2015 (2) TMI 80 - AT - Customs

100% EOU or free trade zone - DTA Clearances without permission - there was no manufacturing operation at all carried out by the appellant - Held that - CPT and PMC were removed from DTA without carrying out any manufacture activity because the CPT and cabinet imported were not mentioned to be any raw-material in the Bill of Entry as well as invoices of the exporter. Degaussing does not amount to manufacture because it does not change the character and nature of the input. CPT itself were imported. Those were capable of performing their own function without undergoing any processing. - Appellant did not get any permission for carrying out degaussing and alignment of CRT from the appropriate authority. Similarly, plastic cabinets were imported without indicating any manufacturing process to be carried thereon in absence of entry in LOP in that regard. Similarly spray painting does not amount to manufacture. Those were neither meant for export nor independently manufactured but used as accessories. As per LOP, CPT and moulded cabinets were raw-materials and those were not subjected to a manufacturing process for which those are not included in the list of items to be manufactured while LOP was granted. Therefore, CPT and PMT cleared in DTA were mere imported materials and components only. The appellant also did not inform to the Department about carrying out of any activity to be called degaussing and spray painting as manufacture. The terminology degaussing and alignment of CRT and spray painting of plastic moulded cabinets were only nomenclature given by appellant to give an impression that certain processes were carried out on such goods imported and sold in the DTA. There was failure to fulfil the conditions of the Notification 52/2003-Cus., dated 31/03/2003. The duty free goods not being used in manufacture violation of condition of export calls for recovery of the customs duty foregone by the Department. - The citations relied on by the appellant are not profitable to it when there was no manufacturing of CPT and cabinet activity carried out by them. Degaussing and spray painting is not known in trade parlance as manufacturing activity. When the goods imported were declared to be used in manufacturing process, but not so used, the duty foregone on import thereof is recoverable. The goods sold in DTA were the imported CPT and PMC misconceiving that manufacturing was done. Thus, the benefit of Notification claimed is not tenable and plea of excise duty is immaterial. Customs duty is recoverable. - Decided against assessee.

Summary

Issues:
1. Imposition of customs duty on imported raw material.
2. Penalty imposed on the company and its director.
3. Alleged violation of conditions of a customs notification.
4. Dispute regarding whether certain activities amount to manufacturing.
5. Recovery of customs duty foregone.
6. Levy of penalty on the director for duty evasion.

Analysis:
1. The appeal challenged the imposition of customs duty amounting to a specific sum on imported raw material by the company. The duty was imposed under the Customs Act, 1962, based on the failure to fulfill conditions of a customs notification related to duty-free imports for manufacturing goods for export.

2. Penalties were imposed on both the company and its director under different sections of the Customs Act. The company was subject to a penalty amounting to a percentage of the duty, while the director faced a separate penalty under a different section of the Act.

3. The adjudication order found that the company had not used the imported goods in the manufacturing process as required by the customs notification. The extended period of limitation was invoked due to suppression of facts with the intention to evade duty, leading to penalties being imposed for causing prejudice to revenue.

4. The dispute centered around whether certain activities conducted by the company, such as 'degaussing' and 'alignment of CPT,' constituted manufacturing as claimed by the appellants. The company argued that these processes amounted to manufacturing, citing relevant legal provisions and permissions obtained.

5. The revenue contended that the activities in question did not amount to manufacturing, as they did not change the character or nature of the imported goods. The company failed to obtain permission for these processes and did not inform the authorities, leading to the conclusion that the goods sold in the domestic market were merely imported materials.

6. The judgment dismissed the appeals, upholding the findings that the activities in question did not amount to manufacturing. As a result, the recovery of customs duty foregone was deemed necessary, and penalties were upheld, including on the director for his involvement in the evasion of duty.

This detailed analysis of the legal judgment provides a comprehensive overview of the issues involved and the reasoning behind the decision rendered by the Appellate Tribunal CESTAT NEW DELHI.