2016 (3) TMI 567 - AT - Central Excise

Damaged goods beyond recovery - partial damage - Export of damaged goods reprocessed - Claim of recovery - demand duty on 11786.30 mtrs of fabrics on the grounds that it was not possible to verify the correctness of the claim that the goods which have been cleared are re-processed goods - benefit of Notification No. 24/2003-CE dated 31.3.2003 denied - Held that - We find that it is not disputed that the damaged goods were brought back into the factory. The argument of the Revenue that it is not possible to reprocess the goods in 2007 which were considered unfit for reprocessing in 2003, is not sustainable in view of the facts that the technology keeps improving and any claim made in 2003 is based on the appellant s knowledge at the material time. The appellants have argued that in 2006, they come to know the chemicals which can reprocess the said materials and they reprocessed the material. We do not find that there is anything which cannot be taken at face value. The appellants have not only shown the details of clearance of reprocessed materials in export/DTA on payment of duty and Revenue has not challenged that fact. Revenue has only raised the suspicion that the records produced by the appellant are not authenticated. The assertion of the appellant cannot be set aside merely on suspicion. It has not stated by the Revenue at any stage as to what records were required to be produced that the appellant failed to produce. The facts of the case are not exactly similar but it is seen that the appellants are not much better footing than Madhav Marbles (2008 (10) TMI 209 - CESTAT, CHENNAI) in so far as the goods have not been totally lost but have been only partially damaged. If benefit can be given in case of goods totally lost then there is no reason to deny benefit in case of appellants where the goods were only partially damaged and they were able to reprocess the goods. - Decided in favour of assessee

Summary

Issues involved:
1. Duty liability on damaged fabrics cleared for export but brought back to the factory.
2. Claim of reprocessing damaged fabrics for export and DTA clearance.
3. Denial of duty exemption under Notification No. 24/2003-CE.
4. Authentication of records and verification of reprocessed goods.
5. Comparison with relevant case laws and legal interpretations.

Issue 1: Duty liability on damaged fabrics cleared for export but brought back to the factory:
The appellants, an Export Oriented Unit (EOU), cleared consignments of fabrics for export in 2003, which were damaged due to rain and brought back to the factory. The Insurance Surveyor confirmed the damage, and the original adjudicating authority observed that duty was payable on the goods not exported. A demand for duty was raised, asserting that the damaged fabrics were beyond recovery. The lower authorities confirmed the duty demand, stating that the goods were not reprocessed, and no evidence of reprocessing was provided.

Issue 2: Claim of reprocessing damaged fabrics for export and DTA clearance:
The appellants claimed to have discovered a chemical in 2006 to make the damaged fabric usable again. They reprocessed the fabrics and exported a portion while clearing the rest for Domestic Tariff Area (DTA) on payment of duty. The Revenue alleged lack of evidence for reprocessing and denied duty exemption under Notification No. 24/2003-CE. The appellants argued that they informed the Revenue immediately in 2003 and should not be penalized for claiming insurance on the damaged goods.

Issue 3: Denial of duty exemption under Notification No. 24/2003-CE:
The Revenue denied duty exemption under Notification No. 24/2003-CE, contending that goods manufactured by 100% EOU and not exported but sold in DTA are chargeable to duty. The appellants argued that the notification related to duty exemption on inputs for manufacturing, not on final products. The Tribunal found the Revenue's argument unsustainable and emphasized the appellants' compliance with duty payment for reprocessed goods.

Issue 4: Authentication of records and verification of reprocessed goods:
The Revenue raised concerns about the authenticity of records provided by the appellants for reprocessed goods clearance. The Tribunal noted that the Revenue's suspicions were not substantiated with specific requirements for record production. The appellants' compliance with duty payment for reprocessed goods and lack of challenge from the Revenue supported the appellants' claim.

Issue 5: Comparison with relevant case laws and legal interpretations:
The Tribunal compared the present case with precedents like Honest Bio-vet Pvt. Ltd. and Madhav Marbles and Granites Ltd. to determine the applicability of duty remission and exemption. The Tribunal found the appellants in a superior position compared to similar cases, as the goods were partially damaged and successfully reprocessed for export and DTA clearance. The Tribunal set aside the impugned order and allowed the appeal based on the appellants' actions and compliance with duty payment.

This detailed analysis of the judgment highlights the key issues, arguments presented, legal interpretations, and the final decision of the Appellate Tribunal CESTAT MUMBAI regarding duty liability on damaged fabrics cleared for export and subsequent reprocessing for export and DTA clearance.