Consulate General of India in...... a clarification was received from the Department of.....and Customs, United Arab Emirates, Dubai vide their Letter Ref. Cus/M/12-2304/95, dated 19-9-1995 through the Consulate General of India in Dubai. On examination of the documents enclosed to the aforesaid letter i.e., the Customs Bills and copies of the invoices submitted by the importer there by M/s. Calipar Trading, Inc., UAE, to the Dubai Customs authorities for the import of Garbage Bags, it is observed that the Garbage bags have been valued at US $ 0.01 per piece for which customs duty have been paid by the importer M/s. Calipar Trading Inc., UAE to the Dubai Customs. The invoice produced is that of M/s. Shree Tirumala Udyog, Bangalore and "The same has been signed by Sri. Kiran Jain, one of the partners of the said firm, raised on M/s. Calipar Trading Inc., UAE. For export of Garbage Bags under the said advance licence, as per the value declared, it works out to US $ 20,000 for the entire 20 lakhs garbage bags exported by the exporter under the said advance licence. Further, as per the number of bags declared and the weight of the total consignment, declared in the shipping bills and the invoice/packing list, the average weight of the Garbage Plastic bags exported by the exporter works out to 11.4 gms per bag and similarly the average price of the Garbage Plastic Bags exported works out to Rs 8.44 per bag. If the price of the Garbage Bags exported and considering the weight of the bags, the price of.........Kg of the exported Garbage Plastic Bags works out to Rs. 740.35 per Kg. Whereas, the Exporter has so far imported 986.37 MTs of Acrylic material, LDPE and PP at a total value at Rs. 50,64,200/- and the average cost of the raw material works out to Rs. 5.13 per Kg. Considering the job work cost of Rs. 15/- per Kg as has been admitted by the Supporting manufacturer M/s.

Alplas Industries, the total conversion charges works out to Rs. 20.13 per Kg. Even adding the overheads, profits and other incidental charges liberally, the export price of Rs. 740.35 per Kg.

appears to be grossly over invoiced and therefore, the average price of Rs. 8.44 per Garbage Bag appears to be grossly overinvoiced which has been amply supported by the other invoice raised by the Exporter on M/s. Calipar Trading Inc., UAE on which the overseas party has paid the Customs duty at Dubai, which appears to be reasonable in as much as by adopting the value of US $ 0.01 per piece of Garbage Bag and considering the weight at 11.4 gms which is as per the declaration of the exporter, the value per Kg. of the Garbage Plastic Bags exported by the exporter works out to Rs. 28/- which is in line keeping in view the cost of the raw material at Rs. 5.13 Per Kg. and Rs. 15/- per Kg. the job work charges and the remaining portion can be attributed the overheads and profit margins. Here, it may be noted that out of the 986.37 tonnes of raw materials imported duty free, by the exporter, majority are Acrylic plastic which is costly and which appears to have not been used in the export product, and therefore, the value of Rs. 5.13 per Kg. of the raw material taken for calculation purposes is already on the higher side, and actually the raw material used is only LDPE which is a cheap plastic. Therefore, it appears that the value of US $ 0.27 declared by the exporter to the Customs authorities at ICD, Bangalore at the time of Export of the consignments appears to be grossly over-valued in as much as 27 times the declared value of the items to the Dubai Customs authorities. Therefore, the actual export obligation achieved by the Exporter is to the tune of US $ 20,000 instead of the set export obligation of US $ 5,40,000/- by the JDFT, Bangalore under the said advance licence. Further, it also appears that the exporter has grossly over-invoiced the export product i.e., Garbage Plastic Bags in order to complete the export obligation quickly and to avail the duty free import benefits at the time of import of the raw materials to a large extent and value and by this mis-representation of fact and misdeclaration of the particulars, the Exporter has tried to defraud the Government its legitimate import revenue on import of such duty free raw materials to that extent which is otherwise not allowed duty free. The exporter has also not fulfilled the export obligation as per the licence conditions and the Conditions of the Customs Notification No. 203/92, dated 19-5-1992 and they have inflated the export products value in order to achieve the requisite value addition. Therefore, it also appears that the exporter has over-invoiced the export product in order to complete the export obligation and has realised the export proceeds through other means. In view of the position discussed above, it appears that the endorsement made in the DEEC Part II with regard Mo Export Values are not correct and are to be corrected as per the Invoice value of US $ 0.01 per piece of Garbage Bags exported and also the import entitlement allowed duty free under the DEEC Part I also appears to be wrong and duty to be demanded on such imports, as the duty free import on the relevant plastic scrap used in the Export product i.e., Garbage Plastic Bags can be allowed only to the extent of US $ 14,285.72 (GIF) keeping in view the 40% value addition and the actual value of the Garbage Bags exported at US $ 0.01 per piece." He has pleaded that the learned lower authority has entered a finding in this regard at Para (h) which is reproduced below for convenience of reference :- "(h) Coming to the allegation of over-invoicing in respect of plastic garbage bags exported, I find that there are two types of invoices - first the one submitted by the exporter at the time of Export and covering the eight consignments exported to Dubai consisting of eight invoices; and the second, the invoices submitted by the party at Dubai covering the eight consignments imported by him at Dubai. There has been a value difference in the two sets of invoices, but the total quantity in aggregate in the two sets of invoices remains the same. The average price of each plastic garbage bags exported as per the export invoice of the exporter produced to the Customs authorities in India at the time of export is declared at US $ 0.27 which works out to Rs. 8.44 Approx. Whereas the value declared by the importer at Dubai as per the invoices submitted by him is at US $ 0.01 which works out to Rs. 0.32 per piece, approx.

It is contended by the Exporter that the invoices submitted by the Importer in Dubai are fabricated and need not be relied upon. I have perused both the sets of invoices and find some discrepancies, but the signatures appears to be the same and the signatory in his statement dated 6-11-1995 has admitted and identified that they are his signatures. There is no room to suspect that the invoices produced by the importer at Dubai to the Customs authorities are fabricated ones, since the duty rate as per the letter received from the Customs authorities at Dubai is only 5% and the total duty payable being marginal, there is no reason to manipulate the value.

As against this, by showing excess value at the time of export, the exporters can show his export obligation fulfilled faster and import materials duty free. Further, as the entire consignment of 18,00,000 pieces of garbage bags have been received at Dubai in 2 x 40 containers, and cleared vide Customs Bills No. 699298 and 699299, dated 4-7-1994, it is possible that only two invoices reflecting the actual value could have been produced. If the invoices produced by the Exporter at the time of Exports are analysed, it is seen that average weight of the plastic garbage bags is around 11.4 gms and valued at Rs. 8.44 per piece. Therefore, value per kg. of the material works out to Rs. 740.35. Considering the total quantity of raw materials imported by the Exporter and the value thereof, the average cost of the raw material works out to Rs. 5.13 kg. and the job work charges per kg. is Rs. 15/-. Even after allowing huge margin of overheads and profit margin, the value declared at Rs, 740.35 per kg. at the time of Export is grossly over-valued and hence the correct value which is to be adopted per piece of plastic garbage bags could be taken as Rs. 0.32 as the per kg. value of the finished goods works out to Rs. 28/-. Therefore, based on the analysis of the 2 sets of invoices, I place reliance on the value declared in the invoices submitted by the importer at Dubai, for the reasons mentioned above. I am unable to accept the contention of the Exporter that Customs Officers had examined the goods at the Export time and the endorsement had been made after verifying the consignments, in as much as only a small percentage of export product had been examined and the declaration made by the Exporter had been accepted by the Department in good faith, as per the statements of the concerned Appraiser and the Inspector." He further pleaded that the Hon'ble Calcutta High Court in the case of CC v. Pankaj Sheth has held that the customs authorities could take action as such and cited the judgment reported in 1997 (90) E.L.T. 31 (Cal.). In the face of clear overvaluation, the appellants could not be allowed the benefit under the DEEC scheme for importation of goods to the extent of the overvaluation.

17.2 Adverting to the drawal of samples, he has pleaded that the learned authority referred to this point in Para (f) and has clearly entered a finding that the reliance could not be placed on the Chemical Examiner's Test Report and there is an admission by the importers themselves that the bags were made of LDPE with threads made of Polypropylene as handles through holes in acrylic strips as against the Chemical Examiner Report as the bags had been tested as having been made of HDPE. He also referred to Para (e) in this regard and also the statement recorded from Mr. P.V.K. Saikumar that they were not manufacture of Acrylic Handles. He, therefore, pleaded that the learned lower authority's findings notwithstanding the plea that the samples which had been drawn were in accordance with the procedure that no plastic strips as such were used are sustainable. In regard to the overvaluation of the imported goods, he has pleaded as it is the appellants are not disputing the enhancement of the value of the acrylic scrap from US $ 150 to US $ 240 per MT and therefore action for misdeclaration of value in regard to the same is sustainable. He has pleaded that for revision of the prices of Off cuts from US $ 240 to US $ 450 the recorded prices had been relied upon and the appellants were not able to challenge as to how the recorded prices at which other contemporaneous imports had been made could not form the basis for valuation of the consignment of Off cuts. He has therefore pleaded that the learned lower authority's order is sustainable in law.

18. In this regard, the learned Advocate for the appellants in reply stated that so far as the licensing angle is concerned, the appellants could import the acrylic plastic scrap material and since there is evidence by way of the test report, the acrylic material had been used on the plastic bags and in terms of Advance Licence Circular Nos. 8/94, dated 27-4-1994 and ALC No. 3/95, dated 6-3-1995, the appellants were at liberty to import any one of the plastic scrap which had been used in the export product without restriction unless the item was shown to be a sensitive item. He has pleaded that acrylic plastic scrap was not notified as one of the sensitive items for import in the Import Policy.

19. The learned SDR at this stage intervened to say that if the appellants were able to establish that they had used the acrylic plastic material in the plastic bags exported the import of the goods in question could be allowed against the DEEC licence.

20. In this connection, the learned Advocate referred us to the circular issued by the licensing authorities and Para 21 of the Export & Import Policy and also Para 49 of the said policy and Para 110 of the Handbook of Procedures issued by the Import & Export Policy.

21. In regard to the judgment of the tribunal cited by the SDR, reported in 1995 (75) E.L.T. 865 (T), the learned Advocate pleaded the statement regarding predecessor Notification No. 159/90 i.e.

predecessor notification to 203/92. He has pleaded that the facts in the present case are not pari materia to the facts of that case and this judgment is not applicable as flexibility now provided for was not available then. Adverting to the condition (vi) of Notification No.203/92 he has pleaded that this condition has two components, one which envisages full export of the goods and the other is realisation of the sale proceeds. He has pleaded significantly in this condition so far as the export of the goods was concerned the notification required the full export to be made before the goods could be sold but so far as the realisation of the foreign exchange was concerned no such stipulation could be read therein. His plea is that the realisation could follow the full export and both need not be simultaneous. Once the full export of the goods had physically taken place, the appellants could sell the goods. In this connection, he referred us to Para 63 of the Import & Export Policy March-April 1993-94 to point out that period of the export obligation deals with the physical export of the goods. He has pleaded that the export could be made either with the LIC or on credit basis giving credit right up to 120 days. He has pleaded so long as the revenue was protected by the Bank Guarantee executed in terms of Notification 203/92 the appellants' obligation to pay the duty continued and same could be cancelled only after the realisation of the amount. In this background, he pleaded there was no need for the exporter to hold on to the imported goods till the last rupee of the foreign exchange had been repatriated. As it is, he pleaded, no evidence has been cited regarding the sale of the goods before fulfilment of the export obligation. He has pleaded that final export had been made by 16-5-1994 and there could not be any objection as it is to the sale of goods in respect of imports made after 16-5-1994. The imports which were made up to 16-5-1994 were of the order of 44.89 MT and at worst if the charge of sale is held against the appellants before 16-5-1994 the same would be relevant only in respect of this quantum. As it is, he pleaded, that some goods had been seized and others had been detained by the Customs and this would be part of the components of 44.89 MT.22. In regard to over-valuation, he has pleaded that the learned lower authority has misdirected himself in fixing the value taking into consideration the value of the goods based on the cost of the same to the appellants. He has pleaded that the law applicable for valuation of the export goods would be the one as set out under Section 14 of the Customs Act. He has pleaded the learned lower authority should have gone by the parameters of this section rather than having resorted to the cost construction method. The methodology for valuation as set out under Section 14 had not been followed and therefore the charge of over-valuation as held against the appellants was not sustainable. He has further pleaded that the learned lower authority has gone by the invoice copy which was obtained from U.A.E. and has not taken note of the invoices under which the goods were exported. He has pleaded that the invoice copy at the importer's end in U.A.E. was typed in a different typewriter and there was tampering in the documentation there. He has pleaded the appellants has sought for the enquiry to be done with reference to the invoices which were sent through the Canara Bank, the bank through which the export documents were despatched and the learned lower authority has not chosen to refer to the same. He has pleaded therefore the charge of over-valuation as held against the appellants was not sustainable.

22.1 He has further pleaded the learned lower authority has not taken note of the documents including the purchase orders placed by the customer. He has also pleaded that one of the consignments in question sent to Singapore as a part of the export obligation, in the present case at the very same price and this has not been dealt with nor any fault found with the export price of the same and no separate charge in respect of the same has also been framed against the appellants. He has pleaded that the consignment in this case was valued at US $ 54,000 of the total export obligation US $ 5,40,000/-. He has pleaded that the on the invoice copy obtained from UAE customs without having been notarised by a Notary could not be relied upon by the learned lower adjudicating authority and in this connection, he referred us to Section 79 Clause (6) of the Evidence Act.

