Goods damaged in transit for export are deemed destroyed before removal, qualifying for duty remission under Rule 21 of Central Excise Rules.

DR. D.M. MISRA

This is an appeal filed against Order-in-Appeal No.12&13 /2017/LTU dated 16.01.2017 passed by the Commissioner(Appeals), LTU, Bangalore.

2. Briefly stated the facts of the case are that the appellant are engaged in the manufacture of Gear Boxes (Transmission Assembly Units) and their parts falling under Chapter 87 of the Central Excise Tariff Act, 1985. By a letter dated 27.02.2012, the appellant had informed the Department that they have removed final products for export against invoice dated 19.02.2012 to M/s. Toyota Argentina S.A. Argentina through 3^rd party exporter, which met with an accident on 20.01.2012 and 288 nos. of Gear Boxes contained in the export container was brought back to the factory for quality inspection and later found to be damaged. Hence, they requested for permission for destruction of the said goods at their premises without payment of duty and for removal of the scrap/wastage on destruction of the said goods on payment of duty in terms of Para 6.8(f) of the Foreign Trade Policy (FTP) read with Para 8(ii) of Notification No. 52/2003-Cus dated 31.03.2003 and Para 3(iii) of Notification No. 22/2003-CE dated 31.03.2003. Consequently, they were directed to pay duty on the value of the goods damaged and not on the scrap value. As appellant has not paid the duty on the value of goods, information were called for from the appellant including the insurance claim on damaged goods in transit relating to the consignment in 2012 as well as the past consignment in February 2008. On the basis of the information submitted and later collected from the insurance company, show-cause notice was issued to the appellant on 20.02.2013 for recovery of the total duty of Rs.34,70,133/- against the value of the goods cleared vide invoice dated 19.01.2012 and 04.02.2008, which got damaged during the course of transit invoking extended period of limitation with interest and penalty. On adjudication, the demand was dropped by the adjudicating authority. Aggrieved by the said order, Revenue filed appeal before the learned Commissioner(Appeals) who in turn allowed the Revenue’s appeal by setting aside the order of the adjudicating authority. Hence, the present appeal.

3.1. At the outset, the learned advocate for the appellant has submitted that they had cleared their final goods for export through merchant exporter viz. M/s. Toyota Kirloskar Motor Private Limited (TKML) to M/s. Toyoka Motor Thailand Co. Ltd., vide Export invoice dated 04.02.2008 and cleared 1152 nos. of gear assembly. Out of the said goods meant for export, a consignment of 288 units met with an accident and were brought back to the factory after filing Form D-3 declaration in terms of Rule 16 of Central Excise Rules, 2002 ( CER , 2002) and also an FIR was filed with the Police authorities. After verification of the returned goods by the Departmental authorities, the goods were re-warehoused. Consequently, quality of the accident-damaged goods was carried out and it revealed that the same became unfit for re-work or refurbishing. Consequently, they sought permission for destruction of the goods in terms of Para 3(iii) of Notification No.22/03-CE and Para 8(i) of Notification No.52/03- Cus. read with Para 6.8(f) of the FTP. The Deputy Commissioner, LTU, Bangalore vide order dated 26.03.2008 granted permission for destruction of 288 nos. of goods within the appellant’s EOU premises and to discharge duty on the scrap generated and cleared into DTA. On the basis of the said permission, they have destroyed the goods and scrap generated was sold into DTA after payment of applicable duty. The Department has never objected to such clearances. Further he has submitted in January 2012, similar accident occurred while effecting clearance against export invoice dated 19.01.2012 wherein they cleared 576 nos. of finished goods valued at Rs.1,54,37,496/-. 288 nos. of final goods were damaged d