2008 (2) TMI 117 - AT - Customs

EOU - Excitability of Aluminium Dross/scrap (which is a byproduct cleared to DTA) u/not. 52/03 - assessees are importing Aluminium Ingots to manufacture Aluminium Wheels, which are final products and not Aluminium Dross, which is just a by product - No duty can be demanded on the imported Aluminium Ingots relatable to the Aluminium Dross generated as all ingots have been used in mfg. of final products (Aluminium Wheels), which have been exported demand & penalty set aside

Summary

Issues Involved:
1. Interpretation of Notification No. 52/2003-Cus dated 31.03.2003 concerning Aluminum Dross and Scrap.
2. Excise duty applicability on Aluminum Dross.
3. Customs duty liability on imported Aluminum Ingots used in manufacturing Aluminum Wheels.

Detailed Analysis:

1. Interpretation of Notification No. 52/2003-Cus dated 31.03.2003:
The primary issue revolves around the interpretation of Notification No. 52/2003-Cus dated 31.03.2003, specifically concerning the treatment of Aluminum Dross and Scrap. The assessees, operating as a 100% EOU, imported raw materials duty-free under this notification for manufacturing Aluminum Wheels, which are excisable and primarily exported. The notification allows EOUs to import raw materials duty-free provided the final products are exported. It also permits DTA clearances with appropriate excise duty payment.

2. Excise Duty Applicability on Aluminum Dross:
Revenue contended that Aluminum Dross, a by-product of the manufacturing process, is non-excisable and thus falls under the proviso to para 3 of Notification No. 52/2003-Cus. This proviso stipulates that if the finished goods are non-excisable, the Customs Duty on the raw materials used must be discharged. The Commissioner's order dated 29.07.2005 concluded that the assessees need not discharge any Customs Duty on the imported Aluminum Ingots related to the Aluminum Dross cleared in the DTA, as the final product (Aluminum Wheels) is excisable. Conversely, the order dated 09.02.2007 demanded duty based on the proviso, interpreting that Aluminum Dross being non-excisable necessitates Customs Duty on the imported Ingots.

3. Customs Duty Liability on Imported Aluminum Ingots:
The Tribunal clarified that the primary obligation under Notification No. 52/2003-Cus is the use of imported goods for manufacturing final products, which should be exported. The proviso to para 3 applies only if the finished goods are non-excisable. Since Aluminum Wheels, the final product, are excisable, the proviso does not apply. The Tribunal held that the Commissioner's interpretation in the order dated 29.07.2005 was correct, emphasizing that the excisability of Aluminum Dross is irrelevant in this context. The duty-free import of Aluminum Ingots used in the manufacturing of excisable Aluminum Wheels, which are exported, is justified, and no duty can be demanded on the Ingots related to the Dross.

Conclusion:
The Tribunal concluded that the proviso to para 3 of Notification No. 52/2003-Cus is inapplicable since the final product, Aluminum Wheels, is excisable. The order dated 29.07.2005, which did not demand Customs Duty on the imported Aluminum Ingots, was upheld. The order dated 09.02.2007 demanding duty was set aside. Consequently, Revenue's appeal was dismissed, and the assessees' appeals were allowed, negating the duty demand and penalties imposed.