2008 (2) TMI 237 - AT - Customs

Deemed export - imported duty free raw materials and also procured duty free materials from domestic sources clearance of waste & rejects in DTA demand on this waste & on raw material used in such waste waste is cleared to DTA after permission from Development Commissioner moreover, waste & rejects cleared are within permissible limit of 50% of exports since raw material procured duty free was used for goods to be exported, impugned demand is not sustainable

Summary

Issues involved:
Dispute over excise duty on waste and rejects as finished products, demand of customs duty on inputs, imposition of penalties, determination of FOB value for export, interpretation of Section 72 of the Customs Act.

Analysis:
The appeal before the Appellate Tribunal CESTAT, Ahmedabad involved the Department challenging an order by the Commissioner regarding the payment of excise duty on waste and rejects as finished products, along with other demands. The appellant argued for the demanding of customs duty on inputs, imposition of penalties, and interest under various sections of the Customs Act and Central Excise Act. The respondent, on the other hand, filed a cross-objection against the duty and penalty imposed. The Tribunal examined the case in detail.

The Tribunal noted that the respondent was entitled to clear 50% of the value of the exported goods to the Domestic Tariff Area (DTA). The key issue in the cross-objection was the determination of the stipulated FOB value of the export. Referring to a previous case, the Tribunal held that the value of deemed export clearances should be considered for determining the eligibility of 50% of the FOB value of the export, allowing the appellant to clear goods in the DTA on payment of applicable duties.

Regarding the Department's appeal on the demand of duty on inputs used in the manufacture of waste and rejects, the Tribunal analyzed the provisions of Section 72 of the Customs Act. It was observed that Section 72 pertains to goods improperly removed from the warehouse, which did not apply in this case as the raw materials were issued for manufacture with permission. The Tribunal found no grounds to interfere with the Commissioner's decision of non-demand of duty on raw materials and no penal action.

Consequently, the Tribunal concluded that the clearance of rejects and wastes fell within the permissible limit of 50% of exports when considering the value of deemed exports. Therefore, the demand on finished goods was deemed unwarranted. The Tribunal rejected the Department's appeal and allowed the cross-objection by the party, pronouncing the judgment on 6-2-2008.