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

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 destroyed during the manufacturing process from remission benefits. Relying on a Coordinate Bench decision, the tribunal ruled that such a restrictive interpretation would render Rule 21 of the Central Excise Rules and Section 23 of the Customs Act, 1962 ineffective. Since no contrary order has been cited, the impugned order denying remission was set aside, and the appeal was allowed.

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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.

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