2023 (12) TMI 324 - AT - Customs

Taxability of the processed goods leftover after completion of the export obligation - diverted goods or not - violation of Condition X mentioned in the Notification 21/2015-Cus dated 01.04.2015 - HELD THAT - It is seen that the condition X of Notification No. 21/2015-Cus dated 01.04.2015, applies only to the goods imported under the duty exemption scheme, whereas the provision of para 4.16 of the Foreign Trade Policy 2015- 20 covers the goods manufactured out of imported goods. It is seen that para 4.16 of foreign trade policy 2015-20 specifically designed to deal with the cases like the instant case. In the case of PCL Oil Solvents Ltd 2019 (12) TMI 953 - CESTAT AHMEDABAD in identical circumstances, it was held that Revenue has failed to notice Para 4.28 of HBP relates only to cases of bona fide default in fulfilling export obligation and it would naturally not apply to the cases where there is no default like in the instant case. Appeal allowed.

Summary

Issues involved:
The appeal against demand of Customs duty, interest, and penalty; Allegation of violating 'Condition X' of Notification No. 21/2015-Cus dated 01.04.2015.

Judgment Summary:

Issue 1: Violation of 'Condition X' of Notification No. 21/2015-Cus
The appellant, engaged in providing Engineering & Construction Solutions, imported Seamless Pipes under Notification No. 21/2015-Cus for a project with ONGC. After completion, leftover concrete coated pipes were sold. The impugned order alleged violation of 'Condition X'. The appellant argued that 'Condition X' applies to imported Seamless Pipes, not the manufactured concrete coated pipes. They relied on para 4.16 of Foreign Trade Policy 2015-20. The Tribunal noted the distinction and allowed the appeal, following a similar precedent.

Issue 2: Taxability of leftover processed goods
The dispute centered on taxability of leftover processed goods after fulfilling export obligation. The Revenue relied on Para 4.28(f)(v) of Handbook of Procedure, seeking duty on unutilized imported material. The appellant argued no unutilized material existed as all was used for finished goods. They cited policy allowing clearance of such goods in domestic market. The Tribunal agreed, emphasizing harmonious reading of FTP and HBP, and allowed the appeal based on relevant provisions.

Separate Judgment by Tribunal:
The Tribunal rejected Revenue's reliance on Para 4.28(f) as it relates to regularization of default, not applicable to fulfilled export obligations. The policy permitted use of leftover material for manufacturing and clearance in Domestic Tariff Area. Noting no provision violation by the appellant, the Tribunal allowed the appeal, citing a case where the Tribunal confirmed applicability of para 4.16 of Foreign Trade Policy in similar circumstances.

The appeal was allowed based on the distinction between imported goods and manufactured goods, compliance with relevant policy provisions, and lack of violation of specific notification conditions.