2009 (8) TMI 564 - AT - Customs

Export oriented Units- Notification No. 52/2003-Cus- The appellants herein are a 100% EOU. They had imported transformers engines motors pumps etc. under the cover of three bills of entry availing exemption from customs duty in terms of Notification No. 52/03-Cus. dated 31-3-2003. This Notification provided exemption for specified goods imported for manufacture of articles for export or for being used in connection with production or packing or job work for export of goods/services by an EOU. Adjudicating allegation that the appellants had not fulfilled the conditions of Notification No. 52/03-Cus. vide the impugned order the Commissioner confirmed demand being the exemption availed on imports of unserviceable motors etc. as not admissible. Held that- The appellants commenced production on 1-9-2004 and the disputed activities took place within five years of 1-9-2004. Therefore the appellants could not be denied the benefit of Notification No. 52/03-Cus. for the impugned imports on the ground that the same were subjected to segregation which did not amount to manufacture as defined in Section 2(f) of the Central Excise Act. We also find that the same adjudicating authority has allowed the benefit of exemption notification to the appellant. In respect of a similar consignment used for segregating scrap in view of the Public Notice No. 45(RE-2005/2004-2009) dated 31-8-2005. In the circumstances we find that the impugned demand of duty order of fine and penalty are not sustainable. We vacate the same and allow this appeal.

Summary

Issues:
1. Admissibility of exemption under Notification No. 52/03-Cus.
2. Interpretation of 'manufacture' in the context of exemption for EOUs.
3. Applicability of Circulars and Public Notices in determining eligibility for exemption.
4. Compliance with conditions of Notification No. 52/03-Cus.

Analysis:

1. The appellants, a 100% EOU, imported goods under exemption from customs duty as per Notification No. 52/03-Cus. The Commissioner alleged non-fulfillment of conditions, leading to a demand for an amount and confiscation of goods. The Tribunal considered the segregation of scrap and export by the appellants. The appellants argued that the process of segregation constituted manufacturing activity, supported by Exim Policy definitions and CBEC Circulars. They cited Tribunal decisions favoring a broader interpretation of 'manufacture' for EOUs.

2. The Tribunal reviewed the Commissioner's order and the submissions. The learned Counsel highlighted dropped proposals and clarifications supporting segregation activities as manufacturing. The DR argued that no new articles emerged from the process, thus not qualifying for the exemption. The Tribunal analyzed the definition of 'manufacture' under the Exim Policy, emphasizing the inclusion of segregation as a manufacturing activity authorized by the LOP and Assistant Development Commissioner.

3. The Tribunal referenced Circulars clarifying the broader view required for interpreting exemption provisions and the distinction between 'manufacture' for EOUs and under the Central Excise Act. Public Notices were considered, indicating the allowance of segregation activities for units set up before a specified date. The appellants' activities fell within this period, entitling them to the benefit of the Notification No. 52/03-Cus. despite the segregation not aligning with the Central Excise Act's definition of 'manufacture.'

4. Ultimately, the Tribunal found in favor of the appellants, noting the inconsistency in the adjudicating authority's treatment of similar cases and the applicability of the Public Notice allowing segregation activities. The demand for duty, order of fine, and penalty were deemed unsustainable, leading to the appeal's allowance. The Tribunal emphasized the authorization for segregation activities, the broader interpretation of 'manufacture' for EOUs, and the specific circumstances of the appellants' case in reaching its decision.