- (1.) The revenue has approached this Court by filing this appeal under Section 35G of the Central Excises and Salt Act, 1944 challenging the order dated 29-12-2004 passed by the Customs Excise and Service Tax Appellate Tribunal, New Delhi while disposing of C/Appeal No. 410/2003-NB(C). The revenue has claimed that following substantial question of law arises for our determination : "Whether Tribunal have committed error in allowing the benefits of CBEC Circular No. 60/99, dated 10-9-1999 without fulfilling the conditions as said down in the circular?"
(2.) The facts are not in dispute. The assessee respondent is 100% Export Oriented Undertaking and had entered into a contract with M/s. Gauthier S.A. of France for the supply of Rice Processing machinery. However, French firm supplied only a Calorimetric sorting machine, one Electrical Control Panel and a set of spare parts which were cleared under Bill of Entry dated 8-8-1997. The foreign supplier could not supply the rest of the machinery as it went into liquidation. As such the Calorimetric sorting machine could not be used without the rest of the components and other parts. The machinery remained unused ever since its import and the 100% Export Oriented Unit could not be set up and commissioned. The foreign supplier accepted the request made by the assessee-respondent to take back the machinery shipped by them. The assessee also approached the Custom authorities and Development Commissioner of Noida Export Processing Zone for granting necessary permission for re-export of the goods vide letters dated 23-12-1998 and 30-4-2001. In the absence of grant of permission the foreign supplier backed out without any option with the assessee- respondent but to abandon the goods. The assessee eventually surrendered the goods vide letter dated 7-8-2001 leaving it to the Customs Department to dispose of the same in any manner they like. The assessee-respondent also approached the Development Commissioner for de-bonding of the unit and for discharging the bond executed with the Department stating that the Development Commissioner vide letter dated 12-2-2002 had conveyed their consent for withdrawal of 100% Export Oriented Unit and allowing in principle of de-bonding of the unit. However, the request was rejected for surrender of capital goods on the ground that the assessee-respondent had failed to fulfil the condition Nos. 3, 5 and 6(1) of the notification dated 30-6-1997 which requires the manufacture, production, packaging, job work or service in Customs Bonds. The capital goods were required to be installed in the bonded premises within a period of one year from the date of import. The appeal filed by the assessee-respondent was rejected by the Commissioner (Appeals) on the ground that their case is neither a case of clearance of goods for home consumption nor a case of deposit of goods in the warehouse.
(3.) On appeal to the Tribunal, the assessee-respondent was given the benefit of circular dated 10-9-1999 by observing as under : "We have considered the submissions of both the sides. The Central Board of Excise and Customs under Circular No. 60/99-Cus., dated 10-9-1999 has considered the difficulties of EOU., etc. faced by them in regard to replacement of goods imported and found damaged or defective or otherwise unfit for use. The Board after examining the matter issued the instructions that has to be followed by field formations in regard to the goods imported and found damaged or defective or otherwise unfit for use. The relevant portion of the instructions reads as under : (B) Goods imported and found defective/damaged or otherwise unfit for use. (i) The units may be allowed to receive free replacement of the goods imported and found defective, damaged or otherwise unfit for use, prior to re-export of the same. However, re-export of such defective/damaged or otherwise unfit for use goods may be subsequently made later. (ii In case, the supplier of such defective, damaged or otherwise unfit for use goods does not insist on re-export of such goods, the same may not be re-exported subjected to the condition that such goods shall be either destroyed with the permission of Assistant Commissioner of Customs/Central Excise in charge of unit or cleared into DTA on payment of full custom duty." A perusal of the Board's circular clearly reveals that these instructions apply to goods imported and found defective/damaged or otherwise unfit for us. As per the Circular first, the importer is to be allowed free replacement of the goods and subsequently re-export may be allowed. In case the supplier does not insist on re-export of the goods the same has to be destroyed or cleared into DTA on payment of customs duty. The Board's circular does not apply only to defective or damaged goods, it also applies to the goods which are " otherwise unfit for use" . It has been contended by the appellants which has not been rebutted by the Revenue that calorimetric sorting machine imported by them was not for use for want of the entire machinery for which they had placed order with the foreign supplier. As the machinery in question was unfit for use and the foreign supplier is not insisting on re-export of the same the only option available to the Appellants was to abandon the goods for which permission is available to them under the Board's Circular dated 10-9-1999. Accordingly, we set aside the impugned order and allow the appeal filed by the Appellants.";