2023 (6) TMI 423 - HC - Customs

Advance authorisation Scheme - supply of valves - deemed exports - manufacturing activity carried out or not - the goods imported and goods exported were same or not - HELD THAT - The argument that both the imported and sold product remain one and the same, that is, valves, is also liable to be rejected since the emergence of a commercially distinct commodity is satisfied in the present case by the requirement of inspection and testing which falls within the definition of manufacture . The judgment of the Hon ble Supreme Court in Shri Hariprasad Shivshanker Shukla and Another v. Shri A.D. Divelkar and Others 1956 (11) TMI 34 - SUPREME COURT is an authority for the proposition that where a term has been defined in the statute, there is hardly any need for further scrutiny of the term and the statutory definition is itself to be scrupulously applied. Admittedly, there is a grey area in regard to whether at all the petitioner has added any components to the imported valves. While it has been consistently representing to the authorities that it has been fitting indigenously procured actuators and gear-boxes to the valves, the authority has, in the impugned order, pointed out that there is a declaration in Form ANF 4A of the Advance Authorisation confirming that the petitioner has not procured any indigenous items for the export product - Even in the writ affidavit, the petitioner has maintained that it has been procuring indigenously procured items for the process of manufacture. One approach is to state that even without such procurement and additions to the imported valves, the processes of testing of the valves prior to final supply would suffice to satisfy the definition of manufacture under Clause 9.36 of the Exim Policy. The Karnataka High Court in Commissioner v. Hewlett Packard India Sales (P) Ltd 2011 (4) TMI 1281 - KARNATAKA HIGH COURT has held that the process of testing, repacking and re-labelling of imports would satisfy the definition of manufacture under the Foreign Trade Policy. The matter remanded to the file of Respondent 1, to be decided afresh - Petition allowed.

Summary

Issues Involved:
1. Validity of the order dated 12.08.2014 by the Director General of Foreign Trade.
2. Whether the processes carried out by the petitioner qualify as 'manufacture' under the Exim Policy.
3. The factual correctness of the petitioner's claim regarding the addition of indigenously procured components.

Summary:

1. Validity of the Order Dated 12.08.2014:
The petitioner challenged the order dated 12.08.2014 by the Director General of Foreign Trade, which rejected the petitioner's claim that the processes carried out on imported valves constituted 'manufacture.' The petitioner argued that the processes, including fitting actuators and gearboxes, hydro testing, and re-assembly, rendered the valves commercially fit for use.

2. Qualification as 'Manufacture' Under Exim Policy:
The respondents contended that the imported and exported items were identical and no manufacturing activity was involved. The court examined the definition of 'manufacture' under Clause 9.36 of the Exim Policy, which includes processes like testing, re-packing, and re-labelling. The court referred to several judgments, including Doypack Systems (Pvt) Ltd. v. Union of India and Flex Engineering Limited v. Commissioner of Central Excise, U.P., to emphasize that processes like testing and inspection fall within the ambit of 'manufacture.'

3. Factual Correctness of Addition of Indigenously Procured Components:
There was a dispute regarding whether the petitioner had added any indigenously procured components to the imported valves. The court noted that the petitioner consistently claimed to have fitted actuators and gearboxes, but the authorities pointed out a declaration in Form ANF 4A stating otherwise. The court concluded that even without such additions, the processes of testing and inspection would suffice to satisfy the definition of 'manufacture.'

Conclusion:
The court set aside the impugned order and remanded the matter to Respondent 1 for a fresh decision, considering whether the petitioner made any additions to the imported valves by procuring indigenous products. The writ petition was allowed with no costs.