Arkema Catalyst India PVT. LTD. Vs Union of India

@JUDGMENTTAG-ORDER

1. Rule. Heard forthwith The Petitioners were importing raw material (inputs) which was to be used in the manufacture of goods which had to be exported to avail of duty exemption. There is no dispute that the petitioners, in fact, had used the inputs to manufacture goods which have been exported. The petitioner, as per the policy, was entitled to import the raw materials against an advance license in terms of the policy in force for the period 1997-2002. Para 4.1.1., states that the advance license is issued to allow duty free import of inputs which are physically incorporated in the export product (making the allowance for wastage).

2. The controversy involved in this matter is whether on account of less user of inputs in the production of goods than as per the norms provided in the policy, the petitioner in respect of such balance amount of inputs is not entitled to exemption. The respondents have demanded duty on such balance inputs on the ground that the manufactured goods contain less quantum of inputs.

3. The notification dated 19-4-2002, prima facie, exempts goods imported against an advance license from the various duties set out therein on the imports, on fulfilling the conditions of the notification. One of the requirements is export obligation. The notification, prima facie, does not provide for levy of duty on the input imported by remaining unused in the manufacture of goods which are exported, in terms of the quota required to be exported.

4. The respondents themselves have fixed the norms based on the percentage of the inputs used in the manufacture. In a more efficient system of production, this may result in using of less inputs than the percentage quantified under the norms. In the system if there is more wastage, it may result in more inputs produce than those prescribed by the norms.

5. A show cause notice came to be issued to the petitioner on the ground that the actual consumption of the Aluminium inputs in the manufacture of final product is 0.206 metric tonnes as against 0.268 metric tonnes, permitted under the SION. The contention of the respondents is that the appellant was entitled to import 200.814 M.T. of Aluminium inputs without payment of duty and the exemption was available only to the extent of raw materials actually consumed in the resultant product which is exported. The respondents'' contention was that quantity actually consumed was 154.358 M.T. and for the balance quantity of 46.456 M.T., the petitioner was not entitled to exemption under Notification No. 43/2002.

6. The question for consideration is - once a notification is issued, setting out the norms, an advance license is issued and inputs imported against an advance license, is it open to the Customs Authorities to go behind the license? A similar issue came up for consideration before the Delhi High Court in the case of C. L. Jain Woollen Mills Vs. Union of India, . The learned Bench of the Delhi High Court took the view that when the license is valid and duly covering the goods imported, the Customs Authorities are not competent to go behind the licence that impinge upon the jurisdiction of the licensing authority. Our attention was invited to several citations in the compilation handed over, which shows that various Benches of the Tribunal have taken a similar view. The learned counsel for the petitioners submits that once the percentage is fixed by the notification, mere fact that the one manufacturer may use more inputs and the another manufacturer use less inputs in terms of the norms prescribed is irrelevant as long as conditions of the notification are fulfilled. It will not be open to the Customs Authorities to charge duties on inputs legally imported as long the manufacturing activities subsist and even though goods were not exported, as long as the petitioners had exported the quota required for export.

7. In our opinion, considering the facts and circumstances, the petitioners have made a strong prima facie case. The issue is whether on the facts and circumstances, the petitioners have made out a case for hardship. The law on the issue of hardship in the matter of Central Excise has been set out in a large number of judgments. We may gainfully refer to the judgment in the case of Benara Valves Ltd. and Others Vs. Commissioner of Central Excise and Another, . The learned Supreme Court has taken a view that from a cursory glance, it appears that the demand raised has no leg to stand, it would be undesirable to require the assessee to pay full or substantive part of the demand. In B.M. Malani Vs. Commr. of Income Tax and Another, , the Supreme Court has further observed that demand to pay any unjust dues per se would cause hardship.

8. In the instant case, the petitioners have not violated the terms of the notification. The advance license was issued to them. They have complied with the terms of the advance license. The revenue where-ever it desired that when inputs are imported based on the norms and the inputs have been allowed based on a percentage content in the inputs with the export product with some wastage or on net to net basis or on net plus wastage basis, the exporter shall account for the quantity allowed for import minus the wastage permitted, if any, in the product exported. In other words, a provision has been made for accounting. In the instant case, there is no such provision.

9. In the circumstances of the case, in our opinion, the Tribunal has misdirected itself in law, in calling on the petitioners to pre-deposit the amount as ordered. There has been no violation of the notification and further prima facie the Customs Authorities cannot go behind the licence issued, in our opinion, calling on the petitioners to pre-deposit would by itself causing undue hardship to the petitioners.

10. In the light of that, the impugned order of the Tribunal [2009 (248) E.L.T. 329 (Tribunal)], calling on the petitioners to pre-deposit, is set aside. The petitioners to furnish a bond to secure the respondents within four weeks from today. The Appeal to proceed without pre-deposit subject to the petitioners furnishing the bond for the amount as set out earlier. Rule is made absolute accordingly. There shall be no order as to costs. The bond to be executed within eight weeks.