22.2 He has pleaded that the plastic material was used as was found to be shown in the test done on the sample drawn in respect of Shipping Bill No. 1676 seen from the endorsement on the shipping bill for drawal of the sample. He has pleaded that the dealing Inspector Shri J.Darshan in his examination has accepted the drawal of the sample. He has pleaded that two sets of sample drawn one from the consignment which was exported and the other from the factory on 5-7-1995. He has pleaded the reliance placed on the statement of Shri P.V.K. Saikumar that the sample which was drawn from the factory was the one which was exported was not valid. He has pleaded that Shri Saikumar was not in service at the relevant time and he was not competent to give a statement as he joined the company in January, 1995. The statement of the workers in this regard, he pleaded, could not be accepted as they were not responsible people and have not known as to whether which of the goods were exported. He has pleaded no link between the sample drawn at the factory with the goods exported had been established. He has pleaded the enquiries made abroad has also not established any evidence as to the nature of the goods exported. He pleaded that there is no evidence that the sample which had tested for acrylic had been substituted. He has pleaded the learned lower authority could not have rejected the evidence of the test results without doubting the veracity of the sample which was sent to the Chemical Examiner.

23. Shri Victor Thiagarajan, SDR pleaded so far as the consignment sent to Singapore was concerned it was not taken-up for examination as the consignment was small.

24. We have considered the pleas made by both the sides. The following points arise for determination :- (1) Whether the licence produced is valid for the import of Acrylic Scrap Material.

(2) Whether the appellants had exported the goods using the Acrylic Material.

(3) Whether the appellants had correctly availed of the benefit of Notification No. 203/92.

(5) Whether the imported goods viz. Acrylic Plastic Scrap offer sale were under-valued.

24.1 In regard to first point, we observe that the appellants hold a licence bearing No. 2026451, dated 17-2-1994 with the face value of Rs. 1,05,63,750/- valid for 12 months period with the description of the goods as under:- "Relevant Plastic Scrap Materials as per the conditions attached to the licence." This licence issued was the advance licence subject to the conditions that the appellants would export 14,000/- Kgs. of Garbage Plastic Bags (Other than PVC) made out of Plastic scrap for a FOB value of Rs. 1,69,02,000/ equivalent to US $ 5,40,000/-. They were required to earn this foreign exchange within 12 months from the date of issue of the licence. Further, the conditions endorsed on the licence are as under :- To ensure fulfilment of export obligation as mentioned in column 1 above, the firm shall before clearance of the first consignment shall execute a legal under taking/joint legal undertaking for FOB obligation of US $ ______plus 1.5/0.75 times of customs duty______plus interest for three years at 24% on customs duty in the Form XXXIV-B and bank guarantee for 1.5/0.75 times of customs duty ______in the Form XXXIV-A of Import and Export Policy (reprint 1-4-1993) 92-97.

The goods imported against this Advance Licence shall be utilised in accordance with the provisions of the customs Notification No. 204-Customs/203-Customs, dated 19-5-1992.

In the event of the firm's failure to fulfil the export obligation within the prescribed time limit as stipulated above, the firm shall be liable for penal action in terms of Para 71 of Export-Import Policy 1992-97.

24.2 The licence by separate endorsement has been further revali-dated up to 16-8-1995. The appellants it is seen in terms of the condition of the notification had executed a letter of LUT dated 4-4-1994 for Rs. 3,21,45,492.00 which has been accepted by the licensing authorities.

The imports of the goods, which are the subject matter of the proceedings made before us, were made between 9-5-1994 to 22-9-1995.

While the export in terms of conditions of the import licence covering the full value of the export obligation as set out were made between 8-3-1994 to 16-5-1994, the plea of the appellants is that they had used the acrylic material in the garbage bags exported and therefore in terms of flexibility clause as set out in Para 49 of the Export .& Import Policy 1992-97. Under this para, the following has been set out :- "Under a value based Advance Licence, any of the inputs may be imported within the total CIF value indicated for those inputs, except inputs specified as sensitive items." The same provision has also been set out in Para 110 of the Hand Book of Procedures. Under this para, the following inter alia has been set out :- "Once the CIF value of all imports is determined the applicant exporter will have the flexibility to import any one or more items listed in the licence within the average value of the value based advance licence regardless of the quantity indicated against each item in the DEEC book excluding the value of sensitive items." 24.3 There is no dispute so far as the acrylic plastic scrap is concerned, it is not listed in the Import & Export Policy or in the Handbook of Procedures as a sensitive item. The appellants therefore in terms of flexibility provided under the Import & Export Policy and the procedures as set out under the Handbook of Procedures issued by the Dy. General of Foreign Trade (DGFT), could have imported the acrylic plastic scrap without limit subject to the other conditions of the DEEC scheme and the conditions as incorporated in the licence. The goods allowable under the policy are relevant plastic scrap. There is no dispute that the acrylic material imported answers to the description of Plastic Scrap.

25. The learned SDR for the department on a specific query accepted this position. As it is the term "Plastics" as has been defined technically in the Chambers Dictionary of Technology, the same is defined as under :- "Plastics (Genrl) A generic name for certain organic substances, mostly synthetic (see synthetic resins) or semi synthetic (casein and cellulose derivatives) condensation on polymerization products, also for certain natural substances (shellac, bitumen but excluding natural rubber), which under heat and pressure become plastic, and can then be shaped or cast in moulds, extruded as rod, tube etc., or used in the formation of laminated products, paints, lacquers, glues etc. Plastics are thermoplastic or thermosetting. Adaptability, uniformity of composition, lightness and good electrical properties make plastic substances of wide application, though relatively low resistance to heat strain and weather are, in general limiting factors of consequence." 26. The acrylic scrap imported therefore would be covered by the licence so long as it is shown that it was a relevant plastic scrap.

What would make it a relevant plastic scrap is the use of the same for the manufacture of the Export Product viz. Garbage Bags which was the exported item indicated in the Import Licence. The learned SDR does not contest the position that the applicants could have imported this acrylic scrap provided it could be shown that the said material had been used in the export product. This, therefore, brings us to the next point whether the appellants had used the acrylic plastic material in the export product. The charge against the appellants is that they had not done so. It is seen that after the exports had been effected and the appellants had started importing the acrylic scrap, on an intelligence gathered by the authorities that the above exports had been over-valued and that no acrylic material had been used in the export product investigation was taken-up. During the investigation, statements were recorded from persons concerned with the appellants firm, some of their employees and also enquiries were caused to be made abroad through the Governmental agencies i.e. by U.A.E. and they accepted that all consignments were sent. As seen from the correspondence that were exchange between the customs authorities at Bangalore and the Indian Consul in the Embassy in UAE while the importing party at the other end was located and was contacted for information no sample of the goods exported could be obtained by the Consul, as requested by the Customs Authorities at Bangalore. The authorities further had taken some samples of the garbage bags as were available in the appellants factory and the same were also sent for chemical test. The same were sent to the Chemical test as well as to an independent agency viz. CIPET. Statements were also recorded from the Customs Officers to ascertain as to the nature and material of the bags as were exported. During the course of the hearing, we had also examined the endorsement on the shipping bill made at the time of exports by the examining officers before the export of the goods was allowed. It is the totality of this evidence on record which has to be considered for the purpose of determination as to whether the acrylic material as such was used by the appellants in the goods exported. The learned lower authority in Para (c), which is reproduced earlier, has taken note of the samples which were picked-up during the investigation to come to conclusions that no acrylic plastic material had been used on the garbage bags which are exported. He has gone by the average weight of the bags based on the weight of the consignments of the bags exported to be varying between 11 grams to 11.44 grams per bag. During the investigation, two types of garbage bags which had been picked up as samples, one weighed around 11.0 grams and the other weighed around 75.0 grams. He has gone by the statement of Shri Rajesh Jain of M/s.

Shree Thirumala Udyog, the appellants before us, in his statement he has stated that the average weight of the bags exported was 11.0 gms and they were of uniform shape and that they measured 16' x 24' in size and of 80 micron gauge in thickness and that acrylic strip of rectangular shape approx. 4 inches in length and 2 inches in width and thickness ranging from 1.5 to 3 mm attached to this. The observations of the lower authority are that if the weight of the acrylic scrap was to be taken into account and the weight of the plastic garbage bags will be certainly more than 11 grams. He has also gone by the statement of the Customs Appraiser and also the Inspector of Customs in this regard. The samples which were picked-up did not test positive for acrylic as per the test report of the CIPET. The learned lower authority has held that the bags exported therefore were manufactured out of only LDPE and which alone therefore could be imported. The learned lower authority further has chosen to discard the test reports of the Chemical Examiner of Customs, Madras which indicated the presence of the acrylic material and he has referred to the remnant samples which had been received by them weighed around 30.71 gms.

Another reason for discarding the Chemical Examiner's report indicated that while the test report bearing No. S/9/95 ICD, dated 30-5-1995 showed that there were HDPE threads used, the importers had stated that the bags were made of LDPE, with threads made of PP as handles through holes in acrylic strips. This reliance of the learned lower authority on the evidence held against the appellants has to be raised against what happened at the time when the exports took place. It is seen from the copies of the shipping bills filed in the paper book before us that the shipments had been supervised by the departmental officers and the goods had been examined before the shipment was allowed and they were also opened and at the same time stuffing of the container was done under the supervision of the officers. The sample was also drawn in the case of Shipping Bill No. 1676 which covered the shipment to Singapore of the garbage plastic bags as part of the export obligation at the same rate as U.A.E. The report as seen from the copy of the shipping bill reads as under :- Verified the marks and numbers on the Gunny bags. Opened and examined the cargo in Bag Nos. 12, 27, 48, 51 and 86 and found to contain "Plastic Bags" coloured black - 2000 pieces in one gunny bag. There were 100 gunny bags in all. Supervised the stuffing into to the Cont. No. TEXU-286474-sealed with OIL No. 319245. LCL cargo.

Samples drawn for test.' Then we have another shipping bill No. 2727 figuring at Page 158 where the examination report reads as under :- Verified the marks and numbers on the cartons. Opened and examined 5% of the cargo and found to contain "Garbage Plastic Bags" supervised the stuffing into Cont. No. ITLU-519325-8. Sealed with OTL.' Again the above report is signed by the same officer who had signed in earlier shipping bill. Likewise, the endorsement by the same officer is respect of Shipping Bill No. 2729 at Page 168 and also in respect of Shipping Bill No. 2730 at Page 175 of the paper book. It is thus seen that in the case of one consignment, the sample of the bag had been drawn for test while in respect of three shipping bills the examination report as endorsed on the shipping bills shows that the examination of a percentage of packages before stuffing was done and thereafter the export was allowed.

27. We observe that the learned lower authority has not addressed himself as to what happened in respect of the sample of the bag which was drawn for test in respect of shipments covered by the Shipping Bill No. 1676. However, it is seen on the test Memo No. S59/82/95, dated 22-2-1995 that the sample of the garbage bags was enclosed with the test memo filed at Page 292 (Vol. II) in the appeal paper book as Exhibit XIII and that the sample as per chemical examiner is a Black coloured plastic bag and that it is composed of Low Density Polyethylene. The upper portion is made of acrylic strip which is used as support for the bag. In that it is provided with thin polypropylene yarn.

27.1 Further there is another test memo dated 30-5-1995 and which shows shipping bill Nos. and date 2630, 2631, 2632, 2633 and 2634 and the description of the goods as Garbage Bags and the query raised is (i) whether it is made of Acrylic Plastic Scrap; (ii) composition of the Bag, i.e. materials used in the manufacture of Bag; (iii) and whether it is made of PP/LDPE scrap. The test memo has been signed by an A.C.and the test report reads as under :- "The sample is in the form of black coloured plastic bag with handles. The plastic bag and the thread in handles are made of High density polyethylene. The Plastic strips in handles are made of acrylic.

It has been further stated that it is not possible to say whether it is made out of scrap by chemical test. It may be ascertained from factory records.

28. We observe that the learned lower authority has chosen to discard the result of the Chemical Examiner test in respect of samples which had been sent by the jurisdictional officers for test to ascertain whether the acrylic material had been used in the export product, by merely observing that the appellants representative had stated that they had used LDPE material as against HDPE, which was found used by the Chemical Examiner on test. We observe that in the case of one test report the use of LDPE has been ascertained by the Chemical Examiner and there is no mention of the HDPE in the test report dated 2-6-1995.

Further, reliance was sought to be placed from the statement of Shri J.Darshan and the one Shri Saikumar. Shri J. Darshan, departmental officer, who examined the goods and he has stated that the bags in question which had been found from the factory which did not contain plastic strip in question were the ones which were exported.

29. We observe that the learned lower authority has not referred in detail the information that was elicited from both Shri J.S.A. Julius, appraiser concerned and the inspecting officer Shri J. Darshan who examined the goods. Statements were recorded from both of them under Section 108 of Customs Act in the question answer form. Shri Darshan in his statement has stated that he had examined the export consignment and the samples were also taken, whenever he was asked to do so either in writing or orally and the samples were submitted to the officers for further action. In reply to the various queries, when he was asked specifically to answer at question 10-14, figuring at Page 362 of the paper book filed by the appellants he has stated as under : "Q. 10 What was the nature of Garbage Bags you have examined in case of export by M/s. Shree Thirumala Udyog. Have you drawn any sample? A. 10 The bags were black in colour and rectangular in shape. With regard to weight, size and exact specification, 1 am not aware of the same. I remember, to have drawn sample and submitted to concerned officer in a consignment.

