2022 (5) TMI 25 - AT - Customs

Tribunal Grants Duty Exemption on Appeal, Emphasizes Substantial Benefits

The Tribunal allowed the appeal, setting aside the adjudicating authority's order and granting the appellant the benefit of duty exemption. The Tribunal ... 100% EOU - eligibility for exemption from duty while clearance of re-imported goods despite that the procedure as incorporated in notification no. 52/2003 w.e.f. 30.6.2017 under which said exemption was claimed was not followed by the appellant - Whether the condition that the goods to be re-exported have to be the manufactured goods has been fulfilled by the appellant or not? - HELD THAT:- Condition no. 2 of N/N. 42/2003 as amended vide notification no. 68/2017 has come into effect from 30.06.2017 which require the compliance of Rule 5 of Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 - the procedure required under the said rule was the submission of the application in a prescribed format accompanied with certain other documents as that of continuity bond with the surety or security. This perusal makes it clear that the condition in Rule 5 / condition no. 2 of the impugned notification were purely procedural. The rule is absolutely silent to highlight that the non compliance of the said procedure irrespective it was a condition precedent but would have caused any major inconvenience to the Department. In the present case, there is nothing brought on record by the Department as to what administrative inconvenience would have been caused to the Department. There is no denial to the fact that the adoption of the impugned procedure was very much recent introduction at the relevant time of impugned bill of entries. The said condition was not required to be followed since the year 2003 till the year 2017. There is nothing on record to show that the exemption as claimed, irrespective in the absence of the said procedure, there is any element of fraud has been committed by the appellant. In such circumstances, it cannot be ruled out that the non observance of the impugned condition was mere lack of knowledge of the amendment as was introduced vide notification no. 68/2017 that too in June 2017 (the impugned bill of entries are of year November 2017 to January 2018). The procedural condition of Rule 5 of the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 were not at all the substantive condition but was merely a technical condition. Apparently the benefit of exemption from customs duty to a 100% EOU is a substantive benefit. Such substantive benefit cannot be denied for want of the compliance of technical procedural conditions. Thus, the denial of exemption to the appellant is absolutely wrong. The adjudicating authority has failed to observe that the substantive benefit has been disallowed to the appellant on mere technical grounds. The said findings are therefore not sustainable. The order under challenge is liable to be set aside on this score. The condition that the goods to be re-exported have to be the manufactured goods has been fulfilled or not? - HELD THAT:- There is no denial for the appellant to be a 100% EOU nor for the fact that the goods in question were initially exported by appellant, which for some reason, have been returned back. It is apparent from the record that the appellant while replying to the show cause notice as well as making submission in defence before the adjudicating authority below has specifically mentioned that the goods in question after being imported were stored in 100% Export Oriented Unit and after processing such as cleaning and re-packing that the goods were re-exported. It is submitted that this particular activity satisfies the compliance of all the condition of notification no. 52/2003 read with notification no. 45/2017. This Tribunal in the case of COMMISSIONER OF CUSTOMS, NEW DELHI VERSUS WESTON ELECTRONICS [1999 (9) TMI 369 - CEGAT, NEW DELHI] while relying upon the similar circular as mentioned above has held that packing of the goods into different packs amounts to manufacture and while exporting such goods, the activity of packing / repacking entitles the EOU to claim exemption from the customs duty while exporting such repacked goods - there is no denial nor it is the case of the Department that the goods in question were not repacked by the appellant before exporting goods in question were not repacked by the appellant by exporting those goods again. The packing activity amounts to manufacture, it is held that the second condition of the impugned exemption notification that the goods have to be manufactured goods also stands complied with by the appellant. Adjudicating authority is held to have committed an error by holding the repackaged goods as non manufactured goods. The order under challenge to that extent is also liable to be set aside. Appeal allowed - decided in favor of appellant. Issues Involved:1. Eligibility for exemption from duty for re-imported goods despite non-compliance with procedural requirements.2. Whether the re-exported goods qualify as 'manufactured goods' under the exemption notification.Issue-Wise Detailed Analysis:1. Eligibility for Exemption from Duty:The primary issue was whether the appellant was eligible for exemption from duty on re-imported goods despite not following the procedural requirements stipulated in Notification No. 52/2003, as amended by Notification No. 68/2017. The procedure required under Rule 5 of the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017, involved submitting specific documents and a continuity bond to the customs authorities. The appellant argued that the non-compliance was unintentional and due to the recent introduction of the procedural requirement. The Tribunal observed that the procedural requirements were technical in nature and their non-compliance did not cause any administrative inconvenience or fraud. The Tribunal cited the Supreme Court's distinction between procedural and substantive conditions, emphasizing that non-compliance with technical procedural conditions is condonable. The substantive benefit of duty exemption should not be denied for mere technical non-compliance. Therefore, the Tribunal concluded that the denial of exemption was incorrect and set aside the adjudicating authority's order on this ground.2. Qualification of Re-exported Goods as 'Manufactured Goods':The second issue was whether the goods re-exported by the appellant qualified as 'manufactured goods' under the exemption notification. The appellant contended that the goods were cleaned, unpacked, and repacked before re-export, and this activity amounted to manufacture. The Tribunal referred to Circular No. 489/55/99-CEX, which clarified that the term 'manufacture' includes processes like packing and repacking. The Tribunal also cited previous judgments, including CCE vs. Western Electronics and Bala Handlooms Exports Co. Ltd. vs. Commissioner of C.Ex, Chennai, which held that packing and repacking activities qualify as manufacture for the purpose of extending exemption benefits. The Tribunal found that the appellant's activities of cleaning and repacking met the criteria for manufacture, thereby fulfilling the condition of the exemption notification. Consequently, the adjudicating authority's finding that the goods were not manufactured was deemed erroneous, and the order was set aside on this ground as well.Conclusion:The Tribunal allowed the appeal, setting aside the adjudicating authority's order and granting the appellant the benefit of duty exemption. The Tribunal emphasized that substantial benefits should not be denied due to technical procedural non-compliance and recognized repacking activities as sufficient to qualify goods as manufactured for exemption purposes.