ORDER
Gowri Shankar, Member (T)
1. M/s. MSA Exports (MSA for short), New Delhi, one of the two appellants before us, exported in November 1992 two consignments of plastic bags, in fulfillment of an obligation in the advance licence, grant of which an application had already been made. The advance licence was granted in December of that year. The appellant, in February next year transferred the licence to Plast Chem Industries Bombay, other appellant before us. This latter appellant imported three consignments of high density polyethylene. In the bill of entry filed for the clearance of the goods, the appellant claimed the benefit of the notification 203/92 and the benefit was also granted for fulfillment of any of the condition asked for and submitted before clearance. The goods were assessed finally before clearance.
2. On 3-9-1997 common notice was issued to both the appellants before us by the Commissioner of Customs, Nhava Sheva. The notice alleged that Modvat credit had been taken of the duty paid on the inputs used in the manufacture of exported product, thereby contravening the condition 5 of the notification 203/92, and hence the benefit of the notification was not available to the imported goods. The notice alleged that the fact of credit being availed was “deliberately suppressed or willfully mis-stated by the licence holder in various shipping documents namely shipping bills, AR4A form, and false declaration was made in the various shipping bills regarding non-availability of credit under 57A and fraudulent intention of duty benefit.” On this basis duty was demanded from M/s. Plastchem. The notice proposed penalty both on this appellant and M/s. MSA under 112 and 114A.
3. Both noticees filed replies to the Commissioner and M/s. Plastchem was also heard by him, the notice of hearing M/s. MSA having been received too late for it to attend the hearing. M/s. Plastchem the importer took the stand that the advance licence had been transferred to it, after completion of whatever formalities were required and it was therefore not required to satisfy the department that Modvat could not be availed of. It also contended alternatively that it had not misdeclared or suppressed any fact. MSA in its reply reiterates its contention that it had not availed of any Modvat credit. It was not the manufacturer of the goods. The actual manufacturer was also not registered with the excise authorities. The Commissioner refused to accept this contention. He found the absence of tangible evidence that credit had not been availed of and these conclude that there was a provision of condition 5 of the notification. He therefore demanded duty from Plastchem and imposed penalty on MSA Exports under Section 114A of the Act.
4. We shall first take the appeal of the latter. Penalty under Section 114A is imposable on the person from whom the duty or the interest of such duty is recoverable and no duty has been demanded from MSA. Provisions of Section 114A will not apply to it. Its appeal hence has to be allowed.
5. Let us now consider the case of the importer. The contention raised on its behalf is that it had acquired the licence by transfer from the original licensee after the bond or legal undertaking which the licensee gave was cancelled (Paragraph 126 of the Procedural Policy 1992-97) mandates the verification of the Modvat credit being availed of before the bond or undertaking redeemed by the licensing authority. The decision of the Tribunal in Goodluck Industries v. CCE -1999 (108) E.L.T. 818 is also cited in support. We are not able to find in paragraph 126 of the Handbook of Procedure a requirement for the licensing authority before canceling the bond or legal undertaking, to verify whether Modvat credit was or was not availed of. The paragraph only prescribes that a declaration by the applicant for the redemption that Modvat credit or proforma credit under Rule 191 A & B has been availed of by the manufacturer. The licensing authority is not required to look into the veracity of the certificate. This is in fact made clear from the provision in paragraph 126 dealing with redemption of the bond/LUT that the redemption by the licensing authority shall not prelude taking action against the licence holder or misrepresentation or misdeclaration conducted subsequently.
6. The notification itself provides that the importer, at the time of clearance of the imported material, execute a bond undertaking to produce proof of compliance with the conditions of the notification within the time given to him for this purpose and makes a declaration undertaking to pay on demand duty due but for the exemption on imported material in respect of which the conditions have not been complied with. It further provides that such declaration will not be necessary in respect of imports made after discharge of export obligation in full. This provision does not in any manner restrict, or confine to a particular period of time, the obligation placed on the importer to comply with the conditions of the notification including the condition that Modvat credit under Rule 56A or 57A of the Central Excise Rules had not been availed of or the other provisions of Rule 191 A or B not availed of, must be fulfilled. It is in fact for the importer, at whatever stage import is made, whether prior to or subsequent to the fulfillment of export obligation to demonstrate that the conditions in the notification have been availed of. It is the importer who claims the benefit of exemption, and it is he who has to satisfy the conditions subject to which the exemption is granted.
