ORDER
P.K. Kapoor, Member (T)
1. This is an appeal against the order dated 21-10-1992 passed by the Collector of Customs & Central Excise (Appeals), Bangalore. The appellants filed a Bill of Entry for the clearance of 3440 numbers Silk Cushion Covers under the provisions of Section 20 of the Customs Act, 1962 as reimported goods. The goods were originally exported but on rejection by the foreign buyer they were called back by the appellants. The appellants claimed that reimported goods were exempted under Section 20(1)(d) of the Customs Acct, 1962 and duty was even otherwise not chargeable on the goods since the appellants who were working under the Duty Exemption Entitlement (DEEC) Scheme were to re-export the goods. The Assistant Collector by his order dated 26-8-1992 held that the reimported Silk-madeups (Cushion covers) were classifiable under sub-heading 6304.99 of the Schedule to the Customs Tariff Act, 19851 and the goods were chargeable to additional duty in terms of Section 3 of the Customs Tariff Act, 1975. The appellants filed an appeal before the Collector (Appeals) claiming that the reimported Silk made-ups (Cushion covers) were correctly classifiable under sub-heading 5007 and no duty was chargeable thereon in terms of Section 20(1 )(d) of the Customs Act, 1962. However, by the impugned order the Collector (Appeals) held that the goods in question were classifiable under sub-heading 6304.99 and also confirmed the Assistant Collector’s finding that no central excise duty having been paid on goods prior to their export, on reimportation, they were liable to pay excise duty leviable on the goods in terms of Section 20(1 )(c) of the Customs Act, 1962.
2. On behalf of the appellants, Shri V. Lakshmi Kumaran, Learned Advocate appeared before us. He stated that the appellants were not contesting the finding of the Collector (Appeals) in regard to the classification of the goods under the Customs Tariff. He submitted that the finding in the impugned order that the reimported goods of Indian origin were chargeable to excise duty in terms of Section 20(1)(c) of the Customs Act, 1962 was erroneous since the goods in question were manufactured by a unit which was eligible for exemption from payment of central excise duty and were exported in terms of the Duty Exemption Entitlement Scheme. He contended that the goods not having been exported under Bond the provisions of Clause (c) to the proviso to Section 20 of the Act were not attracted and, therefore, they were eligible for clearance without payment of duty in terms of Clause (d) to the proviso to Section 20(1).
In support of his contentions he placed reliance upon the following case law :
Khandelwal Metal and Engineering Works, v. Union of India -1985 (20) E.L.T 222 (S.C.);
Pelisetty Somasundaram (P) Ltd. v. Govt. of India – 1984 (17) E.L.T. 306 (Mad.)
3. On behalf of the respondents Shri M.K. Jain, Learned SDR reiterated the findings of the Collector (Appeals). He stated that the goods in question having been exported in terms of the requirements of the Duty Exemption Entitlement Scheme, they have to be deemed as having been exported in bond since no duty was paid on them. He contended that under these circumstances the goods on reimportation were chargeable to duty in terms of clause (c) of the proviso to Section 20(1) of the Act as held by the Collector (Appeals), in support of his submissions he placed reliance on the judgment of the Andhra Pradesh High Court in the case of Barium Chemicals Ltd. v. Union of India reported in 1988 (37) E.L.T. 327.
4. We have examined the records of the case and considered the submissions made on behalf of both sides. The only question that arises for consideration in this case is whether the goods of Indian origin reimported by the appellants due to rejection by foreign buyer would be chargeable to duty in terms of clause (c) of the proviso to Section 20(1) of the Customs Act, as held in the impugned order or they were eligible for clearance without payment of duty in terms of clause (d) of the proviso to Section 20 of the Customs Act as contended by the appellants.
5. It is seen that in the case of Pelisetty Somasundaram (P) Ltd. v. Govt. of India reported in 1984 (17) E.L.T. 306, the Madras High Court has held that if goods exported under Central Excise bond are imported back due to their rejection by foreign buyer because of deterioration in quality, no customs duty would be chargeable on such imports in terms of Section 20(1 )(d) of the Customs Act, 1962 since the expression “where goods are exported in bond” appearing in clause (c) of the proviso to Section 20(1) would cover only the goods exported in Customs bond and not the goods exported in excise bond.
6. From the records of the case it appears that the goods in question were manufactured by the appellants under the Duty Exemption Entitlement Scheme (DEEC) for the purpose of export out of India. It is seen that Notification No. 44/87-Cus., dated 19-2-1987 which exempt goods imported under the DEEC for the manufacture of products for export out of India subject to certain conditions, inter alia, provides for execution by the importer of a bond with the Customs authorities prior to the clearance of the imported materials binding himself to pay on demand an amount equal to the duty leviable but for the exemption on the imported materials in respect of which the conditions specified in the notification are not complied with. In view of this requirement we are of the view that the goods manufactured under the said Scheme have to be deemed as having been manufactured under the customs bond. Hence, in case the appellants had executed the prescribed bond with the Customs authorities prior to the clearance of the imported materials used for the manufacture of the re-imported goods, then on the ratio of the Madras High Court judgment quoted above, duty would be recoverable on goods in terms of clause (c) to the proviso to Section 20(1) of the Act.
7. The judgment in the case of Barium Chemicals Ltd. v. Union of India reported in 1988 (37) E.L.T. 327 relied upon by the SDR is not relevant since it relates to the interpretation of a notification.
8. From the records of the case it is not clear whether the appellants executed any bond in terms of the relevant notification for importation without payment of customs duty any materials for the manufacture of the goods in question under DEEC prior to their export out of India. We therefore, set aside the impugned order and remand the matter to the Assistant Collector for readjudication in accordance with law, having regard to the Madras High Court judgment referred to in this order and also the provisions of the DEEC Scheme. We direct that the appellants should be granted personal hearing.
9. The appeal is, therefore, allowed by way of remand.
