Remission of duty and place of removal for returned exported goods: extended limitation demand set aside, appeal allowed

Remission of duty and place of removal for exported goods returned as damaged: the destroy-and-scrap of returned finished goods under departmental supervision with duty discharged on scrap value precluded a subsequent demand invoking the extended period of limitation; the port is treated as the place of removal for export consignments where relevant. Because duty on the scrap value was assessed and accepted previously, a fresh demand for duty on those damaged goods under extended limitation could not be sustained, resulting in the impugned demand being set aside and the appeal allowed with consequential relief.

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Issues: Whether the appellant is required to discharge central excise duty on finished goods that were cleared for export but returned to the factory damaged in transit before export.

Analysis: The appeal concerns goods cleared for export which were returned after being damaged in transit; the appellant complied with Rule 16 (D-3 declaration and physical verification) and sought permission to destroy the goods and pay duty on scrap value. The Tribunal relied on the Larger Bench decision in Honest Bio-Vet (following the Gujarat High Court) holding that for exports the "place of removal" is the port of shipment and that goods destroyed before export may be treated as destroyed before removal for the purpose of remission under Rule 21. The Tribunal found that the Revenue's contentiontreating the factory gate as place of removalrests on a wrong premise given the settled view that sale/export completion occurs at the port in such cases. The facts also showed that in 2008 a departmental permission for destruction and payment of duty on scrap had been granted and acted upon; that assessment was accepted by the Department. The Tribunal held that invoking extended limitation to demand duty on the earlier consignment was not sustainable and that the appellant complied with procedures and acted bona fide.

Conclusion: The impugned order confirming demand is set aside and the appeal is allowed in favour of the assessee with consequential reliefs, if any, as per law.

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