BEFORE THE AUTHORITY FOR
ADVANCE RULINGS
(CUSTOMS & CENTRAL
EXCISE)
NEW DELHI
PRESENT
Hon'ble Mr. Justice Syed
Shah
Mohammed Quadri (Chairman) |
Dr. K.N.
Chaturvedi
(Member) |
Mr. Somnath Pal
(Member) |
ADVANCE RULING No.AAR(CUS)/01/2004
Application No.AAR/44/102/2003
Name & address of t he
applicant
|
M/s. A. Tex (India) Private Ltd.
C-116, Defence Colony,
New Delhi-110024
|
Commissioner concerned
|
Commissioner of Customs
Delhi |
Present for the Department
|
Mr. K.R.Bhargav,
Commissioner (Export)
Mr. B.B. Mahapatra,
Addl. Commissioner.
|
Present for the Applicant
|
Mr. Amarjeet Singh,
Director.
Mr. Prashant, A.R.
|
O R D E R
(By Mr. Justice Syed Shah Mohammed Quadri)
The applicant, M/s. A. Tex (India) Private Limited, filed this application under
section 28H of the Customs Act, 1962 (hereinafter
referred
to as "the Act") seeking an advance ruling in respect of the
following
questions:
Question No.1: Can
(Standard and Additional) duty free clearance of the items detailed against
serial Nos. 140, 167, 167A and 168 of the table read with condition Nos.21 and
21A in the Annexure to the Main Exemption Notification No.21 dated 1st
March 2002 as amended by Notification No.26 dated 1st March, 2003
issued by Department of Revenue, Ministry of Finance, Government of India, in
exercise of the powers conferred by sub section (1) of Section 25 of the Customs
Act, 1962 (52 of 1962) be allowed by the Customs from a Custom Bonded Private
/Public Warehouse to bona fide and other eligible exporters, who are otherwise
allowed to import the same items duty free (Standard and Additional Duty) as per
Sl.Nos. and conditions of Main Exemption Notification of 2002 referred above?
Question No.2: Are
we (the applicant) allowed by the customs to get the items proposed to be
imported by us as detailed against Sl.No.140, 167, 167A and 168 of the table
read with condition Nos. 21, 21A in the Annexure to the Main Exemption
Notification No. 21 dated 1st March 2002 as amended by Notification
No. 26 dated 1st March 2003, issued by Department of Revenue,
Ministry of Finance, Govt. of India cleared (Standard & Additional) duty free
from the Custom Bonded Warehouse proposed to be set up by us to supply the
same(items) to bona-fide and other eligible exporters who are otherwise allowed
to import these very items duty free as per the Main Exemption Notification
No.21 dated 1st March 2002, its Sl.Nos. and condition Nos. mentioned
above?
2.
It may be relevant to note here the factual background in which advance
ruling is sought. The applicant and M/s. A.Tex Design (India) Private Limited
are Indian subsidiaries of M/s. A. Tex A/S Denmark (a foreign company,
hereinafter referred to as the 'Holding Company'). On the date of filing this
application, M/s. A.Tex Design India Private Limited was importing the goods
under consideration into India from the holding company. It appears that the
applicant and the Holding Company have entered to an arrangement under which the
applicant will import the goods of the Holding Company into India and thereafter
it sought advance ruling in regard to the aforementioned questions.
3. When the case was placed before us for passing preliminary order under
sub section 2 of section 28 I of the Act, having regard to the contents of the
application and the comments offered by the jurisdictional Commissioner, notice
was ordered to the applicant to show cause as to why the application should not
be rejected in view of proviso (a) to the said provision and also for the
reasons that the applicant is said to have already commenced the activities of
importing goods.
4. To appreciate the points raised in the notice, it is necessary to look
into the relevant provisions of the Act. Proviso (a), sub-section(2) of
section 28-I enjoins that the Authority shall not allow the application where
the question raised in the application is already pending in the applicant's
case before any officer of Customs, the Appellate Tribunal or any Court. On the
grounds that another subsidiary (M/s A-Tex Design India Pvt. Ltd.) of the same
foreign holding company is already importing the goods and the case is pending
before Customs Officer, it was sought to be contended that the proviso would be
attracted. However, this plea was not pursued by the Revenue and in our view
rightly so.
5. To seek an advance ruling from the Authority under the Act, what is
necessary is that the applicant must satisfy the requirement of definition of
'applicant' and 'advance ruling' which shall be in respect of matters enumerated
in sub-section (2) of the section 28H.