A. 11 The samples were drawn in the presence of representative of CHA M/s. Forrol, Bangalore.

Q. 14 How were you satisfied with regard to use of LDPE/PP & Acrylic scrap as declared by exporter in this case? A. 14 On physical examination the goods were found to be "Plastic Bags" and same was brought out in the examination report. Being a nontechnical person, I was not in a position to be absolutely sure of the constituents of the bag. However, sample of the bag was put-up for perusal.

Q. 16 Was there any order by Superior for drawal of sample in this case? A. 16 Yes. In one of the consignments pertaining to Shipping Bill No. 1676/28-3-1994 being the first shipment there was an oral instruction to draw the sample and same was submitted for further action.

A. 19 The sample was drawn from the packages opened for examination and the same is a correct representative sample of the shipment under export.

Q. 20 Please see the sample which was handed over by ICD customs to AC (P). Whether it is the same you have examined. Whether it contains acrylic handles? A. 20 I have seen the sample now shown to me. However, I cannot confirm whether this sample was handed over to AC (P). The bag which was examined by me bears resemblance to this with regard to colour and shape, but I am not sure of other specifications. The sample shown to me does not contain any handle." Thereafter, he was asked about the sample which had been drawn and sent for Madras Central Excise authority. Interestingly, a leading question was put him as to whether the sample which was drawn from the export consignment could have contained acrylic handle. This question obviously was put and which is reproduced below to verify which was the sample picked-up from the factory and contained any handle. : "Q. 21 If it is a group sample, it has to be a representative of the export consignment? Do you agree? Thereafter further questions were put with a view to describe the samples which was sent to the Madras Custom House Laboratory and this comes out clearly in question and answer No. 23. However, the officer has stated that he had not known which was the sample sent to Madras Customs. Both question and answer 23 are reproduced below :- "Q. 23 Therefore it appears that the sample tested at Madras is not the sample drawn from the export consignment? Do you agree? A. 23 As I do not know what sample was sent to Madras for test, I am not in a position to answer this question." Again, a leading question was put and the officer has replied as under :- "Q. 24 From the group sample drawn, it is seen that it weighs around 75 grams, whereas as per the total weight of consignment and no. of bags declared per bag weight comes to 11.4 grams. Therefore either the group sample drawn are not the ones actually exported or there is a quantity mis-declaration. How have you satisfied in this regard. Have you counted no. of bags in any packages? A. 24 In export consignments which I have examined, I have counted the no. of bags in pkgs. selected for examination and satisfied with regard to quantity." No individual weighment of bags was done. As regards the weight of group sample weighing around 75 gms. I am not aware of the weight and other details.

The Officer in Question No. 25 again confirmed that the bag recovered from the factory was similar to the one which was exported and towards end in Question 29 he was again asked about the sample which were recovered after one year of the export which weighed around 11 grams and the sample which was forwarded by the ICD to AC (P) and he was asked to confirm the similarity or identity of the garbage bags exported and again he was asked whether the bags had any acrylic handle. The question and Answer No. 29 are reproduced below :- "Q. 29 Please see the garbage bags recovered from factory of STU by Customs Prev. staff on 5-7-1995 which weighs around 11 gms and also see the garbage bags forwarded by ICD customs to AC (P). Please examine and confirm which one was the product similar/identical to garbage bags exported by STU. Please also confirm whether the examined bags had any acrylic handle? A. 29 I have seen both the bags shown to me. Both of them bear resemblance in shape and colour to the bags exported. However as the bags were not weighed at the time of examination, I do not know the weight of the bags. Today after carefully verifying entries in shipping bill with regard to weight of no. of bags, the bag weighing around 11 gms. appear to be the sample of bag which was exported.

The examined bag did not have any handle." The above statement has been given voluntarily without any threat or coercion and true and correct.

30. It is seen from the above the Officer who was again and again put questions on two aspects one to describe the bag which was sent for examination for test and he was put a leading question to say that the bags exported did not have acrylic handles. We may mention that it is not the case of the appellants that the bags exported had acrylic handles what they have stated which has been maintained by them is there was a strip of acrylic which was attached to the top of the opening of the bag through which the handle made of other material was put. In reply to more than one question the officer has stated that the bags which was drawn and sent by him had resemblance to the one which was exported and he had drawn the sample from one of the consignments while the others were examined by him by examining the goods before stuffing when he was shown the samples which was sent by the ICD Customs to AC (P). He fairly stated that he could not state whether this sample which was handed over to AC (P) was the one which was examined by him and it bore resemblance to the same. While recording the statement, the concerned officer was being asked to recall from memory as to the nature of the bags which were exported. He himself has stated that he was non-technical person and could not be absolutely sure of the constituents of the (bags) which were exported. It is to be observed that in the shipping bill which has been filed the description of the goods has been shown to be as under : GARBAGE PLASTIC BAGS (OTHER THAN PVC) MADE OUT OF PLASTIC SCRAP (LDPE, PP, ACRYLIC) It is seen that the appellant had come on record as to the materials out of which the plastic garbage bags had been made out and this description could, not have escaped the authorities when they examined the goods and passed the shipping bill for export.

31. The appraiser Shri J.S.A. Julius, who was questioned about this in a statement has stated that Shri J. Darshan and the one Shri Lakshman, Examiner who examined the export cargo gave the examination report and he admitted that the examination order has to indicate comparison with the shipping documents which are already compared with DEEC book/Advance licence at the time of entering in the DEEC Register. He also stated that during 1994 they were not drawing the samples of the export consignments, going through ICD Bangalore including for DEEC exports. He also accepted to have seen some of the samples which were drawn in March, 1994 which were Rectangular approx. measuring 24" x 16" without any handle. He has further stated that it was thought that the exporters might have used any one of the plastic materials namely LDPE or PP or Acrylic and he admitted, in the statement against question and answer No. 7 that it was lost sight that they have declared to have used all the above and it has been further accepted by him in, the same answer by stating as under :- "It is admitted that the usage of LDPE, PP and Acrylic scrap were not conclusively verified at the time of export of garbage bags." 31.1 He accepted the drawal of the sample covered by the Shipping Bill No. 1676, dated 28-3-1994 but he has stated that the sample was not drawn as per the procedure of sample drawal and it did not bear the signature of the exporter or his agent, and it could not be correlated to the above shipping bill and it could not be sent for test. Again a question was put as to the drawal of group samples, one weighing 11 grams and the other sample weighing approx. 75 gms. The first sample was stated to have been drawn from the factory premises of the appellants as a representative export sample of garbage bag while the other was available at the ICD during May, 1995 and he confirmed that the sample of garbage bag which weighed 11 gms which was verified at the time of assessment of Shipping Bill and the samples weighing 75 grams which was available in ICD sent by mistake as pertaining to the export. Again an information has been elicited from him to a query that whether acrylic bag weighed 11 gms which is recovered from the appellants' factory on 5-7-1995 it was similar to the export bags and he has confirmed that the exported garbage bags did not have any handle. It is seen from the above that the drawal of sample had not been denied but the appraiser at the time when the sample was drawn treated it as non-representative sample for reason of absence of the signature of the appellants and he accepts that the sample which is found in the ICD, was not the correct one and the samples which are recovered from the factory were similar to the one which was exported.

32. We observe that the appellants has squarely come on record as to the material which they had used for the manufacture of the bags and the appraiser accepts this position but has stated that while passing the shipping bills one after the other, he by mistake, understood that the bags could be made out of any one of the three materials. It is rather naive on the part of the appraiser to have said so, as acrylic material though it is a plastic material like PP or HDPE, could not have given rise to the plastic bags as such. After having passed the shipping bill which carries the clear description as to the material of which the goods were manufactured, he cannot say that he understood the bags to have been manufactured out of one of the three materials as pointed out above as the bags could not have been manufactured out of acrylic alone. When a sample had been drawn there is no reason why the officer who was passing the shipping bills under DEEC scheme did not satisfy himself about the material of which the bags were made to verify whether the described material out of which the bags were stated to have been manufactured as per the declaration in the shipping bill.

The samples as such could not have disappeared and the sample as per record was sent to the Examiner and who has verified the acrylic material to be there and the learned lower authority also has taken note of the same but has chosen to discard for the reason that the material shown that the handle is made of HDPE as against the PP stated by the appellant.

33. We observe that cannot be a reason to discard the test results unless it could be shown that the sample tested and sent was not the one which was drawn, and it had been substituted.

34. We observe the information which was elicited from the appraiser Shri J.S.A. Julius and inspecting officer, Shri J. Darshan is after over a year of the export. They have also stated that while the examination was done the examining officer was not sure, being a non-technical person, about the constituents of the bags and all have stated is that the bags of the scrap which was picked up bear resemblance to the bag which was exported. The issue relates to the use of plastic strips on the top of the bags and not about the handle. None of them have stated that the plastic strip was not used on the bag. He has in question No. 10 stated "with regard to weight, size and exact specification, he was not aware of the same". Again to a query (Q. 20) he was asked whether the sample which was sent to AC (P) was the one which he had examined and whether it contained acrylic handle and he replied as under :- "I cannot confirm whether this sample was. handed over to AC (P).

The bag which was examined by me bears resemblance to this with regard to colour and shape, but I am not sure of other specifications. The sample shown to me does not contain any handle." He has clearly stated about his not being sure of what was examined and whether it correspond to the sample which was being shown to him. While at the same time the appellants was made subsequently in answer to a question after repeated questions in this regard confirmed that the bags which are exported did not have any handle.

35. Taking into consideration the totality of the statement of Shri Julius and Shri Darshan the least that can be said is that the statements could not be relied upon as these were based on the memory of events which took place one year back and when they have stated in answer a number of questions, during the questioning, that they were not sure about the other specifications of the bags which was exported and examined by them except the colour and shape. When a sample had been drawn in respect of the goods covered by the Shipping Bill No.1676, the examiner would have been in the best position to bring out with the tested sample as to what were the goods actually exported i.e.

with the plastic scrap or without the plastic scrap used. The relevance on the memory of lapse of one year would not be a proper thing to do.

Again the reliance has been made on the statement of one Shri Saikumar, who according to the appellants had joined the company only in January, 1995 to say that the sample which was found in the factory was the one which was exported. No reliance on his statement could be made unless the records in the factory supported the same. To attach the strip bag would not require any complex machinery. It has been mentioned by the learned lower adjudicating authority during the course of the examination of the issue regarding absence of machinery and he has given a reason for discarding the test results stating that the remnant of the bags tested weighed over 31 grams while the average bag weighed only 11 grams. Again here, it is to be seen that the Chemical Examiner in the case of test results dated 2-6-1995 has clearly stated that "SAMPLE DESTROYED IN TEST". Again, the test result report dated 30-5-1995, 21-4-1995 and 21-7-1995 endorse that "SAMPLES USED-UP". What the scrap, which the learned lower authority is talking about and the remnant on which he has relied upon to come to conclusion that the weight of the remnant itself would discard the appellant's claim for the use of the acrylic material, is not known. It is observed that the test memo dated 12-5-1995 while carries no shipping bill no. the test memo dated 30-5-1995 filed in the paper book carries Shipping Bill Nos.

2630 to 2634. The samples therefore could be taken to be relatable to these shipping bills as otherwise there was no need to endorse the shipping bills on the test memo. The learned lower authority has not chosen to ignore the particulars as have been mentioned in these test memos and he has not dealt with as to the consignments to which the sample which was sent pertaining to the shipping bill. By the very mention of the shipping bill and in the absence of any evidence to the contrary we have no option but to accept that the samples sent pertain to these shipping bills.

36. The learned lower authority discarded these test results on the ground that HDPE has been found to have been used is shown contrary to the appellants use of LDPE and it cannot be taken as a reason to discard the test results. What we have to look into for the purpose of the proceeding before us is whether the acrylic material was used in the goods which were exported, and these test results clearly point out to this. On some of the sample bags the HDPE might have used is not the issue and even if the appellants had used of HDPE would not take away the effect of the test results so far as the acrylic material is concerned. There may have been some manipulation so far as the HDPE vis-a-vis LDPE but for the purpose of proceedings before us what has to be ascertained is whether the acrylic material had been used. The learned lower authority has stated that the average weight of the bags imported varying from 11 to 11.4 grams and in case of acrylic material had been used the average weight of the bag would have been much more.

We observe that the learned lower authority has not done the exercise taking into consideration the weight of all the materials which had gone into the manufacture of the plastic bags and has merely on assumption stated that the average of the bag would have been much more. This, in our view, is a wrong way to give any conclusion as to the use of particular material in the manufacture of the garbage bag exported and his presumption has been made without laying any basis in regard to that. As it is the test results of the Chemical Examiner cannot be discarded lightly unless it could be shown that there had been a fraud by the substitution of samples and the samples as were sent did not pertain to the consignment in question. The Hon'ble Supreme Court in this context in the case of Reliance Cellulose Product v. CC reported in 1997 (93) E.L.T. 646 (S.C.) = 1997 (71) ECR 513 has observed at Paras 12 and 13 as under :- "These orders are now under challenge before this Court. We were referred to a number of test reports obtained by the appellant from various persons and on the basis of these opinions, the reports of the Departmental Chemical Examiner and also the Chief Chemist were assailed. We are of the view that the Assistant Collector cannot be said to have erred in relying upon the reports given by the Chemical Examiner and the Chief Chemist. It may be that in a given case, the report of the Chief Chemist may be demonstrated to be palpably wrong. In such a case, the Court may direct re-examination of the whole issue. But that is not the case here. It has not been shown that the Chemical Examiner or the Chief Chemist were in error in their analysis in any way. The views expressed by the Chief Examiner and Chief Chemist of the Government cannot be lightly brushed aside on the basis of opinion of some private persons obtained by the appellant.

