2003 (9) TMI 113 - HC - Customs

Summary

Issues Involved:
1. Interpretation of 'use' under Section 74(2) of the Customs Act, 1962.
2. Entitlement to duty drawback at 98% versus 60%.
3. Applicability of interest on delayed payment of duty drawback.

Analysis of the Judgment:

1. Interpretation of 'use' under Section 74(2) of the Customs Act, 1962:
The core issue revolves around whether the use of a fully built imported car for study and research constitutes 'use' under Section 74(2) of the Customs Act, 1962. The petitioners argued that 'use' should be interpreted as commercial use, meaning the car was not used for its intended purpose commercially. They contended that driving the car within the factory premises and from Pune to Mumbai for export does not amount to 'use' as per the Act. The petitioners relied on the Supreme Court judgments in Anwarkhan Mahboob Co. v. State of Bombay and Kathiawar Industries Ltd. v. Jaffarabad Municipality to support their claim that 'use' should be for the intended purpose of the goods.

Conversely, the Revenue argued that 'use' under Section 74(2) includes any use, including for demonstration, exhibition, study, or research. They cited the Karnataka High Court's decision in Millipore (India) Private Limited v. Union of India, which held that even short-term use for demonstration or exhibition qualifies as 'use' under the Act.

2. Entitlement to Duty Drawback at 98% versus 60%:
The petitioners initially claimed a duty drawback of 98% under Section 74(1) of the Customs Act, asserting that the car was not used in India. However, the Assistant Commissioner of Customs granted a 60% drawback under Section 74(2), considering the car was used. The Commissioner of Customs (Appeals) later allowed the petitioners' appeal, granting a 98% drawback but denying interest on the delayed payment. The Government of India, upon revision, upheld the 60% drawback, recognizing the car's use before export.

The court examined the applicable provisions and the definition of 'use.' It concluded that the car was indeed used for the purpose it was imported, i.e., for study and research, and driving it within the factory and on public roads constituted 'use' under Section 74(2). Thus, the petitioners were rightly granted a 60% duty drawback.

3. Applicability of Interest on Delayed Payment of Duty Drawback:
The Commissioner of Customs (Appeals) had denied interest on the delayed payment of duty drawback. However, the Government of India, in its revision order, held that the petitioners were entitled to interest on the delayed refund of duty drawback. The court did not specifically address this issue in-depth but upheld the Government's decision to grant interest on the delayed refund.

Conclusion:
The court dismissed the petition, upholding the Government of India's decision to grant a 60% duty drawback under Section 74(2) of the Customs Act, 1962, and recognizing the car's use for study and research as 'use' under the Act. The court also upheld the entitlement to interest on the delayed refund of duty drawback. The petitioners' arguments were found to be misplaced, and the interpretation of 'use' was aligned with the broader definition, including non-commercial use for study and research.