The term "applicant" is
defined in clause (c ) of Section 28E thus:
(c )
"applicant" means -
(i)
a non-resident setting up a joint venture in India in collaboration with
a non-resident or a resident; or
(ii)
a resident setting up a joint venture in India in collaboration with a
non-resident; or
(iii)
a wholly owned subsidiary Indian company, of which the holding company is a
foreign company,
who proposes to undertake any business activity in India and
makes application for advance ruling under sub-section(1) of section 28H;
6. From a perusal
of definition extracted above, it is evident that the term takes in its fold
three categories of persons, referred to in clauses (i) to (iii), who propose
to undertake any business activities in India and make application for advance
ruling under sub section (I) of section 28H. The first category is comprised of
non-residents setting up a joint venture in India in collaboration with a
non-resident or a resident; in the second fall residents setting up a joint
venture in India in collaboration with a non-resident and the third takes in
wholly owned subsidiary Indian Companies of which the holding company/companies
are foreign companies.
7. Now we may
advert to the definition of expression of 'advance ruling' incorporated in
clause (b) of section 28E which reads as under:
(b) "advance ruling' means the determination, by the Authority, of a
question of law or fact specified in the application regarding the liability to
pay duty in relation to an activity which is proposed to be undertaken, by the
applicant;"
It
means determination by the Authority on a question of law or fact, specified in
the application, regarding the liability to pay duty in relation to an activity
which is proposed to be undertaken by the applicant. The term 'activity' is
defined in clause (a) to mean import or export.
8. Sub-section (2)
of Section 28H is as follows:-
"(2) The question on which the advance ruling is sought shall be in
respect of, -
(a)
classification of goods under the Customs Tariff Act, 1975 (51 of 1975);
(b)
applicability of a notification issued under sub-section (1) of section
25, having a bearing on the rate of duty;
(c)
the principles to be adopted for the purposes of determination of value
of the goods under the provisions of this Act;
(d)
applicability of notifications issued in respect of duties under this
Act, the Customs Tariff Act, 1975 (51 of 1975) and any duty chargeable under any
other law for the time being in force in the same manner as duty of customs
leviable under this Act."
Admittedly the
aforementioned questions fall in clause (b).
9. Merely because
another subsidiary (M/s. A. Tex Design Private Limited) is importing the same
goods it cannot be said that the applicant is ineligible to seek advance ruling
from the Authority. Having regard to the scheme of Ch. V B of the Act
incorporating the beneficial provisions of advance ruling, a liberal
interpretation has to be placed to extend rather than withhold the benefit of
the chapter, of course, without doing any violence to those provisions inasmuch
as there is no adversarial litigation. The applicant is a wholly owned
subsidiary Indian company of M/s. A. Tex Denmark which is a foreign company and
it is seeking advance ruling in respect of its liability to pay duty in relation
to import of goods - an activity proposed to be undertaken by it under the
notification referred to in the questions. It is not disputed before us that the
applicant has not commenced importing the goods. As such, it is end to
seek advance ruling. We, therefore, discharge show cause notice.
11. Now coming to the
merits of the case, the questions referred to above, in short, means whether the
benefit of Notification No.21/2002 dated 1.3.2002 as amended by Notification
No.26/2003 dated 1.3.2003 would be available to a purchaser of goods sought to
be imported by the applicant, at time of ex-bond clearance from the Bonded
Warehouse when such a purchaser is a bona fide exporter and is otherwise allowed
to import the goods duty free.It
would be apt to read the said Notification here:
Text of the main Exemption Notification
Notification No. 21/2002 dated 1.3.2002.
(As Amended by Notification 26 dated 01 March 2003; Sl.Nos. 416 to 433 inserted
by 28/01.03.2003)
Ntfn 21
01.03.2002
In exercise of the powers conferred by sub-section (1) of section 25 of the
Customs Act, 1962 (52 of 1962) and in supercession of the notification of the
Government of India in the Ministry of Finance (Department of Revenue)
No.17/2001-Customs, dated the 1st March, 2001 [G.S.R. 116(E) dated
the 1st March,2001], the Central Government, being satisfied that it
is necessary in the public interest so to do, hereby exempts the goods of the
description specified in column (3) of the Table below or column (3) of the
said Table read with the relevant List appended hereto, as the case may be, and
falling within the Chapter, heading or sub-heading of the First Schedule to the
Customs Tariff Act, 1975 (51 of 1975) as are specified in the corresponding
entry in column (2) of the said Table, when imported into India;
(a)
from so much of the duty of customs leviable thereon under the said First
Schedule as is in excess of the amount calculated at the rate specified in the
corresponding entry in column (4) of the said Table;
(b)
from so much of the additional duty leviable thereon under sub-section
(1) of section 3 of the said Customs Tariff Act, as is in excess of the rate specified in the corresponding
entry in column (5) of the said Table.Subject to any of the conditions, specified in the Annexure to this
notification, the condition No. of which is mentioned in the corresponding entry
in column (6) of the said Table:Provided that nothing contained in this notification shall apply to -
a) the goods specified against serial Nos. 239, 240, 241 and 242 of the
said Table on or after the 1st day of April, 2004;
b)
the goods specified against serial Nos. 250, 251, 252 and 415 of the said
Table on or after the 1st day of March, 2005.
