2017 (9) TMI 1018 - AT - Customs

100% EOU - Scrap - SION - generation of scrap at abnormally high levels - undervaluation of scrap - interpretation - Held that - It is clear from the decision of the committee that it decided to ratify the norms for the items manufactured by the assessee. It is also noted in said letter that the norms were also supported by actual consumption/scrap data - expression Ratification means the making valid of an act already done. DGFT has retrospective validated higher norms for the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Short payment of duty on sale of scrap generated from duty-free imported materials.
2. Dispute regarding the waste input output norms for export products.
3. Interpretation of the term "ratify" in the context of retrospective validation of norms by DGFT.

Analysis:
1. The case involved the appellant, a 100% Export Oriented Unit, importing duty-free materials for manufacturing Wheel Chair & Components. The appellant was found to have generated scrap at abnormally high levels, leading to short payment of duty amounting to ?1,04,12,130 on aluminum scrap and ?10,30,790 on M.S. tubes scrap. The Revenue issued a show cause notice demanding differential duty along with interest and penalties under relevant acts. The appellants challenged this before the tribunal.

2. The appellant argued that waste input output norms for their export products were retrospectively fixed by the DGFT, ratifying the higher norms for them. The tribunal noted that the Ld. Commissioner had misinterpreted the term "ratify" and wrongly confirmed the demand. Citing legal precedents, the tribunal held that ratification retrospectively validates an act already done, and in this case, DGFT had validated the higher norms for the appellant. Consequently, the tribunal set aside the Ld. Commissioner's order.

3. The Ld. Commissioner's findings highlighted that in the absence of notified norms for scrap generation exceeding 2%, the duty foregone on raw materials needed to be paid. However, the tribunal observed errors in the Ld. Commissioner's analysis of the DGFT's letter, which clearly indicated retrospective validation of norms for the appellant's products. Relying on legal interpretations, the tribunal concluded that the DGFT had indeed retrospectively validated the higher norms, rendering the Ld. Commissioner's order unsustainable and allowing the appellant's appeal.

This detailed analysis showcases the issues of duty payment on scrap, retrospective validation of norms, and the interpretation of the term "ratify" in the legal judgment delivered by the Appellate Tribunal CESTAT CHANDIGARH.