Export Obligations met: Penalty on duty exempted Lauryl Alcohol quashed by Bombay HC [Read Order]

The Bombay High Court has recently quashed an order, demanding penalty and duty on Lauryl Alcohol, seized from the respondent-assessee, Galaxy Surfactants Ltd., a listed company engaged in the manufacture and export of Surfactants used for manufacture of toothpaste and shampoos.

The assessee imports materials into India against an advance licence with actual user condition in terms of paragraph 7.4 of the Export and Import Policy, 1997-2002. In 2004, a notice to show cause as to why the duty exempted material of 83,128 kgs of Lauryl alcohol imported under the licence should not be confiscated under Section 111 of the Customs Act, 1962. The exemption under the Notification No.30/97-CUS dated 1 April 1997, was being availed by the assessee.

Since the goods were not available for confiscation, a fine in lieu of confiscation, along with the customs duty and penalty under the Customs Act, Section 112 was also demanded.

The Respondent had used the imported duty free goods in the M3 Unit at Tarapur instead of V23 Unit at MIDC Taloja. This, according to the department, amounts to diversion of the inputs and violates condition (vii) of the said Notification.

According to the Appellant, the condition (vii) of the said exemption Notification clearly provides that exempt materials shall not be disposed of or utilised in any manner except for utilisation in discharge of export obligation or for replenishment of such material and the materials so replenished shall not be sold or transferred to any other person.

The said transfer of duty free material was observed, to be not violative of the provisions of the actual user condition by the Division Bench of Justices Abhay Ahuja and Nitin Jamdar who noted and quoted the decision of the Kerala High Court, “considering the units of Petitioner in the decision above observed that the effect of registration was only to enable a dealer to collect tax payable by him to the purchaser, but it did not have the effect of carving out an independent existence for the registered unit or to delink it from the other units for the purposes of the Act.”

The observation in the same that, no sale liable to tax has occurred in the said transaction was reiterated by the Bombay High Court, ruling the issues in the case in favour of the petitioner.

To Read the full text of the Order CLICK HERE

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