M/S Silver Line Plastpack Pvt.Ltd vs Commissioner, Central Excise & Service ...

Appeal No.C/297,300,301,303-306,308,335,340/2010 [Arising out of OIO No.12/BVR/COMMISSIONER/2010, dt.16.04.2010, passed by Commissioner of Customs, Bhavnagar]

1. M/s Silver Line Plastpack Pvt.Ltd, 2. M/s Rachana Seedsw Industries, 3. Archan Polyfilms Pvt.Ltd., 4. M/s Sunshine Polymers, 5. M/s Ashutosh Multifilms, 6. M/s Rainbow Packaging Pvt.Ltd., 7. M/s Risabh Packaging, 8. M/s Promact Plastics Ltd., 9. M/s Ketan Jute Bags Pvt.Ltd. Appellants

Vs

Commissioner, Central Excise & Service Tax, Bhavnagar Respondent

AND

Commissioner, Central Excise & Service Tax, Appellant Bhavnagar

Vs

Shri Vikram P. Duvani Respondent

Represented by:

For Appellant: Shri T. Vishwanathan, Shri Jigar Shah, Shri Manish Jain Shri R. Subramanya  Advocates, Shri M.A. Patel, Consultant For Respondent: Shri Sameer Chitkara, A.R.

For approval and signature: Honble Mr. P.K. Das, Member (Judicial) Honble Mr. P.M. Saleem, Member (Technical)

1. Whether Press Reporters may be allowed to see the No Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy of Seen the order?

4. Whether order is to be circulated to the Departmental Yes authorities?

CORAM: HONBLE MR. P.K. DAS, MEMBER (JUDICIAL) HONBLE MR. P.M. SALEEM, MEMBER (TECHNICAL)

Date of Hearing/Decision:15.10.2015

Order No.A/11509-11518/2015, dt.15.10.2015

Per: P.M. Saleem

The Appellants herein were operating under the Target Plus Scheme, which provided for exemption from payment of Customs duty on import of goods, in terms of Notification No.32/2005-Cus, dt.08.04.2005. As per the provisions of said notification, they were eligible to import the goods free of duty, which were to be used for manufacture of final product, which could be cleared on payment of applicable duty. The Appellants, in the instant case, imported plastic granules and sent the same to job workers under the provisions of Notification No.214/86-CE, dt.25.03.1986, for further manufacture into plastic films/sheets which were cleared on payment of duty. The Department contended that they had imported the goods free of duty under the scheme and had not utilised the goods, by themselves, but had sent the goods to job workers for manufacturing the final finished goods, which is a violation of the provisions of the notification.

2. Heard both the sides. The learned Advocate for the Appellant submits that as per the provisions of the Customs notification, there was no prohibition for sending the goods imported to job worker for manufacture of final goods. He points out that they had sent the goods to the job worker under the provisions of Notification No.214/86 and followed the procedures thereof. They had cleared the final goods on payment of applicable Central Excise duty. He contended that there is no violation of the provisions of the notification and therefore, the impugned Order-in-Original is not sustainable. He also drew our attention to the Foreign Trade Policy and the written submissions filed.

3. On the other hand, the learned Authorised Representative for the Revenue strongly contested the submissions of the learned Counsel. In addition to reiterating the findings of the Adjudicating authority, he submits that the Customs notification specifically mentions that the goods imported shall not be transferred or sold. His contention is that the Appellants have transferred the imported goods to job worker and therefore, they have violated the said provisions. He also submits that Para 3.7.6 of the Foreign Trade Policy says that the goods should be imported for their own use. As the Appellants who did not have any facility for manufacture, had transferred the goods to their job workers, they have not used the goods by themselves. Therefore, it is a contravention of the provisions of Foreign Trade Policy, read with Customs notification. He further draws our attention to Para 5.8 and 5.9 of the Order-in-Original, wherein the Adjudicating authority tried to establish that the transfer of the imported goods takes place at the time of sending the same to the job workers.

4. It is observed from Paras 3.7.1 and 3.7.6 of Foreign Trade Policy (2004-2009) that Target Plus Scheme is an export incentive scheme, wherein those who have achieved a quantum growth in exports, are allowed duty credit which may be used for import of any inputs, capital goods, spares, office equipments, office furniture etc, for their own use or that of supporting manufacturers. Thus, it is seen that the exports have already taken place, and the exporters are given this facility as an incentive or reward. The duty exemption is regulated by Notification No.32/2005-Cus, dt.08.04.2005.

5. For better appreciation of the provisions of the notification, the relevant portion of the Notification No.32/2005-Cus., is reproduced below:-

Exemption to imports against a duty credit certificate issued during 2004-05 under Target Plus Scheme. 

