C.N.B. Nair, Member (T) - (1.)The appellant is a 100% EOU and they produce inter -alia, Hexa Methyl Di Silliazine (HMDS). During February 1998 to November 1998, the appellant made some supplies of HMDS to M/s Lupin Laboratories Ltd. These supplies were in terms of Advance Release Order issued by Director General of Foreign Trade (DGFT) office. The Advance Release Orders were issued in lieu of advance licenses, which had been issued to M/s Lupin Laboratories Pvt. Ltd. In terms of advance licence, M/s Lupin Laboratories Pvt. Ltd. were entitled to import inter -alia, HMDS for export production. Further, in terms of Notification No. 30/97 -Cus. dated 1.4.97, the materials imported against advance licence "with Actual User Condition in terms of para 7.4 of the Export - Import Policy, 1997 -2002" were exempt from the whole of duty of customs leviable thereon which is specified under First Schedule to the Customs Act, 1975 and "from the whole of additional duty leviable thereon under Section 3 of the Customs Tariff Act". The appellant supplied HMDS to M/s Lupin Laboratories without levying additional duty leviable under Customs Tariff Act also. Subsequently, Show -cause Notices were issued contending that the supplies were covered by Notification No. 82/92 dated 27.8.92 and that, under that Notification, additional duty of customs was not exempt. For this reason, it was alleged that the appellant was liable to pay additional customs duty. In the adjudication as well as in the first appeal, this contention has been upheld. As a result, duty liability of about Rs. 10 lakhs remains confirmed alongwith penalty on the appellant. The present appeal challenges that finding.
(2.)The contention of the appellant is that additional duty of customs was also exempt under Notification No. 30/97 in respect of the goods supplied by the appellant as the advance licences in question had been issued with Actual User Condition in terms of para 7.4 of the Export -Import Policy 1997 -02. Therefore, duty demand is not justified. As against this, the contention of the Revenue "is that Notification No. 30/97 -Cus. related to imported goods while supplies by EOU remain covered by Notification No. 82/92 and for this reason what is applicable are the terms of Notification No. 82/92. The Revenue also has contended that Notification No. 82/92 covered all supplies made against Advance Release Orders issued under para 7.15 of Export -Import Policy and no distinction is made in that Notification based on whether the advance licences in question had been issued under para 7.3 or 7.4 of the Export -Import Policy. For this reason, the Revenue has held that the duty demand is fully justified.
(3.)We have perused the records and have considered the submissions made by both sides. Supplies in question are in terms of Export -Import Policy. The Customs Notifications have been issued to give effect to the Export -Import Policy. Therefore, both the provisions have to be seen as parallel and complementary and should be construed as to support each other. M/s Lupin Laboratories Pvt. Ltd. is an exporter and they had obtained advance licences for the import of materials for their export production. Chapter 7 of Export -Import Policy 1997 -02 relates to (Duty Exemption Scheme). General provisions in para 7 relating to issue and terms of advance licence, the benefit under those licences and the provisions for issue of Advance Release Orders are read hereunder: "Duty Exemption Scheme 7.1. The Deputy Exemption Scheme consists of Duty Free Licence and Duty Entitlement Pass Book (DEPB). Duty Free Licence 7.2 'Duty Free Licence' includes Advance Licence/Advance Intermediate Licence and Special Imprest Licence. Import of raw materials, intermediates, components, consumables, parts, accessories, mandatory spares (not exceeding 10% of the CIF value of the licence), and packing material (hereinafter referred to as 'Inputs') may be permitted against a Duty free Licence. Advance Licence 7.3 An Advance Licence is granted to a merchant - - exporter for the import of inputs required for the manufacture of goods without payment of basic customs duty. However, such inputs shall be subject to the payment of additional customs duty equal to the excise duty at the time of import. The said additional customs duty shall be adjusted in the following manner: (a) If the importer uses the inputs for production of export goods, which are otherwise liable to a duty of excise and eligible for Modvat, he may avail of Modvat Credit in respect of the additional customs duty so paid, immediately upon the said inputs entering his factory; (b) If the importer uses the inputs for production of exports goods, which are otherwise not excisable or not dutiable or not eligible for Modvat benefit, he may claim drawback in respect of the additional customs duty so paid at the time of export of goods in which such inputs have been used; (c) If the importer uses the inputs for manufacture and sale in the DTA of excisable goods, he may claim Modvat in respect of the additional customs duty so paid, immediately upon the said inputs entering his factory; (d) If the importer uses the inputs for manufacture and sale in the DTA of goods, which are not excisable or not dutiable or not eligible for Modvat benefit, he shall not be eligible to any rebate or adjustment of the additional customs duty so paid. 7.4 (i) Notwithstanding anything contained above, exemption from payment of additional customs duty and Anti dumping duty shall be allowed in respect of Advance Licences, issued with actual user condition to: (a) Manufacturer exporter (emphasis supplied) (b) Merchant exporter where the merchant exporter agrees to the endorsement of the name(s) of the supporting manufacturer(s) on the relevant DEEC Book. (ii) Such advance licences and/or materials imported thereunder shall not be transferable even after completion of export obligation. (iii) Sub -licences shall be issued with a positive value addition without stipulation of minimum value addition as prescribed in paragraph 7.9 Advance licences shall be issued in accordance with the Policy and Procedure in force on the date of issue of licence and shall be subject to the fulfilment of a time bound export obligation and value addition as may be specified. Advance Release Orders 7.15 A duty free licence holder intending to source the inputs from indigenous sources/canalising agencies/EOU/EPZ/EHTO/STP units in lieu of direct imports has the option to source them against Advance Release Orders denominated in foreign exchange/Indian rupees. In such a case, the licence shall be invalidated for direct import and a permission in the Form of ARO shall be issued which will entitle the supplier to the benefit of deemed export. The transferee of the duty free licence shall also be eligible for ARO facility."