Factory stuffing of Goods by Excise officers - whether amount to presentation of goods for Customs examination for export?

Case: BHOLEBABA DAIRY INDUSTRIES VERSUS UNION OF INDIA

Citation: 2012 (275) ELT 211 (Del.)

Issue:- Export – Factory stuffing of consignment by Excise officers – Consignments received later than date of imposing prohibition – whether presentation of goods for examination before the jurisdictional Central Excise Officers for export can be said to be presentation of goods for Customs examination for export?

Brief Facts:- Petitioner is manufacturer of diary products having factory duly registered with the Central Excise Division. They are eligible for opting clearance of goods for export and examination thereof at the factory itself in terms of CBEC's Circular No. 60/2001-Cus, dated 1-11-2001, being a Central Excise registered manufacturer. They have from time to time applied and obtained permission for factory stuffing under Excise provisions in terms of the aforesaid Circular. They had time bound export contractual obligations of 560 MT of casein prior to 18-2-2011.

A consignment of 135 MT of casein was made ready for export. Petitioner filed four shipping bills and sought factory stuffing permission in respect of the same. In terms of the factory stuffing permission they requisitioned seven containers for stuffing of consignments for exports at the petitioner's permission and thereafter applied to the jurisdictional Central Excise Officers for examination of goods, stuffing thereof in containers, sealing of containers and endorsement of ARE-1's.

The Excise Officers examined the goods under four shipping bills (in seven containers) on 16-2-2011, 16-2-2011, 16-2-2011 and 18-2-2011 and thereafter the goods were removed from factory on the same very date and they were handed over at ICD Tuglakabad on 17-2-2011 (at 06:07 am and 06:06 am in two containers); 18-2-2011 (at 04.26 am and 04.26 am in two containers); 17-2-2011 (at 07:23 am and 11:49 am in two containers); 19-2-2011 (at 2.47 am in one container).

Meanwhile, three Notifications were issued by Respondent No. 2 i.e. Notification No. 23 (RE-2010)/2009-2014, dated 18-2-2011, Notification No. 25 (RE-2010/2009-2014), dated 24-2-2011, Notification No. 37E (RE-2010)/2009-2014, dated 24-3-2011 whereby DGFT has prohibited export of inter alia various milk and milk products, including 'casein' and 'casein products', which the petitioner was exporting.

The containers of goods arrived at ICD Tughlakabad on various dates. Petitioner thereafter presented the Shipping Bills to the Adjudicating Authority for formal 'Let Export Order'. The Adjudicating Authority disallowed the exports on the reason that goods were presented for examination before the Custom Officer on 21-2-2011. Therefore, it cannot be permitted in terms of the said notification.

In appeal, the Commissioner (Appeal) allowed the appeal and the impugned order disallowing the export of the goods was set aside. The Commissioner (Appeals) concluded that the said order was not legal in view of the Notification No. 31/1997-Cus(NT), dated 7-7-1997 wherein it is mentioned that all Superintendents and Inspectors of Central Excise Department in any place of India have been appointed as Officers of Customs and therefore presentation of goods for examination before the jurisdictional Central Excise Officers for export is nothing but presentation of goods for Customs examination for export in terms of Para 9.12 of the Foreign Trade Policy and the stipulations of Notification No. 37(RE-2010)/2009-2014, dated 24-3-2011. As the goods were presented for examination before the said officers prior to 18-2-2011 the exports are not hit by the prohibition imposed under the Notification No. 23(RE-2010)/2009-2014, dated 18-2-2011 as the same are covered under transitional provision of the said notification.

Respondent No. challenged the impugned order before the Tribunal. It was noted that since the said appeal is yet to be listed and there is no stay of the operation of the said order, thus the order dated 27-04-2011 is operational.

Petitioner filed writ petition under Article 226 and 227 of the Constitution challenging inter alia Notification No. 23(RE-2010)/2009-14 dated 18.02.2010; Notification No. 25 (RE-2010)/2009-14 dated 24.02.2011, Notification No. 37E (RE-2010)/2009-14 dated 24.03.2011.

At the interim stage relief sought is for letting the petitioner to export 135MT of casein lying at ICD Tughalakabad, New Delhi and 70 MT of casein lying in their godowns. They are seeking permission to fulfill their total pending export orders of 560 MT of casein.

Petitioner’s Contention:- Petitioner contended that they have already suffered demurrage of more than 20 Lakhs and the same is being continued to be levied at an escalating rate. Their product has no domestic market and has a shelve life of one year. The goods were manufactured in January-February 2011 and five months have already passed. After clearance the required shipping time to destination is one and a half month and the importers also accept the product if approximate six months of the shelve life of the products is remaining. As on date five and a half months of shelve life of the product only remains.

With regard to challenging the said Notification, it was submitted that the effect of impugned Notifications is that all the plant and machinery worth crores of rupees is lying idle and the dues of the bank over Rs. 150 Crores are mounting and Petitioner has liability of paying interests and term loan repayment. They have given direct employment to hundreds of skilled and unskilled workers, professionals, technicians, and scientists in the field of Diary Science, Nutrition, Veterinary, Food Technology, life sciences and research professionals.

