Tribunal rules in favor of EOU on Customs duty liability for dis-assembly activities

The Tribunal ruled in favor of the appellant, a 100% EOU, in a case involving liability to pay Customs duty on goods brought into the EOU for dis-assembly and segregation, as well as the availment of Notification No. 21/2002-Cus. benefit for duty liability on ferrous scrap cleared to melting units. The Tribunal held that the appellant's activities constituted manufacturing, citing relevant precedents, and emphasized that duty should be levied at effective rates. Consequently, the Tribunal set aside the previous order, allowing the appeals and providing any consequential relief. The judgment was delivered on 15-12-2011.

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Issues:
1. Liability to pay Customs duty foregone on goods brought into EOU for dis-assembly and segregation.
2. Availment of Notification No. 21/2002-Cus. benefit for discharge of duty liability on ferrous scrap cleared to melting units.

Analysis:

Issue 1:
The appellant, a 100% EOU, imported burned transformers for dis-assembly and segregation of scrap, treated as manufacturing activity. The Development Commissioner permitted this activity, considering it as manufacturing. The Tribunal held that since the appellant segregated the scrap and cleared it from EOU, it amounted to manufacturing. Therefore, no Customs duty demand was justified, citing precedents like Sanjari Twisters, Dupont Synthetics, and Amitex Silk Mills.

Issue 2:
Regarding the benefit of Notification No. 21/2002-Cus., the appellant cleared ferrous scrap to melting units in DTA. The lower authorities rejected the end use certificate produced later. The Tribunal disagreed, stating that if the benefit of notification is available and the certificates are correct, denial of the benefit is incorrect. Citing Ratangiri Textiles case, the Tribunal emphasized that duty should be levied at effective rates, not tariff rates, settling the issue in favor of the appellant.

In conclusion, the Tribunal set aside the impugned order and allowed the appeals with any consequential relief. The judgment clarified the liability for Customs duty foregone on goods brought into EOU for dis-assembly and segregation, as well as the availment of Notification No. 21/2002-Cus. benefit for discharge of duty liability on ferrous scrap cleared to melting units. The decision was pronounced on 15-12-2011.

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