2008 (8) TMI 152 - AT - Customs

Imported Betelnut under job work contracts with foreign suppliers for the purpose of undertaking the job of manufacture of Tannin for export to the raw material-suppliers - The imported raw material was cleared duty-free in terms of Notification No. 32/97-Cus. - allegation of waste material having been diverted to the local market without being destroyed in terms of condition No. (ii) of the Notification cannot be established by revenue - demand of duty & penalty cannot be sustained

Summary

Issues:
- Duty demand on imported raw material under Customs Notification No. 32/97
- Alleged violation of condition No. (ii) of the Notification
- Confiscation of goods and imposition of penalties under Customs Act
- Compliance with Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996
- Appeal against the decision of the adjudicating authority

Analysis:
1. Duty Demand and Violation of Notification Condition:
The case involved M/s. APP Enterprises importing "Betelnut" for manufacturing 'Tannin' under a job work contract. The Customs Commissioner issued a show-cause notice demanding duty on the imported raw material, alleging a violation of condition No. (ii) of Customs Notification No. 32/97. The notice also proposed confiscation of goods and penalties under the Customs Act.

2. Compliance with Customs Rules:
M/s. APP Enterprises claimed compliance with the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. They followed the prescribed procedures under the Rules, including obtaining registration, permissions, and certifications from relevant authorities. The Asst. Commissioner of Central Excise and Customs acknowledged their compliance with the Rules.

3. Evidence of Intended Use:
Documentary evidence presented by M/s. APP Enterprises demonstrated the export of Tannin manufactured from the imported raw material. The Asst. Commissioner permitted the destruction of waste generated during the manufacturing process, indicating adherence to the Notification's conditions. The export of Tannin, approximating 20% of the imported betelnut, aligned with their claim of intended use.

4. Judgment and Dismissal of Appeal:
The Appellate Tribunal found no evidence to support the duty demand or penalties against M/s. APP Enterprises. The Tribunal concluded that the imported goods were used for the intended purpose of manufacturing Tannin for export. Consequently, the penalties imposed on the partners of the firm were vacated, and the appeal against the adjudicating authority's decision was allowed.

5. Operative Part of the Order:
The Tribunal pronounced the operative part of the order on 19-8-2008, dismissing the appeal for imposing penalties on another partner of the firm. The decision highlighted the importance of complying with Customs Rules and demonstrating the intended use of imported goods to avoid duty demands and penalties under the Customs Act.