It was submitted that they had imported machinery against the EPCG license. As per the terms of this license, import duty was partially waived of against the guarantee given by petitioner that they will make exports to the tune of certain crores and as per the said license if they fail in discharging their obligation, then the petitioner shall have to pay import duty that was waived on import of machines along with interest. Petitioner further submits that Commissioner of Customs ICD Tuglakabad New Delhi has not till date, permitted the Petitioner to export 135 MT of casein, in spite of clear Orders dated 27-4-2011 passed by the Commissioner (Appeals) wherein, inter alia, it was held that the petitioner was to be permitted to export casein as their case was covered under Notification dated 24-3-2011. Therefore, Petitioner had no alternative except to file writ petition.

It is also mentioned in petition that the Additional Commissioner Customs ICD Dadri NOIDA in the matter of another exporter vide orders dated 4-5-2011 had permitted export of skimmed milk powder in respect of goods as were handed over to the Customs for export before the dead line i.e., 18-2-2011 as per Notification dated 24-3-2011 and examination of goods by the 'Excise Officer' were taken to be examination by the 'Customs Officer'. It is further stated that in case of M/s. VRS Foods Ltd, department did not file any appeal against the Orders dated 4-5-2011 and product which was factory stuffed and examined by officers of the Central Excise was permitted to be exported by the Customs Officials.

Respondent’s Contention:- Respondent No. 3-Authority contended petitioner’s export of 135 MT of casein is hit by prohibition imposed under Notification No. 23(RE-2010).

Although petitioner has filed 4 shipping bills for export of Acid Casein at ICD, Tugakabad on or before 18.02.2011, however it is contended that date of assessment of shipping bill and date of production of cargo to customs were subsequent to the date of Notification as cargo was handed over to the customs for examination and export subsequent to the said date. Respondent No. 3 is thus stating that the goods ought to have handed over to the customs on or before 18th February, 2011 for examination of export.

Further, it is contended that in case of factory stuffed cargo, where goods are examined in factory in the presence of jurisdiction Central Excise Officers, goods are not produced to Customs at the ICD/Port. Hence, it was not permissible to permit export of impugned goods due to prohibition in the Notification.

They submitted that since appeal has been filed by them against order dated 27th April, 2011 therefore the issue in question is now sub-judice and no order can be passed in present writ petition. It is submitted that, however, some directions may be issued to the Ttibunal for early disposal of appeal filed by Respondent No. 3.

Reasoning of Judgment:- The High Court perused the provisions of Notification No. 31/97-Cus(NT) dated 07.07.1997 wherein it is clearly mentioned that all the Superintendents and Inspectors of Central Excise Department in any place of India have been appointed as Officers of Customs. It was noted that respondent No. 3 has not shown/produced any other contrary Notification.

The Court observed that eligibility of Petitioner for opting clearance of goods for exports and examination thereof at the factory itself in terms of Board Circular No. 60/2001-Cus dated 01.11.2001. And the exports are permitted for dairy products manufactured by petitioner till 18.02.2011. It was noted that respondent No. 3 has also not disputed the fact that petitioner sought stuffing permission in respect of the same.

The Court noted that present petition has been filed for compliance of Order dated 27-4-2011 passed by the Commissioner (Appeals). It is not denied by respondent No. 3 that on the date of filing of petition, petitioner has incurred demurrage of Rs. 20 lacs and the amounts of demurrage against them are continuing every day.

Reference was made to Para 9.12 of the Handbook of Procedures 2009-14. It was noted that petitioner's case is that Notification dated 18-2-2011 was issued without any intimation/notice whatsoever given by the Revenue Authorities to them or any concerned parties though many courts have time and again held that legitimate expectations but a fact of the Rule of Law and Administrative action must be in conformity with the Legitimate Expectation of a persons. The petitioner says that in view thereof, respondents have no power to take away any vested rights with retrospective effect.

The High Court felt that in case there is any procedural delay, petitioner cannot be blamed as they have completed the formalities in terms of Notification dated 7-7-1987. Therefore, it is apparent on the face of it that the exports are not hit by the provision imposed under Notification dated 18-2-2011. The High Court could not understand why respondent No. 3 had not challenged the order dated 27-4-2011 promptly if they were serious about the said order, rather the appeal was filed after filing the present writ petition by that time the petitioner had to incur demurrages of Rs. 20 lakhs on the date of filing.

It was noted that in similar situations in the case of M/s. VRS Foods; orders were passed by Additional Commissioner, ICD on 4th May, 2011 and in the said case the goods were examined by the Central Excise Officer under their supervision for container No. SGCU 2458144 & TGHU 0144617 and brought in the customs area on 18-2-2011 (but after office hours) already had been examined by the Central Excise Officer on 18-2-2011. The respondents have banned the export casein which is made from less than 0.25% of the total milk production in the country as per the case of the petitioner while it is an admitted position that the respondents have not banned the export of the other milk products like cheese, ghee, butter etc.

It was noted that in the present case, in case export of Casein and Casein products of petitioner are not allowed, it will cause irreparable loss and injury to the petitioner as the said goods cannot be re-used. It is also a fact that there is no loss of custom duty as admitted by respondent No. 3. Therefore, the balance of conveyance even otherwise lies in favour of the petitioner and against the respondents. The Court relied upon the judgment of Division Bench of Bombay High Court in Parag Milk and Milk Products Ltd. v. Union of India [2007 (216) E.L.T. 664 (Bom.)].

Accordingly, the High Court direct Respondent-Authorities to allow petitioner to export the good in question in terms of prayer made in the application.

Decision:- Interim application allowed.

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PJ/Case Laws/2011-12/1559

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