2020 (6) TMI 69 - AT - Customs

100% EOU - Removal/diversion of imported inputs in contravention of Notifications 53/97 dated 3.6.1997 and 52/2003 dated 31.3.2003 - indigenous inputs procured on the basis of CT-3 certificates and diverted in contravention of Notification No.136/94 dated 10.11.1994 as amended and No.22/2003-CE dated 31.3.2003 as amended - duty chargeable on inputs used exclusively for manufacture of goods sold in DTA - Items imported and traded without any manufacture. - Process amounting to manufacture or not - labeling and repacking of the impugned goods. HELD THAT - As demonstrated by the learned counsel that the recipient in the case is also an EOU, who are otherwise entitled to procure goods by import or on CE-3 certificates as per the provisions of FTP. We find that the provisions of the FTP and the Customs Notification are required to be read in harmony. It is not the case of the department that the imported or domestically procured goods are diverted into open market. The department agrees to the fact that the appellants have transferred the impugned goods to their sister EOU unit in Venkatapur. There is no allegation or proof that the same has been diverted by either of the EOUs. The appellants have submitted a Chartered Accountant certificate correlating transfer and receipt of the goods. They have also made good the duty for deficient items along with interest. Eligibility of olives to be sold in the domestic market - HELD THAT - The provisions of FTP 2004-2009 as explained by CBEC Circular No.7/2006 are very clear in this regard. We hold that similar goods do not necessarily mean same goods. Looking into the LOP issued to the appellants and the fact that they were exported olives till 2000 under the same LOP, we find no reason as to why the DTA clearance of the same is not permissible afterwards. Alleged trading of jams - HELD THAT - CBEC Circular No.314/30/97-CE dated6.5.1997 clarifies that it is clarified that a broader view is called for in respect of the interpretation of the provisions of Notification No. 1/95-C.E. and the exemption may not be restricted only to cases where manufacture‟ under section 2(f) of Central Excise Act is involved. It is clarified that the exemption under Notification No. 1/95- C.E. will also be applicable to a 100% EOU engaged in galvanising‟ of black MS pipes. This issues with the approval of the Board. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Demand of duty on imported or procured goods sold to another EOU
2. Applicability of DTA permission to goods similar to export goods
3. Whether labeling and repacking of goods amount to manufacture

Analysis:

Issue 1:
The case involved a demand of duty on goods imported or procured duty-free and sold to another EOU. The appellants, engaged in in-bond processing and manufacture of agricultural commodities, were accused of evading duty on various counts. The Tribunal found that the goods were transferred to a sister EOU unit with due permission from the Development Commissioner. The department did not prove any diversion of goods into the open market, and the appellants had paid duty for deficient items. Citing a previous judgment, the Tribunal held that the demand in this regard was not sustainable.

Issue 2:
The second issue revolved around the eligibility of olives to be sold in the domestic market. The appellants argued that similar goods did not necessarily mean the same goods, and they had a valid License of Permission (LOP) for reprocessing. The Tribunal examined the provisions of FTP 2004-2009 and a CBEC circular, concluding that there was no reason to restrict DTA clearance of olives, especially considering their export history under the same LOP. A previous case decision was referenced to support this finding.

Issue 3:
Regarding the labeling and repacking of goods, the appellants had imported unlabeled processed jams in bulk and repacked them before sale. The Tribunal referred to a circular emphasizing a broad interpretation of the term "manufacture" and cited previous cases in favor of the appellants. The demands were deemed unsustainable on merits, and the appeal was allowed based on the arguments presented and the evidence provided by the appellants.

In conclusion, the Tribunal analyzed each issue thoroughly, considering legal provisions, past judgments, and the specific circumstances of the case. The decision was based on the lack of evidence supporting the duty demands, the permissible activities under relevant permissions, and the interpretation of manufacturing processes in line with established legal principles.