2009 (10) TMI 630 - HC - Customs

whether on account of less user of inputs in the production of goods than as per the norms provided in the policy, the petitioner in respect of such balance amount of inputs is not entitled to exemption Held that - petitioners have not violated the terms of the notification, Tribunal has misdirected itself in law, in calling on the petitioners to pre-deposit the amount as ordered. There has been no violation of the notification and further prima facie the Customs Authorities cannot go behind the licence issued, calling on the petitioners to pre-deposit would by itself causing undue hardship to the petitioners

Issues:
1. Interpretation of duty exemption policy for imported raw materials used in manufacturing goods for export.
2. Dispute regarding duty exemption on unused balance inputs in manufactured goods.
3. Authority of Customs to question the usage of inputs against the norms specified in the policy.
4. Application of the notification exempting goods imported against an advance license.
5. Consideration of hardship in demanding duty payment on unused inputs.
6. Compliance with terms of the advance license and the requirement for accounting for imported inputs.

Analysis:

1. The judgment concerns the interpretation of a duty exemption policy for imported raw materials used in manufacturing goods for export. The petitioners had imported inputs for manufacturing goods to be exported, as allowed by the policy in force for the period 1997-2002.

2. A dispute arose regarding duty exemption on the balance inputs remaining unused in the manufactured goods compared to the norms provided in the policy. The respondents demanded duty payment on the unused inputs, contending that duty exemption was only applicable to inputs physically incorporated in the export product.

3. The question of whether Customs Authorities can question the usage of inputs against the specified norms in the policy was raised. The petitioners argued that once the percentage is fixed by the notification, Customs Authorities cannot charge duties on legally imported inputs as long as the conditions of the notification are fulfilled.

4. The judgment analyzed the application of a notification exempting goods imported against an advance license from various duties, emphasizing the requirement of fulfilling export obligations. It was noted that the notification did not provide for levying duty on unused inputs imported against the advance license.

5. The court considered the aspect of hardship in demanding duty payment on the unused inputs. Citing previous judgments, it highlighted the principle that demanding payment of unjust dues could cause hardship, and in this case, the petitioners had not violated the terms of the notification.

6. Compliance with the terms of the advance license and the requirement for accounting for imported inputs were also discussed. The court noted that in this case, there was no provision for accounting for the permitted quantity of imported inputs minus any wastage in the exported product, as specified in other situations.

In conclusion, the judgment set aside the Tribunal's order demanding pre-deposit from the petitioners, emphasizing that there was no violation of the notification and Customs Authorities cannot go behind the license issued. The petitioners were directed to furnish a bond to secure the respondents, allowing the appeal to proceed without pre-deposit, subject to furnishing the bond within the specified timeline.

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