Import at Concessional Rate

[Kaustubh Karandikar]

As per Notfn. 25/2002 Customs, concessional rate of duty is available on imported inputs used in the manufacture of specified finished goods. XYZ is importing Input “A” which is used to manufacture Intermediate Goods “B” and “B” in turn is used to manufacture the finished goods “C”. Now customs department is denying the concessional rate on ‘A’ since the same is not directly used for “C”. Any defence possible?

[KASTURI SETHI]

Dear Sir, There is no substance in the objection of the department. The department's view is devoid of legal force. It is certain that the department will issue SCN. Relief is possible only through litigation. Flow chart of manufacturing process duly certified by the chartered engineer will prove that the input A has been used directly in the manufacture of final product C. Both A and B have become an integral part of C. Exemption cannot be denied but as per judgement of the Supreme Court, the burden of proof is cast upon the person who avails exemption. So you cannot escape litigation. If SCN is issued that will be vacated at the first stroke by the Appellate Authority.

[Kaustubh Karandikar]

Kasturi Ji thanks for your kind advice. I am also of the same view. However unfortunately there is no case law on this specific issue to defend.

[Raghunandhaanan rvi]

My view is that :

• Notification No. 25/2002 provides duty exemption for importation of capital goods for use in the manufacture of finished products mentioned there in the Notification.
• Column 2 in the table shows description of capital goods / instruments/ equipment to be imported duty free
• Column 3 in the table is showing the description of finished product to be manufactured by using the capital goods imported duty free

Hence once you manufactured a description of finished goods as mentioned in column 3 of the table , you have fulfilled the condition of the notification – nothing more to do by you.

In my opinion, customs objection is not valid as long as the importer satisfy the condition of the notification and they need not think beyond that.

Thanks

AI Summary

Concessional import duty applies when an input forms part of the manufacturing chain producing the listed finished product.
Concessional import duty under Notification 25/2002 is available where an imported input or capital good is used in the manufacturing chain that produces a specified finished product; entitlement is satisfied by demonstrating that the input becomes an integral part of the final listed product. A certified manufacturing flow chart can serve as evidence, but the claimant bears the burden of proof and may face show cause notices if the department disputes the claim.