Order Date – 06 June 2023 

Parties: M/s.Xomox Sanmar Ltd. Vs The Director General of Foreign Trade DES I Section, The Additional Director General of Foriegn Trade 

Facts –  

• The Petitioner, M/s.Xomox Sanmar Ltd., engaged in the manufacture of industrial valves and clears the final products both domestically as well as to the export market.  
• The petitioner had received a purchase order from M/s. Thyssenkrupp which was to be affected to Anrak Aluminium, a unit in a Special Economic Zone in Vizag and since Thyssenkrupp had an advance authorisation from the Customs Department, the import was made by the petitioner without payment of customs duty on 17.01.2011. 
• R1 sought details from the petitioner in regard to the operational/manufacturing activities that it carried out and the details submitted by the appellant was rejected, being of the view that the items imported and ultimately exported were one and the same and there was no manufacturing activity involved that brought into existence a new product with a distinctive identity and name. 

Issue –  

• Whether the petitioner is required to pay customs duty on import made to a SEZ Unit? 

Order –  

• The Single Bench of Hon’ble High Court observed that the Foreign Trade Policy for the period 27.08.2009 to 31.03.2014 as relevant to the petitioner’s case, in Chapter 8 deals with ‘Deemed Exports’. Clause 8.2 sets out various categories of supply in clauses (a) to (j). The supply in the present case would fall under a permissible category being supply to an export-oriented unit, provided that the goods supplied have been manufactured in India. 
• By including processes such as refrigeration, re-packing, polishing, labelling, re-conditioning repair, remaking, refurbishing, testing, calibration and re-engineering within the ambit of manufacture itself, the legislature clearly intended an expansive understanding of what constituted ‘manufacture’ for the purposes of ‘deemed export’. 
• Is not necessary in all cases that the end product must be unrecognisable from the inputs that constitute it as long as the processes carried out would satisfy the statutory definition of ‘manufacture’, and the present case is an illustration in point. 
• One approach is to state that even without such procurement and additions to the imported valves, the processes of testing of the valves prior to final supply would suffice to satisfy the definition of manufacture under Clause 9.36 of the Exim Policy. 
• Hence, the impugned order is set aside and the matter remanded to the file of Respondent 1, to be decided afresh and in line with the discussion in this order after ascertaining if the petitioner has in fact, made any additions to the imported valves by procurement of indigenous products.