Legal principle

Where imported goods availing a conditional end-use exemption are in fact used in the manufacture of the specified final product and never leave the premises in which they were received, the benefit cannot be denied merely because the fabrication was carried out by a job worker under a business arrangement documented as a sale, since the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 are procedural and facilitative and substantial compliance with the exemption condition suffices. Rule 7 of those Rules governs only the re-export or clearance of unutilised or defective goods and is not attracted where the imported goods were wholly consumed in the intended manufacture.

Court decision

The Tribunal set aside Order-in-Original No. DLI/CUS/PREV/SKR/Pr. Commr./03/2022-23 dated 26.09.2022 and allowed Customs Appeal No. 50011 of 2023 by Final Order No. 51596/2026, holding that there was substantial compliance with Notification No. 50/2017-Cus and condition No. 9 and that duty cannot be demanded; this set aside the differential duty of Rs. 1,06,69,156/- confirmed under Section 28(4) read with Rule 8 of the IGCR Rules, 2017, the interest recovery under Section 28AA, the appropriation of Rs. 25,00,000/- already deposited, and the penalty imposed under Section 114A.

Facts

PMI Electro Mobility Solution Private Limited, of Plot Nos. 39 and 26, Industrial Area Dharuhera, District Rewari, Haryana, manufactured electrically operated vehicles (electric buses) and held ICAT/NATRIP authorisation for the manufacture of Electric and Hybrid Electric Vehicles; its parent, M/s PMI Coaches Pvt. Ltd., which holds more than 50% of its shares, fabricated bus bodies, and both plots were taken on rent from PMI Coaches. The appellant imported Lithium-ion Battery Packs, AC/DC Motors, motor controllers, AC/DC converters, brake systems for recovering and electric compressors at a concessional/Nil rate under Sr. Nos. 528 and 528A of Notification No. 50/2017-Cus dated 30.06.2017, whose condition No. 9 requires the importer to follow the procedure in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017; it filed intimations dated 18.03.2020 and 28.04.2020 with the jurisdictional Deputy/Assistant Commissioner, EPC, Faridabad, furnished a continuity bond with surety/security and filed quarterly returns. On an order dated 18.01.2019 from Himachal Road Transport Corporation for 20 electric buses, it placed a purchase order dated 06.06.2019 and imported components under Bill of Entry No. 4700062 dated 30.08.2019, and by MOU dated 01.10.2019 had PMI Coaches fabricate the 20 buses at Plot No. 26 under its supervision, the components moving under 10 GST tax invoices and the completed buses coming back under a tax invoice dated 18.10.2019 before supply to HRTC. A search on 26.06.2020 showed the registered premises under construction since December 2019 with no manufacturing there, and statements of Shri Sourabh Rawat (26.06.2020 and 13.08.2020) and Shri Aman Garg, Executive Director (08.09.2020), were relied on by the department as admissions of sale 'as such' and of absence of permission from the jurisdictional AC/DC. A show cause notice dated 29.07.2021 followed, and the Principal Commissioner of Customs (Preventive), New Delhi, by order dated 26.09.2022, denied the exemption on that Bill of Entry, confirmed differential duty of Rs. 1,06,69,156/- under Section 28(4) read with Rule 8 of the IGCR Rules, 2017, ordered interest under Section 28AA, appropriated Rs. 25,00,000/- and imposed penalty under Section 114A.

Key provisions

• Rule 7(2), Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 — Re-export or clearance of unutilised or defective goods
• Section 28(4), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Rule 8, Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 — Recovery of duty in certain case