Case Law Details
Sunita Commercials P Ltd Vs C.C (CESTAT Ahmedabad)
CESTAT Ahmedabad held that Heading No.3102 1000 of the ITC (HS) Policy 2009-2015 allows import of Urea through STC, MMTC and Indian Potash Limited. Hence, goods cannot be held liable to confiscation. Consequently, no penalty u/s 112 can be imposed.
Facts-
Prior to 28-4-2015, under Heading No. 3102 1000 of the ITC (HS) Policy, import of Urea was allowed through STEs viz. STC, MMTC and Indian Potash Limited. The Government of India, Ministry of Chemical and Fertilizers had permitted the Appellant, Sunita Commercials P Ltd to import Technical Grade Urea through any STEs (i.e. MMTC, IPL, STC). The Appellant, accordingly, purchased on High Seas, consignments of Urea imported by the STE viz. MMTC sought clearance thereof with customs by filing Bills of Entry and the proper officer of customs granted clearance to the said goods.
The Additional Commissioner of Customs (SIIB) Mundra issued to the Appellant a Show Cause Notice dated 30-5-2018 proposing imposition of penalty on the ground that prior to 28-4-2015, “Urea whether or not in aqueous solution” was allowed to be imported only by STEs under Heading No. 3102 1000 of the ITC (HS) Policy 2009 – 2015 and that since the Bills of Entry were filed by the Appellant after purchasing Urea on High Seas from STE, such an import cannot be said to be by the STE but by the High Seas Buyer who files the Bill of Entry, and further that permission dated 15-5-2013 granted by Government of India was only for domestic purchase of Urea from STE and hence Urea so imported is in contravention of the provisions of Foreign Trade Policy and is therefore liable to confiscation under Section 111(d) of the Customs Act 1962.
Conclusion-
Held that the purchase from the foreign suppliers was made by STE viz. MMTC and Indian Potash Ltd and the goods were shipped by the foreign suppliers to MMTC/ Indian Potash Ltd and the Appellants have purchased the said goods on High Seas from the MMTC/Indian Potash Ltd.
It can be seen that Heading No.3102 1000 of the ITC (HS) Policy 2009-2015, does not stipulate that Urea was allowed to be imported only by State Trading Enterprises; the said Heading allows import of Urea through STC, MMTC and Indian Potash Limited. Clearly, the word used in the said Heading 3102 1000 is “through” and not “by” STC, MMTC and Indian Potash. In view of above, when the import is allowed “through” STC, MMTC and Indian Potash, it means that so long as the purchase of the Urea from the foreign supplier is effected by STC, MMTC or Indian Potash and payment to foreign supplier is made by STC, MMTC or Indian Potash, who in turn sell the same to a party in India whether on High Seas or otherwise, the import is clearly through STC, MMTC or Indian Potash.
Since the import was made through MMTC/Indian Potash Ltd and was in accordance with Heading No.3102 1000 of the ITC (HS) Policy and the letters of the Government of India, Ministry of Chemical and Fertilizers, the import was in accordance with law and therefore the goods cannot be held to be liable to confiscation under Section 111(d) of the Customs Act 1962. Consequently, no penalty is imposable on the Appellants under Section 112 of the said Act.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The present appeals are preferred against these five Orders-In-Appeal (“OIA”) involving common issue viz. whether the import of “Urea” purchased by the appellants on High Seas Sale from State Trading Enterprises (“STEs”) is in accordance with the ITC (HS) Policy. Since the facts are identical in all the above appeals, facts of M/s. Pooja Chemicals are considered for ease of convenience.
2. Briefly, the facts are that Prior to 28-4-2015, under Heading No. 3102 1000 of the ITC (HS) Policy, import of Urea was allowed through STEs viz. STC, MMTC and Indian Potash Limited. In that view, it appears that by letter dated 15th May 2013, the Government of India, Ministry of Chemical and Fertilizers had permitted the Appellant to import Technical Grade Urea through any STEs (i.e. MMTC, IPL, STC). The Appellant, accordingly, in the year 2013 purchased on High Seas, consignments of Urea imported by the STE viz. MMTC and sought clearance thereof with customs by filing Bills of Entry and proper officer of customs granted clearance to the said goods.
2.1 In April 2018, the customs department initiated investigations into the question of validity of the said imports. The Additional Commissioner of Customs (SIIB) Mundra thereafter issued to the Appellant a Show Cause Notice dated 30-5-2018 proposing imposition of penalty on the ground that prior to 28-4-2015, “Urea whether or not in aqueous solution” was allowed to be imported only by STEs under Heading No. 3102 1000 of the ITC (HS) Policy 2009 – 2015 and that since the Bills of Entry were filed by the Appellant after purchasing Urea on High Seas from STE, such an import cannot be said to be by the STE but by the High Seas Buyer who files the Bill of Entry, and further that permission dated 15-5-2013 granted by Government of India was only for domestic purchase of Urea from STE and hence Urea so imported is in contravention of the provisions of Foreign Trade Policy and is therefore liable to confiscation under Section 111(d) of the Customs Act 1962.
