2018 (3) TMI 1440 - AT - Customs

Concessional rate of duty - appellant has imported components at concessional rate of duty for manufacture of mobile phone and LED/LCD televisions at their factory in Uttarakhand - goods were rejected and cleared them as scrap - Held that - these components have not been used for manufacture of the finished goods and hence, as per Rule 8 of the 1996 Rules, the demand was raised by the department. The goods were initially consumed and after assembly, tested and found defective, When the goods were not of the quality that can be re-exported so that it gets out of production. There was no provision under which the appellant can claim the benefit - appeal dismissed.

Summary

Issues:
- Applicability of duty on defective parts rejected as scrap under area-based exemption notification.

Analysis:
1. Background of the Case: The appellant, engaged in the manufacture of mobile phones and LED/LCD televisions, enjoyed area-based exemption under Notification No.50/2003-CE. During the period under consideration, they imported components at a concessional rate of duty under Notification No.12/2012-Cus. However, upon testing, it was discovered that the parts were defective, leading the appellant to reject and clear them as scrap.

2. Appellant's Argument: The appellant contended that the defective goods were properly utilized but were found to be defective only upon testing. They imported another set of parts on duty payment against the defective ones. The appellant relied on legal precedents such as the decision of Ericsson India Pvt. Ltd. Vs. CCE & ST, Jaipur and Jhunjhunwala Vanaspati Ltd. Vs. CCE Allahabad to support their position.

3. Revenue's Position: The Revenue, represented by Shri Majhi, supported the impugned order by citing Rule 7 and 7A of the Customs (Import of Goods at Concessional Rate of Duty) Rules, 1996. It was argued that there was no provision to clear goods as scrap if they were not exported.

4. Decision and Reasoning: The Tribunal observed that the components in question had not been used in the manufacture of finished goods, leading to a demand raised by the department under Rule 8 of the 1996 Rules. Since the goods were tested and found defective after assembly, without the possibility of re-exportation or utilization, the appellant could not claim any benefit. The Tribunal upheld the impugned order, stating that there was no justification to interfere with it.

5. Conclusion: Consequently, the appeal filed by the appellant was dismissed, and the decision was dictated and pronounced in the open court. The judgment reaffirmed the duty liability on defective parts rejected as scrap under the area-based exemption notification, emphasizing the importance of adherence to customs rules and regulations in such cases.