2018 (2) TMI 1840 - CGOVT - Customs

Duty Drawback - rejection on the ground since the goods had been put to use by the applicant, 98% drawback of duty of Customs is not admissible by virtue of Section 74(2) of the Act - Section 74 of the Customs Act, 1962 - Held that - Testing of goods is considered as use of goods. The order of the Commissioner (Appeals) holding that testing of goods amounts to use of goods is not denied by the applicant also. But it is claimed that they had only inspected the goods and not tested. But no evidence has been provided to support their above claim. It does not sound otherwise also logical as the defects in the product like lanterns cannot be found out merely on physical verification and the functional defects can be actually found out on testing of the lantern. The applicant has also not produced any copy of correspondence with the Chinese supplier of lanterns to ascertain the type of defects found in the lanterns from which it can be ascertained whether the defects in lanterns could be found out on mere physical inspection or testing of the goods was required - Whereas the Commissioner (Appeals) has clearly held in his order that the goods in question were tested and comes under the category of used goods as envisaged under Section 74 of the Customs Act, 1962. The applicant has failed to rebut his finding and, therefore, the Government does not find any reason for interfering in the order of Commissioner (Appeals). Revision application dismissed.

Summary

Issues:
Claim for drawback under Section 74 of the Customs Act, 1962 for re-exported goods.

Analysis:
The case involved a revision application filed by M/s. Eveready Industries India Ltd. against the rejection of their drawback claim under Section 74 of the Customs Act, 1962. The applicant imported lanterns, some of which were found defective and re-exported. The Assistant Commissioner denied the drawback claim, stating that since the goods had been used by the applicant, 98% drawback was not admissible. The Commissioner (Appeals) upheld this decision. The applicant contended that they fulfilled all criteria for re-export under Section 74 and that the goods were new, not used. The Government noted that to qualify for the 98% duty drawback, specific conditions must be met, including the goods being new and not used.

The Government observed that the first three conditions for the duty drawback were met in this case. However, the Assistant Commissioner denied the claim on the basis that the goods were not new and had been used by the applicant before re-export. The Commissioner (Appeals) held that testing of goods constituted use, a decision not challenged by the applicant. The applicant claimed they had only inspected, not tested the goods, but failed to provide evidence supporting this claim. The Commissioner (Appeals) concluded that the goods were tested and considered used under Section 74. The Government found no reason to interfere with this decision as the applicant did not rebut this finding.

As a result of the above considerations, the revision application was rejected.