Customs duty on imported capital goods cannot be levied merely for NFEP failure under Notification No. 53/97-Cus.

Under Notification No. 53/97-Cus., failure to achieve NFEP does not by itself create customs duty liability on imported capital goods. The notification treats capital goods differently from raw materials, components, spares and consumables, and duty on capital goods arises only if they are not installed or used in the bonded premises, or are not re-exported within the permitted period. As the moulds and dies were installed and used in the factory for manufacture of export articles, the duty demand on those capital goods was not sustainable and was correctly dropped.

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Issues: Whether duty demand could be raised on imported moulds and dies, being capital goods, on the ground that the unit failed to achieve the prescribed NFEP under Notification No. 53/97-Cus.

Analysis: The relevant notification drew a clear distinction between capital goods and raw materials. Duty liability for capital goods arose only if they were not shown to have been installed or used in the bonded premises, or were not re-exported within the permitted period. The NFEP-based levy applied to raw materials, components, spares and consumables, not to capital goods. Since the moulds and dies were installed and used in the factory for manufacture of export articles, the condition for demanding duty on capital goods was not attracted.

Conclusion: The demand of customs duty on moulds and dies was not sustainable and was correctly dropped.

Final Conclusion: The substantive duty demand on capital goods failed, and the departmental challenge was rejected.

Ratio Decidendi: Under Notification No. 53/97-Cus., failure to achieve NFEP does not by itself create duty liability on imported capital goods; duty on such goods can be demanded only on non-installation, non-use, or non-re-export within the prescribed period.

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