AI Structured Summary
Not yet generated for this judgment
Judgment
J.P. Devadhar, J.—Whether the CESTAT by its order dated 7th October 2011 was justified in directing the appellant-assessee to deposit Rs. 1 crore for entertaining the appeal against the Order-in-original dated 24th November 2009 is the question raised in this appeal. The appeal is admitted on the aforesaid question of law and taken up for hearing by consent of the counsel on both the sides.
The assessee-company has filed this appeal as a successor to and owner of M/s. Prakash Ispat Udyog. The assessee is engaged in the manufacture of angles, flat bars of Iron and Steel etc. On the basis of the prior exports effected, the assessee was granted advance licenses under which the assessee was entitled to import raw materials viz. prime steel billets without payment of duty under Notification No. 51 of 2000, dated 27th April 2000 and Notification No. 43 of 2002, dated 19th April 2002 (impugned notifications for short). Condition No. (vii) and (viii) of both the impugned notifications read thus:
(vii) that the said license and the materials shall not be transferred or sold;
(viii) that in relation to the said License issued to a Merchant Exporter,-
(a) the name and address of the supporting manufacturer is specified in the said license and the bond required to be executed by the importer in terms of condition (ii) shall be executed jointly by the Merchant Exporter and the supporting manufacturer binding themselves jointly and severally to comply with the conditions specified in this notification; and
(b) exempt materials are utilized in the factory of such supporting manufacturer for discharge of export obligation and the same shall not be transferred or sold or used for any other purpose by the said Merchant Exporter.
The assessee had purchased billets from Maharashtra Steel Rolling Mills Private Limited (''MSRM'' for short) another manufacture-exporter on high-sea sale basis and on arrival cleared the same without payment of duty by availing the benefit under the impugned notifications.
It is not in dispute that the duty free billets cleared by the assessee were sent to MSRM for conversion of billets into angles on job-work basis as per the Memorandum of Understanding (MoU for short) entered into by and between the assessee and MSRM.
By a show-cause notice dated 26th August 2008, the assessee was called upon to show-cause as to why customs duty on billets should not be demanded with interest and penalty, since the assessee has transferred the imported billets to MSRM thereby violating the condition (vii) of the impugned notifications. The assessee denied to have transferred the billets to MSRM. However, by an order-in-original dated 24th November 2009 duty amounting to Rs. 2.49 crores was confirmed with interest and after confiscating the billets in question, redemption fine and penalty was imposed.
Challenging the aforesaid order, the assessee filed an appeal and by the impugned order, the Tribunal directed the appellant to deposit Rs. 1 crore for entertaining the appeal. Challenging the aforesaid order, the present appeal is filed by the appellant/assessee.
The entire case of the Revenue as also, the basis on which the CESTAT has ordered pre-deposit is that in the case of a manufacturer-exporter there is no provision to send the goods to a job-worker and, therefore, the assessee, a manufacturer/exporter by sending the billets to MSRM has in fact transferred the billets in violation of condition No. (vii) of the impugned notifications.
Prima facie the argument of the Revenue is untenable, because, construing similar provisions contained in Customs Notification No. 32 of 2005, dated 8th April 2005 issued under the Target Plus Scheme, the Directorate General of Foreign Trade has issued a public notice on 15th February 2008 stating therein that the beneficiary status holder whether a manufacturer-exporter or merchant exporter can get the imported goods converted through a job-worker. It is further stated in the said public notice that if the imported raw materials are sold to the job-workers prior to the conversion, then only it shall be treated as violation of actual user condition of the notification. In the present case, the Tribunal has recorded a finding that the sale to the job-worker took place after the conversion. Therefore, prima facie it appears that sending the billets to a job-worker for conversion into angles by the manufacturer-exporter cannot be construed as transfer of billets especially when there is no bar for the manufacturer-exporter to get the raw materials imported under the advance licences get converted through a job-worker.
Moreover, the argument of the Revenue that the manufacturer-exporter covered under Notification No. 51 of 2000, dated 27th April 2000 cannot take assistance of a supporting manufacturer-job-worker is also prima facie without any merit, because, the DGFT has in the past admittedly granted advance licenses to MSRM as a manufacturer-exporter with the assessee as a supporting manufacturer for duty free imports under Notification No. 51 of 2000, dated 27th April 2000. Therefore, when according to the licensing authorities a manufacturer-exporter can get the raw materials converted through a job-worker/supporting manufacturer, it would not be open to the Revenue to contend that the manufacturer/exporter cannot take assistance of a supporting manufacturer.
Apart from the above, on perusal of the Hand Book of Procedure from 1993 onwards, it is seen that initially it was mandatory for the advance license holder, be it a manufacturer-exporter or merchant exporter to get the name of the supporting manufactures entered on the license. Later on, the requirement of endorsing the name of the supporting manufacturer has been dispensed with and by making the license subject to actual user condition till redemption of legal undertaking, the license holder was permitted to have the material processed through any other manufacturer including a job-worker. However, it was open to the license holder to get the name of the supporting manufacturer entered on the license if he chose to do so. By reading together paras 4.16 and 4.17 of the Hand Book of Procedure as amended up to 31st March 2003, it is prima facie seen that endorsing the name of the supporting manufacturer is at the option of the licence holder except in the case prior import.
The fact that the impugned notifications specifically provide that in the case of a merchant-exporter, the name of the supporting manufacturer shall be entered on the license and the bond shall be executed jointly for fulfilling the export obligation, it cannot be inferred that even in the case of manufacturer/exporter it is mandatory to get the name of the supporting manufacturer/job-worker endorsed on the license. It is relevant to note that in the present case, in view of the fulfillment of the export obligation, the assessee is not even required to execute a bond.
In these circumstances, the fact that the assessee manufacturer-exporter who has already fulfilled the export obligation has got the conversion work done through a job-worker would not, prima facie, constitute transfer of the imported raw materials, because, firstly there is no bar for the manufacturer-exporter to get the imported raw materials converted through a job-worker and thereafter sell the converted goods and secondly, the assessee has sold the goods after its conversion and not before its conversion.
For all the aforesaid reasons, in our opinion, it is a fit case for entertaining the appeal without any pre-deposit. Accordingly, the order of the Tribunal directing pre-deposit of Rs. 1 crore on the ground that there is no provision to send the goods to a job-worker by the manufacturer-exporter is quashed and set aside and the Tribunal is directed to hear the appeal on merits without insisting on pre-deposit.
We make it clear that the observations made herein are only prima facie observations and the Tribunal shall dispose of the appeal on its own merits without being influenced by this order. The appeal is disposed of in the above terms with no order as to costs.