ORDER
S.L. Peeran, Member (J)
1. The appellants are aggrieved with the order in appeal passed in Order No. 1129/90 BCH dated 18-7-1990. The question involved in this appeal is the grant of exemption of Notification No. 44/87-Cus., dated 19-2-1987 in respect of components of lime kiln (Industrial furnace) exported by appellants to Bhutan for erection of Lime Kiln (Industrial furnace).
2. The importer had imported components of Lime Kiln (Industrial furnace) against Advance Licence No. 3132379 dated 7-1-1987 and DEEC Book No. 00455 (Bom.) dated 7-1-1987. The components imported included instruments also, assessment of which was claimed duty free under the said advance licence and DEEC Book. However, the assessing authority assessed the said instruments on merits because there was endorsement in the DEEC Book to the effect, “Import of Instruments to be allowed on payment of duty only.” After the clearance of the impugned goods, the appellants filed a refund claim seeking exemption in terms of Notification No. 44/87-Cus., dated 19-2-1987. They claimed that the components had been exported to Bhutan for reaction of Lime Kiln (Industrial furnace) under a contract between M/s. Bhutan Carbide and Chemicals Ltd. Bhutan and the payment has been received in foreign currency. The Asstt. Collector of Customs rejected the refund claim on the grounds that the impugned goods were exported without carrying out any process of manufacture on the imported goods. He held that in terms of Notification No. 44/87-Cus., dated 19-2-1987, goods are allowed to be imported for manufacture of resultant product which is required to be exported. The goods had been exported in the same condition as they were imported and hence the claim was rejected. The learned Collector (Appeals) also rejected the contentions of the appellants. The appellants in this appeal are contending that they have fulfilled all the conditions of the Notification No. 44/87 excepting that the components imported for the assembly or manufacture of the resultant product were exported to Bhutan without carrying out any manufacture in India in terms of a contract with M/s. Bhutan Carbide & Chemicals Ltd. They say that these facts were also known to the ITC authorities who issued the advance licence and DEEC Book for the import of the said components of Lime Kiln. Since the components had been exported to Bhutan and payment for them had been received in foreign exchange as admitted by the Collector (Appeals) himself, the provisions of the manufacture in 44/87 ought to have been interpreted more liberally to avoid a manifestly unjust result. They contend that as per the explanation appended to Notification No. 44/87 dated 19-2-1987 “exempt material” means the material imported and specified in Part ‘C’ of the DEEC Book and eligible for exemption from Duty under this notification and “resultant product” means the goods specified in Part ‘E’ of the DEEC. Referring to Part ‘E’ of the DEEC Book No. 000455 against which the goods were imported, it could be seen that the components imported and sought to be cleared free of duty were also specified in Part ‘C’ of the said certificate. It is further stated that, in the Advance Licence and DEEC Book, the “resultant product” was shown as components of Lime Kiln. They say that by exporting the said components of the Lime Kiln they had thus fulfilled their export obligation in terms of Notification No. 44/87. It is further said that from the description of resultant product as given in the advance licence and DEEC Book, it could easily be inferred that the intention of the ITC Authorities was that the Lime Kiln would not be required to be manufactured in India otherwise they would have mentioned “Lime Kiln” against the resultant product and not component of Lime Kiln. They further say, that there is no stipulation in the Notification No. 44/87 that manufacture of resultant product must compulsorily be undertaken in India, therefore, the notification should not be construed literally but liberally benefit should be granted to them.
