2018 (2) TMI 1100 - AT - Central Excise

Benefit of N/N. 25/99-Cus. dated 28.02.99 - import of inputs for use in the manufacture of relays - Department was of the view that the goods/inputs having not been put to use in the manufacture of excisable commodity i.e. Relays, the benefit of notification is not available to them - Held that - The Tribunal in the appellant s own case Areva T And D India Ltd. Versus Commissioner of Central, Excise (LTU) 2017 (10) TMI 129 - CESTAT CHENNAI analyzed the issue and observed that no duty demand can be made when the inputs have been re-exported - The appellants have explained that substantial portion of the imported inputs were used for the manufacture of relays and the balance could not be used by them was re-exported in order to reduce their obligation to that extent - benefit cannot be denied - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 and Notification No.25/99-Cus.
2. Eligibility for concessional rate of customs duty on imported goods.
3. Re-export of imported inputs and its impact on duty liability.

Analysis:

Issue 1: Interpretation of Customs Rules and Notification
The case involved the appellants, registered as LTU, engaged in manufacturing relays and other products. They imported inputs for manufacturing relays at a concessional rate of customs duty under Customs Rules and Notification No.25/99-Cus. The dispute arose when the department alleged that the appellants exported inputs without utilizing them in manufacturing excisable goods, leading to a demand for differential duty and interest. The appellants argued that they followed the prescribed procedures under the Rules and that the imported goods should be used for the intended purpose, which, according to them, was the manufacture of specified goods like relays.

Issue 2: Eligibility for Concessional Rate of Customs Duty
The appellants contended that they had used a substantial portion of the imported materials for manufacturing relays, complying with the Rules. They further explained that any balance of imported inputs not utilized was re-exported to reduce their obligation. They cited a previous Tribunal order in their favor, emphasizing that no duty demand can be made when the inputs have been re-exported. The Tribunal, in the cited order, noted that re-exporting the goods would legally imply as if those goods were never imported in the first place. The Tribunal also highlighted the importance of not denying cenvat credit on the additional duty of customs suffered by the appellants post-reexport, as it would result in unintended double loss to the appellants.

Issue 3: Re-export of Imported Inputs and Duty Liability
The Tribunal, after considering the arguments from both sides and the previous order, concluded that the demand for duty was unsustainable. The impugned order demanding differential duty and interest was set aside, and the appeal was allowed in favor of the appellants, providing them with consequential relief. The Tribunal's decision was based on the legal position that re-exporting the imported inputs absolved the appellants from duty liability, as if those goods were never imported, and the appellants had complied with all relevant provisions during the re-export process.

In conclusion, the Tribunal's judgment clarified the interpretation of Customs Rules and Notification regarding the utilization of imported inputs for manufacturing excisable goods, emphasizing the impact of re-exporting unused inputs on duty liability and the eligibility for concessional rate of customs duty.