Expert Views Required - MOOWR for Trading Model & Customs Duty on Used Capital Goods at Ex-Bond Clearance

[Piyush Choudhary]

Dear Experts,

We seek your views on the following practical issues under the MOOWR Scheme.

Query 1 - MOOWR for Trading Entity

A Company is engaged in trading imported consumer products such as kitchen chimneys, appliances and utensils.

Business model:

• Import finished goods from overseas.
• Store goods at our Central Distribution Centre (Haryana).
• Carry out quality inspection, testing, repacking, relabelling, barcode affixation and kitting.
• Thereafter, supply goods to dealers across India.

No manufacturing activity is undertaken.

Queries:

1. Can such a trading entity obtain MOOWR approval under Section 65?
2. Whether testing, inspection, repacking, relabelling and kitting qualify as 'other operations'?
3. Can customs duty be deferred till DTA clearance?
4. Has anyone implemented a similar model or obtained Customs approval? Any supporting Circulars, FAQs or case laws?

Query 2 - Capital Goods under MOOWR

Another group entity engaged in manufacturing activity of plastic products proposes to import capital goods under MOOWR. The machinery will remain installed and used for manufacturing for around 10-20 years and thereafter may be sold or cleared into DTA.

Queries:

1. At the time of ex-bond clearance after long-term use, will deferred customs duty be payable on:
   • Original import assessable/CIF value, or
   • Depreciated value / WDV?
2. CBIC FAQs mention that depreciation is not available for capital goods cleared into DTA after use. However, under which specific provision of the Customs Act/Rules is such valuation governed?
3. Has anyone practically handled such ex-bond clearance? If yes, how was the assessable value determined and did Customs allow any depreciation?

Any practical experience, departmental practice or judicial precedents would be highly appreciated.

[Nash Industries I Pvt Ltd]

MOOWR is a duty deferral scheme and not an exemption scheme. The duty that is to be paid at the time of import is deferred till DTA clearance. And as such depreciation is not applicable as per the current provisions. You may please refer to Customs Circular No 38/2018 dated 18.10.2018 and circular 34/2019 dt 01.10.2019

[Shilpi Jain]

Manufacture under FTP is defined as this

11.31 "Manufacture" means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, re-packing, polishing, labeling, Re-conditioning repair, remaking, refurbishing, testing, calibration, re-engineering.

As you are performing these activities MOOWR should not be a problem.

[Shilpi Jain]

No depreciation benefit will be available at the time of clearance as it is in the nature of duty deferment scheme.

AI Summary

MOOWR duty deferment permits specified warehouse operations, while capital goods cleared domestically receive no depreciation benefit. MOOWR may be available to an importing trading entity undertaking inspection, testing, repacking, relabelling, barcode affixation and kitting, as the cited definition of manufacture includes repacking, labelling and testing. Customs duty is deferred until domestic tariff area clearance. MOOWR is a duty-deferment, not a duty-exemption, scheme; consequently, the discussion states that capital goods used in manufacturing and later cleared into the domestic tariff area do not receive depreciation benefit under current provisions.