Per Archana Wadhwa :

The appellants, M/s. Kitply Industries Ltd. imported Timber Logs in August, 1994 under Advance Licence Scheme, by availing the benefit of Notification No. 203/92-CE dated 19.5.92. The appellants had already fulfilled their Export Obligation and the entire export proceeds were realised in respect of which the Timber Logs were imported by the appellants against the Advance Licences.

2. On investigations having been started against the appellants by the Customs Authorities, it was seen that the appellants had already entered into negotiations for sale of the imported goods to different parties. It was also seen that the appellants had availed the MODVAT benefit on the goods exported against the Export Obligation of the above-mentioned Advance Licences, against which imports were made. However, during the investigations, the appellants reversed the MODVAT Credit of Duty availed on the inputs used in the manufacture of the exported goods. As the authorities also entertained a view that the appellants have sold the imported items without first redeeming the LUT, the appellants approached the D.G.F.T. who vide their letter dated 8.9.94, granted relaxation for LUT redemption under para 21 of the Export-Import Policy, 1992-97, subject to the condition that the imported goods which have been disposed of, had been imported against those Advance Licences against which Export Obligations have been completed in full and that the foreign exchange in respect of the Advance Licences referred to above, had been realised in full.

3. However, the appellants were issued a show cause notice proposing to deny the benefit of Notification No. 203/92 and proposing to the confirm the duty of Rs. 33,86,659.00 on the alleged ground that the appellants had sold the imported goods without redemption of LUT, waiver of bond condition and endorsement of transferability.

4. During adjudication, the appellants took a stand that benefit of the Notification was available inasmuch as they have already fulfilled their Export Obligation and as such, the transfer of the imported goods was permissible once the Export Obligation is discharged and export proceeds realised. The Notification is silent about redeeming the LUT. They further contended that the redemption of LUT was to be done by D.G.F.T. who, according to the provisions of para 21 of the ITC Policy, 1992-97, are empowered to waive any of the conditions and relax the provisions of the Policy and procedures on the ground that there is a genuine hardship to the appellants. As D.G.F.T. regularised the sale of the Timber Logs imported against the Advance Licences under para 21 of the ITC Policy, subject to the conditions mentioned therein, the Customs Authorities were not justified in proposing to reject the benefit under Advance Licences.

5. The Commissioner of Customs, Kandla, however, was not satisfied with the appellants' contentions and by observing that the goods have been sold before being regularised by D.G.F.T., he remarked that the same cannot be considered as only a procedural lapse on their part. He also observed that the appellants had approached the D.G.F.T. For getting LUT redeemed only after the investigations were initiated by the Customs Authorities. The MODVAT Credit was also reversed by the appellants, after the start of the investigations. He observed that the transfer of the imported goods can be made after the export is made, the export proceeds are realised and the LUT redeemed. As such, the redemption of LUT not being a specific condition in Notification No. 203/92, will not entitle the appellants to get the benefit of the same, inasmuch as the same being a condition of the ITC Policy in force, has to be adhered to.

6. As regards the D.G.F.T.'s regularisation of sale, he observed that it is for the Customs Authorities to see whether the Licence validity covers the goods and while examining the said aspect, the condition of the licence is fulfilled or not. The D.G.F.T.'s