2010 (8) TMI 598 - HC - Customs

Import of goods - Concessional rate of duty - Whether the goods imported in terms of Notification No. 13/97-Cus., dated 1-3-1997 and successor Notification No. 25/99 dated 28-2-1999 can be used in any other factory other than the factory registered under Rule 1996 and as per the procedure set out in these Rules - Since, the assessee was that though the goods were purchased for use in the manufacture of colour picture tubes at their Mohali Unit, but due to closure of that unit, the assessee-company was not able to use the inputs and as such the same were diverted to their unit in Vadodra for the same purpose - This was done after giving proper intimation to the appellant-Department and the latter had never raised any objection to that being so done - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of Notification No. 13/97-Cus. and 25/99 dated 28-2-1999 under the Central Excise Act, 1944.
2. Validity of utilizing imported goods in a factory other than the one registered under the Customs Rules.
3. Admissibility of concessional rate of duty on goods diverted to another factory.
4. Liability to pay excise duty, interest, and penalty for violating import rules.

Issue 1: Interpretation of Notification No. 13/97-Cus. and 25/99 under the Central Excise Act, 1944:
The case involved a dispute regarding the interpretation of Notification No. 13/97-Cus. and its successor, Notification No. 25/99 dated 28-2-1999, under the Central Excise Act, 1944. The primary question was whether goods imported under these notifications could be used in a factory other than the one registered under the Customs Rules. The controversy arose when the respondent imported goods at a concessional rate of duty but diverted them to another unit, leading to a loss of custom duty to the exchequer.

Issue 2: Validity of utilizing imported goods in a factory other than the registered one:
The respondent, a manufacturer of colour picture tubes, imported goods under the Customs Rules to avail the concessional rate of duty. However, an audit revealed that the respondent had moved some imported items to a different unit, violating the provisions of the Rules. The adjudicating authority confirmed the duty demand, along with interest and penalty, for breaching the import rules by using goods in a factory not registered under the Customs Rules.

Issue 3: Admissibility of concessional rate of duty on diverted goods:
The Commissioner (Appeals) considered various factors, including the diversion of goods to another factory due to the closure of the original unit. The appellate authority accepted the appeal, emphasizing that the importer had used the goods for the intended purpose in another unit with the approval of the department. The Tribunal concurred, stating that the failure to use the goods in the registered factory did not warrant denial of the concessional benefit, as the department had condoned the procedural deviation.

Issue 4: Liability for violating import rules:
The case involved the liability of the respondent to pay excise duty, interest, and penalty for violating the import rules by diverting goods to an unregistered factory. The appellate authorities upheld the respondent's actions, noting that the diversion was due to the closure of the original unit and approved by the department. The High Court dismissed the appeals, stating that no substantial question of law arose, and there was no basis for interfering with the orders of the appellate authorities, as the findings were based on relevant considerations and the record.

In conclusion, the High Court upheld the decision of the appellate authorities, dismissing the appeals and affirming that the respondent was entitled to the concessional rate of duty on the imported goods diverted to another factory with departmental approval due to the closure of the original unit.