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Rajasthan High Court · body

2005 DIGILAW 702 (RAJ)

R. S. Industries v. Union of India

2005-03-02

SHASHI KANT SHARMA, Y.R.MEENA

body2005
Judgment Y.R. Meena, Actg. C.J.-The petitioner company, inter alia, engaged in manufacturer of Steel products. The manufacturing process entails utilization of Zinc. For its requirements, the petitioner company imported the Zinc Anodes from Sri Lanka with which the Government of India has a free trade agreement. The petitioner imported the goods into India from Sri Lanka accompanied by requisite certificate of origin, which is necessary for exemption of customs duty and in that case the petitioner has to pay only Counter Veiling Duty (here-in-after be called as "CVD"), which is a compensatory duty for excise duty. The petitioner company has imported the goods aggregating to 105.086 MT under bill of entry Nos. 346 and 347 both dated 26.2004 and bill of entry No. 405 dated 17.2004. 2. The petitioner company for the purpose of clearance filed the requisite documents including invoices under which the manufacturer one SS Steel Export (Pvt.) Ltd., Sri Lanka had consigned the goods to the petitioner company through the Indus Ind Bank, Jaipur. For clearance, the petitioner company also submitted a certificate of origin issued by the Assistant Director of Commerce, Government of Sri Lanka on 25.2004 under the Indo Sri Lanka Free Trade Agreement certifying the said import goods being Zinc Anodes and listed as scheduled goods entitled to the benefit of Indo Sri Lanka Free Trade Agreement. 3. The respondent No. 3 was of the view that the Zinc Anodes were manufactured out of unwrought Zinc, which according to respondent No. 3 was quoted at the relevant time in the London Metal Exchange Bulletin at about 950 US $, thus the invoice price of US $ 1100 was understated. The respondent No. 3 wrote a letter to the petitioner stating therein that the burden to prove that the price is not understated is on the petitioner. 4. On receipt of the letter of respondent No. 3 dated 26.2004, the petitioner wrote a letter to the foreign supplier that while issuing the certificate of origin, all aspects of free trade agreement including cost of imports, manufacturing process and value of addition norms were checked and verified by the Department of Commerce, Government of Sri Lanka. 5. In reply, the foreign supplier said that the Dy. Commissioner of Customs can ask the details of imports from Government of Sri Lanka. They would be in a better position to explain. 6. 5. In reply, the foreign supplier said that the Dy. Commissioner of Customs can ask the details of imports from Government of Sri Lanka. They would be in a better position to explain. 6. On receipt of this reply from foreign supplier, the petitioner company addressed a letter dated 30.6.2004 to the respondent No. 3 stating therein that there was no basis to assume that the value addition was 35% in the finished goods. It was further stated that under Rule 7 of the Rules of 2000, the value addition by the exporting country should be 35% of the value of the finished products. It was also submitted by the petitioner in the letter to respondent No. 3 that the petitioner company has no control over the exporter to find out whether the raw material was procured at what cost by the exported company in Sri Lanka. However, the petitioner in the letter requested the Department to make whatever queries from those concerned exporters to clarify the doubt whether there was a value addition by 35% in the goods or not while processing the raw material. Inspite of request, exporter has not supplied any documents to the petitioner company. In a letter to the respondent No. 3, the petitioner further submitted that once the letter of origin has been issued by the Government of Sri Lanka and when that letter is genuine, the imported goods should be released after charging CVD. 7. Vide letter dated 28.2004, the respondent No. 3 purported to provisionally release the goods in issue on the condition that petitioner company should deposit duty equal to total customs duty including basic customs duty on the value arrived at USD 1400 PMT CIF, PD Bond for total value of the goods + customs duty as arrived as mentioned and the bank guarantee of Rs. 20,00,000/-. The petitioner has challenged the legality of order dated 28.2004 and prayed that this order be quahsed. 8. Learned Counsel for the petitioner Mr. Alok Sharma submits that once the certificate of origin has been issued and that is genuine, the goods should be released on payment of CVD. 9. Learned Counsel for the Department Mr. 20,00,000/-. The petitioner has challenged the legality of order dated 28.2004 and prayed that this order be quahsed. 