COMMISSIONER OF CUSTOMS, HYDERABAD versus M/S. PENNAR INDUSTRIES LTD. &ANR.

Citation: [2015] 8 S.C.R. 728 · Decided: 31-07-2015 · Supreme Court of India · Bench: A.K. SIKRI · Disposal: Appeal(s) allowed

Judgment (excerpt)

[2015) 8 S.C.R. 728 
A 
COMMISSIONER OF CUSTOMS, HYDERABAD 
B 
v. 
M/S. PENNAR INDUSTRIES LTD. &ANR. 
(Civil Appeal Nos. 4444-4445 of2005) 
JULY31,2015 
[A.K. SIKRI AND N.V. RAMA'NA, JJ.] 
Customs Act, 1962 -
s. 25 -
Exemption under 
C Notification No. 3011997 - Claim of- Import of goods against 
advance licence - However, non-fulfillment of export 
obligation under the licence - No exports effected by 
exporting tho~e goods so manufactured from the raw material 
that was imported duty free - Demand of duty by Revenue -
0 
Assessee's case that it had arranged for third party export, 
thus fulfilled its obligation and was entitled to duty free imports 
- Said demand confirmed - However, tribunal set aside the 
same holding that the Director General of Foreign Trade had 
amended the licence permitting such export through third 
E party, it amounted to fulfilling the export obligations - On 
appeal, held: Since the conditions of the exemption 
notification are not fulfilled and law requires strict compliance 
of the exemption notification, assessee becomes liable to 
pay the import duty which was payable, but for the benefit of 
F exemption Notification No 3011997, which was obtained by 
the assessee - Purport of the exemption notification is to 
advance the objectives of the EXIM Policy - When DGFT 
itself accepted the benefits of the assessee and carried out 
the amendment in the import licence and further that the 
G assessee could make the exports on the basis of the 
amendment,· albeit through third party, such person should 
not be left high and dry- Thus, necessary amendments are 
needed in such notifications making appropriate provisions 
H 
728 
COMMNR. OF CUSTOMS, HYDERABAD v. PENNAR 
729 
INDUSTRIES LTD. 
to meet these types of eventualities - As regards charge of · A 
interest, as per the bond the assessee agreed to pay interest 
@24% pa-In the peculiarfaCts of the case, rate of interest 
reduced from 24% pa to 9% pa. - Qrder passed by the 
tribunal set aside. 
B 
Allowing the appeals, the Court 
HELD: 1.1 In the instant case, advance licence wu 
issued to the assessee in terms of para 7 .4 of the EXJM 
Policy 1997-2000. It was in terms of this licence that the 
import of the specified material was permitted on the C 
condition that the assessee is obligated to meet the 
export obligation as contained in the licence issue~ by 
the DGFT. No doubt, this obligation in the export licence, 
read with conditions contained in Notification No. 30/ D 
1997, puts the onus upon the assessee to make the 
exports of the products produced from the material so 
imported. However, it is the case of the assessee that 
for certain bona fide reasons (as the bona fides of the 
assessee have been accepted by the DGFT), as the E 
assessee was not able to export same very goods 
produced by it from the material imported on which he 
was given exemption from payment of the import duty, 
the DGFT allowed the assessee to meet the export 
obligation through third party. [Para 14] [739-H; 740-A-
F 
D] 
· 1.2 Insofar as DGFT is concerned, it has passed 
Order-in-Original dated 03.08.2011 holding that the 
export through third party would tantamount to fulfilling 
the export obligation contained in the licence. Howeve~. G 
since the total import entitlement of the firm, as per the 
amended licences, worked to 2123.1538 MTs and the 
assessee had imported 2712.41 MTs, it resulted in excess 
import of 589.26 MTs. Therefore, only on this excess H 
import, customs duty was payable, which was directed 
730 
SUPREME COURT REPORTS 
[2015] B S.C.R. 
A to be paid along with interest calculated@ 15% from 
the date of first import to the date on which last 
consignment of exports were effected by the assessee 
through third party. The DG~T, in its order, also 
mentioned that there was no misutilization of the raw 
B material imported by the assessee and there was no 
violation of any other conditions of the licence causing 
Revenue loss at the cost of exchequer. The said Order- . 
in-Original of DGFT was under the provisions of EXIM 
Policy. [Paras 15, 16) [740-D-H] 
c 
1.3 Since the conditions of the exemption notification 
are not fulfilled and the law requires strict compliance of 
the ~xemption notification, the assessee becomes liable 
to pay the import duty which was payable, but for the 
D benefit of exemption Notification No 30/1997, which was 
obtained by the assessee. [Para 19] [743-F-G] 
1.4 The Government should bestow its consideration 

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