ORDER
S.K. Bhatnagar, Vice President
1. This is a stay application filed w.r.t. the order-in-original passed by the Collector of Customs, Mumbai dated 11-1-1997.
2. Ld. Counsel stated the appellants, a Government recognised trading house and a merchant exporter had obtained three quantity based advance licences between November, 1989 and July, 1990. The export product under all the three licences has Gamma Acid. The material permitted for duty free import was Beta Naphthol.
3. As the appellant was a merchant exporter, the export product was got manufactured through supporting manufacturers. In the matter under consideration, M/s. Gamma Colours Ltd., Vapi were the supporting manufacturers and the name of the supporting manufacturer was indicated in the advance licence itself.
4. The export obligation, both in quantity and in value terms, was fulfilled prior to the import of the goods.
5. A total quantity of 226.025 MTs of Beta Naphthol (BN) was imported under all these three licences. Of this total quantity, [164.5] MTs was imported directly by the appellant and made available to the supporting manufacturer in entirety, as required under the law. The balance 61.525 MTs was imported directly by the supporting manufacturer based on Letters of Authority issued by the appellant.
6. Of the 164.5 MTs imported directly by the appellant and made available to the supporting manufacturer, 26.83 MTs was not accounted for by the supporting manufacturer and was sold in Mumbai.
7. A show cause notice was issued on 10-5-1995 proposing to recover duty on the entire quantity of imported BN Under Section 28 of the Customs Act, 1962.
8. Pursuant to personal hearings held on 30-7-1996,1-8-1996 and 20-8-1996, the Commissioner passed the order-in-original dated 11-1-1997. By the said order, the ld. Commissioner had held that duty of Rs. 18.93 lakhs on 26.83 MTs of BN directly imported by the appellant and made available to supporting manufacturer but not utilised by the latter according to the provisions of Para 250 of the Export-Import (EXIM) Policy would be the liability of the appellant.
9. The Commissioner refrained from imposing any penalty on M/s. Usha on the ground that they had taken all reasonable steps to ensure that the imported goods are used in accordance with the Policy and hence had not done any act that would render them liable for penalty Under Section 112(a) of the Customs Act, 1962.
10. In Para 11(c) of the order, the ld. Commissioner had categorically observed that the quantity of 164.5 MTs imported by M/s. Usha was made available in toto to Gamma, the supporting manufacturer. Similarly, in Para 11(d) of the order, the Id Commissioner had also held that out of the quantity imported by M/s. Usha on behalf of the supporting manufacturers, 26.83 MTs had not been account for by Gamma. The duty liability of Rs. 18.93 lakhs on the quantity of 26.83 MTs has been fastened on Usha on the only ground that it has been imported by Usha but made available to the supporting manufacturer. In accordance with the licensing condition, Usha had discharged its export obligation in full. The BN imported directly by M/s. Usha has also been made available in to to to the supporting manufacturer as required. Usha had neither sold or otherwise disposed of any of the material in contravention of the licence conditions. The liability for having disposed of 26.83 MTs by the supporting manufacturer should be entirely on the supporting manufacturer only and not on M/s. Usha. The finding of the ld. Commissioner is, therefore, not sustainable.
11. The demand of duty on M/s. Usha Under Section 28 of the Customs Act is also barred by limitation. There has been no mis-declaration at any point of time by Usha. In this connection, the declarations at p. 75,78 and 79 0f the paper book may be perused. The declarations contained therein would show that there is no suppression or mis-declaration and hence the demand is barred by limitation. In the light of the ld. Commissioner’s finding that the quantity imported by Usha was made available entirely to the supporting manufacturer and his finding in Para 11(i) that Usha had taken all reasonable steps to ensure that the goods imported as replenishment and have not done any act which would render them liable for penalty Under Section 112(a) of the Customs Act clearly show that Section 28 cannot be invoked against Usha. It is further reinforced by the finding in Para 11(i) that M/s. Gamma, on the other hand, have knowingly and admittedly disposed of the goods by sale at their Mumbai and Vapi office and would, therefore, be liable for penalty Under Section 112(a) of the Customs Act.
12. In the light of the fact that there has been no penalty on Usha, the applicant submits that as a natural corollary, the extended period of limitation cannot also be invoked.
13. In response to queries from the Bench the ld. Counsel stated that he will in particular draw attention towards the observations of the Commissioner in which he has given reasons for not imposing penalty evidently because they had taken all the precautions which they could. In response to further queries he stated that they were not required to execute any bond as the export obligations had already been fulfilled and it was his submission that the fact that the offence has really been committed by the supporting manufacturer and not by them may be kept in view. The Bench wanted to know whether there was any joint responsibility or they were entirely responsible or there was any vicarious responsibility in the matter for determining the liability for the purpose of payment of duty. It was his submission that even w.r.t. the provisions in the Customs Act regarding the relationship between the principal and the agent and the responsibility of the principal in this regard, the liability is only limited to the extent of agency terms and if the agent goes beyond that the principal is not responsible.
14. It was also his submission that since he had taken all the precautions that he could and the demand has been raised beyond the normal period of limitation of six months therefor the entire demand is time barred.
15. Furthermore, the Supreme Court has already held that in a case where mis-statement or suppression is alleged but not established and the penalty is therefore set aside the demand cannot be sustained. In this particular case there is no mis-statement or mis-declaration on their part at any stage and they had already fulfilled the export obligation therefore, the department should have proceeded against the supporting manufacturer whose particulars had already been declared in respect of default by the latter and not against them.
16. Ld. DR strongly opposed the prayer. He drew attention towards the relevant provisions of the Import Policy, 1993. Since the import of the goods took place against the advance licence issued under the DEEC Scheme, the conditions subject to which these licences are issued and the payment of duty is not required at the time of import are very important; and one of the conditions is that the importer must enter into a bond(s) for fulfilment of the conditions subject to which the licence is granted and the conditions prescribed by the relevant notifications. Therefore, it is not clear as to how the ld. Counsel is stating that he was not required to enter into any bond; and he would also like to mention in this connection that the condition of fulfilling the export obligation is a different condition than the condition for proper utilisation of the imported material for the purpose indicated. In this case the provisions of Para 250 have not been complied with and therefore, the appellant being the licence holder was liable to pay the duty demanded. In fact the Commissioner has already taken a very lenient view but the duty remains payable.
17. Ld. Counsel stated that he would like to draw attention towards the copies of the advance licences in which the condition of giving bank guarantee and bond has been deleted evidently because export obligation had already been fulfilled. However, without prejudice to his other arguments he has offered to deposit Rs. 5 lakhs. He is already in great difficulty because the supporting manufacturer has already gone in liquidation and therefore the Indemnity Bond which he had taken, he is not in position to get it enforced.
18. Ld. DR sought leave to mention that they have not pleaded any financial hardship.
19. We have considered the above submissions. We observe that the basic fact remains that the appellant is the licence holder who was required to comply with the conditions of the licence and exemption granted under the scheme. The question as to how far the liability rested with him and how far it was required to be jointly shared with the supporing manufacturer or otherwise passed on to the latter is a matter of detail and may be required to be considered at the time of hearing of the main appeal. At this stage looking to the totality of facts and circumstances, we feel that it would be sufficient if the appellants were asked to deposit a sum of Rs. 9 lakhs (Rupees Nine Lakhs Only). We therefore, waive the pre-deposit of the amount in question and grant stay of recovery subject to the appellants deposit the above amount of Rs. 9 lakhs within eight weeks from the date of receipt of this order failing which the appeal would be liable to be dismissed without further notice.
20. To come up for reporting compliance on 26th March, 1998.
