CESTAT Kolkata Sets Aside Interest Demand On Dalmia Cement's Capital Goods Imported Under MOOWR Scheme

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside the interest demand raised against Dalmia Cement (Bharat) Ltd. on customs duty paid while clearing imported capital goods from its bonded warehouse.

The tribunal held that interest could not be demanded merely because the goods were cleared for home consumption without being put to use, where they had been imported with the intention of being used in manufacturing.

Relying on Supreme Court precedents, the tribunal held that the expression "for use" has consistently been interpreted to mean "intended for use" rather than actual use.

A single-member bench of Judicial Member, R. Muralidhar, therefore, allowed the company's appeal

Dalmia Cement, which manufactures clinker and cement, had obtained a licence to operate a bonded manufacturing warehouse under the Manufacture and Other Operations in Warehouse Regulations (MOOWR) Scheme. In January 2023, it imported a cooler gearbox from Germany and warehoused it without payment of customs duty. T

The company later decided not to install the gearbox because of operational and commercial considerations and instead cleared it for home consumption. While it paid the deferred customs duty of about ₹12.89 lakh, customs authorities also recovered interest of ₹43,898. Its appeal before the Commissioner (Appeals) was dismissed.

Before the tribunal, Dalmia argued that the law requires only that capital goods be "intended for use" in a warehouse where manufacturing operations are permitted and does not require their actual use before ex-bond clearance.

Dalmia also relied on CBIC's October 2020 FAQ, which clarifies that capital goods imported under the MOOWR Scheme can be cleared for home consumption on payment of duty without interest. It further cited the Delhi Bench's ruling in Commissioner of Customs (Preventive), Jaipur v. ACME Aklera Power Technology Pvt. Ltd., where the tribunal had taken a similar view.

The Revenue, on the other hand, argued that interest was payable because the gearbox had never been used in the bonded warehouse before it was cleared for home consumption. It relied on Paragraph 12 of CBIC Circular No. 34/2019-Customs in support of its case.

Referring to the Supreme Court's rulings in State of Haryana v. Dalmia Dadri Cement Ltd., Steel Authority of India Ltd., and BPL Display Devices Ltd., along with the Delhi Bench's decision in ACME Aklera, the tribunal held that the expression "for use" has consistently been interpreted to mean "intended for use" rather than actual use.

Since the revenue had never disputed that the imported gearbox was intended for use, the tribunal held that the interest demand was legally unsustainable.

For Appellant: Advocates Sreeja Chakraborty and Mr. Deepro Sen,

For Respondent: A.K. Choudhary, Authorized Representative