8. Learned Counsel for the petitioner Mr. Alok Sharma submits that once the certificate of origin has been issued and that is genuine, the goods should be released on payment of CVD. 9. Learned Counsel for the Department Mr. Kamlakar Sharma submits that it is true that raw-material has been imported in Sri Lanka by the exporter, but unless there is a value addition by the exporting country to the tune of 35%, the petitioner is not entitled for the benefit of Indo Sri Lanka Agreement. In the case in hand, if we take price P.M.T. of the export goods and the value of the import of raw material in the Sri Lanka country, the value addition is not 35% as required for exemption under the Indo Sri Lanka Agreement. Therefore, Mr. Sharma, submits that as per material on record, a total quantity of 105.445 MT of Zinc Ingots were imported at a value of USD 85770.73 by M/s. SS Steel Export (Pvt.) Limited in Sri Lanka from whom the petitioner had imported the goods. 10. The average price of import for the subject exports comes to USD 813 PMT. As per the documents supplied by the petitioner the exporter has supplied Zinc Andoes to the petitioner at USD 1100 PMT FOB. Thus, on the basis of the information received from Sri Lanka Customs, the average value of import is 73.90% of the FOB value of export. If the average value of the import of raw material is 73.90%, there cannot be a value addition by the exporters to the tune of 35% of the value of the goods. Thus petitioner has not fulfilled the conditions laid down in Rule 7(a) of the Origin Rules and thus not entitled to the benefit of Customs Notification No. 26/2000-Cus. 11. The short controversy for our consideration is whether the import is in conformity with Rule 7(a) of the Origin Rules. As per Rule 7(a), the exporter i.e. M/s. SS Steel Export (Pvt.) Ltd. after import of the raw material from some other country should add value of 35% in processing. 12. 11. The short controversy for our consideration is whether the import is in conformity with Rule 7(a) of the Origin Rules. As per Rule 7(a), the exporter i.e. M/s. SS Steel Export (Pvt.) Ltd. after import of the raw material from some other country should add value of 35% in processing. 12. The admitted facts are that manufacturer i.e. M/s. SS Steel Export (Pvt.) Ltd. had shown the import price of Zinc Ingots at USD 864.21 PMT CIF in the case of Russia and at USD 650 PMT CIF in the case of China. The average value of the raw material imported by the exporter in Sri Lanka comes to 73.90%. If that is the value of raw material imported in Sri Lanka, the value addition cannot be 35% as in this case the FOB value of goods was declared as USD 1100 PMT. If the exporter has supplied Zinc Anodes to the petitioner at USD 1100 PMT FOB, on these facts, it cannot be said that value addition by the exporting country was 35% of value of the finished product. 13. Mr.Alok Sharma, learned Counsel for the petitioner submits that the figures of import of raw material taken are not correct. Those are the figures of March, 2004, therefore, it cannot be said with all certainty that the raw material, which was imported in March, 2004 has been used in the finished goods by the exporter M/s. SS Steel Export (Pvt.) Ltd. in Sri Lanka. 14. The admitted facts in the instant case are that the Department is prepared to release the goods on provisional clearance provided the petitioner deposits duty equal to total customs duty and furnish PD Bonds for total value of the goods and also furnish the bank guarantee of Rs. 20,00,000/-. 15. Counsel for the Department has failed to show whether in case of provisional release all these conditions at a time can be imposed especially can the party ask to deposit the amount euqal to customs duty as well as furnish a bank guarantee and also PD Bond for the total value of goods. 16. However, from the aforesaid facts brought on record, it cannot be said with all certainty that there was no value addition of 35% on the raw material imported by manufacturer in Sri Lanka but a letter of origin of the goods has been found genuine. 16. However, from the aforesaid facts brought on record, it cannot be said with all certainty that there was no value addition of 35% on the raw material imported by manufacturer in Sri Lanka but a letter of origin of the goods has been found genuine. Therefore, in the interest of justice, we set-aside the impugned order of Department dated 28.2004 and direct the respondents to release the goods on provisional clearance provided the petitioner company pay the amount of CVD and furnish bank guarantee of 50% of the value of the goods and for the balance 50% furnish a personal bond to the satisfaction of the concerned authority in Customs Department. If petitioner pays the amount of CVD and furnish bank guarantee and P.D. Bond, as directed, release the goods within a week thereafter. 17. The writ petition stands disposed of with the above directions. 10.18. Since the writ petition has been disposed of , the stay application connected therewith also stands disposed of .