2024 (11) TMI 618 - AT - Customs

Appellant wins permission to destroy obsolete imported raw materials under harmonious reading of exemption notification

CESTAT Bangalore allowed four appeals by appellant who sought permission to destroy obsolete imported raw materials and components. The appellant had ... Permission to destroy the goods and clearance of the destroyed goods on payment of duty on the scrap value - appellant complied with the export obligation, however due to change of technology, some of the imported raw materials and components have become obsolete and unfit for manufacturing - HELD THAT:- We find that the appellants have imported goods and also procured goods from DTA in terms of exemption Notification No. 52/2003-Cus dated 21.03.2003 and Notification No.22/2003-CE dated 31.03.2003, respectively. The notification was amended and raw materials were also allowed to be destroyed under intimation to customs. The period of dispute in the present 4(four) appeals is prior to the substitution of condition (8) of Notification 52/2003 dated 31.03.2003. The appellant contends that the intent of the amendment was to address this particular situation, which was already provided in the Foreign Trade Policy (FTP) at Para 6.15(b) and was not provided in the Customs Notification No.52/2003 dated 31.03.2003 - We find that on a harmonious reading of the provisions of Para 6.15(b) of FTP and the Customs Notification No. 52/2003 prior to the substitution of condition (8) of the notification, it would tacitly imply that destruction of the obsolete raw materials may be allowed after intimation to customs authority, if destroyed within the unit, and with permission of the customs authority for destruction outside the unit. We also find that such permission for destruction was given in the past by the Department. As regards the other submissions of the learned AR that; the appellant cannot raise the point of substitution of condition (8) in Notification No. 52/2003 as it was not raised before the original authority nor the first appellate authority, we find that the substitution was made in 2015, which is much after the passing of the orders by both the authorities; as regards the submission of approval from BOA ( DGFT/JDGFT), we find that the learned AR has not adduced any such mandatory requirement; as regards the C.E. certificate certifying the obsolesce we find that their no such requirement, further there was no charge/finding that the destroyed goods are not obsolete. We also acknowledge that technological innovation and advancements would result in obsolesce of the earlier technology whereby the inputs, capital goods etc., used earlier for the production of final product would become obsolete and not fit for further use. Hence, the provision for destruction of the obsolete goods may have to be provided in the Policy/Notification. We find that the provision for destruction of capital goods, raw materials etc., was provided under the Foreign Trade Policy (FTP) in para 6.15(b), however, the provision for destroying the raw materials was not provided in the Notification No. 52/2003 dated 31.03.20003 and the provision has been bought in by the amending Notification No. 34/2015 dated 25.05.2015. We find that there is no plausible reason to interfere with the ratio of precedent decisions of this Tribunal mentioned at Para 7 supra, hence the 4(four) appeals are allowed. Issues Involved:1. Denial of permission to destroy obsolete imported goods and the demand for duty at the time of import.2. Applicability of Notification No. 52/2003-Cus and Para 6.15(b) of the Foreign Trade Policy (FTP) concerning duty on destroyed goods.3. Retrospective application of the amendment to Notification No. 52/2003-Cus by Notification No. 32/2015-Cus.4. Compliance with procedural requirements for destruction and clearance of obsolete goods.Issue-wise Detailed Analysis:1. Denial of Permission and Duty Demand:The appellant, a 100% Export Oriented Unit (EOU), imported goods duty-free under Notification No. 52/2003-Cus, intending to use them in manufacturing. However, due to technological changes, some goods became obsolete. The appellant sought permission to destroy these goods and clear the scrap on payment of duty on the scrap value, but the jurisdictional authority denied this request, demanding duty payable at the time of import. The appellant challenged this decision, arguing that they had previously been allowed to destroy goods with permission and clear them on payment of duty on scrap value, thus forming a bona fide belief that the same process could be followed post opting for Large Taxpayer Unit (LTU) jurisdiction.2. Applicability of Notification and FTP:The appellant contended that both Notification No. 52/2003-Cus and Para 6.15(b) of the FTP provide that no duty shall be payable when scrap is destroyed. The FTP allows the destruction of imported raw materials without duty payment after intimation to the department. The impugned order demanding duty with interest was argued to be contrary to these provisions. The appellant cited several judicial decisions supporting their stance that duty should not be levied on destroyed goods when they become obsolete.3. Retrospective Application of Amendment:The appellant argued that the amendment to Notification No. 52/2003-Cus by Notification No. 32/2015-Cus, which aligned the customs notification with Para 6.15(b) of the FTP, should apply retrospectively. This amendment was intended to harmonize the customs notification with the FTP, avoiding any dichotomy between the two. The appellant relied on previous judgments to support the retrospective application of such amendments.4. Compliance with Procedural Requirements:The appellant asserted that the CBEC's Customs Manual of Instructions and Board Circular No. 18/1998-Cus clarified that duty-free imported goods could be destroyed without duty payment. They argued that the department had previously allowed the destruction of obsolete goods and clearance on payment of duty on scrap value in their own case. The appellant also contended that the requirement for a Chartered Engineer's certificate evidencing obsolescence was not mandatory, and there was no charge or finding that the destroyed goods were not obsolete.Tribunal's Findings:The Tribunal found that the appellant had imported goods under exemption notifications, and due to technological advancements, some materials became obsolete and unfit for manufacturing. The relevant notifications allowed for the destruction of goods under certain conditions. The Tribunal noted that the amendment to the notification in 2015, which allowed for the destruction of raw materials, was intended to address situations already covered by the FTP. The Tribunal acknowledged that technological changes could render inputs obsolete, necessitating provisions for their destruction. It also noted that similar appeals by the appellant had been allowed previously, and there was no reason to deviate from these decisions.Conclusion:The Tribunal allowed the appeals, finding no reason to interfere with the precedent decisions. The appellant was entitled to consequential relief in accordance with the law. The decision emphasized the need to harmonize customs notifications with the FTP and recognized the practical implications of technological changes on manufacturing processes.