2009 (12) TMI 351 - AT - Customs

Boat and launches Parts-Notification No. 23/98-Cus. dated 2-6-98- Show-cause notice was issued proposing to disallow the benefit under the notification and proposing recovery of Rs. 34,98,749/-. Duty exemption was extended to 5 items and disallowed in respect of 6 items, by the Asst. Commissioner of Customs, Cuddalore. Held that- Table to Notification No. 23/98, raw materials and parts falling under any chapter, for use in the manufacture of goods falling under Heading 89.01, 89.02, 89.04, 89.05 (except 8905.20) or 89.06, in accordance with the provisions of Section 65 of the Customs Act, 1962 are exempt from payment of duty. Therefore, set aside the denial of the benefit of exemption

Summary

Issues:
Interpretation of Notification No. 23/98-Cus. dated 2-6-98 for duty exemption on imported items used in manufacturing boats/launches under Customs supervision.

Detailed Analysis:

1. Background:
- M/s. Goodwill Engineering Works (GEW) were granted a private bonded warehouse license to manufacture boats/launches under Customs supervision using imported parts.
- GEW imported 11 items and cleared them without duty payment under Notification No. 23/98-Cus. dated 2-6-98.
- A show-cause notice proposed disallowing the exemption benefit, leading to a dispute.
- The Assistant Commissioner disallowed duty exemption for 6 items, extended it to 5 items, and the Commissioner (Appeals) further extended the benefit to 3 more items.

2. Appeals and Tribunal Orders:
- The Tribunal remitted the case to the Commissioner (Appeals) for fresh adjudication.
- The Commissioner (Appeals) rejected exemption claims for Differential Global Positioning System (DGPS), Electronic Theodolite, and Radio Telephone Equipment but granted benefits for Echo Sounder, Water and Grab Samplers, and Radio Tide Gauge.
- Assessees challenged the denial of benefit for the first three items in Appeal No. C/454/02, while the Revenue challenged the extension of benefit for the remaining 3 items in Appeal No. C/405/02.

3. Functional Analysis of Disputed Items:
- DGPS: Satellite-based navigation system for accurate positioning of the launch.
- Electronic Theodolite: Used for superimposing shorelines on charts during survey operations.
- Radio Telephone Equipment: Used for communication between vessels.
- Echo Sounder: Measures water depth using ultrasonic waves.
- Water and Grab Samplers: Used for sampling water and sediments for analysis.
- Radio Tide Gauge: Provides tide height corresponding to measured depth for correction.

4. Legal Interpretation and Decision:
- Items in dispute are essential parts for survey vessels under Heading 89.06.
- Notification No. 23/98 exempts parts for manufacturing goods under specific headings, including 89.06, from duty payment.
- Since the disputed items are parts used in manufacturing launches under Heading 89.06 and comply with Customs Act provisions, they qualify for duty exemption.
- The Tribunal allowed Appeal No. C/454/02 challenging the denial of exemption to DGPS, Electronic Theodolite, and Radio Telephone Equipment, and dismissed Appeal No. C/405/02 challenging the extension of benefit to other items.

5. Conclusion:
- The Tribunal upheld the benefit of exemption for all disputed items, emphasizing their role as essential parts for survey launches, thereby allowing one appeal and dismissing the other.

This detailed analysis highlights the legal interpretation of Notification No. 23/98-Cus. for duty exemption on imported items used in manufacturing boats/launches under Customs supervision, providing a comprehensive understanding of the issues involved and the Tribunal's decision.