Under Rule 56 of the Central Excise Rules, the Central Excise Officer is empowered to take samples for the purpose of testing the samples. He has to communicate the result of such tests to the manufacturer. If the manufacturer is aggrieved by the result of the test, he can request the Assistant Collector that the samples be retested. That procedure has been followed. Therefore, there is no procedural infirmity in the order of the Assistant Collector nor has it been established that the Assistant Collector was wrong in relying on the report of Chemical Examiner and Chief Chemist in preference to the opinion obtained by RCPL from some private individuals." 37. We observe that the appellants have all along been taking the plea that the samples drawn from the factory did not pertain to the export product but the goods which are meant for local market. This acquires credibility from the fact that the garbage bag being 75 grams was also found and which was taken up for investigation which ultimately has not been accepted by the learned lower authority as it not pertained to the export consignment. In view of the above discussion, we are of the view that when there is Chemical Examiner report on the samples pertaining to the consignments were drawn and tested, there is no reason why the test results of those samples should be discarded and reliance should be placed on the memory of the Examining Officer after one year of the examination of the goods and on the vague statement of others. In view of the above evidence placed before us therefore we are of the view that the appellants plea that they had used the acrylic plastic material has to be accepted.

38. In regard to benefit of Notification No. 203/92, which has been held by the learned lower authority that would not be available, the ld. Advocate for the appellants pleaded that the appellants have been ruled out for the reason that Condition No. (vi) of the notification had not been fulfilled by the appellants. He has pleaded that the conditions of the notification should be interpreted in a practical manner. His plea is that this condition No. (vi) carries two elements.

(1) regarding full export to be made and (2) regarding realisation of the foreign exchange. According to the revenue condition envisages that unless these requirements in this regard are satisfied the imported goods could not be sold by them. In regard sale of the goods, he has pleaded that in the very vague statement from the Power-of-Attorney holder as was recorded, he has stated that the goods have been sold before the export obligation was completed. He has stated that no details as such were elicited from him as to the quantum of the sales which were effected, the realisation made in respect of these sales nor any detail customers' wise statements was obtained in regard to these sales. He has pleaded in the absence of any such particulars, the lower authority could not have held that the imported goods had been sold before the export obligation was made.

39. The condition (vi) of the benefit of Notification No. 203/92 is reproduced below :- "(vi) exempt materials shall not be disposed of or utilised in any manner, except for utilisation in discharge of export obligation, before the export obligation under the said licence has been discharged in full and export proceeds realised : Provided that Acetic Anhydride in respect of which the benefit of this notification is claimed shall be utilised by the importer in his own factory or in the factory of any other manufacturer indicated in the said certificate even after discharge of export obligation and realisation of export proceeds." 40. His plea is that the appellants had exported the goods in full as per the requirements as set in the licence by 16-5-1994 and the export obligation for the fill export of the goods for entitlement of the appellants to import Plastic Scrap and the condition of the licence can be taken to have been completed by that date. He has pleaded so far as the repatriation of the foreign exchange is concerned, as per the normal practice in the trade the export and the receipt of the foreign exchange are never simultaneous and the sale proceeds of export are received depending upon the terms of payment agreed to between the buyer and the seller and sometimes they could be even delays for various reasons including disputes and therefore in this background, the condition of repatriation of foreign exchange cannot be read as a precondition for sale of the goods which the appellants might import after the export had been effected. He has pleaded what the appellants had to prove that ultimately the sale proceeds in respect of the exported goods had been repatriated and once that is done, the condition of notification can be taken to have been satisfied even though the goods could have been sold prior to the receipt of the foreign exchange. The Revenue interest he pleaded, is protected by the Bond or the Guarantee which the appellants had executed with the licensing authorities in terms of condition (ii) of the notification which is reproduced below for convenience of reference :- "(ii) that the importer at the time of clearance of the imported materials - (a) produces proof of having executed a bond or a legal undertaking before the Licensing Authority concerned, for complying with the conditions of this notification; and (b) makes a declaration before the Assistant Collector of Customs binding himself to pay on demand an amount equal to the duty leviable but for the exemption, on the imported materials in respect of which the conditions specified in this notification have not been complied with : Provided that a bond or legal undertaking and the declaration shall not be necessary in respect of imports made after discharge of export obligation in full, as evidenced by endorsement of Licensing Authority in the said certificate;" 41. He has pleaded therefore that the two conditions i.e. full export of the goods and realisation of the foreign exchange should be read separately. So far as the first condition is concerned, the same had to be fulfilled before the goods could be imported in terms of licence issued could be sold. So far as the second condition, he pleaded all that the appellants was required to show that the foreign exchange was ultimately realised.

42. The learned SDR however has urged that the wordings of notification is quite clear in this regard and till sale proceeds have been realised the goods could not have been sold.43. In the same context, the learned Advocate pointed out that the condition of the realisation of the sale proceeds can be considered as condition precedent only in the context of the transfer of the licence as in that event the bond executed by the appellants would have been cancelled and unless the sale proceeds had been realised, the transfer of licence could not be allowed. In this connection, he referred us to Para 67 of the Export Import Policy-1992-97 which is reproduced as under :- "67. A Value Based Advance Licence or the materials imported against it may be freely transferable after the export obligation has been fulfilled, export proceeds realised and the Bank Guarantee/LUT redeemed. The export obligation should have been discharged by exporting goods in respect of which benefit of Rule 191A or 191B of the Central Excise Rules, 1944 or input stage credit under Rule 56A or Rule 57A of the Central Excise Rules has not been availed of in respect of any of the inputs used in the manufacture of export products.

A Quantity Based Advance Licence (except Advance Intermediate Licence and Special Imprest Licence) or the material imported against it may be freely transferable after the export obligation has been fulfilled, export proceeds realised, and the Bank Guarantee/LUT redeemed. This facility shall not be available in respect of inputs for which input stage credit under Rule 56A or Rule 57A of the Central Excise Rules, 1944 has been availed of.

Export obligation should have been discharged by exporting goods in respect of which benefit of Rule 191A or 191B of the Central Excise Rules, 1944 has not been availed in respect of inputs permitted under the said licence.

The facility of transferability shall not be permissible to the duty free licence on which import of "Acetic Anhydride" is allowed.

Similarly the facility of sale/transferability of Acetic Anhydride imported against a duty free licence shall also be prohibited." 44. We have considered the submissions. We observe that the DEEC scheme and the Customs Exemption Notification are complimentary pieces of legislation with a view to effectuate the purposes of export promotion.

The facilities given under the scheme is to ensure that the exporters have the benefit of the duty free import of the raw materials to facilitate the export of the goods without duty burden on the raw materials. The substantive requirements of the scheme is that the export obligation as envisaged in the advance licence issued is fulfilled and the foreign exchange is repatriated. For this purpose, various conditions have been envisaged under the Import and Export Policy as also under the Exemption Notification No. 203/92. These conditions as set out are to be so interpreted that the subserve basic purpose for which the scheme has been formulated and the duty free import is allowed only in the event of all the purposes of the scheme are fulfilled. The purpose of the scheme as could be read from the various conditions are that the imported goods should be relatable to the export goods in terms of Import & Export policy as envisaged under the DEEC scheme and the goods imported duty free are either used for the purpose or are found to be usable in terms of Import & Export policy and the transfer of the licence is allowed only in the event of the export having taken place and the foreign exchange is repatriated.

The revenue interest is secured by execution of Bond/LUT. Having said so, we now proceed to analyse the condition which has been held not to have been fulfilled by the appellants.

45. In the present case, the full export as per the licence for the value envisaged in the advance licence issued for duty free imports according to the evidence produced by the appellants had taken place on 16-5-1994. The part of the goods had been imported before this date and the remaining goods in question were imported after this date. The part of the goods imported before the full export as above are stated to be over 45 MTs while the remaining over 1000 MTs of Acrylic Scrap off cuts etc. were imported after this date. The appellants received the sale proceeds in regard to the same at different items as per the information gathered by the department from the buyers of the appellants as under :- With reference to the above, we confirm that M/s. Tirumala Udyog, Bangalore exported 47,520 Acrylic Serving Trays to Calipar Trading Inc.

during May, 1994. We confirm that we have cleared the same and are enclosing copies of the relevant clearance documents.

A copy of our Purchase Order No.CTI/IMP/004/94, dated 11-4-1994 is enclosed.

Please let us know if you require any further clarifications.

Thanks and 46. To ensure the compliance with the requirements of the condition (vi), it is seen among others, as per condition (ii) of the notification before the first clearance of the goods could be allowed, a bond or a legal undertaking was required to be executed before the licensing authorities for compliance with the conditions of the notification and the appellants were also required to make a declaration before the Asstt. Commissioner binding to pay the demand equivalent to the amount of duty lent for the exemption, in case any condition of the notification was not complied with. This execution of the bond as per this condition would not be necessary, if the export obligation stood discharged before the importation. In the present case, the appellants had started importing the goods before completing the export obligation and they had executed the legal undertaking with the authorities concerned as seen from the endorsement made on the reverse of the licence. The appellants stood bound by the bond for complying with the conditions of the notification. The position therefore has to be examined in the background of the above facts as to the compliance of the requirements of the notification, particularly condition (vi) which has been held not to I have been not fulfilled by the appellants for the reason of the allegation that the goods had been sold before the fulfilment of the export obligation. The view I taken by the ld. lower authority is that the export obligation can be taken to have been fulfilled only when the goods of the full value as per the condition of the licence had been exported within the stipulated period and that export proceeds had also been realised.

47. It is interesting to see from a reading of the wording of condition (vi) is that the rider for sale of the goods "before the export obligation under the said licence has been discharged in full and exports proceeds realised", while it clearly requires that the export obligation under the licence is to be discharged in full; the realisation of the sale proceeds does not carry the word "full" before it. This indicates that full export obligation and realisation of the export proceeds have been treated as two separate events for fulfilment for the purposes of sale of goods imported duty free. The export obligation as set out under the condition of the licence endorsed on it is that the appellants were required to export 14,000 kgs of Garbage Plastic Bags (other than PVC) made out of plastic scrap for an FOR value of Rs. 1,69,02,000/-and earn US $ 5,45,000/-. This export obligation, the appellants, as per their plea, had been fulfilled by 16-5-1994 when the full quantum of the export bags had been exported (the value of the same is the subject matter and the dispute before us) and thereafter they had earned US $ 5,45,000/-. Thus, once the export obligation as per the licence had been fulfilled the question arises is whether the appellants can be taken to be debarred from the sale of the goods if the sale proceeds followed later after the export obligation had been fulfilled. It is observed that the repatriation of sale proceeds as has been urged before us that in the normal trading practice may not always be simultaneous with the export of the goods.

There could be credit terms for the payment which would go up to various periods. The interest of the Revenue is safeguarded by the legal undertaking as envisaged in condition (ii) of the notfn. and also an undertaking before the A.C. for payment of duty in case of violation of any conditions of the notification. The DEEC scheme is a benefi-cient piece of legislation and it has to be interpreted liberally so long as the conditions of Export & Import Policy and realisation of the sale proceeds are satisfied, so long as revenue interest stands safeguarded. While the condition of non-sale of goods till the full export has taken place as per the licensing condition i.e. export obligation, is made is quite understandable as physical export of the goods for the purpose of physical manufacture of the goods in question and the exports thereof as there is a nexus between the imported goods and the physical export of the goods. But so far as the realisation of the foreign exchange is concerned, so long as the Revenue interest is protected by a Bond and a Legal undertaking as per condition (ii), the bond could be taken to be a substitute for the goods as held by the Hon'ble Supreme Court in the case reported in 1984 ECR 138 at Paras 21 and 39 which are reproduced as under :- "21. It remains only to consider the argument that under the Sea Customs Act only the goods imported can be confiscated and therefore the money now lying with the Presidency Magistrate cannot be confiscated. I think this argument is wholly untenable, The money represents the goods. The order for sale was made by the High Court with the consent of both the parties because the goods were deteriorating. Therefore there can be no doubt that the sale proceeds of the goods which could be confiscated, can also be confiscated.

