2025 (7) TMI 1785 - AT - Customs

Inputs destroyed in manufacturing qualify for remission under Notification 21/2002 Cus, Rule 21, and Section 23 upheld

M/s. Venkraft Paper Mills (P) Ltd. Versus Commissioner of Customs, Tuticorin

The CESTAT Chennai held that the phrase 'for use in manufacture' in notification No 21/2002 Cus. cannot be interpreted to exclude inputs that are ... Interpretation of statute - phrase 'for use in manufacture' as appearing at Sr. No 152 of notification No 21/2002 Cus. - intent or actual usage of imported goods - violation of end use condition - HELD THAT:- A similar issue including the issue raised by the Ld. AR in his submission has already been decided by a Coordinate Bench in M/s Sennar Paper and Boards [2024 (10) TMI 909 - CESTAT CHENNAI] where it was held that 'A legal position that inputs which are destroyed etc. were not used in the manufacture of the final product and hence were not eligible for remission, would make Rule 21 of the Central Excise Rules and Section 23 of the Customs Act, 1962 redundant. A provision of an Act or Rule cannot be read in a manner to render its purpose otiose. Hence on this ground too, the impugned order fails.' It has also not been brought to notice that the said order has been set aside or modified in any manner. The impugned order is hence set aside, and the appeal is allowed. ISSUES: Whether the phrase 'for use in manufacture' in a customs notification implies intent to use or actual usage of imported goods.Whether duty can be demanded when imported goods intended for manufacture are destroyed by an unavoidable accident such as fire before usage.Whether claiming insurance for goods lost in fire constitutes obtaining double benefit and affects eligibility for concessional duty.Whether failure to produce an end-use certificate due to destruction of goods violates the conditions of the concessional duty notification.Whether the department's demand for differential duty is sustainable in the absence of proof of diversion or misuse of imported goods. RULINGS / HOLDINGS: The phrase 'for use in manufacture' as appearing in Notification No. 21/2002-Cus. means 'intended for use' rather than actual usage, consistent with the Hon'ble Supreme Court's interpretation in State of Haryana Vs Dalmia Dadri Cement Ltd.Imported goods destroyed by fire, an unavoidable accident beyond the control of the importer, do not attract duty demand as the intention to use suffices; actual use is not mandatory under the notification conditions.Claiming insurance for the loss of goods does not amount to obtaining double benefit unless proven otherwise by documentary evidence; assumptions or allegations without proof are insufficient to sustain duty demand.Failure to produce an end-use certificate due to destruction of goods by fire does not violate the undertaking condition, given the statutory provisions for remission of duty on lost or destroyed goods under Rule 21 of the Central Excise Rules and Section 23 of the Customs Act.The department's demand for differential duty is unsustainable in absence of evidence showing diversion of goods or misuse; mere non-use due to destruction does not constitute breach of notification conditions. RATIONALE: The Court applied the legal framework established by Notification No. 21/2002-Cus. and Condition No. 20 therein, which requires an undertaking and end-use certificate but does not explicitly mandate actual usage if goods are lost by unavoidable accident.Precedents from the Hon'ble Supreme Court (State of Haryana Vs Dalmia Dadri Cement Ltd., BPL Display Devices Ltd. Vs Commissioner of Central Excise) were relied upon to construe 'for use' as 'intended for use.'Tribunal precedents (Sennar Paper and Boards Ltd., Vamsadhara Paper Mills Ltd.) were cited to support the principle that loss of goods due to fire does not attract duty demand and that remission provisions under Rule 21 and Section 23 apply.The Court emphasized that statutory provisions for remission of duty on lost or destroyed goods cannot be rendered otiose by a narrow interpretation of 'use' and that the department must substantiate allegations of double benefit or diversion with documentary proof.No dissenting or differing opinion was recorded; the Court followed established doctrine and coordinate bench decisions without modification.