Customs, Excise & Service Tax Appellate Tribunal, West Zonal Bench At Mumbai

Commissioner of Customs (Export), Nhava Sheva V. M/s Shlok Exim Corporation

Appeal No. C/594/09 (Arising out of Order-in-Appeal No. 95(AC Gr. VII D)2009 (JNCH) dated 12.03.2009 passed by the Commissioner of Central Excise & Customs (Appeals). 17-08-2010

JUDGMENT

Per: Shri Ashok Jindal, Member (Judicial)

Revenue has filed this appeal.

2. The respondents imported 131 packages of Polyester Woven Fabrics (PWF) and filed ex-bond Bill of Entry for its clearance. They claimed duty free clearance of the same under Notification No. 203/92-Cus dated 19.5.1992 by submitting Release Advice issued by Mumbai Custom House against Value Based Advance Licence No. 0510233922 dated 05.1.2009 issued in lieu of the original licence No. 2270714 dated 9.1.1995 issued in the name of M/s M.S. Shoes East Ltd.

2.1 On scrutiny of the licence, if was found that the same was originally issued to M/s M.S. Shoes, New Delhi, the original copy has been reported lost and the present licence produced is a duplicate one issued by the DGFT in lieu of the original, made transferable by them on 18.12.2008 and revalidated upto 25.6.2009. It was also noticed that there is no endorsement on the licence regarding the condition of nexus between the imported material and material used in the manufacture of the goods exported. It was also noticed that the polyester fabrics sought to be cleared duty free could not be used in the manufacture of shoes, which were the resultant products exported. As per the licence, the item can be imported as synthetic material. While assessing the Bill of Entry, it was endorsed by the Asstt. Commissioner of Customs that ‘the licence granted by the DGFT is not valid and the description does not tally with the item imported i.e. Polyester Woven Fabrics’. Against the said endorsement, the respondent filed an appeal before the Commissioner (Appeals) and the Commissioner (Appeals) allowed the imports duty free. Aggrieved from the said order, the Revenue is before me.

3. Shri B.P. Pareira, learned JDR appeared before me and submitted that the Commissioner (Appeals) has committed the error by entertaining the appeal. The order appealed before the Commissioner (Appeals) was not any order in the eyes of law as it was only a query made to the respondents. He also submitted that the endorsement on licence of the condition of nexus between the imported material and the material used in manufacture of the goods exported has been deleted. He further submitted that the material imported by the respondent is a polyester fabric, which is not being used in the manufacture of shoes. Hence, the respondents are not entitled for duty free clearances taking the benefit of Notification No. 203/92 dated 19.5.1992. He also submitted that the department vide letter dated 30.03.2009 asked the DGFT whether the clearance of the goods should be allowed without ascertaining the nexus between the goods imported and the export product? The DGFT replied the same on 2.4.2009 stating that the condition regarding nexus is applicable.

4. On the other hand, Shri Prakash Shah, learned Advocate appearing for the respondent submits that there is a clear-cut endorsement on the Bill of Entry, which shows the decision taken by the Assistant Commissioner that - (a) licence as granted by the DGFT is not valid, and (b) the description does not tally with respect to the item in import i.e. polyester woven fabrics. That is the decision taken by the adjudicating authority and the same is appellable order before the Commissioner (Appeals) as per Section 128 of the Customs Act, 1962. He also submitted that the respondent did not delete any condition of the licence and in fact the respondent has been able to fulfill the condition of nexus between the imported material and the material used in manufacture of the goods exported. To support the impugned order, he has submitted that as per the technical opinion on polyester fabrics used in the manufacture of synthetic material, he produced an opinion of the Joint Director, New Custom House Laboratory, report dated 22.4.2009 holding that the fabric is polyester and hence, this is a synthetic material. He also placed on the record a clarification from the DGFT with regard to import of polyester fabrics, in which it is clarified that the said product is synthetic material which is used in the manufacturing of synthetic footwear as per SION Product Group 63 (Plastic) at sr. No. 208. He further submitted that on these conditions, after examining the case in detail, the Commissioner (Appeals) has allowed them to import duty free giving the benefit of Notification No. 203/92. He also submitted that the department did not take any objection before the Commissioner (Appeals) that the endorsement by the adjudicating authority is not an appellable order and the clarification has been sought by the department from DGFT. He also submitted that the department has taken the clarification after passing the impugned order and the letter written by the department and their reply by the DGFT are not placed before this Tribunal for consideration and the same cannot be entertained in absence of any evidence before this Tribunal.

