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2024 (3) TMI 970 - AT - CustomsDenial of benefit of the N/N. 52/2003-customs to input/raw material imported by EOU used - denial on the ground that appellant had consumed inputs and generated wastage beyond the norms fixed by norms committee - HELD THAT - In the instant case for material consumed over and above the SION notification issued by the DGFT, Department views that duty or at least penalty is liable to be charged in case excess wastage comes into play. However, it is found that Hon ble Gujarat High Court in the matter of COMMISSIONER, CUSTOMS (PREVENTIVE) VERSUS MONARCH OVERSEAS 2019 (1) TMI 1513 - GUJARAT HIGH COURT , while dealing with scope of Notification No. 52/2003 Cus. Dated 03.01.2003 31.03.2003 particularly clause (3) construed the non-obstante clause by interpreting that once the material procured are used for the purpose of manufacture of finished goods or services then even if, waste and scrap arises in course of production and manufacture over the norm then same is also exempt from the duty of custom leviable or the additional duty. Appeal allowed.
Issues Involved:
1. Denial of exemption under Notification No. 52/2003-Cus due to excess wastage beyond SION norms. 2. Validity of customs duty demand on inputs used in manufacturing within an EOU. 3. Applicability of judicial precedents and non-obstante clause in Notification No. 52/2003-Cus. Summary: Issue 1: Denial of Exemption under Notification No. 52/2003-Cus Due to Excess Wastage Beyond SION Norms The department applied SION norms by DGFT and determined that M/s. Deep Recycling Industries used 10.841 tonnes of excess imported scrap beyond permitted wastage, thus denying the benefit of Notification No. 52/2003-Cus. The appellants argued that the waste generated was cleared on payment of applicable Customs duty with the permission of the Development Commissioner, and hence, the demand was unsustainable. They relied on the non-obstante clause in para 3 of the Notification, which allows for the sale of waste and scrap in the Domestic Tariff Area (DTA) on payment of duty, as upheld in the cases of Meridian Impex Vs. CCE & ST and Commissioner of Customs (Preventive) Vs. Monarch Overseas. Issue 2: Validity of Customs Duty Demand on Inputs Used in Manufacturing within an EOU The appellants contended that customs duty could only be demanded on finished goods or goods leaving the EOU, not on inputs used within the EOU. They cited several judicial precedents, including Kiran Syntex Ltd. Vs. Commissioner of Central Excise, Surat-I, and Paras Fab International versus CCE Kandla, which support the view that no duty is applicable on inputs used by EOUs for manufacturing in bonded warehouses. The Tribunal agreed, emphasizing that the duty demand on raw materials used in manufacturing within an EOU is not justified, especially when waste and scrap are cleared on payment of applicable duties. Issue 3: Applicability of Judicial Precedents and Non-Obstante Clause in Notification No. 52/2003-Cus The Tribunal noted that the department's reliance on certain case laws was per incuriam as they did not consider the non-obstante clause of Notification No. 52/2003-Cus. The Tribunal upheld the interpretation that once imported materials are used for manufacturing finished goods, any resultant waste and scrap, even if exceeding norms, are exempt from customs duty if cleared on payment of applicable duty. This interpretation was supported by the Gujarat High Court in Commissioner of Customs (Preventive) Vs. Monarch Overseas and the Tribunal's own decision in Meridian Impex Vs. CCE & ST. Conclusion: The Tribunal concluded that the appeals were allowable, setting aside the impugned order and allowing the benefit of Notification No. 52/2003-Cus to the appellants. The appeals were allowed, and the decision was pronounced in the open Court on 19.03.2024.
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