2016 (4) TMI 283 - AT - Central Excise

Demand of duty - PP bags procured duty free under Notification No. 43/2001-CE(NT) for packing of export goods - Manufacturer of vegetable oil and De Oiled Cake (DOC), exempt from Central Excise duty - Demand confirmed on the ground that at the port at the time of loading of goods on to the ship, DOC was taken out of these bags and loaded on the ship bulk and these bags were discarded as scrap at the port and therefore as the bags were not exported the duty foregone in terms of Notification No. 43/2001-CE(NT) became recoverable. Also DOC was also exported by train to Pakistan and in respect of such export DOC crossed the border in PP bags. Held that - as regards the exports to Pakistan by train there is no evidence that the goods did not cross the border packed in PP bags and therefore if there is any demand in respect of the same, the same would not be sustainable. Regarding export of DOC by ships, the PP bags were used for manufacture/processing of the export goods as packing is certainly a process. The condition of the notification is that the goods (DOC) for the processing of which the bags were procured duty free should be exported. There is no dispute that DOC was exported and it is not the allegation that DOC was not exported. Even the evidence to that effect has been given in the form of Customs endorsed AREs. The said notification nowhere stipulates that the goods which were procured duty free under Notification No. 43/2001-CE(NT) are required to be exported. Therefore, the demand is not sustainable. - Decided in favour of appellant

Summary

Issues: Leviability of duty on PP bags procured duty-free for packing export goods under Notification No. 43/2001-CE(NT).

Analysis:
1. Factual Background: The appellant, a manufacturer of vegetable oil and De Oiled Cake (DOC), exported DOC using PP bags procured duty-free under Notification No. 43/2001-CE(NT). The demand for duty arose when the bags were discarded as scrap at the port during loading, leading to the contention that duty foregone on the bags became recoverable.

2. Appellant's Arguments: The appellant's consultant argued that DOC was also exported to Pakistan in PP bags, and the demand for duty in such cases was unjustified. It was emphasized that the DOC was cleared and delivered at the port in packed condition, meeting the conditions of the notification. Evidence was presented to prove the export of DOC in the bags.

3. Revenue's Position: The Departmental Representative (DR) contended that for DOC exports by ships, the PP bags were not exported, justifying the duty demand on the bags.

4. Judgment Analysis: The tribunal analyzed the relevant Notification No. 43/2001-CE(NT) governing duty-free procurement of goods for export. It noted that the bags were procured duty-free and used for packing the export goods, fulfilling the notification's conditions. Although DOC was loaded onto the ship in bulk, necessitating removal from the bags, the bags were integral to the export process as packing constitutes a processing step. Importantly, the notification did not mandate the exported goods to be the same ones procured duty-free under it.

5. Notification Interpretation: The tribunal emphasized that the bags were used for the manufacture/processing of the export goods, and the exported DOC was not in dispute. Customs-endorsed AREs provided evidence of the export. Notably, the notification did not explicitly require the duty-free procured goods to be exported, further supporting the appellant's position.

6. Conclusion: Considering the above analysis, the tribunal found the demand for duty on the PP bags unsustainable. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant.