Refund on destruction of rejected inputs is not barred by mere procedural lapse when destruction is genuine and duty has been paid.

For a 100% Export Oriented Unit, refund of duty on destroyed rejected inputs and expired goods could not be denied merely because prior permission of Customs was not obtained when the destruction was genuine, intimation had been given, and no diversion into the domestic tariff area was alleged. The amended destruction scheme treated intimation for in-unit destruction and prior permission for destruction outside the unit as verification safeguards, not substantive conditions, once duty had already been paid on removal for destruction. The denial of refund for absence of prior permission was therefore treated as a procedural lapse, and the refund rejection was set aside.

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Issues: Whether refund of duty paid on destruction of rejected inputs and expired goods by a 100% Export Oriented Unit could be denied for not obtaining prior permission of the Customs Authorities and for absence of the officer at the time of destruction.

Analysis: The appellant was a 100% Export Oriented Unit and the applicable notification exempted duty on capital goods, reject, waste or scrap intended for destruction. The original 2003 notification required presence of a Central Excise officer, while the amended scheme required intimation where destruction was within the unit and prior permission where destruction was outside the unit. The record showed that intimation had been given, the goods were destroyed through an approved waste-management body, duty had already been paid on removal for destruction, and no diversion into the domestic tariff area was alleged. In these circumstances, the purpose of prior permission was held to be only verification and prevention of revenue loss, which had no substantive significance once duty had already been paid and the destruction was otherwise genuine.

Conclusion: The denial of refund for want of prior permission was held to be only a procedural lapse. The order rejecting the refund was set aside and the appeal was allowed.

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