2019 (6) TMI 1521 - AT - Customs

Refund of Import Duty - goods in damaged condition - goods imported by the appellant were not defective and were damaged en route after clearance from the customs in sound condition - applicability of Section 22 or Section 26A of Customs Duty - HELD THAT - The overseas supplier is under the contractual obligation to deliver the goods in the condition as per the agreed terms at the buyer s premises. In this case, since the goods were damaged en route and did not reach the factory of the appellant, such defective goods were exported by it and also accepted by the overseas supplier. The documents annexed to the Shipping Bill also established the fact that the duty paid imported goods was in fact re-exported by the appellant. Since, the goods imported by the appellant were not subjected to any process of repair, re-conditioning etc. and the department was satisfied that the defective imported goods were actually re-exported by the appellant and that the appellant did not claim any duty. The observation of the learned Commissioner (Appeals) that Section 26A ibid does not deal with the situation of goods damaged during transportation is not proper and justified - Section 22 ibid and Section 26 ibid are independent of each other and repeated reference to Section 22 in the impugned order is unwarranted and has no relevance to the case in hand. The appellant should be entitled for refund of import duty in terms of Section 26A ibid. - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Refund of import duty under Section 26A of the Customs Act, 1962 for damaged goods during transportation.

Analysis:
The case involved the appellant filing a refund application under Section 26A of the Customs Act, 1962 for the import of goods damaged during transportation. The appellant imported 3 sets of Press Machine on Delivery Duty Unpaid (DDU) basis from Japan. En route, two vehicles met with an accident, damaging part of the consignment. The damaged goods were re-exported back to the Japanese supplier after establishing their identity. The refund application was rejected on the grounds that the goods were damaged after customs clearance. The Commissioner of Customs upheld the rejection, stating that the goods were not defective at the time of dispatch from the Country of Export or customs clearance, hence not falling under Section 22 or Section 26A for refund.

The Tribunal noted that part of the imported goods was damaged during transportation, and the damaged goods were re-exported after payment of appropriate customs duties. The appellant had imported the goods under a DDU contract with the Japanese supplier, which outlined obligations for both seller and buyer regarding delivery and transfer of risks. The overseas supplier was contractually obligated to deliver goods in the agreed condition at the buyer's premises. The documents confirmed that the duty-paid imported goods were re-exported by the appellant without any repair or re-conditioning. The Tribunal found that the appellant had complied with the requirements of Section 26A for the refund of import duty paid at the time of assessment of the Bill of Entry.

The Tribunal disagreed with the Commissioner's view that Section 26A does not cover goods damaged during transportation. It clarified that Section 22 provides for duty abatement on damaged goods before clearance for home consumption, but the appellant did not claim abatement. The Tribunal emphasized that Sections 22 and 26A are independent, and repeated references to Section 22 in the impugned order were unwarranted. Ultimately, the Tribunal held in favor of the appellant, setting aside the impugned order and allowing the appeal for the refund of import duty under Section 26A of the Customs Act, 1962.

In conclusion, the Tribunal's decision centered on the interpretation of contractual obligations, compliance with customs regulations, and the distinction between Sections 22 and 26A of the Customs Act, 1962 in the context of refund claims for damaged imported goods during transportation.