7. The view expressed in paragraph 5.3.1 of the Tribunal’s decision of the Goodluck Industries appears to be that a transferee of the licence cannot be asked import of goods to fulfill the condition relating to non-availment of Modvat credit. As we have said, it is the importer of the goods, whether transferee or the original licensee who is required to fulfill this requirement. It is difficult for us to appreciate the view in this decision that the exemption notification applies to two persons, the original licensee and the transferee of the licence. It may be correct, as the Tribunal observed, that it is easier for the exporter to satisfy the condition regarding Modvat credit not having been availed. This is obviously so, as it is he who has manufactured the goods or purchased the goods from their manufacturer. The person who ultimately imports the goods under such licence granted to the exporter may be many times removed from the exporter, the licence having passed through a number of hands. It would therefore be more difficult for him to satisfy the requirement of this condition. This however does not mean he is absolved of that requirement. All that it means is that he should take proper precaution, when requiring the licence that this requirement is satisfied. The aspects, which we have considered in coming to this conclusion, have not been shown to have been argued in Goodluck v. CCE.
8. The definition of the term “import” occurring in the Act as meaning inter alia bringing into India from any place outside India would apply in these circumstances in casting, who the importer is. The importer, thus is the person who caused the import to be made. The licensee unless he himself causes import to be made cannot be the importer. The term “importer” occurring in the notification can only be referred to the person who brings the goods into India and claims clearance by filing a bill of entry for that purpose. It is therefore clear to say the obligation to show compliance with the conditions of the notification falls on the importer, and no other person, irrespective, of whether the import is taken place prior to or subsequent to fulfillment of export obligation.
9. Nor is it possible for us to agree with the view that the licensing authority has satisfied himself before permitting the transfer of the grant that Modvat facility has not been availed of.
10. Paragraph 67 of the Policy which is referred to in the Tribunal’s order does not say specifically that the licensee must satisfy the licensing authority while applying for transfer that such facility has not been availed of, although it says that the licensee must declare that this condition has been availed of. Therefore, once such a declaration has been made the licensing authority is required, in terms of the Policy to proceed on the declaration, also does not require it to go through or verify the correctness of that declaration. The fact that such declaration has been made is itself is a conclusive evidence that such credit has not been availed of. It is likely possible that such declaration may be made either knowing it to be wrong or bonafide or on a mistaken information or information received from the supplier of the goods. It is precisely for this purpose that the provision in the paragraph that such transfer does not exclude action.
11. The decision in Nitco Marble & Granite (P) Ltd. v. CCE -1996 (63) ECR 111 and CCE v. Alfa Exim & Sandeep Impex (P) Ltd. – 1997 (95) E.L.T. 366 (Tribunal), which relied upon Nitco, were not on this aspect. They were on applicability of import licence. These would not be relevant to determine this question.
12. In the case before us, the Custom House had in question the declaration made by the importer when claiming the benefit of the exemption that Modvat credit had not been availed of. The benefit of exemption was therefore allowed. However as we have noted the importer being a transferee of the licence, was not required to bind himself undertaking to pay duty if the condition specified in the notification had not been complied with. This would obviously be the case since the primary condition that the goods are used in the designated export product had already been complied with before the licence had been issued. It was still at this stage open to the department to ask the importer of evidence that Modvat credit had not been availed of. It is the importer who could be required to furnish such evidence failing which the department would be right to deny the exemption. The department chose to accept the declaration and grant the exemption. If, now, it is alleged that the declaration has resulted in suppression and misdeclaration (both terms are used in the show cause notice), it is up to the department to establish by citing evidence that such misdeclaration or suppression has taken place. It is well to remind ourselves of the view expressed by the Supreme Court in CCE v. HMM -1995 (76) E.L.T. 497 (S.C.) for that the extended period contained in proviso under Section 11 A (2) of the Central Excise Act to be invoked acts or omissions which justify the applicability of any of the conditions in the proviso such as misdeclaration and suppression must be clearly spelt out in the notice to show cause. This observation will apply with equal force to a notice under the Customs Act, which invokes the extended period contained in the proviso under section 28(1). There is nothing at all in the notice or the order of the Commissioner to show existence to any such fact benefit to shown it has to be shown credit has to be wrongly availed of. It merely proceeds on the assumption, unsupported by evidence, that it is the case. The extended period contained in the proviso therefore will not be available to the department. Even in the absence of the extended period notice would be maintainable for the reasons it does not disclose material to come to prima facie condition that credit has been availed of. Accordingly it is not maintainable and duty demanded cannot be sustained.
13. Both appeals allowed. Impugned order set aside.