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TMI Blog2019 (1) TMI 1514X X X X Extracts X X X X X X X X Extracts X X X X ..... s dated 9.2.1981, the Central Government, in exercise of powers under section 25 of the Customs Act, has exempted goods specified in the table therein below when imported into India for the purpose of manufacture of articles for export out of India by 100% export oriented undertakings approved by the Board of Approval for 100% Export Oriented Undertakings from the whole of the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 and the additional duty, if any, leviable thereon under section 3 of that Act, subject to the conditions stipulated thereunder. In this case, there is no dispute that the duty free imported goods were used in the manufacture of final products for export and the waste was generated during the course of the manufacturing process. The export obligation against the goods imported as per the letter of intent has been fulfilled - It is also not in dispute that the waste was disposed of after due permission being obtained from the Deputy Commissioner, Central Excise - The department has nowhere alleged that the duty free imported goods were not consumed in the manufacturing of the finished goods or that such goods have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact that the assessee is in a position to show that the entire material has been used for the purpose of manufacture of goods and there is no allegation with regard to diversion of goods, merely because the wastage norms are not satisfied, the Assistant Collector of Customs can record satisfaction to the effect that the goods have not been used for the manufacture of articles for export. The Appellate Tribunal was, therefore, not justified in confirming the customs duty on imported raw materials contained in wastage in excess of input output norms under the Export Import policy - appeal allowed - decided in favor of appellant. - R/TAX APPEAL NO. 9 of 2007 - - - Dated:- 21-12-2018 - MS HARSHA DEVANI AND DR A. P. THAKER, JJ. For The Petitioner (s) : MR PARESH M DAVE (260) For The Respondent (s) : MR DHAVAL D VYAS (3225) ORAL JUDGMENT ( PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. By this appeal under section 130 of the Customs Act, 1962 (hereinafter referred to as the Act ), the appellant has challenged the order dated 26.6.2006 passed by the Customs, Excise and Service Tax Appellate Tribunal, Mumbai (hereinafter referred to as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of such reports, the excise authorities in charge of the appellant unit found that the total quantity of fabrics consumed for each trouser was 1.984 square metres per trouser on average basis. 4. The Exim Policy prescribes input output norms for various goods including trousers. The input output norm for trousers under the Handbook of Procedure has been prescribed as 1.687 square metres per trouser. On the basis of the above norm, the Commissioner of Central Excise and Customs issued a show cause notice to the appellant suggesting that there was excess consumption of fabrics to the tune of 32185.06 square metres and, accordingly, suggested that duties to the tune of ₹ 17,44,818.23 were required to be recovered on excess consumption of fabrics with penalty and interest under the provisions of the Customs Act. 5. The show cause notice culminated into an order-inoriginal dated 30.3.2001 holding that the appellant had contravened the provisions of Notification No.13/81-Cus read with Exim Policy norms for trousers and accordingly, duty demand of ₹ 17,44,818.23 came to be confirmed with penalty of ₹ 35,00,000/- and interest under section 28AB of the Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Development Commissioner, KSEZ in respect of appellant s unit viz.15% of the total quantity of fabrics consumed. 6.1 It was, accordingly, urged that the duty demand confirmed by the Appellate Tribunal is required to be quashed and set aside and that the appeal deserves to be allowed by answering the questions in favour of the appellant. 7. Vehemently opposing the appeal, Mr. Dhaval Vyas, Iearned senior standing counsel for the respondent, submitted that the norm of 1.687 square metres fixed under the standard input-output norms takes into account the possible wastage in manufacturing over and above the quantity prescribed under the Import Policy. It was submitted that the appellant has not established that the trousers manufactured by it required more material than that fixed under the norms, and, therefore, the appellant has not proved to the satisfaction of the Assistant Commissioner of Customs and Central Excise that the imported goods have been used for the manufacture of articles for export. 7.1 Reference was made to Notification No.13-Cus dated 9.2.1981, to point out that Condition No.6 thereof requires the importer to execute a bond in such form and for such s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quires that the entire production shall be exported to the countries specified and the value addition shall be a minimum of 45.78%. In the present case, it is not the case of the respondent that the entire production has not been exported or that the condition of minimum value addition has not been satisfied. 10. For the purpose of disposal of the waste generated on account of manufacture of trousers from the fabric imported by it, the appellant addressed a letter dated 22.3.2001 to the Deputy Director for fixing the waste norms for manufacture of men s and children s wear. The assessee stated therein that trousers wastage is not covered under Appendix-41; therefore, fixation is required only for trousers wastage. By a communication dated 18.1.2001 of the Joint Development Commissioner, the petitioner was informed that pending fixation of wastage norms on regular basis on BOA, the Development Commissioner, KASEZ has fixed ad hoc wastage norms at 15% of the inputs. By a communication dated 30.3.2001, the Superintendent of Central Excise, Range-IX, Navsari informed the appellant that the Deputy Commissioner of Central Excise Division, Valsad has given necessary permission for dest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Act, 1975 and the additional duty, if any, leviable thereon under section 3 of that Act, subject to the conditions stipulated thereunder, which insofar as the same are relevant for the present purpose, read thus:- ( 1) the importer has been granted necessary licence for the import of the goods for the said purpose; ( 2) the importer carries out the manufacturing operation in customs bond and subject to such other conditions as may be specified by the Assistant Collector of Customs in this behalf; ( 3) the importer exports out of India hundred per cent or such other percentage, as may be fixed by the said Board, of articles manufactured wholly or partly from the goods for the period stipulated by the Board or such extended period as may be specified by the said Board; 4. Xx 5. Xxx 6. the importer executes a bond in such form and for such sum with such authority as may be prescribed by the Assistant Collector of Customs binding himself to fulfill the export obligations and conditions stipulated in this notification and to pay, on demand, an amount equal to the duty leviable on goods as are not proved to the satisfaction of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, such satisfaction would be relatable to actual use of the goods for the purpose of manufacture to ensure that there is no diversion of goods or that imported raw material is not clandestinely removed. In the present case, as noticed earlier, it is not the case of the respondent that any part of the imported fabric has been diverted or clandestinely removed. The only allegation is that the waste generated is more than the standard input output norm, which has nothing to do with the fulfillment of export obligation or compliance with the conditions of the exemption notification. Under the circumstances, the raw material being exempted under Notification No.13/81-Customs dated 09.02.1981, the demand of customs duty on imported raw materials contained in wastage in excess of input-output norms is not justified. 18. It may be noted that Paragraph 190 of Chapter IX of the New Import Export Policy Procedures, 1992-97 provides for disposal of waste and postulates that where no wastage norms are fixed by the Board of Approval, disposal of waste shall be allowed as per the norms notified under Duty Exemption Scheme. In the opinion of this court, disposal of waste as provided under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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