- Broad nexus is essential and not product-to-product nexus is necessary under Target plus scheme.

PJ/Case Laws/2012-13/1218

Case:- MMTC LTD. VERSUS COMMISSIONER OF CUSTOMS, VISAKHAPATNAM

Citation: - 2012 (282) E.L.T. 476 (Tri.-Bang.)

Issue: - Broad nexus is essential and not product-to-product nexus is necessary under Target plus scheme.

Brief fact: - This application seek waiver and stay in respect of the adjudged dues. The impugned demand of duty arises out of denial of the benefit of Notification No. 32/2005-Cus., dated 8-4-2005 in respect of RBD Palmolein imported by the appellant under Target Plus Scheme. Under the Scheme as embodied under the Foreign Trade Policy (para 3.7) read with para 3.2.5(II) of the Handbook of Procedures Vol. II 2004-2009, the importer was entitled to use the credits which accrued to them from exports of goods falling under the same product group. The appellant had exported various products including Rice, Wheat and Maize under the Scheme and had accordingly acquired a total credit of about Rs. 119 crores. They imported Palmolein during August, 2008 by making use of this credit in terms of the aforesaid Notification. The Id. Commissioner, in adjudication of a show-cause notice which was issued to the appellant for denying the benefit of the Notification and recovering duty on the imported item on the ground that the imported item did not have any nexus with the exported goods, confirmed the demand of duty against the appellant, confiscated the imported goods with option for redemption against payment of fine, and imposed a penalty on them.

Appellant Contention: - The learned counsel has made the following submissions:-

(a)The goods imported by the appellant fulfilled the condition of 'broad nexus' with the exported goods as required under the Foreign Trade Policy and hence the benefit of the Notification should be admissible.

(b) The Board's Circular No. 21 /2007-Cus., dated 8-5-2007 which was heavily relied on by the adjudicating authority for holding that a product-to-product nexus was required was quashed by the Hon’ble Bombay High Court in the case of Essel Mining & Indus-tries Ltd. V. L101 1-2011 (270) E.L.T. 308 (Born)] and therefore the decision rendered by the Commissioner by placing reliance on the Circular will not be sustainable in law.

(c) The appellant fulfilled the actual user condition inasmuch as the commodity imported in bulk was got repacked into one litre packs by availing the services of supporting manufacturers and this activity amounted to manufacture and therefore the contra view taken by the Commissioner is untenable.

(d) The longer period of limitation is not invocable in this case as the appellant was under the bona fide belief that they were eligible for the benefit of Target plus Scheme.

The learned counsel has invited our attention to the relevant provisions of the Input-Output Norms laid down under the Foreign Trade Policy. He further submits that Rice, Wheat etc. figuring at Sl. No. E-38 and Palmolein figuring at SI. No. E-122 are both falling in the same chapter titled 'Food Products' and therefore the "broad nexus" test embodied in para 3.2.5(II) of the Handbook of Procedures stands passed in this case in favour of the appellant and therefore there is no reason whatsoever to deny the benefit of the Target Plus Scheme to the appellant

Respondent contention: - The learned Commissioner (AR) has opposed the present application on the strength of the findings recorded by the adjudicating authority.

Reasoning of judgement: - The only ground stated by the adjudicating authority in support of denial of the benefit of the Notification is absence of product-to-product nexus between the imported item and the exported goods. The Input-Output Norms referred to by the learned counsel indicate nexus between the item (Palmolein) and the exported goods (Rice, Wheat etc.) which are within the same product group (viz. Food Products). Tribunal has also found mention of this product group in the condition sheet attached to the authorization letter issued by the DGFT to the appellant for utilizing duty credit. Therefore Stay and waivers in respect of adjudged dues allowed.

Decision: -Application allowed

Comment :- This is very important decision on Target plus scheme. The DRI has booked a number of cases against the user of Target plus scheme. The DGFT has clarified the matter many times. It was held that board nexus between the products is required and it is not necessary for product-to-product nexus for availing Target Plus scheme. When the prime authority governing Target Plus scheme (DGFT) does not objection then the department should not have taken the objection.

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PJ/Case Laws/2012-13/1218

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