Jyoti Balasundaram, Member (J)

1. After granting early hearing of the stay applications and appeals we find that it is possible to dispose of the appeals at this stage itself. After hearing for some time the applications for waiver of pre-deposit of penalty, we proceed to hear the appeals with the consent of both sides after waiving pre-deposit of penalties.

2. The facts of the case are that M/s. B.G.H. Exim Ltd. filed two bills of entry for warehousing of imported goods viz. High Speed Diesel Oil. The item was declared as bonded cargo for the purpose of supply to foreign going vessels as bunkers. The importer was granted warehousing licence under Section 58 of the Customs Act, 1962 vide letter dated 24-9-2002 to store HSD in the private bonded warehouse at Kandla. On the basis of intelligence and on examination of the documents submitted along with the bills of entry, it was seen that the importer had not produced any valid import licence for HSD and had also not submitted any documents showing export/supply orders for the consignments. HSD is a restricted item under EXIM Policy, 2002-07, falling under ITC (HS) code 2710.1930. The condition for import was that import was allowed through IOC subject to Para 2.11 of the EXIM Policy, 2002-07. The Department was of the view that the conditions mentioned in theC (HS) and EXIM Policy were not fulfilled and also appellant has contravened the provisions of the Foreign Trade (Development and Regulation) Act, 1992. Therefore, show cause notice dated 4-4-2003 was issued proposing confiscation of the entire quantity of HSD, imported, in terms of Sections 111(d) and 111(m) and proposing penalty under Section 112 of the Customs Act, 1962. The Commissioner of Customs held, after reference to Paras 2.28 and 2.36 of the EXIM Policy, that the import of HSD, which is a restricted item could be done only through canalizing agency i.e. IOC Ltd. On this basis he confiscated the consignment with an option to redeem the same on payment of Rs. 75 lakhs and also directed that the goods can be supplied only to EOU/EPZ units as clarified vide letter dated 21-11-2002 of the Ministry of Commerce and Industry, Department of Commerce or re-exported as Ship Stores under Clause 3(1)(d) of Foreign Trade (Exemption from Application of Rules in Certain Cases) Order, 1993 or Exim Policy, 2002-2007. He also imposed a penalty of Rs. 15 lakhs upon the importer and penalty of Rs. 10 lakhs upon the Chief General Manager. Hence, these appeals.

2. We heard both sides. The appellants submits that after passing the impugned order they have approached the Director General of Foreign Trade vide letter dated 17-6-2003 seeking necessary clarifications as to whether HSD can be imported under customs bond in a private bonded warehouse for supply to EOU/EPZ/SEZ and for supply to foreign going vessels, and by communication from the Ministry of Commerce and Industry, office of the Director General of Foreign Trade vide letter dated 23-6-03 they have received clarifications to the effect that restricted items such as HSD Oil can be imported under customs bond in a private bonded warehouse without an import licence. They, therefore, request us to send back the case to the Jurisdictional Commissioner for re-examining in the light of above mentioned clarification.

3. Ld. SDR reiterated the findings of the adjudicating authority.

4. We have carefully considered the submissions made by both the sides. The letter seeking clarifications is reproduced below :-

"We would like to seek clarifications on a matter where difference of opinion has arisen between the local customs office at Kandla and our interpretation of Exim Policy. The difference of opinion is on the matter whether HSD Oil can be imported by customs bonded warehouse setup in accordance with provisions of Exim Policy and the Customs Act. The difference of opinion is also on the matter whether such customs bonded warehouse can dispose/sell such imported HSD Oil to out bound vessel and to other EOUs or units set up in SEZ. We would request you to kindly give your clarification on the matter to put an end on this contention.

I. Policy Para 2.36

"goods, including those mentioned as restricted item for import or export (except prohibited items) in ITC (HS), may be imported under customs bond for export in freely convertible currency without a licence/certificate/permission."

II. Para (ii) of Policy Circular No. 7 (RE-98)/98-99 -

"Such private bonded warehouses can import any goods except prohibited items, arms and ammunition and hazardous waste and chemicals and warehouse them in such private bonded warehouses. No licence is required at the time of import of such goods even if the item is in the negative list of imports by such private bonded warehouses for warehousing them in such private bonded warehouses."

III. Para 3(1)(d) of Foreign Trade (exemption from application of Rules in certain cases) Order, 1993, which provides exemption from application of Foreign Trade (Regulation) Rules, 1993 to the import of any goods by transhipments or imported and bonded on arrival for re-export as ships stores to any country outside India and supply to 100% EOU/SEZ/EPZ units and units holding Advance Licence.

Further, we wish to inform you that we have been granted Warehousing Licence Under Section 58 of the Customs Act, 1962 for import of HSD. Copies of warehousing licence Nos. 369, dated 23-9-2002 and 278, dated 27-9-2002 is enclosed herewith. We also got clarification from Department of Commerce vide its letter dated 21 November, 2002 for supplying HSD to EOU/SEZ Units.

In view of the above provisions and explanations, we seek your kind clarification that HSD can be imported under private bonded warehouse for supply to EOU/EPZ/SEZ and for supply to foreign going vessel.

Appendix 19 of the policy duly filled in and signed is enclosed."

4. The clarification reads as under :-

"With reference to your letter on the issue of Clarification regarding import of HSD Oil (HSD Code 27101930) in the private bonded warehouse setup under Section 58 of the Customs Act, 1962, the matter was deliberated upon in this office.

It is hereby clarified that restricted items such as HSD Oil can be imported under customs bond in a private bonded warehouse without an import licence.

This issue with the approval of the Joint Director General of Foreign Trade."

5. We agree that the matter requires fresh consideration by the Commissioner of Customs, who shall re-examine the case, in the light of above clarifications from the office of the Director General of Foreign Trade, and pass fresh order in accordance with law after extending a reasonable opportunity to the appellants of being heard and explaining their defence.

6. The appeals are thus allowed by way of remand.