39. Before closing, we may briefly notice one more contention raised by Learned Counsel for the appellants. It is said that, as the goods imported were converted into money, the Customs Collector has no jurisdiction to confiscate the same and that he can, at the best, only trace the goods in whatsoever hands they may be. We have pointed out that the goods were sold only at the instance of the Court in the interest of both the parties, as they were deteriorating. The order is binding on the parties. The sale proceeds are preserved for the benefit of the party who finally succeeds. In the circumstances, it is not open to the appellants to argue that the money deposited in the Court does not represent the goods." In the same context, the Hon'ble Supreme Court in the compilation judgment in the case of Lokenath Tolaram Etc. v. B.N. Rangwani and Ors.

reported in 1983 (13) E.L.T. 1520 (S.C.) = ECR C 896 SC = 1974 Cen-Cus April 7 S.C. in Civil Appeal Nos. 1109, 1132 and 1133 of 1971 at Para 23 has held as under :- "The moneys deposited and the bonds executed by the appellants are really the substituted goods for the purpose of adjudication as to whether there can be any confiscation of goods or imposition of penalty. The parties agreed that the Excise Authorities would retain the securities for the purpose of adjudication proceedings in the event of failure of the appellants in the writ petitions filed by them." 48. Taking into consideration the purpose of the scheme, as mentioned by us above, we are of the view that even if the goods had been sold before the full amount of foreign exchange had been repatriated as the bond executed represented the goods and there could be no bar for sale of the goods so long as the export proceeds are shown to have been ultimately realised. It would be invidious burden on the importer and the user of DEEC scheme, if the sale proceeds of exported goods are not realised in full as per the licence, in view of some dispute or hitch for remittance of the amount from abroad and, sale proceeds take some time to come, to ask the party to hold on the goods when he has exported the goods, in full and revenue interest also stands protected by the execution of Bond and LUT.49. Looking from another angle, it is seen that condition (vi) envisages that the same material shall be disposed of to utilise in any manner, except for utilisation in the discharge of the export obligation. It is seen that the flexibility clause allows the import of any one of the material covered under the licence without limit except in the case of sensitive items. As it is the duty free import of materials as imported in terms of licence therefore may not be all needed for utilisation i.e. utilisation in the export of the goods as mentioned in the licence.

50. In our view, legally, no bar can be placed regarding sale of the goods, once the goods have been exported as per the condition of the licence, pending the receipt of foreign exchange, so long as the bond given by the appellants protects the interest of the Revenue in regard to the sale proceeds. Even otherwise in the present case no facts have been brought on record that the goods in fact had been sold before the realisation of the foreign exchange. The realisation of the foreign exchange as seen from the above communication which was received by the authorities from the buyer of the goods abroad took place between 23-7-1994 to 17-1-1995. There is nothing on record to show that these remittances which had been made from time to time had not been received. In the bank certificate these amounts shown to have been received between May, 1994 and March, 1995 as seen from the copy of the bank certificate which is filed in the paper book at Page 288 and 289 (Volume II) and which is enclosed as an Annexure. On 16-5-1995 the appellants have been given an endorsement for transferability of the licence on the appellants' showing that the full value of the sale proceeds had been received. The transferability of licence is dated 24-5-1995. It has not been shown that the goods in question had been sold before realisation of the sale proceeds as indicated in the above communication or which component relatable to the particular amount repatriated had been sold before the repatriation of the amount. It is seen that the statement which had been recorded from the appellants' authorised agent by the authorities and which has been cited supra is a piece of evidence against the appellants.

51. He has stated at Question No. 31 that they had manufactured the garbage bags out of the imported raw material imported by duty free and duty paid. With regard to endorsement on the shipping bills other than Shipping Bill No. 1676, dated 28-3-1994 and S.B. No. 2631, dated 10-5-1994 wherein they had indicated the utilisation of the imported raw materials as seen from Question and Answer No. 32. On a query, whether they had utilised the declared imported raw materials as the remaining goods had been declared to be out of indigenous raw materials which is contrary to Answer No. 31, he informed that they had given the blank declaration to the clearing agent. To a Question No. 34, he answered as under which is reproduced below :- "Q. 34 You have imported large quantity of Acrylic Plastic materials during the course of Export of Garbage Plastic Bags and also after completion of Export obligation. What have you done with that? A. 34 Partly we have in Export of Plastic Garbage Bags and Balance material other than what has been detained by Customs we have sold." The questions and answers Nos. 35, 36 and 37 also are reproduced as follows :- "Q. 35 Whether you have sold the Acrylic/other plastic material imported duty free for the manufacture of plastic garbage bags under the DEEC licence 118301, dated 11-2-1994 after completion of the Export Obligation and realisation of the Export proceeds? A. 35 We have sold the Acrylic/other plastic material imported duty free for the manufacture of plastic garbage bags under DEEC No. 118301, dated 17-2-1994 before completion of Export obligation and realisation of Export proceeds.

Q. 36 Do you know the conditions of DEEC scheme with regard to sale/disposal of duty free imported goods? A. 36 I am not aware of the conditions of DEEC scheme with regard to sale/disposal of Duty Free imported goods.

Q. 37 Do you know the conditions of customs notification 203/92, dated 19-5-1992 as amended? These are the questions which were put to the Power-of-Attorney holder and reply to which he pleaded the ignorance about the understanding of the scope of the condition of the Notification No. 203/92 and the answers given do not give out actually when in relation to the remittances received from time to time the goods were sold. As it is, it is seen from the realisation of foreign exchange was made over a period of time and no correlation has been established between sale of the goods and the realisation of the sale proceeds i.e. whether the sales took place before a particular quantum of sale proceeds were realised. Unless this is done, it could not be held that sale took place before the realisation of the foreign exchange and no information in this regard has been brought on record. It was therefore essential for the department to have elicited the information or gathered the information to show that the sale of the materials took place before the sale proceeds pertaining to a particular lot could be realised. It is in this, background, the ld. Advocate made the plea that no details regarding the sale of the goods had been brought on record and unless this was done violation of condition (vi) could not be held against the appellants. In the background of the above discussion on facts based on the department's enquiries, the benefit of notification will have to be given to the appellants giving them the benefit of doubt regarding sale of goods as held by the ld. Lower authority and the violation of condition (vi) therefore cannot be held against the appellants, even going by the department's interpretation also.

52. The next question which falls for consideration is whether the quantum as has been imported by the appellants was allowable. As it is the value of the licence covers the goods under the DEEC scheme.

However, the quantum of the goods which could be imported has to be related to value of the goods which had been exported in terms of condition of the DEEC licence. The ld. Lower Authority has held that the goods which were exported were heavily overvalued and he has taken consideration the cost of the raw material and after allowing huge margin of overheads and profit margin, fixed the price of each bag as Rs. 0.32 per piece as against Rs. 8.44 per bag as declared by the appellants in the export documents.

53. The contention of the ld. Advocate is that the ld. Lower authority should have not resorted to the method of cost construction for value of the Export goods and he should have resorted to the provisions of Section 14 of the Customs Act read with Valuation Rules. He has pleaded that ld. Lower authority has not proceeded according to law and therefore the value as adopted by him for the export goods was not sustainable in law. He has pleaded that he has no objection to the matter being re-considered in terms of Section 14 and has prayed for remand of the matter so far as this aspect is concerned.

54. We have considered the pleas. We observe that the ld. Lower authority's finding is based on two aspects i.e. while before the Customs Authorities in India the appellants had at the time of export declared the value of each bag as US $ 0.27 per piece which works out to approx. Rs. 8.44, the value declared by the importer i.e.

appellants' customer abroad before Customs authorities there as per the invoice submitted by him as US $ 0.01 and which works out to Rs. 0.32 per piece approx.

55. At this stage, the ld. Advocate in this regard pointed out that this invoice which was produced was not the one which was sent by the appellants as the appellants had sent the documents through the Bank and it is the invoice which was sent through the bank which was of relevant consideration. He pointed out that the signature on the invoices which were of buyers appeared to be that of the authorised representative of the appellants. The invoice so produced is more than in the nature of a reconstructed copy of the documents which were despatched by the appellants.

56. He has pleaded that the appellant has sought for the examination of the valuation aspect with reference to the invoices which were sent through bank and which formed the basis for remittances by the importer at the other end. He has pleaded that the customer at the other end appears to have manipulated the documents for Customs Clearance Authorities in Du-bai to subserve his own end there. He has pleaded no reliance could be placed on this as this document was not certified by any public authority or Notary. He has pleaded, given an opportunity, the appellant will be able to prove how this document is not genuine taking into consideration the documents under the cover of which the goods were sent and the invoices as were sent through the bank and which form the basis for the realisation. His plea is that the export value realised may not be always have any close nexus with the cost of production and it all depends on a particular exporter and get for the which are exported.

57. We observe that the mark-up of the price over the cost of production as brought out by the ld. Lower Authority in Para (h) of his findings is certainly disproportionate to the cost of production and the export price certainly is suspect. Suspicion, however, may not be a substitute for proof. Further, the issue will have to be determined with reference to the parameters under Section 14 of the Customs Act, 1962.

58. The ld. Lower authority's reliance on the documents on the information furnished by the Dubai Customs showing the price of each bag as US $ 0.01 will have to be decided with reference to the genuineness of the documents which were filed before the Dubai Customs.

The appellants will have to be given an opportunity to establish their claim that this invoice which was filed before the Dubai Customs was not genuine. The copy as it is not notarised for its genuineness.

59. The Section 14 of the Customs Act which is reproduced below for convenience of reference :- "Section 14. Valuation of goods for purposes of assessment. - (1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force whereunder a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale : Provided that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under Section 46, or a shipping bill or bill of export, as the case may be, is presented under Section 50; (1A) Subject to the provisions of Sub-section (1) or Sub-section (1A), the price referred to in that sub-section in respect of imported goods shall be determined in accordance with the rules made in this behalf." The ld. Lower Authority has not examined the invoices under which the goods were sent and also not compared the same with the invoices which were filed before the Dubai Customs by the importers at the other end to ascertain the genuineness thereof.

60. We observe so far as the plea of determination of value under Valuation Rules of Section 14 is concerned, the Section 14 has been reproduced above and speaks about determination of value for assessment purposes where the duty of customs chargeable with reference to the value and the parameters laid down thereunder are that the deemed assessable value would be the one at which such or like goods are ordinarily sold or offered for sale for delivery at the time of exportation in the course of international trade where the seller and the buyer have no interest in the business of each other. It is true that in this particular case no duty was chargeable on the exported goods and therefore provisions of Section 14 may not be straightaway applicable. But the fact remains that the same value as determined is relevant for foreign exchange remittance and therefore it would be in order to determine the export price taking into consideration the parameters as set out under Section 14. The Valuation Rules as it is in terms of Section 14(1A) would be applicable where the assessable value of the goods to be imported is to be determined. These rules therefore in law cannot be invoked for valuation of the exported goods but certainly these can serve as a guideline for valuation of the exported goods.

61. In view of what we have discussed above, while we hold that the ld.Lower Authority has rightly entertained a suspicion about the value of the Export goods as declared before coming to any conclusions, the ld.lower authority should have examined the issue in the context of parameters as set under Section 14 and also after making enquiries about the export of similar goods. We, therefore, hold that so far as the value of the exported goods is concerned, the issue will be required to be re-examined. The value of the goods which could be imported therefore will ultimately depend upon the value of the goods which is held to have been exported in the remand proceedings and the penal action also will have to be taken in regard to the same both from the point of view of licensing angle and the exemption from payment of duty.

62. In regard to the value of the imported Acrylic Scrap, we find that so far as the scraps are concerned, the ld. Lower Authority has taken into consideration the value of the contemporaneously imported goods and increased the value from US $ 150 to US $ 240 per M.T. and the appellants have not contested the same. The appellants have not been able to show as to how they were able to obtain the goods at US $ 150 when similar goods had been imported by them at US $ 240 per M.T.Therefore the charge of misdeclara-tion must be taken to have been established and the charge of undervaluation as alleged to have been brought home.

63. So far as Off cuts and Photoframes are concerned, the off cuts as description suggests are obtained by cutting off from the Sheets during the course of manufacturing. The same in our view, can be considered as Scrap. So far as Photoframes are concerned the ld. lower authority has stated that they are 'ready for use' and therefore these are articles of plastic. No specific plea in this regard has been made before us by the ld. Lower Authority. So far as the findings of the ld. Lower Authority in regard to Photoframes are concerned, we uphold the same.

64. The value as fixed by the Ld. Lower Authority at US $ 450 based on contemporaneous imports of Off cuts and the same value has been adopted for the Photoframe. This enhancement in value is not seriously contested by the ld. Advocate for the Appellants. Since the basis exists for this value, the same in law can be accepted and we therefore uphold this misde-claration of value in regard to these also. The imported goods, for this reason, therefore have been rightly confiscated under Section 111(m) of the Customs Act.

65. Inasmuch as we have remanded the matter for ultimate determination of the importability of the quantum of the goods which could be imported depending upon the value of the exported goods we observe that final determination of the redemption fine in respect of imported goods would depend upon the extent of the over-valuation of the exported goods if any which may be ultimately found and the claim of duty free importation and penalty would also likewise be determined accordingly.

We, therefore, while holding the goods to be confiscable for reason of misdeclaration of value of the imported goods hold that the appellants will be liable to penalty for this reason and order that the final determination of the redemption fine and penalty be done by the ld.Lower Authority depending on the quantum of the goods which were imported and held to have been cleared without payment of duty due and which are liable for confiscation by reason of not being covered by the licence, taking into consideration the value of the exported goods.

66. The appellants' plea regarding the levy of penalty on the partnership concern and the partners also, we observe that the levy of penalty on both the partners and partnership concern separately is not maintainable in law as partnership concern is a compendium of the partners and the penalty could be levied therefore either on the partnership concern or the partners and this should be borne in mind by the ld. Lower Authority while levying the penalty.

67. We, therefore, partially allow the appeal of the appellants by way of remand in the above terms and direct the ld. Lower Authority to re-adjudicate the matter in respect of what we have discussed above after affording an opportunity of personal hearing to the appellants after taking into consideration any further evidence that may be available and also that may be produced by the appellants in this regard. The pre-deposit already made shall abide by the outcome of the final proceedings.

68. The appellants in the course of arguments pleaded that they have suffered double jeopardy inasmuch as their licence which had outstanding balance amount over and above had been seized and they could not operate the same by the reason of seizure. It is open to the appellants to approach the licensing authorities for revalidation of the licence by explaining the circumstances under which they could not operate the same.

