Availability of Payment on Concessional rate of duty on Scrap of repaired goods

PJ/Case Laws/2011-12/1384

Availability of Payment on Concessional rate of duty on Scrap of repaired goods - re-imported

Case: NTPC LTD. v/s COMMISSIONER OF CUSTOMS, MUMBAI

Citation: 2011 (271) E.L.T. 535 (Tri.-Mumbai)

Issue:- Whether the scrap generated during repair of exported goods but re-imported can be extended the benefit of being imported at concessional rate of duty?

Brief Facts:- Appellant exported Rotor with Rotor Heat shield for repairs and re-imported after repairs. On re-import, they claimed full exemption under Notification No. 174/66. The Notification No. 174/66 was applicable to the goods not produced/manufactured in India and which were private personal property. The said re-imports were having damaged parts in it.

The Adjudicating Authority observed that the impugned goods were neither personal nor private property and concluded that the Notification No. 94/96 and not No. 174/66 was applicable. It was further observed that damaged goods were restricted for re-import as per Para 2.17 of Foreign Trade Policy 2004-2009. On the basis of scrap value of alloy steel the goods were revalued. Since the old and used parts were restricted as per Para 2.17 of Exim policy, the Adjudicating Authority confiscated the goods and gave an option to redeem them on payment of fine of Rs. 2.50 lakhs and imposed a penalty of Rs. 1.50 lakhs on the appellant.

In appeal, the Commissioner (Appeals) upheld the order of the Adjudicating Authority as regards the applicability of Notification No. 94/96. As regards valuation of the damaged goods also, the impugned order was upheld. But the order of Adjudicating Authority was set aside on the ground that the damaged goods were also re-imported after the said repairs and as per the DGFT letter dated 6-9-2006, prima facie it appeared that the goods were covered by para 2.22 of the Foreign Trade Policy and were eligible for exemption under Notification No. 21/02 and 26/03. The case was remanded.

On remand, the Adjudicating Authority held that the scrap generated during reconditioning of rotor were freely importable under Foreign Trade Policy. However, it was held that importation of these goods were not covered under Notification No. 21/02 and 26/03.

In appeal, the Commissioner (Appeal) held that the unusable scrap could not be allowed to be imported at a concessional rate of duty. It was held that Notification No. 21/02 envisaged exemption only for such goods, which for ‘renovation or modernization’ and while, the rotor, etc can be termed as ‘goods for renovation or modernization’. This unusable scrap can in no way be used for the renovation or modernization. Similarly under Notification No. 94/96-Cus dated 16.12.96 the condition No. 2 envisaged re-import of goods after repairs wherein the value after repairs were made up of the fair cost of repairs carried out including cost of materials used in repaired (whether such costs are actually incurred or not), insurance and freight charges both ways. In appellant’s case the goods were re-exported under drawback scheme nor were they re-exported under any bond but were only exported and then re-imported after reconditioning/repairs. Notification No. 94/96-Cus cannot therefore be applicable. The crux of this notification is for repair of goods and the goods thereafter re-imported with value addition is for repair of goods and the goods thereafter re-imported at a concessional rate of duty. The Adjudication order was upheld.

Aggrieved by the same, appellant filed appeal before the Tribunal.

Appellant’s Contention:- Appellant contended that they were entitled for the exemption as per Notification No. 21/2002, dated 1-3-2002. Reliance was placed on Tribunal's decision in the case of GMR Energy Ltd. v. CC, Bangalore [2007 (218) E.L.T. 676 (Tri-Bang.)]. In the said decision, dealing with a case of re-import after repair of similar parts of gas turbines, the Tribunal had held the imports were for renovation of power plant eligible for exemption under Notification applicable to goods at Sl. No. 236 of the table to Notification No. 21 /02- Cus.

Appellant further submitted that the scrap goods re-imported were entitled for full exemption in terms of Sl. No. 3 to the table to the Notification No. 94/96.

Respondent’s Contention:- Revenue argued that the imports are not entitled to exemption under Notification No. 21/2002 and further submitted that the scrap goods were covered by Sl. No. 2 to the Table to the Notification No. 94/96.

Reasoning of Judgment:- The Tribunal held that in the light of the Tribunal's decision in the case of GMR Energy Ltd, they were convinced that the re-imported rotors are entitled to be assessed in terms of Sl. No. 236 of the Table to Notification No. 21 /02-Cus. As regards the scrap generated in repair of rotors abroad and under re-import, they are not covered by Sl. No. 3 of the Table to the said Notification as claimed. These are not goods of Sl. No. 1 imported after exports under claim for rebate, under bond, under DEPB or under Drawback. These are 'Goods, other than those falling under Sl. No. 1, exported for repairs abroad' of Sl. No. 2 of the Table to the Notification No. 94/96. Accordingly, the claim of the appellants in this regard is rejected.

Decision:- Appeal disposed off.

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PJ/Case Laws/2011-12/1384

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