1987 (7) TMI 111 - HC - Customs

Summary

Issues Involved:
1. Eligibility for duty-free import of raw materials under the Duty Exemption Scheme.
2. Interpretation of the relevant notifications and their amendments.
3. Fulfillment of conditions for duty-free import.
4. Entitlement to reimbursement or replacement of raw materials already used.
5. Applicability of Section 15 of the Customs Act regarding duty and tariff valuation.

Detailed Analysis:

1. Eligibility for Duty-Free Import of Raw Materials under the Duty Exemption Scheme
The petitioner company, engaged in manufacturing transformers for State Electricity Boards, sought duty-free import of raw materials under the Duty Exemption Scheme. This scheme, framed by the Central Government and detailed in Appendix 19 of the Import & Export Policy (1985-1988), allows duty-free import of raw materials for goods supplied to IBRD/IDA aided projects, treated as 'deemed exports'. The petitioners claimed entitlement to this benefit for their imports.

2. Interpretation of the Relevant Notifications and Their Amendments
The original notification (No. 210/82-Customs, dated September 10, 1982) exempted raw materials and components required for manufacturing goods supplied to specific projects from customs duty. However, the Customs Authorities contended that the imported materials must retain their identity and be used directly in manufacturing. The petitioners argued for a liberal interpretation, allowing for the replacement of materials already used from their stock with imported goods. The subsequent notification (No. 235/87-Customs, dated June 5, 1987) amended the original notification, permitting the use of imported raw materials for manufacturing other goods or their transfer to actual users under certain conditions.

3. Fulfillment of Conditions for Duty-Free Import
The petitioner had executed the necessary bond with a bank guarantee as required under the Duty Exemption Scheme. The Customs Authorities, however, did not release the imported goods duty-free, arguing that the materials must be used directly as imported. The court noted that the amended notification (dated June 5, 1987) clarified that the petitioner could use the imported materials for other goods or transfer them, thus fulfilling the conditions for duty-free import.

4. Entitlement to Reimbursement or Replacement of Raw Materials Already Used
The petitioners had supplied raw materials from their stock before the actual import took place and sought to replace these with the imported goods. Initially, the Customs Authorities did not accept this replacement for duty-free exemption. However, the amended notification allowed for such replacement or reimbursement, thereby entitling the petitioner to duty-free import for materials already used in manufacturing.

5. Applicability of Section 15 of the Customs Act Regarding Duty and Tariff Valuation
Section 15 of the Customs Act specifies that the rate of duty and tariff valuation applicable to imported goods is determined at the time of their clearance from the warehouse. The court held that, given the amended notification (dated June 5, 1987), the petitioner was entitled to clear the goods without paying customs duty, as they had fulfilled all required conditions.

Conclusion:
The court concluded that the petitioner was entitled to duty-free import of raw materials under the amended notification, dated June 5, 1987. The Customs Authorities were directed to clear the goods without payment of customs duty, as the petitioner had met all the stipulated terms and conditions. The writ petition succeeded to the extent indicated, with no order as to costs.