2026-VIL-1623-CESTAT-DEL-CU
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CUSTOMS CESTAT Cases

Customs - Advance Authorization scheme, Duty exemption, Export obligation, Physical incorporation of materials, Use of packaging materials, Violation of Notification No. 96/2009-Cus - Appellant imported Vetted Malt Scotch under Advance Authorization for manufacture of Indian Made Foreign Liquor and also procured glass bottles, caps and labels domestically under Annexure-45 under Rule 19(2) of Central Excise Rules 2002. Department alleged violation of condition (viii) of Notification No. 96/2009-Cus dated 11.09.2009 by using both imported duty-free inputs and domestically procured duty-free goods in conjunction and issued Show Cause Notice proposing recovery of customs duty, interest and penalty - Whether the appellant violated the conditions of Advance Authorization notification by using imported inputs under Advance Authorization and domestically procured packaging materials under Annexure-45 in manufacture and export of resultant products - HELD - Advance Authorization specifically requires goods to be physically incorporated in the export product. The definition of Materials in the notification makes a differentiation between goods required for manufacture of resultant product being raw materials, components, intermediates, consumables, catalysts and parts covered under sub-clause (a) and goods used for packaging being packaging materials required for packing of resultant product covered under sub-clause (d) - In the present case, Vetted Malt Scotch was the raw material imported for manufacture of resultant product IMFL and only this material falls under the export obligation condition of the notification. Bottles, caps and labels were packaging materials procured domestically under Annexure-45 and not imported - Since the condition of the notification applies only to materials that are physically incorporated in the resultant product, and packaging materials are not physically incorporated in the product itself, the use of domestically procured packaging materials does not constitute a violation of the Advance Authorization conditions - The decision in R.P. International vs Union of India clarifies that whereas the Duty Free Import Authorization Scheme permits duty free import of inputs required for production of export product, the Advance Authorization allows duty free import of inputs which are physically incorporated in the export product. Consequently, the export of IMFL manufactured using imported Vetted Malt Scotch and domestically procured packaging materials correctly fulfills the export obligation without violating the notification - Impugned Order-in-Original dated 30.08.2019 is set aside - The findings that appellant violated the conditions of Notification No. 96/2009-Cus are liable to be set aside - Appeal is allowed
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