2011 (10) TMI 211 - AT - Customs

Notification 52/2003 - Assessee 100% EOU manufacturing agricultural tractors - Held that - Where the assessee after importation but before clearance by custom officers got the addendum incorporated in LUT specifying returnable racks as items eligible for duty exemption shall be entitled to benefit of Notification.

Summary

Issues:
- Benefit under Notification No. 52/2003-Cus for re-imported returnable racks
- Eligibility for duty exemption under Notification No. 52/2003-Cus
- Interpretation of EXIM Policy para 2.26
- Customs duty exemption for goods used in connection with production for export

Analysis:
The case involved a dispute regarding the eligibility of duty exemption under Notification No. 52/2003-Cus for re-imported returnable racks used as packaging material for tractors meant for export. The appellant, a 100% Export Oriented Unit (EOU), argued that the returnable racks were essential for stable packaging of tractors for export and should be considered as packaging materials eligible for duty exemption. The appellant highlighted that the Directorate General of Foreign Trade (DGFT) had allowed the re-import of returnable racks, emphasizing that once a license is issued by DGFT, Customs cannot disallow it. The appellant also relied on various precedents to support their contention.

The Revenue, represented by the Additional Commissioner, supported the findings of the lower appellate authority, which had denied duty exemption to the appellant based on the absence of returnable racks in the Letter of Undertaking (LUT) at the time of importation.

Upon careful consideration, the Tribunal observed that the appellant had obtained an addendum specifying returnable racks as eligible for duty exemption before the goods were cleared from Customs. Referring to EXIM Policy para 2.26, the Tribunal concluded that the appellant was rightfully entitled to duty exemption. Additionally, as an EOU operating in a custom bonded warehouse, the movement of goods to the EOU for packaging tractors for export did not require duty payment. Therefore, the denial of customs duty exemption to the appellant for returnable racks under Notification No. 52/2003-Cus was deemed incorrect. Consequently, the impugned order was set aside as unsustainable in law, and the appeal was allowed with any consequential relief.

In summary, the Tribunal ruled in favor of the appellant, emphasizing the importance of timely compliance with regulations and the rightful entitlement of EOUs to duty exemptions for goods used in connection with production for export.