69. I have perused the orders recorded by the ld. Vice President which is placed before me on 10-11-1997. In the above said order from Paras 1 to 9 the facts of the case as well as the arguments of both the sides were narrated. The following points are set out for determination :- (1) Whether the licence produced is valid for the import of Acrylic Material.

(2) Whether the appellants had exported the goods using the Acrylic Material.

(3) Whether the appellants had correctly availed of the benefit of Notification No. 203/92.

(5) Whether the imported goods viz. Acrylic Plastic Scrap and Off cuts etc. were under-valued.

70. I respectfully agree with the findings of the ld. Vice President with respect to the first point to the effect that the licence produced is valid for the import of Acrylic Scrap material.

71. With great respect I am unable to agree with the findings of the ld. Vice President with respect to Points 2 and 3.

As far as the second point is concerned, it is to be seen that the appellants had to establish that they have used Acrylic Scrap material in the export product. The charge against them is that they have not done so. The case of the department is that on an intelligence gathered by the authorities that the appellants have exported the bags without using acrylic material and they had over-valued the same. During the course of the investigation the department had recorded the statement of several persons including the employees of the appellants. The authorities had further taken some samples of the Garbage Bags as were available in the appellant's factory and the same were also sent for Chemical Test. It was sent to the Chemical Laboratory as well as to an independent agency viz. CIPET. The ld. lower authority had taken note of the samples which were picked-up during the investigation to come to the conclusion that no acrylic plastic material had been used on the Garbage bags which were exported.

73. In this connection, he has relied on the statements of the appellants as well as their employees. It is now seen that the statement of Shri Ra-jesh Kumar Jain is recorded by the authorities. He is the Power-of-Attorney holder of Director of the appellants' firm. In his statement dated 6-11-1995, he has given several Answers to the questions put by the departmental officers. To Question No. 19, he has stated that their factory have manufactured 5590 Kgs. of Garbage Bags and 1000 Kgs. of Ganesh Poly type bags. He has also stated that the actual production of garbage bags started from December, 1993 to May, 1994. He has stated that 50 to 65 labourers are employed by them and they have no records for payment of the wages. He has also stated that the raw materials were obtained by way of import. He further stated that prior to export, they were manufacturing the bags. He also stated that they did not have any documents to show about the manufacture of Garbage Plastic Bags which are exported. He also answered that he has not maintained any raw material accounts for use in the manufacture of the Garbage Bags. He has also not maintained any Production Register for manufacture of Garbage Bags and there is also no document or proof to show the utilisation of the raw materials which they have indicated for the manufacture of Garbage Bags. They have packed the Garbage Bags in packets of 100 each and such 20 packets were packed in one carton.

He also stated that he is not aware of any export sample drawn at the time of export. He also stated that they have imported large quantities of Acrylic Plastics and partly they used it in the export of garbage bags and rest of the same were sold by them.

"Q. 16 From whom did you take the technology for manufacture of Garbage Bags exported by you.

A. 16 We were knowing the technology for the manufacture of Garbage Bags as process of manufacturing is very simple. The manufacturing process includes extruding LDPE Film in Extruder and get the film cutted into cutting machine and get it sealed in the bottom of the bags. After bag is completed by this process Acrylic piece will be concealed at the top with PP ropes and packed in 100 pieces. The machines required for the above process are Extruder with cutting and sealing and blower plant and hand cutters to cut acrylic pieces.

Q. 17 How the specifications of the Garbage Bags exported to Caliper Trading, UAE was arrived at and has it been incorporated in the Purchase Order? A. 17 We have indicated to them that the Plastic Garbage bags will be made by LDPE scrapped hard acrylic piece on the top with PP Rope and specification was not incorporated in the Purchase order." "Q. 31 Have you manufactured Garbage Bags from Raw Materials imported duty free or otherwise? A. 31 We have manufactured Garbage Bags from Imported raw material imported by Duty free and Duty paid.

Q. 32 Please see the shipping bills, the relevant invoices and packing list and declaration filed by you in case of export of plastic Garbage Bags under DEEC Scheme. It is seen that only in respect of two shipping bills i.e. 1676, dated 28-3-1994 and 2631, dated 10-5-1994 you have declared utilisation of imported raw material whereas in the case of remaining shipments you have declared utilisation of indigenous raw materials, which is contrary to your Answer No. 31.

A. 32 I have seen the Shipping Bills, the relevant invoices, packing list and declaration filed thereon. We have given blank declaration form as per Annexure-II without giving any details of actual plastic-scrap used, its nature, quality, technical characteristics, source of procurement (indigenous or imported). We have not bothered to check what declaration has been filed by Clearing Agent." 76. And also, to Question Nos. 35, 39 and 41, he has answered as follows :- "Q. 35 Whether you have sold the Acrylic/other plastic material imported duty free for the manufacture of plastic garbage bags under DEEC licence 18301, dated 17-2-1994 after completion of the Export Obligation and realisation of the Export proceeds.

A. 35 We have sold the Acrylic/Other plastic material imported duty free for the manufacture of plastic garbage bags under DEEC No. 118301, dated 17-2-1994 before completion of Export obligation and realisation of export proceeds.

Q. 39 Earlier you have indicated that you have used Acrylic handles for the manufacture of garbage bags. Have you manufactured any Acrylic Handles for use in the manufacture of Garbage Bags. A. 39 We have not manufactured any Acrylic Handles nor do we have any machinery to manufacture such Acrylic Handles. As we have taken strips out of Acrylic Scrap what we have imported from and cut into small rectangular sizes as indicated earlier Q. 41 Whereas from your above answers it is evident that you have violated the conditions of Customs Notification No. 203/92, dated 19-5-1992 as amended and therefore you are not eligible for duty free benefits of inputs of plastic raw materials under said DEEC licence and as such duty has not been paid on such inputs you are liable to pay interest on the duty that was payable from the date of duty for-gery/challan of import consignments. As you have not brought this to the notice of customs authorities what you got to say A. 41 I am ready to pay duty and interest due payable. However, as soon as adjudication authority decides about this, I will abide with this forthwith." The above statement has been written by me voluntarily without any threat or coercion and it is true and correct.

77. Thus, it is seen that what he has stated is that the bags are prepared from LDPE and thereafter Acrylic Handles are fixed on the same. It is in this way, he wanted to say that acrylic material is used in the bag, while it was manufactured. He has also admitted that he used to get the bags manufactured from M/s. Alpha Industries. Shri Giridhar Das of Alpha Industries is also examined in this case. He has clearly stated in his statement dated 17-10-1995 that he manufactured the garbage bags of 16" width and 24" length for the appellants. But he has clearly stated that he received the plastic scraps in crushed form containing LDPE and HDPE only and from that those bags are manufactured. In this statement, he has also stated in Question No. 9 and answered to that question to the effect that he has not used any acrylic material in the manufacture of the bags for the appellants, in view of the fact that he has no infrastructure for the manufacture of the same. He has also answered to Question No. 11 to the effect that the appellants supplied only LDPE and HDPE in crushed form and no acrylic material is used in the manufacture of the plastic bags.

Therefore his statement clearly establishes that no acrylic material is used by the appellants in the manufacture of the garbage bags, which is further corroborated by the other statements.

78. Next statement is that of Shri G. Sathya Narayana. His statement was also recorded under Section 108 of the Customs Act. He has stated that he is working in the factory of the appellants. He also stated that the appellants are manufacturing Garbage Bags and they are also getting the bags from other manufacturers. He has clearly stated that he is also involved in the manufacturing process. He, further, stated that in the factory of the appellants, there is a machine for grinding the plastic scraps. He further stated that there was no handle fixed to these bags which was manufactured in the appellants' premises. He further stated that these bags after manufacture are packed and are sent for packing in boxes. They were removed in Lorries. He also stated that no handles were fixed to these bags before they were packed. He also stated that he along with 2/3 labourers used to sort out the garbage bags which came out of the machine. The bags were used to be packed in garbage bags before packing the same into the corrugated boxes. 100 Nos. of garbage bags were put into a plastic bag and 20 of such plastic bags each containing 100 numbers of bags were put into the corrugated box and the corrugated box was sealed with adhesive tape. He also stated that no handle was put to these bags before they were packed. Therefore his statement negatives the version of Shri Jain that after the manufacture of plastic bags he was putting the acrylic handle to the same. It is therefore seen that this statement of Shri Sathya Narayana clearly goes to show that the plastic bags were not manufactured with acrylic strips. The statement of Shri Sathya Narayana corroborates the statement of Shri Giridhar Das that the plastic bags of the appellants were not manufactured from acrylic material.

79. This is further corroborated by the statement of Shri Ramanna who is also a worker in the appellants' factory. He also stated that these bags are manufactured from plastic materials and no handle was attached to the same. He fully corroborates the statement of Shri Sathya Narayana. Therefore the most important statement to be looked into is the statement of the workers viz. Shri Sathya Narayana and Shri Ramanna as well as the statement of Shri Giridhar Das who manufactured the garbage bags on behalf of the appellants. All these statements clearly show that these bags manufactured by the appellants were manufactured without any acrylic material.

80. It is in this background, the other evidence has to be tested.

These statements recorded from the above said persons is under Section 108 of the Customs Act 1962 and they have evidentiary value. In such circumstances, the ld. Lower Authority was correct in discarding the result of the Chemical Examiner in respect of the samples which had been sent by the jurisdictional officer. These aspects were taken into consideration by the ld. adjudicating authority. In Page 11 of the adjudicating order, he has discussed this aspect which reads as follows :- "(f) Coming to the test reports of Chemical Examiner, Custom House, Madras the reports indicate the presence of Acrylic handles, but the remnant samples received from the Chemical Examiner, Customs House, Madras had been weighed and found to be weighing around 30.71 gms in respect of Test Report of test Memo S. 59/82/95 ICD, dated 22-5-1995 and in the case of Test Report of Test Memo S/9/95 ICD, dated 30-5-1995 the acrylic strip itself weighed around 10.54 gms.

Therefore, it does not stand to reason as the export sample weighed only 11.0 gms per bag. Therefore, I do not want to place reliance on the test reports received from the Chemical Examiner, Customs House, Madras as the samples tested by them itself are not correct and do not correspond to the sample exported. Though this in itself is a sufficient proof, it is further corroborated by the fact that the test report on the test memo S/9/95 ICD, dated 30-5-1995, the bags had been tested to be made of HDPE with HDPE threads and acrylic strips whereas by importer's own admission the bags were made of LDPE, with threads made of PP as handles through holes in acrylic strips. LDPE bags cannot become HDPE bags on testing. There is a discrepancy with regard to composition of the thread used also. All these factors indicate, that reliance cannot be placed on the test report received from Chemical Examiner, Customs House, Madras. This fact of non-existence of handle is also supported by the deposition of the Customs Appraiser Inspector and the Agent for the Export. The Exporter has produced a letter issued by the JDGFT, Bangalore dated 9-8-1995. In the said letter, the JDGFT, Bangalore have clarified that as per the copies of the Shipping Bills furnished by you, the export product 'garbage plastic bags' are made out of plastic scrap of LDPE, PP and Acrylic' and as per the condition sheet attached to Licence No. 2026451, dated 17-2-1994, the relevant scrap can be imported and the relevant plastic scrap in this case is of LDPE, PP and Acrylic. The above clarification has been issued based on the contention of the Exporter and not based on physical verification of the exported goods and this is nothing but a clarification of the Policy in its general sense and it cannot be applied directly in the subject case unless the relevant plastic scraps declared by the exporter were used in the manufacture of exported plastic garbage bags. Therefore, I do not place reliance on this clarification, as Acrylic and PP scrap have not been used in the manufacture of exported plastic garbage bags. Further, the Exporter has contended that Customs authorities cannot sit in judgment over the power exercised by the office of the Controller of Imports and Exports which office has give an Import Licence and has also cited the judgments in the case of Shivasankar Tilakraj v. UOI - 1987 (28) E.L.T. 342 (Bom.); Overseas Cycle Co. v. Collector of Customs - 1992 (58) E.L.T. 248 (T); AM. Bussa Overseas and Properties Pvt. Ltd. v. Union of India - 1991 (53) E.L.T. 165 (Bom.). But I am of the view that these cases are not relevant and applicable to this case in as much as the validity of the licence is not a point of dispute but the utilisation of the raw materials declared to have been used in the exported goods, considering the facts of the case on merits." 81. It is thus seen that these aspects discussed by the ld.adjudicating authority in discarding the Chemical Examiner's Report are further strengthened by the above said statement. Therefore, when the evidence as a whole is viewed, it is clear that the case of the department that no acrylic material is used in the manufacture of the bags is fully proved in this case.

82. Another aspect is the Question No. 29 put to the officer as well as the answer which is discussed in Page 45 of the orders of the Learned Vice President. In the above said statement, the officer had clearly mentioned that the bags exported did not have acrylic handles. This statement given by the officer is a clarification and there is no reason to disbelieve this clarification furnished by the above said officer. But the appellants argued that their case is that there was strip of acrylic which was attached to the top of the opening of the bag through which the handle made out of other material was put. But there is no evidence in this regard available in this case. The best evidence is the evidence of Shri Ramanna and Shri Sathya Narayana who were the workers and their evidence do not show that there was any such opening. So also, the evidence of Shri Giridhar Das does not show the same. Their evidence clearly corroborates the evidence of this Officer.

