2020 (2) TMI 1602 - AT - Customs

Import of the Graphite Tubes - imported Graphite Tubes were not used by the appellant in their factory - non-compliance with the condition of Notification No. 21/2002-Cus., dated 1-3-2002 - HELD THAT - It is an undisputed fact that the imported Graphite Tubes during the relevant period were received in the factory premises of the appellant, and the same cleared to the site of the customer, and fitted to Heat Exchangers, which in turn, used in MSFE system installed at the site of the customer. The Revenue s objection is that as a condition of the said Notification No. 21/2002-Cus., dated 1-3-2002 read with Customs (Import of Goods at Concessional Rate of Duty for Manufacturing of Excisable Goods) Rules, 1996, the imported Graphite Tubes were required to be used in his factory , even though the same were fitted to Heat Exchanger at the site of the customer. Rebutting the said argument, the appellants have submitted that after receiving the Graphite Tubes in their factory the same were tested for its suitability in the Heat Exchanger and cut to relevant sizes, thereafter cleared to the site of the customer for fitting it finally in the Heat Exchanger. They have argued that the Graphite Tubes are cleared separately instead of fitting the same in their factory due to the fragile nature of the said Graphite Tubes, which in all probability could break during the course of transportation of the Heat Exchanger to the site. The Revenue s only objection in denying the benefit of Notification is that the imported Graphite Tubes were not used by the appellant in their factory. There is no dispute of the fact that the Graphite Tubes were received in the factory and to the claim of the appellant that they were tested and made suitable after necessary cutting and polishing, etc., to be used in Heat Exchanger, a part of MSFE system, no contrary evidence has been placed on record - a logical, reasonable and technically sound explanation has been furnished by the appellant for such separate clearance. It is stated that due to fragile nature of the imported graphite tubes, after its testing the same were cleared separately to avoid damage during transportation of the Heat Exchangers to the site. It cannot be denied that the Heat Exchanger cannot function without having fitted with the Graphite Tubes and the Revenue has not disputed that the said Graphite Tubes were fitted to Heat Exchanger at the site of the customer. The appellant had complied with the condition of Notification of using the imported goods in their factory both in letter and spirit, hence denial of benefit exemption Notification No. 21/2002-Cus., dated 1-3-2002 to them would be unjustified and accordingly, the impugned order is liable to be set aside on merit. Also, there is a good case on limitation also. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Interpretation of Notification No. 21/2002-Cus., dated 1-3-2002 regarding import of Graphite Tubes for manufacturing; Jurisdictional authority to issue demand notice for recovery of differential duty; Compliance with Customs (Import of Goods at Concessional Rate of Duty for Manufacturing of Excisable Goods) Rules, 1996; Whether imported goods were used in the factory of the importer as required by the rules.

Analysis:

Issue 1: Interpretation of Notification No. 21/2002-Cus., dated 1-3-2002
The case involved a dispute regarding the compliance of the appellants with the conditions of Notification No. 21/2002-Cus., dated 1-3-2002, specifically Sr. No. 425, related to the import of Graphite Tubes. The Revenue contended that the imported Graphite Tubes were not used in the factory of the importer, as required by the notification. However, the appellants argued that the tubes were tested and made suitable for use in Heat Exchangers at their factory before being cleared to the customer's site. The Tribunal found that the appellants had indeed processed the tubes in their factory, making them suitable for use, and that the separate clearance was justified due to the fragile nature of the tubes. The Revenue's objection was deemed unjustified, and the denial of the benefit of the exemption was set aside.

Issue 2: Jurisdictional Authority for Demand Notice
The appellants raised a procedural issue regarding the jurisdiction of the Commissioner of Customs to issue the demand notice for recovery of differential duty. They argued that the jurisdiction rested with the Central Excise Officer, not the Commissioner of Customs. The appellants referenced a judgment to support their contention. The Tribunal noted the argument but did not delve into it further in the judgment, as the main focus was on the compliance with the notification requirements.

Issue 3: Compliance with Customs (Import of Goods at Concessional Rate of Duty for Manufacturing of Excisable Goods) Rules, 1996
The appellants claimed that they had followed all procedures under the Customs Rules for import of goods at a concessional rate of duty for manufacturing excisable goods. They highlighted that the imported Graphite Tubes were used in the Heat Exchangers, which were integral components of the manufacturing process. The Tribunal accepted the appellants' submissions regarding the testing and processing of the tubes in their factory, emphasizing that the tubes became part of the plant permanently at the customer's site. This compliance with the rules was a crucial factor in determining the benefit of the exemption.

Conclusion:
The Tribunal, after considering the arguments presented by both sides, concluded that the appellants had complied with the conditions of the notification and the Customs Rules. The denial of the benefit of the exemption was deemed unjustified, and the impugned order was set aside. The Tribunal also noted that there was a strong case on the limitation issue, as the appellants had informed the department about the import procedures, and no facts were suppressed or misdeclared. Ultimately, the appeals were allowed, and the impugned order was set aside.