Case Law Details
Commissioner of Customs Vs Aditya Birla Nuvo Ltd. (Karnataka High Court)
Conclusion: Imported material could be disposed of or utilized in any manner including local sale once the export obligations were fulfilled and the only requirement as per condition No.(vii) was that such inputs should not be sold or transferred in the market. In other words, the replenished inputs could be used in manufacture of other products and not necessarily incorporate in export of goods.
Held: Now we may advert to the first issue whether the respondent has violated the actual use condition as envisaged under Section Notification 30/1997. It is pertinent to note that none of the terms and conditions of Notification No.30/1997 envisgge physical incorporation of imported material in the goods that are exported towards fulfillment of export obligations. The aforesaid Notification grants exemption from the whole of the custom duty and whole of the additional duty to the ‘materials’ imported against an Advance Licence subject to conditions stipulated therein. The word ‘material’ has been defined in Explanation II to mean raw materials, components, intermediates, consumables, computer software and parts required for manufacture of resultant product specified in Part E of the said certificate. It is also pertinent to note that phrase ‘required to manufacture’ as stated in the Notification contemplates possible or intended use and not actual use as clarified in Circular No.36/97 dated 16.09.1997. Thus, the material need not be directly used in the manufacture of resultant product and proof of actual use is not a condition attached to the exemption Notification. The aforesaid position has been explained in the Circular No.36/97 dated 16.09.1997 which was issued specifically in the context of difficulties faced by garment exporters as the custom field formations were insisting that nexus between export product and duty free material imported was required to be established. The imported goods need not be physically used in the manufacture of goods that are exported. Condition (vii) of Notification No.30/97-Cus permitted discharge of export obligation either by usage of imported duty free material or by replenishment material. The only requirement as per condition No.(vii) is that such inputs should not be sold or transferred in the market. In other words, the replenished inputs can be used in manufacture of other products and not necessarily incorporate in export of goods. Thus, from the aforementioned reasons, it is evident that the respondent has not violated the conditions of the Notification No.30/97-Cus and has rightly imported the material and has discharged its export obligations. The tribunal therefore, in the impugned order has rightly held the Circular to be applicable in the case of the assessee.
In the instant case, the licensing authority competent to grant licences allowed the respondent to import polyester / cotton blended fabrics without payment of duty against the export of men’s shirts. The Directorate General of Foreign Trade had issued the advance licence for duty free import after due Notification that materials could be used for production of export goods. The respondent fulfilled the export obligations in respect of exporting men’s full sleeve shirts of specified value, which was examined by Joint Director of Foreign Trade and Export Obligation Discharge Certificate (EODC) was issued. Thereafter, it was not open for the officers of the customs department to contend that the imported material could not be used for manufacture of shirts and that respondent had not discharged its export obligation by violating the conditions of the exemption Notification No.30/97-Cus. In this connection, reference might be made to decision of the Supreme Court in TITAN MEDICAL SYSTEMS. The Tribunal on the basis of meticulous appreciation of evidence on record had held that the respondent had not violated the conditions of exemption Notification No.30/97-Cus and had discharged its export obligations. The only requirement as per condition No.(vii) was that such inputs should not be sold or transferred in the market. In other words, the replenished inputs could be used in manufacture of other products and not necessarily incorporate in export of goods. It had further been held that there had been no violation of actual user condition. The findings recorded by the tribunal had been recorded after appreciation of evidence on record, by which no stretch of imagination could be said to be perverse.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
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