Export of duty free goods procured alongwith export goods not mandatory under N/N. 43/2001-CE

(Arising out of Order-in-Appeal No. IND/CEX/000/APP/227/2014 dated 15.9.2014 passed by the Commissioner (Appeals), Central Excise & Customs, Indore)

 Brief of the case:

• The CESTAT New Delhi in the above cited case held that procurement of duty free goods under notification no 43/2001 CE is subject to condition of the use of such goods in the manufacture or processing of goods to be exported.
• In the present case the PP bags procured free of duty under the above notification were used in packing export goods. Merely not sending PP bags alongwith export goods for the sake of convenient loading of export goods would need lead to non-use of PP bags in processing (packing) of export goods because the notification nowhere require that the duty free procured goods to be exported.

 Facts of the case:

• The assessee procured PP bags without payment of duty in terms of Notification No. 43/2001-CE(NT) dated 26.6.2001 claiming that such bags used for packing of De Oiled Cake (DOC) to be exported.
• The adjudication authority demanded duty not paid on such bags on the ground that at the port at the time of loading of goods on to the ship, DOC was taken out of these bags and loaded on the ship bulk and these bags were discarded as scrap at the port and therefore as the bags were not exported the duty foregone in terms of Notification No. 43/2001-CE(NT) became recoverable.
• Aggrieved assessee preferred an appeal before tribunal.

Contention of the Revenue:

• It was contended that in respect of DOC export by ships the PP bags were not exported and so the duty saved on its procurement became recoverable because without export of packing bags alongwith the DOC would lead to PP bags not used in manufacturing or processing of exported goods.

Held by CESTAT New Delhi:

• The tribunal observed that notification no. 43/2001 issued under rule 19 provides that the manufacturer can procure excisable goods without payment of duty for the purpose of use in the manufacture or processing of export goods and their exportation out of India.
• It is not in dispute that PP bags were procured duty free under the said notification and were used for packing the export goods and DOC packed in these bags was cleared to the factory for export.
• The export goods reached the port in the same packing and it was only at the time of loading that possibly for the sake of efficient use of space, it was found useful to load DOC in bulk and therefore DOC was taken out of the bags and loaded on the ship and in the process bags were discarded.
• But as per the condition stated in the above notification that the duty free procured goods must be used for manufacturing or/and processing goods to be exported has been safely fulfilled in the present case because the PP bags were used for manufacture/processing of the export goods as packing is certainly a process. Further, the notification nowhere require that the duty free procured goods to be exported.
• Therefore, no duty can be demanded from assessee on PP bags. In result the appeal of assessee was allowed.