2.2 The Appellant replied to and contested the said Notice by its letter dated 14-7-2018 denying the contentions of the show cause notice and interalia submitted that the word used in Heading 3102 1000 of the ITC (HS) Policy is “through” and not “by”STC, MMTC and Indian Potash, it clearly means that purchase from the foreign supplier has to be by STE and that Appellant in turn can purchase from the STE and file the Bill of Entry. The Additional Commissioner of Customs, Mundra, however, by his Order-In-Original dated 25-04-2019 held that the goods are to be held liable for confiscation under Section 111(d) of the Customs Act 1962 and imposed penalty of Rs. 30,00,000/- on the appellant under Section 112(a) of the said Act. Similar Orders-In-Original were passed in respect of all the appellants herein. The first appellate authority has upheld the said Orders-In-Original. Being aggrieved, the appellants are in appeals before this Tribunal.
03. Shri J.C. Patel and Shri Rahul Gajera, learned counsels for the Appellants assailed the OIAs on the ground that under Heading No.3102 1000 of the ITC (HS) Policy2009 to 2015, does not stipulate that Urea was allowed to be imported only by STEs; the said Heading allows import of Urea through STC, MMTC and Indian Potash Ltd; the word used in the said Heading is “through” and not “by” accordingly, the Government of India, Ministry of Chemical and Fertilizers had by letters issued to Appellant, permitted the Appellant to import Technical Grade Urea through any STEs i.e. MMTC, IPL, STC and therefore it was permissible to purchase from STEs on High Seas, the Urea imported by STEs. There is no restriction in the IT (HS) Policy or in the Foreign Trade Policy for effecting High Seas purchase of Urea imported by STEs and that such imports is to be construed as “through” STEs. Further, apart from the submission that section 112(a)(i) has no application in absence of any prohibition against import of Urea, imposition of penalty was otherwise also entirely unwarranted in view of the consistent past practice of such imports as is evident from the following judgments and the Board Circulars:
(a) CC v Union Carbide India Ltd-1987 (27) ELT 241: This case pertains to the period June 1975when import of Manganese Ore was canalized through MMTC and in this case the Manganese Ore was sold on High Seas by MMTC to Union Carbide India Ltd,
(b) Hyderabad Industries Ltd v UOI–2000 (115) ELT 593 (SC): In this case before the Supreme Court, asbestos was canalized through MMTC who sold the same on High Seas to Hyderabad Industries and the Supreme Court held that duty was payable on the price charged by MMTC to Hyderabad Industries,
(c) CC v Coromondal Fertilizers LTd– 1988 (33) ELT 451: In this case rock phosphate and sulphur were canalized through MMTC who sold the same on High Seas to Coromondal Fertilizers Ltd.
(d) Godavari Fertilizers & Chemicals Ltd v CC–1986 (81) ELT 535: In this case Phosphoric Acid was canalized through MMTC who sold the same on High Seas to Godavari Fertilizers & Chemicals Ltd.
(e) Indian Farmers Fertilizers Co-op Ltd v PCC-2020 (373) ELT 530: In this case, Urea of Fertilizer grade, which is canalised through STE, was sold on High Seas first by STE to Government of India and then again on High Seas by Government of India to IFFCO
(f) Board’s Circular No.49/89-CX. 8 dated 2-11-1989 in which the procedure for taking Modvat Credit has been laid down in respect of the duty paid by Indian Oil Corporation in respect of import of Steel Sheets which was canalized through MMTC and which were purchased on High Seas by IOC from the canalizing agency, MMTC
(g) The view taken in the above circular is reiterated in Circular No. 23/90-CX.8 dated 9-4-1990.
(h) Public Notice:07/95-Cus-Bombay dated 12-1-1995
4. Shri G. Kirupanandan, learned Superintendent (AR) appearing for the department reiterated the findings given in the impugned Orders. He pointed out that by virtue of purchase of Urea on High Seas from STEs and by filing Bill of Entry, the appellant became the importer and that under the Import Policy the STEs who have purchased the Urea from the foreign buyer can sell the same to the Indian buyer after clearance from Customs and that condition no. (xiv) of permission letter of Government of India, Ministry of Chemical and Fertilizers, permission was granted to the Appellant only for domestic purchase of Urea from STE.
5. On carefully considered the submissions made by both the sides and upon perusal of the case records, it emerges that the purchase from the foreign suppliers was made by STE viz. MMTC and Indian Potash Ltd and the goods were shipped by the foreign suppliers to MMTC/ Indian Potash Ltd and the Appellants have purchased the said goods on High Seas from the MMTC/Indian Potash Ltd. It can be seen that Heading No.3102 1000 of the ITC (HS) Policy 2009-2015, does not stipulate that Urea was allowed to be imported only by State Trading Enterprises; the said Heading allows import of Urea through STC, MMTC and Indian Potash Limited. Clearly, the word used in the said Heading 3102 1000 is “through” and not “by” STC, MMTC and Indian Potash. In view of above, when the import is allowed “through” STC, MMTC and Indian Potash, it means that so long as the purchase of the Urea from the foreign supplier is effected by STC, MMTC or Indian Potash and payment to foreign supplier is made by STC, MMTC or Indian Potash, who in turn sell the same to a party in India whether on High Seas or otherwise, the import is clearly through STC, MMTC or Indian Potash.
