Relief for Godrej Consumer: CESTAT Rules Sending Imported Goods to Job Worker is Not Violation of Target Plus Scheme Condition [Read Order]

The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that sending imported goods to job workers was not in violation of the target plus scheme and granted relief to the appellant.

Godrej Consumer Products Ltd. (Appellant), a manufacturer and exporter of electronic mosquito repellent machines and related products. The appellant had obtained a duty credit certificate under the Target Plus Scheme (an export incentive scheme). The appellant utilized this scrip, governed by Notification No. 73/2006-Cus, to import 'PTC Thermistors'.

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The department's investigation found that the appellant had sent the imported 'PTC thermistors' and other raw materials to M/s. EMOX Device and Company on a job work basis for the manufacture of electronic mosquito repellent machines. The finished goods were then returned to the appellant for testing, repacking, and final export.

The Department issued a Show Cause Notice (SCN) alleging that the appellant, being a manufacturer exporter, had violated the condition of Notification No. 73/2006, which stipulated that the scrip and goods imported against it "shall not be transferred or sold".

The Department argued that the facility to transfer the imported goods to a "supporting manufacturer" was only applicable to merchant exporters whose supporting manufacturer's name was specifically endorsed on the scrip. The SCN proposed to recover a duty of ₹41,24,764, along with interest, and sought to impose a redemption fine and penalty.

The Commissioner (Appeals) upheld the demand and observed that a manufacturer exporter was required to use the imported goods themselves and was "not at all allowed to transfer the goods to others". The appellant approached CESTAST.

The bench comprising M. Ajit Kumar ( Technical Member) and Ajayan T.V. ( Judicial Member), held that a plain reading of the relevant condition (Condition 3 of Notification No. 73/2006) and its provision did not place any embargo on a manufacturer importer utilizing the services of a job worker for manufacturing products using the imported goods.

The tribunal relied on Public Notice No. 113 (RE-2007)/2004-09, which explicitly stated: "Job workers can be used for conversion of imports permitted under the scheme into any possible resultant products". It also noted that the violation only occurs if the imported products are sold to job workers prior to conversion. Since the SCN did not allege the sale of goods to the job worker, the tribunal found no contravention.

The Tribunal relied on a coordinate bench's decision in the case of M/s. Silver Line Plastpack Pvt. Ltd. v. CCE & ST held that "own use" also means "use by utilising the facilities of the job worker" and that the customs notification does not prohibit processing by a job worker.

Respectfully following the precedent and interpreting the notification, the tribunal held that the dispatch of imported goods to the job worker for manufacture was not violative of the condition of the exemption notification.

The tribunal consequently set aside the entire demand of duty, interest, redemption fine, and penalty. The appeal was allowed.

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