3. Arguing for the appellant, Dr. Nitin Kantawala learned Advocate submitted that although there is no manufacture on the goods imported and it was sent to Bhutan in ‘as it where basis’ yet the terms of the notification in question had been fulfilled. That the Customs authorities cannot deny the benefit by going behind the licence when all the terms of the licence and conditions of DEEC had been followed. Although the goods required to undergo some process of manufacture before exported yet this process need not be carried out in India itself but the importer could carry it out in Bhutan also as per the terms of their agreement with their party. The Govt. of Bhutan had certified about the manufacture of the resultant product and therefore, the terms of the notification are deemed to have been fulfilled. The imported components were for the use in the Lime Kiln and the Lime Kiln had been set up in Bhutan and the product ultimately put to use. He relied on the following notings in support of his case :
(i)
State of Tamil Nadu v. Kodaiknal Motor Union (P) Ltd. – reported in 1986 (8) ECR 241
.
(ii)
Indian Telephone Industries v. CC, Madras – reported in 1987 (30) E.L.T. 523 (Tri.)
.
(iii)
Commissioner of Income Tax, Bangalore v. J.H. Gotla – reported in AIR 1985 SC 1698
.
4. Shri K.K. Bhatia, learned JCDR countering the arguments of the appellants advocate, contended that the imported item has to undergo process of manufacture and bring into existence a new resultant product and only then it could be exported, to claim duty exemption as per the DEEC Scheme. The imported item had been exported as it is and therefore, the rejection of the benefit of the notification by the lower authorities is justified. He contended that in taxing statute there is no place for equity and the terms, the notification has to be strictly construed. He contended that the case in hand is a case of duty drawback, which case should have been examined by Govt. of India and that the appellant cannot prefer appeal before Tribunal on this subject, as the case was not of refund but of duty drawback. He further pointed out that the DEEC itself is not applicable in this case and that export to Bhutan are not eligible for drawback and if it so resorted than it would nullify the provisions of Section 74 of the Customs Act. He further pointed out from page 3 of Duty Exemption entitlement certificate produced by appellant at page 42 of Paper Book, a query, Name and address of factories where the resultant product for exports are manufacturer for which the appellant have given the following details as follows :
“M/s. Vulcan Engineers (P) Ltd.
Plot No. 8-21, MIDC Area,
Ahmednagar,
Maharashtra”
Pointing out to this detail from DEEC Certificate, Shri K.K. Bhatia contended that the appellant themselves had declared that they would manufacture the resultant product in India but ultimately not having done so they have also not fulfilled the terms of DEEC Scheme. He submitted that the benefit of the notification cannot be extended to jurisdiction beyond the limits of India as the Customs Act applies within the territorial limit of our country only. Except for the provision of Section 74 which provides for drawback allowance on re-export of duty paid goods, which provision does not apply to Bhutan. He further contended that DEEC Scheme has nothing to do with exemption notification. He pointed out that the definition of “Resultant Product” in the notification referred to goods specified in Part ‘E’ of the notification. In the DEEC Certificate produced by the appellant, the resultant product in Part ‘E’ is shown as “Components of Lime Kiln” and what is described in list attached to advance licence is not the same. He further contended that the same is required to be endorsed by the authorities, which is an essential requirement of DEEC and in this case, it has not been done so and hence the benefit as claimed by applicant is not granted at all.
5. Dr. Kantawala countering the arguments submitted that Section 74 of the Act cannot be applied to the facts of the present case.
6. We have carefully considered the submissions made by both the sides and perused the records. The question that arises for our consideration is as to whether the appellants are entitled to the benefit, of the Notification No. 44/87-Cus., dated 19-2-1987 in respect of the components of Lime Kiln (Industrial Furnace) exported by them to Bhutan without carrying out any process of manufacturing on the imported item.
