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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 ..... the Export Import Policy was legally correct? (3) Whether the final order of the Appellate Tribunal confirming demand of duty with penalty on wastage of imported fabrics was legally correct and sustainable?" 3. The appellant herein was a 100% Export Oriented Undertaking engaged in the manufacture of garments and had been operating as an EOU. Under the Export Import Policy of the Government of India, the appellant applied for permission to function as a 100% EOU and a letter of permission (LOP) dated 17.1.1992 came to be issued by the Under Secretary to the Government of India granting permission to the appellant to function as a 100% EOU for manufacture of ready-made garments. The appellant has also been granted a licence under section 58 of the Act for the appellant's factory as a private bonded warehouse for bringing in the factory materials duty free for manufacturing the above referred export goods. The appellant procured nine consignments of fabrics for manufacture of trousers during the period from 25.12.1994 to 24.12.1996. All these nine consignments of fabrics procured duty free have been duly entered in the bond register and other documents maintained at the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the norms prescribed under the Exim Policy. - The input-output norms are in the nature of guidelines and not a fixed formula. - Excess consumption of inputs like fabrics would not call for demand of duties for such quantity of inputs when the same were admittedly consumed in relation to manufacture of the exported goods as neither the policy nor the notification creates any such liability. - Notification No.13/81 has been issued by the Central Government under section 25 of the Customs Act allowing exemption to various goods imported for production of goods for export or for the use in 100% EOUs and various conditions have been laid down therein for allowing availment of duty free imports. All the conditions of the notification have been fulfilled by the appellant and it is not the case of the respondents that any condition of the notification has been contravened. The appellant has fulfilled its export obligations by exporting the goods as required under the policy as well as the notification and export obligations in terms of quantity as well as value of goods exported have been fulfilled by the appellant. - It is not the case of the respondents that this quantity of fabr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the prescribed norms, the respondent has rightly considered the same to be liable to customs duty. 7.2 It was further submitted that this is a classic case where the assessee is not entitled to any exemption and that the view taken by the Appellate Tribunal that neither on facts nor under the notification the assessee is entitled to the benefit thereof, is correct. It was submitted that the assessee having failed to establish the claim for exemption, the Appellate Tribunal was wholly justified in upholding the duty demand. 8. The facts as emerging from the record reveal that vide letter of intent dated 17.1.1992, the appellant has been granted permission for manufacture of ready-made garments to the extent stipulated thereunder. The conditions stipulated in the permission as are relevant for the present purpose are: (1) The entire (100%) production shall be exported to General Current Area countries/Hard Currency Area Countries. (3) The value addition shall be a minimum of 45.78%. Condition No.14 of Annexure stands modified to this extent. 9. The annexure to the letter of intent contains conditions attached thereto. The relevant conditions thereof are: "5. Import of capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isposal of Scrap/Waste/Remnants" and reads thus:- "190.The Development Commissioner may, subject to guidelines laid down by the Board of Approvals in this behalf, permit sale in the DTA of scrap/waste/remnants arising out of the production process on payment of applicable duties and taxes. The percentage of such scrap/waste/remnants shall be fixed by the Board. In respect of items for which no such norms have been fixed by the Board, disposal of scrap/waste/remnants shall be allowed as per the norm notified under Duty Exemption Scheme. A list of items for which percentage of scrap/waste/remnants has been fixed by the Board of Approval is indicated in Appendix XXXII." Thus, paragraph 190 of Chapter IX of the Import Export Policy & Procedures, 1992-1997 lays down the norms for disposal of scrap/waste. 13. The Duty Exemption Scheme is contained in Chapter VII of the Import Export Policy and Procedures, 1992-1997. Paragraph 113 thereof relates to Special Schemes. Sub-clause (ii) thereof, which is relevant for the present purpose, provides that for readymade garments (other than the leather garments) the special scheme for value based licence provides for the import of fabrics and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spute 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 cleared in the guise of removal of waste. There is no allegation relating to removal of goods with intent to evade payment of duties. In the opinion of this court, once it is not disputed that the goods were used in the manufacturing of finished goods and the export obligation has been duly fulfilled, the benefit of exemption provided under the notification in question cannot be denied to the appellant. 17. Insofar as the Notification No.13-Cus dated 9.2.1981 is concerned, the same does not lay down any criteria for waste nor does the same provide any conditions regarding extent of wastage allowed. On reading notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Approval has not fixed norms, the norms notified under Duty Exemption Scheme shall be applied; insofar as disposal of waste is concerned, in the facts of the present case, at the request of the appellant, the Development Commissioner, KASEZ has fixed ad-hoc wastage norms at 15% of the appellant's inputs and vide letter dated 30.03.2001, the Deputy Commissioner Central Excise Division Valsad, has given necessary permission for destruction of wastage/tailor cutting in respect of the nine consignments in question. Thus, despite the fact that excess consumption has been found as compared to the standard input output norms, such excess waste has been permitted to be destroyed by the Deputy Commissioner, Central Excise & Customs, and hence, the respondent is not justified in demanding customs duty forgone on the excess waste material worked out on the basis of the input-output norms. 20. This court is of the view that the mere fact that the wastage is in excess of the input output norms, without anything more, would not be sufficient for the Assistant Collector to arrive at the satisfaction that the imported fabric has not been used for the manufacture of the articles for export. Cond ..... X X X X Extracts X X X X X X X X Extracts X X X X
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