A mere fact that the appraiser has passed the Shipping Bill without verification is no ground to hold that these bags were made of acrylic material. But the findings in this regard has to be arrived at by taking into consideration the several statements as referred to above and more particularly, the statement of the workers of the appellant.

In such circumstances, their statement establishes that no acrylic material was used in the manufacture of these bags and the ld. Lower Authority has rightly discarded the test result. The statement of Shri Julius and Shri Darshan also corroborates the above statements and in the background of the above evidences available in this case, the only conclusion is that the appellants have not used the acrylic material in the manufacture of these Garbage Bags. In such circumstances, as per Point No. 2, I hold that the appellants had exported the goods without using the acrylic material.

83. The next point for determination is whether the appellants had correctly availed of the benefit of Notification No. 203/92. The condition VI of the Notification No. 203/92 states that the exempt materials shall not be disposed of or utilised in any manner except for utilisation in discharge of export obligation, before the export obligation under the said licence has been discharged in full and export proceeds realised. It is therefore seen that on plain reading of the above said clause, it is very clear that the exempt materials should not have been disposed of before the export obligation under the said licence has been discharged in full and export proceeds are realised. It is now an admitted fact as admitted by Shri Jain himself that the imported goods were sold by him even before the realisation of the export proceeds.

84. A plea on behalf of the appellants is that the appellants had exported the goods in full and their export obligation for the full export of the goods could be taken to have been completed by that date.

It was pleaded that so far as the repatriation of the foreign exchange is concerned, as per the normal practice in the trade, the export and the receipt of the foreign exchange are never simultaneous and the sale proceeds of export are received depending upon the terms of payment agreed to between the buyer and the seller. It was also pointed out that the appellants had executed with the licensing authority in terms of condition (ii) of the above said notification.

85. As per condition (ii), it is stated that the importer at the time of clearance of the imported materials should produce proof of having executed a bond or a legal undertaking before the Licensing Authority concerned, for complying with the conditions of the notification and should make a declaration before the Assistant Collector of Customs binding himself to pay on demand an amount equal to the duty leviable but for the exemption, on the imported materials in respect of which the conditions specified in this notification have not been complied with. But it was also stated that such bond or legal undertaking and the declaration shall not be necessary in respect of imports made after discharge of export obligation in full. It was the argument of the ld.Advocate that as far as the first condition is concerned, the appellant has fulfilled the condition and as far as the second condition is concerned, he pleaded that all that required was that the foreign exchange was ultimately realised.

86. It is now seen that an exemption notification has to be interpreted on its plain wordings. In the decision reported in 1997 (3) Supreme Court Cases 511 in the case of Mohammad Alikhan and Ors. v.Commissioner of Wealth Tax, New Delhi at paras 6 and 7 it is held as follows :- '6. It is a cardinal principle of construction that the words of a statute are first understood in their natural, ordinary or popular sense and phrases and sentences are construed according to their grammatical meaning unless that leads to some absurdity or unless there is something in the context or in the object of the statute to suggest the contrary. It has been often held that the intention of the legislature is primarily to be gathered from the language used, which means that attention should be paid to what has been said as also to what has not been said. As a consequence a construction which requires for its support addition or substitution of words or which results in rejection of words as meaningless has to be avoided. Obviously the aforesaid rules of construction is subject to exceptions. Just as it is not permissible to add words or to fill in a gap or lacuna, similarly it is of universal application that effort should be made to give meaning to each and every word used by the legislature. In J.K. Cotton Spg. and Wvg. Milts Co. Ltd. v. State of U.P., it was observed by this Court : ".... the Courts always presume that the legislature inserted every part thereof for a purpose and the legislative intention is that every part of the statute should have effect." 7. In case of taxing statute it has been held by this Court in several cases that one must have regard to the strict letter of the law and if the Revenue satisfies the Court that the case falls strictly in the provisions of law, the subject can be taxed. This being the position, a fair reading of Section 5(1)(iii) of the Act would reveal that only the building or the part of the building in occupation of the Ruler which has been declared by the Central Government to be the official residence under the Merged States (Taxation Concessions) Order, 1949, will not be included in the net wealth of the assessee. The contention advanced by the learned counsel for the appellant that once a building has been declared as the official residence and a portion of the said building is under occupation of the assessee then the said building should come under the purview of Section 5(1)(iii) of the Act even if the substantial portion of the same has been rented out by the assessee to the tenant or for any other purpose would make the expression "in the occupation of a Ruler" redundant and those words in the provision would not have their play.' 87. It is therefore seen that it is an established principle, that the wordings of the notification are to be understood in their natural, ordinary or popular sense and phrases. Therefore the intention of the Legislature is to be gathered primarily from the language of the notification itself. As a consequence a construction which requires for its support addition or substitution of words or which results in rejection of words as meaningless has to be avoided. It is not permissible to add words or to fill in a gap or lacuna in incorporating the Condition No. (vi) of this notification. The Condition No. (vi) is clear to the effect that the exempted materials should not be disposed of unless and until the export obligation is carried out in full and export proceeds are realised. Therefore, it is very clear that unless the export proceeds are realised, the exempted materials cannot be disposed of. If the argument of the ld. Advocate that what it contemplates is that ultimately it should be shown that at a future point of time the export proceeds are realised is accepted, then the wordings in the above said clause becomes redundant. In other words, it will amount to substitution of words or it may result in rejection of the above said words used in the above clause, which is not permissible.

88. As held by the Hon'ble Supreme Court in the above cited case, in case of taxing statute one must have regard to the strict letter of the law and if the Revenue shows that the case of the appellants is hit by the above condition, the benefit should be denied to the appellants.

Hence, a fair reading of the above said clause, would reveal that it is only after the export proceeds are realised, the appellants could dispose of the exempted materials. If the plea of the ld. Advocate is accepted that all that is required to show is that foreign exchange was ultimately realised, then the words, used in the above said condition (vi), that realisation of the export proceeds is a condition for disposing of the exempted materials becomes redundant and the words in the above said notification will not have their play. In this view of the matter, it is seen that these conditions as set out are to be incorporated in the meaning attached to that and that cannot be interpreted in any way so as to make those words redundant.

89. The Hon'ble Supreme Court in the case of J.K. Cotton Spg, and Wvg.

Mills Co. Ltd. v. State of UP., reported in AIR 1961 SC 1170 has held as follows :- "the Courts always presume that the legislature inserted every part thereof for a purpose and the legislative intention is that every part of the statute should have effect." 90. It is therefore seen that the Tribunal should presume that the Legislature inserted the provision that exempted materials shall not be disposed of until the export obligation under the said licence has been discharged in full and export proceeds are realised. The Legislative intention is that it cannot be disposed of until export proceeds are realised and every part of that clause should be given effect while the same is interpreted. In other words, the same should be interpreted primarily from the language used in the above said clause. No addition or substitution of words is permissible. In other words, if the argument of the ld. Advocate is accepted, it will result in rejection of the words "and realisation of export proceeds" as meaningless and it will make those words redundant. Such a course is not permissible as was held by the Hon'ble Supreme Court in the above cited decision.

91. The statement of Shri R.K. Jain before the authorities rendered under Section 108 of the Customs Act clearly states that he has sold the above said goods even before the realisation of the foreign exchange. I am not able to agree with the findings of the learned Vice President that there is no such evidence in this case. In this connection, I reproduce, the statement of Shri Jain given before the officers which is filed in Page 137 of the Paper Book as under : "Q. 33 When was the last realisation of Export proceeds have been realised in case of export of garbage bags by STU under DEEC Book No. 118301, dated 17-2-1994? A. 33 The last realisation of Export Proceeds in respect of Export of Garbage Bags was on 6-3-1995 as per the bank records." Therefore, as per the answer, it is seen that the last realisation of the export proceeds in respect of garbage bags was on 6-3-1995.

92. To Question Nos. 35, 36 and 37, he has answered to the same which are at Page 138 of the Paper Book, it is mentioned as under :- "Q. 35 Whether you have sold the Acrylic/other plastic material imported duty free for the manufacture of plastic garbage bags under DEEC licence 118301, dated 17-2-1994 after completion of the export obligation and realisation of the export proceeds A. 35 We have sold the Acrylic/other plastic material imported duty free for the manufacture of plastic garbage bags under DEEC No. 118301, dated 17-2-1994 before completion of export obligation and realisation of export proceeds.

Q. 36 Do you know the condition of DEEC scheme with regard to sale/disposal of Duty Free imported goods? A. 36 I am not aware of the conditions of DEEC scheme with regard to sale/disposal of Duty Free Imported goods.

Q. 37 Do you know the conditions of Customs Notification 203/92, dated, 19-5-1992 as amended? These answers of Shri Jain goes to show that he had sold the imported duty free materials even before the completion of export obligation realisation of export proceeds. Therefore, there is evidence in this case, coming from the statement of Shri Jain himself that even before the completion of export obligation and realisation of export proceeds he has sold the plastic material imported duty free. The mere fact that these are only the questions put to the Power-of-Attorney holder is not sufficient to disbelieve them. The Power-of-Attorney holder is a person who looks after the affairs of the appellants and is authorised to answer to the questions. The answer given by them cannot be disbelieved on a presumption that he answered the same without knowing the implications of Notification No. 203/92. The reason is that these are answers given by him to the questions put by the authorities and these are questions of fact. It was not necessary for him to understand the scope of Notification 203/92 to answer these questions which are only questions of fact. Therefore, on that ground, it cannot be held that these answers of the Power-of-Attorney holder cannot be accepted. Even otherwise, it is now seen that these answers are given by Shri Rajesh Kumar Jain who is the General Power-of-Attorney of M/s. STU. Therefore, he is an authorised person who is in the knowledge of the facts in this case. These answers therefore have got evidentiary value which clearly establishes that these goods were sold even before the export obligations are met fully and even before the realisation of the sale proceeds.

93. In this view of the matter, I am of the view that the denial of the benefit of notification as held by the ld. Lower Authority on the ground of violation of condition (vi) is legal and proper and I uphold the same. In this view of the matter, I conform the duty demand of Rs. 72,47,895/- as per the Work Sheet (Annexure-II) as per Clause (f) of the impugned order.

94. The next question which falls for consideration is whether the quantum as has been imported by the appellants was allowable. As it is the value of the licence covers the goods under the DEEC scheme.

However, the quantum of the goods which could be imported has to be related to value of the goods which had been exported in terms of condition (ii) of the DEEC licence. In this regard, the ld. Vice President has dealt with the matter in Paras 31 to 38 of his order, and I agree with the view of the ld. Vice President that the ld. Lower authority has rightly entertained a suspicion about the value of the goods as declared before coming to any conclusions, and that ld. Lower Authority should have examined the issue in the context of parameters as set out under Section 14. Hence, I agree with his findings so far as the value of the export goods in concerned that the issue requires to be re-examined and the value of the goods which could be imported therefore will ultimately depend upon the value of the goods which is held to have been exported in the remand proceedings and the penal action also will have to be taken in regard to the same from the point of view of licensing angle and the exemption from payment of duty. For this purpose, the matter requires to be remanded.

95. In regard to value of the imported acrylic scrap the charge of misdeclaration is established and I agree with the above.said view of the ld. Vice President as mentioned in Para 39 of his order. So also, so far as the findings of the ld. lower authority in regard to Photoframes are concerned, I agree with the findings of the ld. Vice President that the department establishes the same as mentioned in Para 40 of the order of the ld. Vice President.

96. I also agree with the findings of the ld. Vice President as mentioned in Para 41 of the order that the goods are rightly confiscated under Section 111(m) of the Customs Act.

97. I also agree with the observations of the ld. Vice President in Para 42 that the final determination of the redemption fine in respect of imported goods, will have to be determined up to the extent of over-valuation of the exported goods, if any, which may be ultimately found and the claim of duty free importation and penalty also has to be determined in the light of the above said findings.

98. As far as the imposition of penalty on the partners as well as the firm are concerned, I agree with the findings of the ld. Vice President as mentioned in Para 43 of his order.

99. In view of difference of opinion on Point Nos. 2 and 3, the matter requires to be placed before the ld. Third Member for disposal.

100. The following difference of opinion are required to be referred to the ld. Third Member :- (1) Whether in the facts and circumstances of the case, the department has not established that the appellants had exported the goods without using the Acrylic material as held by the learned Vice President or whether the department has established the fact that the appellants had exported the goods without using the Acrylic material as held by the ld. Member (J).

(2) Whether the appellants are entitled for the benefit of Notification No. 203/92 as held by the ld. Vice President or in the alternative, whether the appellants are not entitled for the benefit of the above said notification as held by the ld. Member (J).

(3) Whether the demand of duty is to be determined depending upon the value of the goods which will be held to have been exported in terms of the remand order passed in this regard taking into consideration the findings of the ld. Vice President in regard to two points above or that the demand of duty has to be upheld based on the findings of the ld. Member (J) as above at Points 1 and 2.

Sd/- Sd/-(T.P. Nambiar) (V.P.Gulati) Member (J) Vice President 101. This matter has been referred to Third Member for a decision on the 3 points mentioned in para above.