7. The Notification No. 44/87, dated 1.9-2-1987 is reproduced below:
G.S.R. (E) – In exercise of the powers conferred by Sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 117/Cus-toms [G.S.R. 318 (E)] dated the 9th June, 1978, the Central Government being satisfied that it is necessary in the public interest so to do, hereby exempts goods imported into India, against an Advance Licence issued under the Imports (Control) Order, 1955, or obtained against an Advance Release order, being materials required to be imported for the purpose of manufacture of products (hereinafter referred to as the resultant products) or replenishment of materials used in the manufacture of the resultant products, or both, or for export as mandatory spares along with resultant products, for execution of one or more export orders from the whole of the duty of customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and from the whole of the additional duty leviable thereon under Section 3 of the said Customs Tariff Act subject to the following conditions, namely :-
(a) the materials imported are covered by a Duty Exemption Entitlement Certificate (hereinafter referred to as the said Certificate), issued by the licensing authority in the form specified in the Schedule to this notification, in respect of the value, quantity, description, quality or technical characteristics, as specified in Part ‘C of the said Certificate;
(b) the importer at the time of clearance of the imported materials makes –
(i) a claim in writing to the Collector of Customs for such exemption and executes a bond or legal undertaking before such authority as may be approved by the Central Government for complying with the conditions specified in this notification;
(ii) a declaration before the Assistant Collector of Customs binding himself to pay on demand an amount equal to the duty leviable but for the exemption, on the imported materials in respect of which the conditions specified in this notification have not been complied with;
(c) the goods corresponding to the resultant products and the mandatory spares, in respect of value, quantity, description, quality, or technical characteristics, as specified in Part ‘E’ of the said Certificate are exported within the time specified in the said Certificate or such extended period as may be granted by the Committee;
(d) the exempt materials shall be utilised for the manufacture of resultant products specified in Part ‘E’ of the said Certificate or for export as mandatory spares, and no portion thereof shall be sold, loaned, transferred or disposed of in any other manner:
Provided that where such exempt materials are imported for replenishment of materials used in the manufacture of resultant products exported, holder of an advance licence being a manufacturer-exporter may utilise the replenished materials for further production subject to actual user conditions :
Provided further that the licensing authority may consider the request of holder of an advance licence not being a manufacturer-exporter for transfer of the replenished materials at landed cost, to the supporting manufacturer concerned, whose name appears in the said Certificate, for further production, subject to actual user condition:
(e) in the case of goods being nylon fibre, nylon yarn, nylon fabrics, polyester fibre, polyester yarn, polyester fabrics, stainless steel sheets, stainless steel strips magnetic tapes, precious metals, metals clad with precious metals and articles thereof, the import shall be only through any of the sea ports at Kandla, Bombay, Cochin, Madras, Visakhapatnam and Calcutta or through any of the airports at Bombay, Calcutta, Delhi, Madras and Bangalore or through either of the internal container depots at Delhi or Bangalore, and the export of resultant products in which such goods are used shall be only through any of the said sea ports or airports or internal container depots.
(f) the import of mandatory spares shall not exceed 5% of the value of the Advance Licence. Explanation. - In this notification -
(i) “Committee” means the Inter-Departmental Committee as constituted by the Central Government under the Office Memorandum of the Government of India in the Ministry of Commerce No. 1(3)/66-EAC, dated the 26th June, 1967, for the time being in force, or as re-constituted by the Central Government from time to time;
(ii) “exempt materials” means the materials imported and specified in Part ‘C’ of the said Certificate and eligible for exemption from duty under this notification;
(iii) “imported against Advance Licence” includes goods imported under O.G.L. in terms of the import and export policy for the time being in force, for which at the time of clearance out of customs control, a valid Advance Licence is produced by the exporter.
(iv) “Licensing Authority” means an authority competent to grant a licence under the Imports (Control) Order, 1955 made under the Imports and Exports (Control) Act, 1947 (18 of 1947).
(v) “mandatory spares” means parts of the resultant product which are to be compulsorily supplied as spares as per the relevant export order or contract for substitution if it becomes faulty or worn out.
(vi) “materials” means goods which are raw materials, components, intermediate products or consumables used in the manufacture of resultant products and their packings, or mandatory spares to be exported alongwith the resultant products.