Explanation:- For the purposes of this notification, the rate specified in
column (4) or column (5) is ad valorem rate, unless otherwise specified."
12. A plain
reading of the Notification extracted above shows that the Central Government
has exempted the goods of the description specified in Col.3 of the Table read
with the relevant list appended thereto and falling within the Chapter, heading
or sub-heading of the first schedule to the Customs Tariff Act, 1975 as
specified in the corresponding entry in Col.2 of the said Table when imported
into India. The exemption is in respect of so much of the duty of customs
leviable thereon under the said first schedule as is in excess of the amount
calculated at the rate in the corresponding col.4 of the said Table and also so
much of the additional duty leviable thereon under sub-section (1) of section 3
of the Customs Tariff Act as is in excess the rate specified in the
corresponding Col.5 of the said Table. It is to be noted that the exemption is
subject to any of the conditions specified in the Annexure to the Notification,
(the condition number is mentioned in the corresponding entry in Col. 6 of the
said Table). The goods which are sought to be imported are at No. 140, 167,
167A and 168. As against item 140 no condition is mentioned but the entry itself
contains the phrase 'imported by bonafide exporters'. In respect of items
167 and 168 exemption under the notification would be available provided the
requirements of condition No. 21 and in respect of item 167A the requirement of
condition 21A are fulfilled. The said conditions read as follows:
21. If, -
"(a) the goods are imported by a manufacturer of textile garments or leather for
use in the manufacture of said goods for export by that manufacturer and the
said manufacturer is registered with the Apparel Export Promotion Council or
Council for Leather Exports, as the case may be,-
(b) the total value of goods imported shall not exceed 3 per cent of the FOB
value of textile garments or leather garments exported during the preceding
financial year, however, the value of lining, and inter-lining materials
imported shall not exceed 2 per cent of the said total value";
(c)
the importer produces a certificate from the Apparel Export Promotion
Council or Council for Leather Exports, as the case may be, certifying the value
of exports made during the financial year mentioned in clause (b) above, and
also the value and quantity of goods already imported under this notification
during the current financial year;
(d)
the importer produces a certificate from Apparel Export Promotion Council
or Council for Leather Exports, as the case may be, certifying that the lining
and inter-lining materials shall not be put to any other use or sold in the
market except in the manufacture of textile garments or leather garments; and
(e) there is a doubt as to the useability of lining and interlining materials in
relation to the export product, the Commissioner of Customs, for reasons to be
recorded in writing, orders drawal of sample at the time of export to verify
such use;"
21A. If.-
(a)
The goods are imported by a manufacturer of leather footwears, leather
gloves, or travel goods, hand bags and similar containers all made of leather,
for use in the manufacture of said goods, for export by that manufacturer and
the said manufacturer is registered with the Council for Leather Exports:
(b)
The total value of goods imported shall not exceed 1 percent of the FOB
value of leather footwear, leather gloves, or travel goods, hand bags and
similar containers all made of leather exported during the preceding financial
year;
(c)
The importer produces a certificate from the Council for Leather Exports
certifying the value of exports made during the financial year mentioned in
sub-condition (b), and also the value and quantity of goods already imported
under this notification during the current financial year."
It is
not necessary to delve into these conditions. Suffice it to say that unless the
respective condition is satisfied, the benefit of the notification cannot be
availed.
It is fairly
conceded before us by the applicant that none of these conditions are satisfied
in this case. If this be so, the benefit of the notification is not available
to the applicant who is not a bonafide exporter and is not using the imported
goods as inputs to manufacture goods for export; nor will it be available to
purchasers from the applicant even though they may be utilizing the imported
goods in manufacturing other goods for exporting the same for the simple reason
that admittedly they have not imported the goods in question.
13. Accordingly, on the
aforementioned questions we rule as follows:
(1) that duty free clearance of the items detailed therein, proposed
to be imported by the applicant, cannot be allowed by Customs from a Customs
Bonded Private/Public Warehouse to purchasers of imported goods from the
applicant even if they are bona fide and eligible exporters and even though
they are eligible to import the said goods duty free; and
(2) that the applicant cannot be allowed to clear items detailed in
the question, proposed to be imported, by the customs duty free from Customs
Bonded Warehouse so as to supply the same to bona fide and other eligible
exporters who are end to import those items duty free.
Sd/
( Dr. K.N. Chaturvedi )
Member
|
Sd/
( Somnath Pal)
Member
|
Sd/
(Justice S.S.M. Quadri)
Chairman
|
NEW Delhi
Dated: 16.3.2004
F.No. AAR/44/102/2003/
|