2009 (1) TMI 234 - AT - Customs

100% EOU Export of imported goods as such held that - If the Customs Department had felt that this is not permissible in view of the interpretation taken by them in respect of the Customs and Central Excise Notification, it was open to them to make a reference to either the CBEC or even a dialogue with the Ministry of Commerce to obtain a clarification on the issue. - One wing of the Ministry has permitted the exporters to export the bought out parts, whereas another wing of the Government of India feels that this bought out parts could not have been exported as such and they are liable for Customs/Central Excise duty. - They should not pull in the opposite directions - this process of testing and again repacking also amounts to manufacture in the light of the export policy - The definition of manufacture as per Central Excise Act is not applicable in this case. Otherwise, the very purpose of the scheme would be defeated The benefit of notification no. 52/2003 is available to the appellants.

Issues Involved:
1. Violation of conditions in Notification No. 52/2003-Cus. and 22/2003-C.E.
2. Definition of "manufacture" under Foreign Trade Policy.
3. Demand of duty and interest on exported components/parts.
4. Liability for confiscation and penalty under Section 112(a) of the Customs Act and Rule 25 of the Central Excise Rules.
5. Imposition of penalty on the company's executive.

Detailed Analysis:

1. Violation of Conditions in Notification No. 52/2003-Cus. and 22/2003-C.E.:
The appellants, a 100% EOU, were alleged to have violated the conditions of the aforementioned notifications by exporting spares and consumables without subjecting them to any manufacturing process. The Revenue argued that these items were imported duty-free and exported 'as such,' which contravened the stipulated conditions. The Commissioner held that the appellants were not entitled to the benefits of these exemption notifications, confirming the demand for duty and holding the goods liable for confiscation, along with imposing penalties.

2. Definition of "Manufacture" under Foreign Trade Policy:
The appellants contended that their activities, including visual inspection, functional testing, re-packing, and re-labelling, amounted to "manufacture" as defined under the Foreign Trade Policy. The definition includes processes such as re-packing, testing, and re-labelling. The appellants argued that the Commissioner had narrowly interpreted "manufacture" based on the Central Excise definition, which was not applicable in this context. The Tribunal agreed with the appellants, stating that the broader definition under the Foreign Trade Policy should be applied, and the activities performed by the appellants did constitute "manufacture."

3. Demand of Duty and Interest on Exported Components/Parts:
The Commissioner demanded duty and interest on the exported components/parts, asserting that they were exported as such without any manufacturing process. However, the Tribunal noted that the appellants had obtained specific permission from the Development Commissioner for the export of these parts, which were tested and repacked before export. The Tribunal emphasized that there was no revenue loss to the exchequer, as the goods were exported with value addition, leading to a net foreign exchange inflow.

4. Liability for Confiscation and Penalty under Section 112(a) of the Customs Act and Rule 25 of the Central Excise Rules:
The Commissioner had held the goods liable for confiscation and imposed penalties under Section 112(a) of the Customs Act and Rule 25 of the Central Excise Rules. The Tribunal found no merit in this decision, as the activities were conducted with the permission of the Development Commissioner, and the Customs Department was informed. The Tribunal set aside the impugned order, stating that there was no justification for the penalties imposed.

5. Imposition of Penalty on the Company's Executive:
The Commissioner had also imposed a penalty on the company's executive, Shrikant B. Navale, under the proviso to Section 112(a) of the Customs Act. The Tribunal, considering that the activities were performed with the knowledge and permission of the Development Commissioner and the Customs Department, found no grounds for the penalty and allowed the appeals with consequential relief.

Conclusion:
The Tribunal concluded that the appellants had not violated the conditions of the notifications and had indeed performed activities constituting "manufacture" under the Foreign Trade Policy. The demand for duty and penalties was set aside, and the appeals were allowed with consequential relief. The Tribunal emphasized the need for coordination between different wings of the government to avoid conflicting interpretations and actions.

← Previous Next →