P.C. Jain, Member (T)

1. Brief facts of the case are as follows : -

1.1 The respondents, an approved unit of Kanidla Free Trade Zone (KAFTZ) for manufacture of Detergent Powder imported certain quantities of soda ash for the manufacture and export of detergent powder in August 1984 and claimed the benefits of Customs notification 77/80-Cus., dated 17-4-1980 as applicable to imports of units in KAFTZ. As required under the Customs notification 77/80 dated 17-4-1980 the appellants executed a bond undertaking to utilise the raw materials for the manufacture of detergent and to export the detergent so manufactured.

1.2. Due to lack of export orders the respondents could not utilise the entire quantity of soda ash and therefore, requested the KAFTZ administration for permission to remove the surplus soda ash to domestic tariff area (DTA) on payment of duty. Their request for the said removal was considered and agreed to by the licensing authority in terms of para 8(iii) of Appendix 15 of ITC Policy AM 1984-85 subject to the payment of appropriate duty. Appellants accordingly, filed the following bills of entry for home consumption for the removal of surplus soda ash to DTA:-

1.3. The above mentioned bills of entry were assessed to duty according to the provisions of Section 15(1)(a) of the Customs Act, i%2. Whereas the goods covered by the last two mentioned of bills of entry were cleared by the respondents on payment of duty, in respect of the remaining 4 bills of entry i.e. at S. Nos. (1) to (4) above which remained uncleared on the date of issue of the notification 50/85 dated 28-2-1985 the respondents approached the KAFTZ administration for reassessment claiming benefits of the abovesaid Notification 50/85. Their main ground for reassessment was that the presentation of 4 bills of entry for home consumption should be deemed to be under Section 68 of the Customs Act, 1962 and therefore, for the purposes of assessment Section 15(1)(b) would apply. This argument was sought to be fortified by the respondents on the ground that KAFTZ is already declared as a Customs warehouse under the Customs Act, 1962 and the same is akin to the bonded warehouse within which all the activities permitted under Section 65 of the Customs Act, 1962 were carried out. Alternatively they submitted that since no import duty had been paid in respect of the said 4 bills of entry the provisions of Section 15(1) (c) could be considered to be more relevant than the provisions of Section 15(1)(a) of the said Act.

1.4 The Assistant Collector in his order dated 19-7-1985 held that on original importation the goods were cleared through a bill of entry for home consumption claiming the benefit of notification 77/80 dated 17-4-1980 and for that purpose they executed a bond undertaking to fulfil the conditions of the Customs notification. One of the conditions of the bond is as follows :

"II) If the said importers pay on demand and without demur in respect of such raw materials and consumables as have not been proved to the satisfaction of the proper officer of Customs to have been used in the manufacture of goods in the said zone and or exported to place(s) outside India, an amount equal to the Duty of Customs, additional duty leviable under the Customs Tariff Act, 1975 and Auxiliary duty of Customs that would have been payable on such raw materials or consumable stores under the Indian Finance Act 198__but for the said Notification of the Central Government.

In terms of this condition the respondents according to the Assistant Collector, were required to pay duty as was leviable on the original importation of the goods. He further held that KAFTZ has been declared as a warehousing station by Central Board of Excise & Customs in terms of notification No. 68/65 dated 12-5-1965; however, no warehousing licence declaring the units in the KAFTZ to operate as public or private bonded warehouse in terms of Section 58 of the Customs Act, 1962 was issued. The units establishe