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2024 (3) TMI 995 - AT - Customs100% EOU - Denial of benefit of exemption under Notification No. 52/2003-Cus - violation of input output norms - excess generation of waste and scrap - HELD THAT - The present case is entirely covered by the case of Meridian Impex Vs. CCE ST, 2018 (7) TMI 865 - CESTAT AHMEDABAD , wherein it is held that after segregation of the mixed imported scrap, the segregated scrap, if cleared, cannot be considered as clearance of the 'inputs as such. The same has been affirmed by the Gujarat High Court in the decision of Commissioner of Customs (Preventive) Vs. Monarch Overseas, 2019 (1) TMI 1513 - GUJARAT HIGH COURT . It was submitted that Chapter 6 of the Foreign Trade Policy ( FTP ) nowhere mentions that for the excess generation of waste and scrap, duty equivalent to the duty on proportionate quantity of imported raw material is required to be paid. Chapter 6 of the FTP provides that there should be no duty demand even in case where the waste or scrap is destroyed in EOU. Further, it is also stated that the byproducts included in the LOP can be sold in DTA with the permission of the Deputy Commissioner on the payment of applicable duties. Thus, nowhere it was mentioned that duty amount on proportionate raw materials is to be paid in case, there is excess clearance of waste and scrap and therefore the same cannot be demanded. Further, the only restriction on the excess clearance of the waste and scrap is that the same can be cleared on the payment of full duty which the appellants have already paid. Moreover, as per Chapter 10 of the CBEC's Custom Manual of instruction issued on 11.09.2001 duty on bonded goods can only be demanded in certain specified circumstances. Therefore, the appeal is allowed with consequential relief. Appeal allowed.
Issues Involved:
1. Denial of exemption benefit u/s Notification No. 52/2003-Cus. 2. Alleged violation of input-output norms by the Appellant. 3. Applicability of retrospective amendments to Notification No. 52/2003-Cus. 4. Legality of customs duty demand on excess imported scrap. Summary: Denial of exemption benefit u/s Notification No. 52/2003-Cus: The issue pertains to the denial of the benefit of exemption under Notification No. 52/2003-Cus to inputs/raw materials imported by the Appellant, a 100% Export Oriented Unit (EOU), on the grounds that the Appellant consumed inputs and generated wastage beyond the norms fixed by the norms committee. There is no allegation of diversion of inputs from the EOU. Alleged violation of input-output norms by the Appellant: The department alleged that the Appellant violated the conditions laid down under Notification No. 52/2003-Cus by not regulating their operations based on the norms fixed by the norms committee for the consumption of inputs. Customs duty was demanded on the excess imported utilized scrap u/s 72 read with u/s 28 of the Customs Act. Applicability of retrospective amendments to Notification No. 52/2003-Cus: The Appellant argued that the amendment to Notification No. 52/2003-Cus dated 06.07.2007, which limited the generation of waste to 2% of the input quantity, does not have retrospective effect. Therefore, the stock lying in balance out of import consignment prior to 06.07.2007 should not attract the said restriction. Legality of customs duty demand on excess imported scrap: The Appellant submitted that the impugned order is unsustainable in law as it denies the benefit of exemption on inputs used in manufacturing finished goods and the resultant waste/scrap cleared into DTA with due permission of the Development Commissioner. The Appellant referred to the non-obstante clause in para 3 of the Notification, which allows the exemption to apply to goods used for manufacturing finished goods, including by-products, rejects, waste, and scrap, even if not exported, provided they are sold in DTA with the appropriate duty paid. The Tribunal held that the present case is covered by the decision in Meridian Impex Vs. CCE & ST, 2018 (7) TMI 865-CESTAT, affirmed by the Gujarat High Court in Commissioner of Customs (Preventive) Vs. Monarch Overseas, 2019 (1) TMI 1513-Gujarat High Court. The Tribunal concluded that demanding customs duty foregone on the excess quantity of imported scrap based on the norms fixed by the committee is not sustainable in law. Conclusion: The appeal was allowed with consequential relief, following the decision in the case of Deep Recycling Industries vs CCE & ST, Rajkot. Order: Appeal allowed. (Pronounced in the open on 21.03.2024)
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