2010 (4) TMI 366 - AT - Customs

EXIM- Notification No. 40/2006-Cus.- Appellants imported bearings and claimed exemption under the Notification No. 40/2006-Cus. In the case of the appellant, the exported products were electric motors and imported materials are bearings. On the ground that the quality, technical characteristics and specifications of the bearings used in the exported motors were not available in detail and therefore it could not be confirmed that the imported bearings were similar to the ones used for the manufacture of motors, exemption was denied. Hence the appellants are in appeal. Held that- moreover, electric motor which were exported product not specified in the list under para 4.55.3, however bearing listed therein which were imported material. Conditions prescribed under para 4.55.3 not applicable. Thus exemption under Notification available.

Summary

Issues:
Exemption under Notification No. 40/2006-Cus. for imported bearings based on DFIA; Quality, technical characteristics, and specifications of imported bearings compared to those used in exported electric motors.

Analysis:
1. The appellants imported bearings seeking exemption under Notification No. 40/2006-Cus. based on a transferred DFIA. The exemption required the imported materials to match the quality, technical characteristics, and specifications of the materials used in the exported products, in this case, electric motors. However, exemption was denied due to insufficient evidence confirming the similarity between the imported bearings and those used in the motors, leading to the appeal.

2. The advocate for the appellants argued that the bearings imported, up to 50 mm diameter as per the authorization, met the conditions of the notification. Referring to previous tribunal judgments and circulars, it was contended that physical incorporation of the input in the export product was not mandatory. The advocate emphasized that the licensing authorities and customs department verified the documents, and the value of inputs did not govern the admissibility of imports under the DFIA Scheme.

3. The Departmental Representative (DR) countered, highlighting discrepancies in the value and types of bearings imported compared to those used in the exported motors. The DR argued that the importer should have ensured full specifications of the items before obtaining the license and that the bearings sought to be imported did not match the quality and specifications of those used in the export product.

4. The Tribunal considered the provisions of Notification No. 40/2006-Cus. and the requirement for imported materials to match the quality and specifications of materials used in the resultant product. Despite a potential contradiction in the notification, the Tribunal upheld that the conditions of paragraph 4.55.3 did not apply to the appellants as they exported electric motors but imported bearings. The Tribunal also noted the responsibility of customs and DGFT authorities in verifying specifications during export, relieving the appellants from the burden of proving nexus between the imported and exported products.

5. Ultimately, the Tribunal found in favor of the appellants, stating that they were eligible for the benefit of the notification. The decision considered the arguments presented by the advocate, the discrepancies pointed out by the DR, and previous legal precedents, concluding that the appellants met the conditions for exemption under Notification No. 40/2006-Cus.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the Tribunal's reasoning leading to the final decision in favor of the appellants.