102. Heard the ld. Advocate for appellants Shri B.V. Kumar and the ld.SDR, Shri R. Victor Thiagaraj. The ld. Advocate's arguments closely follow the reasoning given by my ld. Brother Vice President while that of the SDR is in support of the views of my ld. Brother Member (J) supra. I have considered the views of my ld. Brothers supra as well as those of the ld. Advocate and ld. SDR and find as follows :- 103. On the question of whether Acrylic material was used in the exported goods, I find that the following facts are significant : 103.1 The Department has established a well defined system for drawal of samples from export/import consignments, the safe transport and custody thereof to and with the Chemical Laboratory at the Custom House and the testing thereof by duly trained and experienced technical personnel who have been doing this work for years together, supervised directly by the Deputy Chief Chemist and indirectly by the Chief Chemist. The legal authority under which this system operates stems out of Section 144 of Customs Act, 1962 which reads as follows : (1) The proper officer may, on the entry or clearance of any goods or at any time while such goods are being passed through the customs area, take samples of such goods in the presence of the owner thereof, for examination or testing, or for ascertaining the value thereof, or for any other purposes of this Act.

(2) After the purpose for which a sample was taken is carried out, such sample shall, if practicable, be restored to the owner, but if the owner fails to take delivery of the sample within three months of the date on which the sample was taken, it may be disposed of in such manner as the Commissioner of Customs may direct.

(3) No duty shall be chargeable on any sample of goods taken under this section which is consumed or destroyed during the course of any test or examination thereof, if such duty amounts to five rupees or more." 103.2 Further, the Hon'ble Tribunal has held in 1995 (76) E.L.T. 114 (T) that the assessee/importer/exporter is bound by the result of the retest done at the CRCL, New Delhi under the Chief Chemist. Now, it is therefore as per the principles of equity that what is binding on the assessee is also binding on the Department. Therefore, it logically follows that any test result of the Custom House Laboratory, or if this is disputed by either side, then that of the CRCL (Chief Chemist) is normally to be respected and cannot be brushed aside lightly. Only when it is proved beyond doubt that this intricate process has not been carried out diligently and that therefore there has been gross negligence or fraud involved, then alone one can disregard these re-suits and that too after analysing the exact nature of this negligence or fraud, as derived from good evidence.

103.3 Now, let us examine therefore the grounds on which ld. Member (J) and the O-I-O have chosen to disregard these test reports. In brief these are : (a) the statement of Shri Rajesh Kumar Jain dated 6-11-1995 - Questions 32, 35, 39 and 41; (b) the statement of Shri Giridhar Das that no acrylic material was used; (c) the statement of Shri G. Sathya Narayana that no handle was fixed on these bags; (e) the views of the ld. Adjudicating Authority in Page 11 of O-I-O that when the export sample weighed only 11.0 gms per bag, how can test report say that the acrylic strip itself weighs 10.54 gms?; (f) the findings in Test Report dated 30-5-1995 that bags were of HDPE when exporter has said that they were of LDPE; and 103.4 I have considered these carefully, but find myself most humbly unable to accept the conclusions of my ld. Brother Member (J) because of the following : (a) In statement dated 6-11-1995 of Rajesh Kumar Jain answers to all questions other than 32, 35, 39 and 41 are clearly exculpatory. His answer to Question 32 is that the declaration in other than 2 Shipping Bills that indigenous material is used is that of the clearing agent, who has wrongly declared so. It appears that there is no evidence led to contradict this explanation. His answer to Q. 35 is that Acrylic material has been sold under DEEC No. 118301, dated 17-2-1994 before completion of export obligation, only shows that imported material was sold, but by itself cannot go to prove that no acrylic was used in the bags. His answer to Q. 39 is the most important one to the issue of handles. He clearly says that these bags do not have any handles (emphasis mine). The top of the bag is fixed with strips made of acrylic scrap (by merely cutting strips of required size). I find that there is no contradiction between this and his answers to Questions 16 and 17 as in each he has held that acrylic strips were not used to act as handles but only as supports to the upper open end of the bag and that PP rope (presumably thick cordage) was fixed through holes on these strip to act as loop for carrying the bags when filled-up. Therefore, it is clear that there were no "handles" in the design of the bag at all.

Instead strips of acrylic were affixed to the brim of the bags by folding over the bag sheets. This provided the necessary rigidity and strength to the bag for the twin purposes of filling it up and subsequent carriage. For lifting/handling the bags, holes were drilled in these strips (as there was no handle) and PP ropes were attached as loops (to act as unrigid handles to carry). This is also confirmed by reports for Test Memos No. S/59/82/95 ICD, dated 22-5-1995 and S/9/95 ICD, dated 30-5-1995. The Chemical Examiner has found "The upper portion is made of acrylic strip which is used as support for the bag....." Therefore, confusion, if any, was in the mind of the interrogator of this and other witnesses, who has presumed the existence of a non-existent handle of rigid variety and of acrylic and has therefore posed general and vague questions on "handle" rather than question each on the exact physical composition and process of manufacture. Wherever a question on above specific issues have been asked (as in questions discussed above) the facts discussed supra have clearly come out viz., there was no rigid handle, that PP ropes were used to create loops to carry the bags under use, and that rigidity and strength to the brim of these bags was provided by acrylic strips affixed thereto at the opening. Any shopper who has carried his purchase in poly-bags (plastic bags) from shops can confirm such a design. Depending upon the expected weight to be carried therein, the top opening of the bag is reinforced either with paper board, or plastic rigid sheets of any variety, and thereto is attached some cordage as loops by which the whole bag along with its contents is carried. In the instant case, the acrylic strips provide this strength and rigidity.

(b) The statements of both Shri G. Sathya Narayana and Shri Ramanna that no handles were attached, only corroborate the statement of Shri Jain that there were no acrylic handles at all. The two witnesses above have nowhere stated, as per the records available, that there were no strips on the brims of the bags to give it strength and the desired rigidity, or that there were no P.P. ropes (cordage) attached thereto.

(c) That leaves us with only the statement of Shri Giridhar Das that no acrylic material was used. I have perused the statement dated 28-6-1995 (Pages 41 to 45 of paper book Vol. III). The only answer which is somewhat in contradiction to the evidences discussed supra is at S. No. 11 and reads as under : Ans : It may be that acrylic was mixed with Polypropylene and HDPE. But I am not able to quantify in terms of percentage as HDPE and PP were similar to acrylic." Now, it is difficult for me to conclude by this answer that no acrylic was used in the bags or even than no acrylic was supplied as R.M. The witness at best expresses a doubt. Furthermore, as against this, his answer to Q. 8 clearly states that it is possible technically to manufacturing bags out of a mix of acrylic and other plastics. Also, his answers to Q. 3 is very significant. It reads as under : "3. What are the material you have used to manufacture garbage bags supplied to Tirumala Udyog? Ans : I have used HDPE, PP and Plastic Square supplied by the party to manufacture garbage bags without handle." (emphasis mine).

This answer clarifies all doubts. Firstly, HDPE granules are used for the main bag cavity walls of sheeting. Secondly, PP is used to extrude the cordage for affixing as loops. And thirdly, what is this "plastic square" he talks of? It is obviously the acrylic off-cut (scrap) out of which the strips are cut as discussed above. What else? And finally, in view of these constituents, he says that the bags have no "handles". In view of this analysis, I am of the view that the deposition of this witness only corroborates that of the others mentioned above. Thus, when everyone says there were no "handles", they only speak the truth.

There was no handle in the product design, if by "handle" what we mean is something by which the bag can be carried in use. But if one restricts the meaning of the word "handle" (by a wrong use of this technology) to strips embedded in the brim sheet opening to provide rigidity or support to the bag, then the misconception of an 'handle' creeps in. Technically, the PP rope loops perform the work of a handle.

103.5 This leaves only two more evidences to be discussed - the weight factor and "LDPE" instead of "HDPE". In the first case, as the weight of the Acrylic strip is quoted less than the weight of the sample, there is no logical inconsistency, though the miniscule quantum of the difference between the two does raise doubts about the accuracy of this report. In the second TR of date 30-5-1995, LDPE could have been a mistake. In any case, I cannot subscribe to a view that the entire intricate procedure of drawing and testing of samples in the Custom House Laboratory is to be brushed away only because two of the reports raise some scope for doubt. There is nothing on record to show that the Chemical Examiner concerned was examined on these discrepancies, which was the correct way to investigate and arrive at the truth.

103.6 The ld. SDR has also argued that the test results of a subsequent sample drawn and tested on 26-7-1995 of what is claimed by the Department to be remnants of same plastic bags as exported and got tested at CIPET, Hyderabad give a different test result. The ld.Advocate has argued that when both Shri JSA Julius Appraiser (Q. Nos. 5 and 10) and Shri J. Dar-shan Inspector (Q. Nos. 10, 11 and 16) have clearly stated that the samples tested by the Madras Customs House Lab.

were actually drawn from the export consignments, then no reliance can be placed on this test report. I would agree with the ld. Advocate on this because, as discussed above, it would be indiscrete, hazardous and setting-up a dangerous precedent, if, merely on suspicion, the entire system of drawal of testing of samples in a Custom House is discarded as worthless. When such test results exist and have not been shown to be squarely inaccurate or fraudulent (upon good evidence), then a subsequent sample dawn (many months after the export is over) from a factory premises where the exporter or his agent does not sign on the sample so drawn, and its test in a non-customs laboratory (contrary to provisions of Section 144 Customs Act, 1962) cannot be allowed to override the Department's test reports. This is a path fraught with danger - the danger of no "proper officer" verifying the authenticity of the sample, the danger of the exporter or his agent not agreeing to its authenticity as there is no counter-signature from them and also the danger of sitting on judgment over both the technical competence and the integrity of the Customs House Lab without adequate evidence.

104. In view of the foregoing discussions, I find that there is no preponderance of probability in the facts of this case of acrylic not having been contained in the garbage bags exported.

105. The second issue under reference is whether the appellants are entitled for the benefit of Notification No. 203/92 or not? I have considered the views of both my ld. Brothers as also of the ld.Advocate and the ld. SDR and I find that I am in total agreement with the views of my ld. Brother Member (Judicial) Shri T.P. Nambiar. While arriving at this conclusion, I am guided by the principles that :- (a) One Statute cannot (unless so specifically provided) be interpreted using the terms of another statute; and (b) Revenue notifications should be interpreted by a strict reading of its wordings, there being no room for finding or guessing intendments therein.

The first principle is laid down in 1989 (41) E.L.T. 186 (Bom.), 1985 (28) E.L.T. 15 (S.C.) and 1988 (36) E.L.T. 369 (Bom.) and the second in 1993 (64) E.L.T. 419 and 1989 (39) E.L.T. 292 (T). Since it is on the basis that a plain reading of the notification is what is warranted that my ld. Brother Member (J) inter alia rests his opinion, therefore I find myself in total agreement with his conclusions on this issue. I cannot in view of above, allow the position that the said notification distinguishes between the act of export and the receipt of foreign exchange remittances etc. as held by the ld. Vice President as it would not be correct to interpret it in terms of the Import Trade Control Order, the ITC Hand Book and the Public Notices issued thereunder. I, therefore, find that in the facts and circumstances of this case, the appellants are not entitled for the benefit of the Notification No.203/92, as also held by the ld. Brother Shri T.P. Nambiar.

106. The third point referred to me is on the method of determining duty in view of the disagreement of views on the aforesaid two points between the ld. VP and ld. Member (J). In view of the aforesaid discussions and my humble opinion that : the exporters had violated the conditions laid down under Notification No. 203/92 and was therefore not entitled to the duty exemption available therein; it is clear that the demand of duty is to be determined accordingly, after redetermination of the values as already held by my ld. Brothers.

107. In view of majority opinion, it is held that the department has not established that the appellants had exported the goods without using the Acrylic Material.

108. In view of majority opinion, the appellants are not entitled for the benefit of Notification No. 203/92.

109. The appellants have not been able to show as to how they were able to obtain the goods at US $ 150 when same had been imported by them at US $ 240 per MT. Therefore the charge of misdeclaration is established and the charge of under-valuation has also been brought home.

110. So far as Offcuts and Photoframes are concerned, the off cuts as description suggests is considered as scrap.

111. So far as the finding of the ld. Lower authority in regard to Photoframes are concerned same is upheld. The value as fixed by the ld.Lower authority at US $ 450 based on contemporaneous imports of Off cuts is hereby confirmed.

Therefore, the misdeclaration of value in regard to these are also confirmed. Hence, the imported goods for this reason have been rightly confiscated under Section 111(m) of the Customs Act.

112. The final determination of the redemption in respect of imported goods would depend upon the extent of the over-valuation of the exported goods, if any, which may be ultimately found and also the penalty imposed on the appellants would also be determined accordingly in the remand proceedings. Therefore, it is held that the final determination of the redemption fine and penalty should be re-determined by the ld. Lower authority depending upon the quantum of goods which were imported and held to have been cleared without payment of duty due and which are liable for confiscation, and taking into consideration the value of exported goods. For this purpose the matter is remanded.

113. It is also held that the levy of penalty both on the partnership firm and the partners is not called for and penalty could therefore be levied either on the partnership concern or the partners. This should be borne in mind by the ld. Lower Authority while levying the penalty, in the remand proceedings.

114. In this view of the matter, since it is held by the majority decision that the appellants are not entitled to the benefit of Notification and since it has also been held that the decision of the learned lower authority for the increase in the value of the goods imported from US $ 150 to 240 Per MT (imported acrylic scraps) has been rightly arrived at, therefore, the duty of Rs. 72,47,895/- as per the work sheet at Annexure II to Clause (f) of the impugned order is hereby confirmed.

115. In view of the majority decision that the acrylic scrap was used in the exported garbage bags, the licence in question is valid.

116. In the result, the impugned order is partly set aside and partly confirmed in terms of the above observation.

117. The appeals are disposed of in the above terms.

Sd/-(V.K. Ashtana) (T.P. Nambiar) Member (T) Member (J)