5. Heard both sides.

6. On careful examination of the case records and submissions made by both the sides, I find that the Revenue has filed this appeal on the following grounds: -

(i) The endorsement on the Bill of Entry was query raised to the respondents which is not an appellable order, the Commissioner (Appeals) has no power to entertain the appeal on that endorsement which is in nature of query and not a final order.

(ii) The licence in question is not a valid licence. The respondent had failed to provide the nexus between the goods imported and the material used in the manufacture of resultant product exported.

(iii) The DGFT has also clarified vide letter dated 2.4.2009 that the condition relating to the nexus is applicable to the impugned licence.

7. The first ground taken by the learned DR that a query has been raised by the department to the respondent/importer saying that the licence granted by the DGFT is not valid and description of item imported does not tally with the materials used in the manufacture of resultant product exported was not a final order, it was only a query.

8. To decide the issue, I have to go through the provisions of Section 128 of the Customs Act, 1962, which are reproduced herein as under: -

SECTION 128.?Appeals to [Commissioner (Appeals). - (1) Any person aggrieved by any decision or order passed under this Act by an officer of customs lower in rank than a [Commissioner of Customs] may appeal to the [Commissioner (Appeals)] [within sixty days] from the date of the

9. From the bare reading of Section 128, it is clear that any order or decision taken by the adjudicating authority is an appellable before the Commissioner (Appeals). From perusal of the endorsement made by the adjudicating authority in the Bill of Entry that ‘the licence granted by the DGFT is not valid and the description does not tally with the item imported i.e. Polyester Woven Fabrics’ is conclusive in nature, hence, it is the decision taken by the adjudicating authority as no explanation has been sought from the importer with regard to the validity of licence or nexus. Hence, it is an appellable order. I do not find that the Commissioner (Appeals) has made any error in entertaining the appeal. The appeal on this ground is not maintainable.

10. The contention of the DR that ‘the licence granted by DGFT is not valid’ is without any basis. In fact, the licence granted by the DGFT is in lieu of the old licence which is a valid licence. The sole ground of holding the licence is that the condition of nexus was not mentioned in the new licence, the same has been clarified by the DGFT through their letter dated 2.4.2009 on which the department is relying that the condition of nexus exists. The DGFT did not deny that no licence is issued or the licence is forged. Hence, the contention that the licence is not valid is not acceptable.

11. The next issue is that whether the respondent has been able to provide nexus between the item imported and the material used in the manufacture of the resultant product exported. There is no dispute that the licence utilized for imports are transferable value based advance licence under Customs Notification No. 203/92. Under the notification, the value based advance licence permits import of inputs used in the export product as per standard input output norms within overall value of the licence.

12. In this case, the exported product is ‘synthetic footwear’ covered under SION, under which one of the input required for used in the manufacturing product is indicated as ‘synthetic material’. The importer has imported ‘polyester fabrics’ and sought clearance under the input item ‘synthetic material’.

13. Further, the opinion of the Joint Director, New Custom House Laboratory on similar samples in a similar case under the same licence, it has been categorically held that polyester woven fabrics is a synthetic material and are used in manufacturing of synthetic footwear and the same has been confirmed by the DGFT in their letter dated 10.6.2009. It is well settled law that the licensing authorities have the final say in the licensing matters and customs cannot go beyond the scope of licence as held by this Tribunal in the case of Hico Enterprises vide order No. M/1152/2005/WZB/C-I dated 20.9.2005. As per the licence, the respondents are entitled to import synthetic material and they have imported polyester woven fabrics, which is nothing but synthetic material as per the opinion of the Joint Director, New Custom House Laboratory and the confirmation of DGFT. The contention of the learned Advocate that a transferee is not required to establish the nexus between the imported goods and exported goods have the force as held by this Tribunal and the Apex Court in several cases. In this case, the respondent has been able to establish the nexus between the imported material and the material used in manufacture of the goods exported.

14. With these observations, the findings of the Commissioner (Appeals) are absolutely correct and I do not find any reason to interfere with the impugned order, same is upheld and the appeal filed by the Revenue is rejected.

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