TIRUMALA IMPEX Vs. COMMR. OF C. EX., VISAKHAPATNAM

JUDGEMENT

(1.) THE appellants herein are a 100% EOU. They had imported transformers, engines, motors, pumps etc., under the cover of three bills of entry dated 24 -3 -2006 availing exemption from customs duty in terms of Notification No. 52/03 -Cus., dated 31 -3 -2003. This Notification provided exemption for specified goods imported for manufacture of articles for export or for being used in connection with production or packing or job work for export of goods/services by an EOU. The appellants segregated from the goods imported, copper scrap, aluminium scrap and silicon scrap etc., and exported the same. Adjudicating allegation that the appellants had not fulfilled the conditions of Notification No. 52/03 -Cus., vide the impugned order, the Commissioner confirmed demand of an amount of Rs. 12,29,944/ - being the exemption availed on imports of unserviceable motors etc., as not admissible. The imported goods were held liable to confiscation under 111(o) and since the goods were not available, the Commissioner ordered fine of Rs. 8,00,000/ - in lieu of confiscation. Applicable interest on the irregular exemption availed was demanded under Section 28AB of the Customs Act (the Act). He also imposed a penalty of Rs. 5,00,000/ - under Section 112(a) of the Act on the appellants. The assssees failure to comply with the conditions of the Notification inviting confiscation of goods u/s 111(o) was found on the basis that the appellant had not undertaken any manufacturing activity using the goods imported availing exemption under Notification No. 52/03 -Cus. The appellants have raised several grounds in the appeal before the Tribunal. They had segregated scrap from the imported non -serviceable motors etc. by a process involving breaking and cutting with gas cutters, chisels, and other machine/hand tools. This process involved activity of manufacture. As per Para 3.31 of the Exim Policy 1997 -2002 manufacture included the activity of segregation. The CBEC vide Circular 314/30/97 -CX., dated 6 -5 -1997 had clarified that a broader view was called for in respect of interpretation of provisions of Notification No. 1/95 -C.E. and the exemption may not be restricted only to cases where manufacturer under Section 2(f) of the CE Act was involved. Exemption under notification would be applicable to a 100% EOU engaged in galvanizing of black MS pipes. The Notification No. 52(03) Cus., was similar to Notification No. 1/95 -C.E.; both allowed an EOU procure materials for production of articles for export. The recycling of imported scrap was specifically authorized by the LOP granted to them by the Development Commissioner. Further the Assistant Development Commissioner, Visakhapatnam, vide his letter No. 8/EOU -98/VSEZ/2007/509 dated 5 -4 -2007 had clarified that the process undertaken by them was manufacturing activity. The appellants relied on the following decisions of the Tribunal:

(2.) DURING hearing the learned Counsel submitted that the same authority had dropped a similar proposal as adjudged in the impugned Order -in -Appeal No. 6/08 V(II) (D) C.E., dated 26 -11 -2008. While dropping the proposal in the said order, the Commissioner (Appeals) had relied on a Public Notice issued by the DGFT dated 31 -8 -05 on the scope of manufacture. As per this clarification, segregation activities constituted manufacture in respect of units set up prior to 1 -4 -2002 for a period of 5 years from the date of commencement of commercial production. Learned Counsel invited our attention to Letter No. 8/EOU/98/SEZ/06/5069 dated 30 -8 -2006 by the Assistant Development Commissioner which stated that the LOP of the applicant had been extended for five years from 1 -9 -2004 when it commenced production. It is also argued that since the Notification No. 52/03 -Cus., permitted re -export of the impugned goods and the appellants had exported materials retrieved from the goods imported in terms of the Notification No. 52/2003 -Cus., the appellants could not in any case be required to pay the exemption availed at the time of import of scrap material such as unserviceable motors, gears, pumps. Another point submitted is that the impugned order demanded customs duty on the FOB value of the scrap recovered and exported from the impugned consignment which was much higher than the value of the consignment on which duty exemption had been allowed.

(3.) WE have also heard learned DR who defends the impugned order. He submits that the exemption was admissible only if the goods imported were used for the manufacture of excisable goods and exported. In the instant case no new article with name, uses and characteristics different from the inputs emerged in the process undertaken. Therefore, the EOU had not undertaken any manufacturing process on the impugned goods and therefore the goods were not qualified for the exemption availed at the time of their import. The impugned order was passed in accordance with law and deserve to be sustained.