Export - Underutilisation of inputs - liability to pay duty so exempted on inputs so used

PJ/Case Laws/2011-12/1555

Case: ARKEMA CATALYST INDIA PVT. LTD. V/S UNION OF INDIA

Citation: 2012 (276) E.L.T 206 (BOM.)

Issue:- Whether an assessee is liable to pay duty which was exempted in case of under utilisation of the Inputs in exported goods?

Brief Facts:- Petitioners were importing raw materials (inputs) which were to be used in the manufacture of the finished goods which were ultimately exported in order to avail the duty exemption. The issue raised was that the petitioner was even though using the raw material for the manufacturing of goods which were eligible for the duty exemption if exported but petitioner used the lesser physical quantity of the inputs in the final product in comparison to the quantity fixed by the norms.

Revenue demanded duty on the ground that the manufactured goods contain less quantum of input. As per the Notification dated 19-4-2002 prima facie exempts the goods imported and used as inputs for manufacturing for goods which are meant to be exported will not be subject to duty.

The Tribunal ordered pre-deposit of amount demanded. Petitioner is in appeal before the High Court.

Petitioner’s Contention:- Petitionercontended that once a notification is issued even the custom authority can’t go behind the scope of the notification issued. The notification so issued did not directly say that under utilisation of the inputs would lead to the revocation of the duty exemption. The scope of the notification was limited to the export of the goods.

It was contended that once the percentage is fixed by the notification, mere fact that the one manufacturer may use more inputs and 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 as the manufacturing activities subsist and ven though goods were not exported, as long as the petitioners had exported the quota required for export.

Respondent’s Contention:- Their contention was that the Petitioner was entitled to import 200.814 m.t. of aluminium inputs without payment of duty and the exemption was available to the extent of the raw material actually consumed in the ultimate finished goods which is to be exported. The quantity actually consumed was 154.358 m.t. and according to union of India for the balance quantity 46.456 m.t. the Petitioner was not entitled to the said exemption.

Reasoning of Judgment:- The High Court noted that the issue raised was that once a notification is issued, setting out 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. It was noted that similar issued was raised in case of C.L. JAIN WOLLEN MILLS V/S UNION OF INDIA [1995 (79) ELT 197 (Del)] wherein the Delhi High Court took the decision that once the licence is valid and duly covering the goods imported, the custom authorities are not competent to go behind the jurisdiction of the licensing authority.

The Court held that petitioners have a strong prima facie case.

On hardship, reference made to Benara Valves Ltd v/s Commissioner of Central Excise [2006 (204) ELT 513 (SC)] wherein it was held 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 case of B.M. MALANI V/S COMMISSIONER OF INCOME TAX [2008 (306) ITR 196 (SC)] the Supreme Court has further observed that the demand to pay any unjust dues per se would cause hard ship.

On the facts of the present case, it was held that petitioners have complied with legal provisions, therefore, the Tribunal was not right in insisting on pre-deposit of amount demanded. There is no violation of Notification and prima facie, the Customs Authorities cannot go behind the licence issued calling on petitioners to pre-deposit would cause undue hardship. Impugned order set aside. Matter remanded.

Decision:- Petitioner allowed.

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PJ/Case Laws/2011-12/1555

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