2019 (11) TMI 1214 - AT - Customs

Liability of duty being the duty foregone on parts of CD Deck mechanism imported - period February 2008 and February 2009 - non-compliance with the conditions in N/N. 25/99-Cus dated 28th February 1999 - benefit of concessional rate of duty - HELD THAT - It would appear that the adjudicating authority has proceeded with his own line of thinking on the scope of the exemption notification. There is no doubt that an exemption notification will need to be construed strictly but an exemption notification that permits import of parts which according to the adjudicating authority cannot find use in the intended finished goods is also an indictment of the Central Government for indulging in superfluity. In the absence of such consideration by the adjudicating authority and casual discarding of the expert opinion of Department of Electronics we are constrained to hold that the findings in the impugned order are not sustainable and must be set aside - matter remanded back to the original authority for consideration of the facts and evidences of proper utilisation of the imported goods in the manufacture of assemblies that conform to the description of the finished goods in the exemption notification - appeal allowed by way of remand.

Summary

Issues:
Fastening of duty liability on imported parts of CD Deck mechanism not in compliance with notification conditions.

Analysis:
1. The appellant, a company, contested the duty liability of ? 99,12,009 on imported parts of CD Deck mechanism not meeting conditions of notification no. 25/99-Cus dated 28th February 1999.

2. The notification allows import of specific parts at concessional duty for use in manufacturing finished goods, subject to compliance with Customs Rules. Allegations arose as parts were used in DVD players instead of CD Deck mechanisms as per the notification.

3. The appellant argued that DVD players require CD Deck mechanisms for operation, presenting end-use certificates and asserting compliance with Rules. They cited tribunal decisions and contended full compliance with all requirements.

4. The Authorized Representative emphasized strict interpretation of exemption notifications, citing Supreme Court and Tribunal decisions. Burden of proof for exemption claim lies with the assessee.

5. The duty demand was raised by the Commissioner of Central Excise, Aurangabad, within whose jurisdiction the factory was located. Post-clearance utilization must align with Customs Rules, with closure by jurisdictional authorities.

6. The show cause notice presumed concessional duty under the Rules, but the exemption privilege is granted by the notification under Customs Act, 1962. Alleged breaches of Rules led to duty demand and penalty proposal.

7. The adjudicating authority limited duty liability to 5% per the notification, rejecting expanded item eligibility. Expert opinion on 'loader assembly' as CD Deck mechanism was disregarded.

8. The authority differentiated CD and DVD mechanisms, overlooking technological evolution. Lack of primary sources for conclusions raised doubts. Expertise dismissal without examination was noted.

9. Procedural breaches like non-intimation of goods arrival and record maintenance were acknowledged but deemed insufficient for exemption denial without diversion allegations.

10. The authority's strict interpretation of the notification was criticized for restricting parts that could be used in finished goods. The need for aligning with industry advancements was highlighted.

11. Due to inadequacies in the impugned order, the findings were deemed unsustainable, leading to remand for further consideration of evidence and proper utilization of imported goods.

12. The appeal and cross objections were disposed of, emphasizing the need for proper consideration of facts and defending the competence of the Commissioner in duty recovery proceedings.