In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government being satisfied that it is necessary in the public interest so to do, hereby exempts goods when imported into India against a duty credit certificate issued under the Target Plus Scheme in accordance with paragraph 3.7 of the Foreign Trade Policy (hereinafter referred to as the said certificate) from, -

(a) the whole of the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975); and

(b) the whole of the additional duty leviable thereon under section 3 of the said Customs Tariff Act, -

subject to the following conditions namely :-

(1) that the benefit under this notification shall be available only in respect of duty credit certificate issued under the said scheme to a Star Export House on the basis of incremental growth in FOB value of exports made during the financial year 2004-05 over the exports made during the financial year 2003-04;

(2) that the said certificate has been issued to a Star Export House by the licensing authority and it is produced before the proper officer of customs at the time of clearance for debit of the duties leviable on the goods, but for this exemption :

???Provided that exemption from duty shall not be admissible if there is insufficient credit in the said certificate for debiting the duties leviable on the goods, but for this exemption;

(3) that the said certificate and goods imported against it shall not be transferred or sold :

???Provided that where the goods are imported by a merchant-exporter having supporting manufacturer(s) whose name and address is specified on the said certificate, the said goods may be utilised by the said supporting manufacturer(s)

6. It is observed from the above that the Appellant is eligible to import the goods under the Target Plus Scheme, subject to various conditions. Condition No.3 is relevant in the present case. The proviso to Condition 3 is applicable to the merchant exporter. It is not applicable to the Appellant who is a manufacturer exporter. Therefore, the Condition 3 as is relevant to the Appellant is that the imported goods shall not be transferred or sold. It is observed that the Appellants have sent the imported goods to their job workers for manufacture of the final products, and the title and the ownership of the goods remained with them during the said dispatch of the imported goods to the job worker. Moreover, the said goods were sent, following the established procedure under Notification No.214/86-CE(NT), dt.25.03.1986.

7. The Public Notice 113/2007, dt.15.02.2008, issued by DGFT, though not binding since it was issued on a later date, still has a reference value. Annexure A to the Public Notice is reproduced below:-

Application for Listing of Job-Workers  Annexure to Appendix 17D

(Sr.No.10A of Appendix 17D, application form for Target Plus Scheme 2004-05)

10A: Listing of Job-Worker(s) for the purpose of conversion of permitted imports into possible resultant products, when imports are made for own use.

Note: The beneficiary status holder (Manufacturer Exporter or Merchant Exporter) can utilize full value of credit scrip issued to him for his own use. Beneficiary may decide to make any possible resultant product for utilizing the imports permitted under the Scheme, when imported for own use. Job-Workers can be used for conversion of imports permitted under the scheme into any possible resultant products. Upon conversion in the factory of Job-Worker, the resultant product can be sold in the open market, upon payment of duties as applicable to the resultant product; including to the conversion unit (i.e. job worker). Sale of permitted products to Job Workers prior to conversion (into any possible resultant products) shall be treated as a violation of AU and Non-transferability conditions, as imports permitted under Target Plus Scheme as per Para 3.7.6 of the Policy (RE2004) are with Actual User Condition and non-transferable (except to listed supporting manufacturers).

The said Annexure mentions about listing of job workers for conversion of permitted imports into possible resultant products, when imports are made for own use. It further states that the job workers can be used for conversion of imports permitted under the scheme into possible resultant products. Therefore, it is clear that own use also means use by utilizing the facilities of job worker. It is also observed that the Customs notification does not prohibit processing of the imported goods into finished final goods by the job worker. It is also seen that when imported plastic granules were sent to various job workers for conversion into plastic films/sheets, necessary permissions were obtained from the jurisdictional Central Excise authority (under the terms of Notification No.214/86-CE) and a list of job workers were also submitted to the Central Excise authorities. The job worker converted the plastic granules into plastic films/sheets and thereafter the appellants sold the said plastic films/sheets to the independent buyers as well as at times to the job workers themselves also. We are not able to accept the contention of the learned Authorised Representative for the Revenue that since when the goods are sold to the job worker, the job worker pays the invoice amount less the job work charges to the Appellant, it will amount to transfer of the imported goods to the job worker. It is observed that this transaction (sale) takes place only at the final stage, and when the sale takes place only the ownership changes from the Appellants to the buyer. The Appellant is sending plastic granules to the job worker, and the buyer is purchasing plastic films. Thus, there is no transfer of the imported plastic granules.

8. In the light of above analysis, the impugned Order-in-Original is not sustainable. As there is no transfer of the imported goods, the Appellants are eligible for availing the CENVAT Credit. Interest and penalties are liable to be set aside. The confiscation of the goods and redemption fine are also liable to be set aside. The penalties on all other Appellants, who are job workers, are also liable to set aside. We hold accordingly.

9. The appeals filed by the Appellants are allowed. The appeal filed by the Revenue is rejected.

(Dictated & Pronounced in open court)

(P.K. Das) (P.M. Saleem) Member (Judicial) Member (Technical)

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