2018 (8) TMI 1607 - HC - Customs

Recovery of Customs Duty - Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 - whether the manufacture made at the factory at Bangalore could be taken as due utilisation for the exemption, when and if the factory at Bangalore is not registered under the Rules of 1996? - Held that - The Tribunals in the various decisions went on the premise that the diversion being intimated to the Department, the Department should have taken proceedings within the limitation period or if the use is found to be for the intended purpose, there could be no proceedings for recovery of duty exempted on import, which is the specific question that has been urged before this Court by the Department - In the present case, the enquiry as to whether the factory at Bangalore has registration under the Rules of 1996 has not been looked into by any of the authorities. In the present case, the diversion was intimated to the Department and permission sought for. Original authority itself finds that the proceedings are beyond the period of limitation. Appeal dismissed - decided against Revenue.

Issues Involved:
Interpretation of Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 - Question of limitation - Applicability of exemption rules to goods transferred to a non-registered factory - Power of Tribunal to declare importer not liable for differential duty.

Interpretation of Customs Rules of 1996:
The case involves a manufacturer of "Electrical-Relays" who imported copper wire under the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. The manufacturer sought to transfer goods to another factory in Bangalore due to reaching maximum capacity in Cochin. The key issue is whether goods manufactured in the unregistered Bangalore factory can be considered as due utilization for exemption under the Rules of 1996.

Questions of Law Raised:
1. Whether contravention of Customs Rules of 1996 disentitles the importer from claiming benefits.
2. Applicability of extended limitation period.
3. Tribunal's power to declare importer not liable for differential duty.

Arguments Presented:
The respondent asserts that registration under Rules of 1996 is only required for the manufacturer, allowing benefits through transfer of goods to another registered factory. The Revenue argues that registration is necessary, citing exceptional circumstances in previous cases. The Tribunal relied on past judgments to support its decision.

Analysis of Past Judgments:
The Tribunal cited cases where diversion of goods to unregistered factories was allowed due to exceptional circumstances, like labor unrest or job work basis. However, the requirement of factory registration under the Rules of 1996 was not specifically addressed in these cases.

Exemption Requirements under Rules of 1996:
The Rules mandate factory registration for availing benefits, with detailed requirements for registration and application process. The registration ensures proper monitoring of goods transfer and utilization by the respective officers.

Judicial Precedents Considered:
The respondent relied on a Delhi Tribunal judgment upheld by Punjab and Haryana High Court regarding diversion of inputs to another factory with due intimation, arguing no violation of exemption terms. However, the issue of factory registration under Rules of 1996 was not a focal point in these cases.

Court's Decision:
The Court declined to answer questions regarding disentitlement and liability for differential duty, emphasizing the lack of inquiry into factory registration at Bangalore. While vacating Tribunal's orders on exemption claim, the Court upheld the original authority's decision on the limitation period. As the diversion was intimated to the Department, and proceedings fell outside the limitation period, the appeal by the Revenue was rejected.

This detailed analysis of the judgment highlights the key issues, arguments presented, past judgments considered, and the Court's decision regarding the interpretation of Customs Rules of 1996 and the applicability of exemption rules to goods transferred to a non-registered factory.

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