(vii) “Obtained against Advance Release Order” means goods obtained in terms of a Release Order from a canalising agency or a Public Sector trading or service agency allowed importation in bulk for servicing the requirements of the Advance Licence holders, where the goods are imported by the said agencies and warehoused in accordance with Chapter IX of the Customs Act, 1962 (52 of 1962).
(viii) “Release Order” means a Release Order issued by the Licensing authority under Duty Exemption Scheme (contained in the Import and Export policy for the time being in force) on the concerned canalising or public sector trading and servicing agency, for release of goods already imported and warehoused under Chapter IX of the Customs Act, 1962 (52 of 1962).
(ix) “Resultant products” means the goods specified in Part ‘E’ of the said Certificate.
“Exemption of Auxiliary Duty is notified under the Customs Act separately.”
A reading of the notification makes it clear that the exemption is given to goods imported in India against an advance licence issued under the Import (Control) Order, 1955 or obtained against an advance release order, being materials required to be imported for the purpose of manufacture of products, which is referred to as resultant products or replenishment of materials used in the manufacture of the resultant products or both or for export as mandatory spares alongwith resultant products, for the purpose of execution of one or more export orders. In this particular case, admittedly, the goods which have been imported, have not been utilised for the purpose of manufacture of resultant products or for that matter, they have been imported as replenishment of materials used in the manufacture of the resultant products nor they have been imported as a mandatory spares alongwith resultant products. Therefore, the basic stipulation of the notification has not been fulfilled by the appellants in this case for the purpose of grant of exemption of the notification in question. It is the appellants case that they have imported the components of lime kiln which they have exported under an agreement to Bhutan and the same have been utilised for the purpose of erection of a lime kiln furnace at Bhutan. It is their contention that they having put the imported item into the use for which it is imported in terms of their agreement with the Bhutan party, they will be entitled for the benefit of the exemption. In this regard, the findings given by the lower authorities are correct and the terms of both the notifications as well as the Advance licence and DEEC book does not provide for a situation like this. The appellants have produced a copy of the DEEC. Before the issue of this DEEC, the appellants appear to have produced the agreement with the authorities who have made a note of it in the second page of this certificate. In Part A of the certificate, there is a Col. which has given the following details –
“Names and addresses of factories where the resultant products for export are manufactured”. Against, this details in part A, the appellants address namely “M/s. Vulcan Engineers Ltd., MIDC Area, Ahmednagar” has been given. Therefore, it follows that the appellants were to have manufactured the resultant products in the address given in Part A of this DEEC. Admittedly, the appellants have not carried out this process of manufacture to bring in the resultant product as per the terms of DEEC and also in terms of the notification. Therefore, the appellants not having complied with both the terms, they will not be entitled to the benefit of the notification as held by the lower authorities.
8. Shri Kantawala, the learned Advocate had contended that the benefit of the notification has to be construed liberally. Now it is a well settled proposition of law that the terms of the notification, cannot be construed in such a way as to whittle down the terms of the notification itself. This notification being not applicable, the question of giving a liberal interpretation does not arise. It is only in those cases where a substantial portion of the notification has been complied with and where there is a breach of some procedure, the Courts have held that in such cases, the benefit should not be withheld. In this case, the appellants not having complied with the terms of the notification itself, the question of giving a liberal interpretation of the notification, does not arise.
9. Shri K.K. Bhatia, learned Jt. CDR made out another plea that the appellants are not entitled to seek duty drawback as per Section 74 of the Customs Act. In this regard, we have to state that the question before us is not pertaining to drawback allowance on export of duty paid goods but only a question of availability of benefit of the notification and therefore, it is not necessary for us to go into this question, as has been raised by the learned Jt. CDR. The various rulings relied by the advocate are pertaining to the liberal interpretation to be given to the notification. On this point, there cannot be two opinions but in this case, the question of liberal interpretation does not arise when the appellants do not come within the ambit of the notification at all. The learned Collector has rightly rejected the plea of the appellants and we uphold the order by dismissing the appeal.