5.1 Learned Commissioner (Appeals) clearly erred in holding that under the Import Policy although the STEs who have purchased the Urea from the foreign supplier can sell the same to the Indian buyer after clearance from customs, such sale cannot be permitted on High Seas before clearance of the Urea from customs and that by virtue of purchase of the Urea on High Seas from STE and by filing the Bill of Entry, the Appellants became the importer is irrelevant because there is no bar against the Appellants being the importer so long as the import is through STE. There is no restriction in the Policy against State Trading Enterprise making High Seas Sale of Urea which during the relevant period was permitted to be imported through State Trading Enterprise.
5.2 Since the import was made through MMTC/Indian Potash Ltd and was in accordance with Heading No.3102 1000 of the ITC (HS) Policy and the letters of the Government of India, Ministry of Chemical and Fertilizers, the import was in accordance with law and therefore the goods cannot be held to be liable to confiscation under Section 111(d) of the Customs Act 1962. Consequently, no penalty is imposable on the Appellants under Section 112 of the said Act
5.3 The Commissioner (Appeals) has erred in not appreciating the permission granted by the Ministry of Chemical & Fertilizers to the Appellant. The very opening sentence of the said letters/ Permission of the Ministry of chemical and Fertilizers has permitted the Appellant to import the Urea through any STE. The permission to import is addressed and granted to the Appellant and such import has to be made by the Appellant through any STE, which only means that the STE would purchase the Urea from a foreign supplier and then sell the same to the Appellant on High Seas. This is the only way in which the permission to the Appellant to import through STE can be implemented and operated. Learned Commissioner (Appeals) finding that per condition no. (xiv) of Permissions of the Government of India, Ministry of Chemical and Fertilizers, permission was granted to the Appellant only for domestic purchase of Urea from STE is also erroneous. There is absolutely no such restriction in the said condition no. (xiv). Neither does condition no.(xiv) contain any restriction that purchase shall be made only domestically from STE nor does it prohibit purchase on High Seas. All that condition (xiv) stipulates is that the Department of fertilizers has to be kept informed through the STE from whom the Urea is purchased, about the product being produced from such urea, the quantity required, etc. There is absolutely no stipulation in condition (xiv) that urea has to be purchased from STE only domestically and not on High Seas. On the contrary, the very first para of the said letter grants permission to the Appellant to import the Urea through STE. If as upheld by the Commissioner (Appeals), Appellant was only permitted to purchase domestically from the STE, the letter would not have said that the Appellant is permitted to import through STE. The authorities below have mis-read the Conditions Nos. (v) and (xiv) of the Permission letter dated 15th May 2013 of the Government of India, Ministry of Chemical and Fertilizers and in inferring therefrom that High Seas purchase by Appellant from STE was not permitted as per the said conditions. The said conditions are not related to the Appellant’s purchase from STE but are related to the purchases by the end users/ distributors from the Appellant. The meaning of the word “through” used in Heading No.3102 1000 of the ITC (HS) Policy, itself show that when the ITC Policy talks of import through STE, it means import using the help of STE and not import by STE.
5.4 Further, as per the regular practice accepted by customs for over several decades in case of imports which are canalized through STEs, the STEs place the order on the foreign supplier and thereafter effect High Seas sale of the same to the Indian Buyers. This is evident from the judgments and Board Circular supra. As laid down in the following judgments, where the import is in accordance with a consistent past practice, the question of confiscation under Section 111(d) and imposition of penalty under Section 112 of the Customs Act 1962 does not arise:
- Gujarat State Export Corporation Ltd v UOI – 1984 (17) ELT 50
- Memon Associates v CC – 1988 (34) ELT 367
- Trident Agencies v CC – 1989 (45) ELT 116
- Varson Chemicals P. Ltd v CC – 1987 (27) ELT 55
The judgment in the case of Marico Industries Ltd v CC – 2007 (209) ELT 403 relied upon by the Commissioner (Appeals) has no application to the facts of the present case. In that case the importer had directly established the Letter of Credit on the foreign supplier as result of which the import could not even be said to be through STE. Further, the import in that case was against Advance Release Order which is issued for sourcing inputs indigenously instead of importing against Advance License. The provisions relating to procurement of inputs against Advance Release Order which applied in that case did not provide for import through STE.
06. In view of above, impugned Orders vide which penalty under section 112(a)(i) of the Act on the appellants was upheld cannot be sustained.
Accordingly, the impugned orders are set aside. The appeals are allowed with consequential relief.
(Pronounced in the open court on 16.01.2023)
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