M/S.
Lohia Sheet Products Vs. Commissioner of Customs, New Delhi [2008] INSC 378 (5 March 2008)
ASHOK BHAN & J.M. PANCHAL CIVIL APPEAL NO.2411 OF 2002 W I T H CIVIL APPEAL NO.2416 OF 2002 M/s. Lohia
Brass (P) Ltd. .....Appellant Versus Commissioner of Customs, New Delhi
.....Respondent ASHOK BHAN, J.
1. The appellants have filed these appeals under Section 130-E of the Customs Act, 1962
against the Final Order No.547-548 of 2001-B dated 11th December 2001 passed by
the Customs, Excise & Gold (Control) Appellate Tribunal [for short, 'the
Tribunal'], New Delhi whereby the Tribunal has rejected the appeals filed by
the appellants and held that the appellants had not satisfied the conditions for
availing the benefit of the Notification No.8/96-CE dated 23rd July 1996 on the
ground that the copper waste and scrap used by the appellants had been imported
and had not been generated in the factory of production.
C.A.No.2411/02 .... (contd.) - 2 -
2. The issue involved in these appeals is as to whether the scrap imported
by the appellants is chargeable to 'NIL' rate of additional customs duty under
Section 3 of the Customs
Tariff Act 1975.
3. The facts of the case, in brief, are enumerated hereinbelow.
4. In the year 1996-97, the appellants imported copper/brass waste and scrap
for use in the manufacture of handicrafts and filed bills of entry and claimed
benefit under Exemption Notification No.8/96-CE dated 23rd July 1996. In order
to avoid unnecessary delay and demurrage, the appellants paid the duty under
protest and filed refund claim before the Asst. Commissioner, ICD, Tughlakabad.
5. Department questioned the refund claim of the appellants by issuing
notice dated 10th September 1998 to show cause as to why their refund claim be
not rejected as the Tariff Heading 7404.10 would be applicable to the waste
which was generated during the process of production only in the factory and
then used in the same factory of production for the manufacture of unrefined or
unwrought copper, copper sheets or circles and handicrafts and hence, the
imported goods fall outside the purview of exemption under Central Excise
Tariff Heading 7404.10. Despite the opportunity of personal hearing having been
given to the appellants, no one appeared before the Asstt.
C.A.No.2411/02 .... (contd.) - 3 - Commissioner (Refund) who, having gone
through the record and the facts of the case rejected the claim of the
appellants by an order dated 15th October 1998 by observing thus :
".....The tariff heading 7404.10 exempts waste and scraps which is
generated during the process of production in the factory and then used in the
same factory of production for the manufacture of unrefined or unwrought
copper, copper sheets or circles and handicraft. Therefore, there is no
substance and legal force in the claimant's contention that the brass/copper
scrap imported by them is covered under Chapter Heading 7404.10 and is exempted
from payment of CVD. Hence, the duty has been charged and paid correctly in the
case under reference and there is no question of incidence of any refund. The
refund claim therefore merits rejection."
6. This finding arrived at in the order in original was confirmed by the
Commissioner of Customs (Appeals) by an order dated 13th June 2001. Being
aggrieved, the appellants filed appeal before the Tribunal which has been
dismissed by the impugned order, holding that the condition of the notification
of the Tariff Heading 7404.10 had not been satisfied by the appellants as the
copper waste and scrap had been imported by the appellants from foreign country
and the same had not been generated in the factory of the appellants. Hence,
this appeal.
7. Relevant portion of Section 3 of the Customs Tariff Act
1975 provides as under :
"3. Levy of additional duty equal to excise duty.-(1) Any article which
is imported into India shall, in addition, C.A.No.2411/02 .... (contd.) - 4 -
be liable to a duty (hereafter in this section referred to as the additional
duty) equal to the excise duty for the time being leviable on a like article if
produced or manufactured in India and if such excise duty on a like article is
leviable at any percentage of its value, the additional duty to which the
imported article shall be so liable shall be calculated at that percentage of
the value of the imported article.
Provided ... ... ...
Explanation.- In this section, the expression "the excise duty for the
time being leviable on a like article if produced or manufactured in
India" means the excise duty for the time being in force which would be
leviable on a like article if produced or manufactured in India, or, if a like article
is not so produced or manufactured, which would be leviable on the class or
description of articles to which the imported article belongs, and where such
duty is leviable at different rates, the highest duty."
8. In exercise of the powers conferred by sub-section (1) of Section 5A of
the Central Excise Act 1944, the Central Government, in public interest,
exempted goods specified in column (3) of the Table annexed to the notification
and falling within the Chapter, Heading No. or sub-heading No. of the Schedule
to the Central
Excise Tariff Act, 1985, specified in the corresponding entry in column (2)
of the said Table, from so much of the duty of excise leviable thereon which is
specified in the said Schedule, as is in excess of the amount calculated at the
rate specified in the corresponding entry in column (4) of the said Table,
subject to the conditions, if any, laid down in the corresponding entry in
column (5) thereof or as mentioned in the said column (5) and specified below
the said Table. Entry 74.04 in the said Table reads thus :
C.A.No.2411/02 .... (contd.) - 5 - "Refe- Chapter Description of goods
Rate rence Heading No. No. or Sub- heading No.
(1) (2) (3) (4) 74.04 Copper waste and scrap used Nil within the factory of
production for the manufacture of unrefined or unwrought copper, copper sheets
or circles and handicrafts."
9. Authorities below and the Tribunal have denied the relief to the
appellants holding that the exemption notification is not applicable to the
appellants.
10. Counsel for the appellants has contended that mere fact that the goods
were imported would not make any difference; that the intention of the
Legislature was to grant exemption under the notification so as to prevent duty
being paid at two stages. In the present case, as the appellants have paid an
amount equivalent to the excise duty at the time of import of the waste and
scrap, they could not be asked to pay the countervailing duty; that if the benefit
of the notification is not given to the appellants, it would mean double
payment of duty which goes contrary to the law laid down by a Constitution
Bench decision of this Court in the case of Hyderabad Industries Ltd. v. Union
of India 1999(108) ELT 321 (SC). According to the counsel for the appellants
the Tribunal committed an error in restricting C.A.No.2411/02 .... (contd.) - 6
- the scope of the impugned notification to the copper/brass waste generated in
the factory of production for the manufacture of unrefined or unwrought copper,
copper sheets or circles and handicrafts and thereby rejecting the appellants'
claim for refund simply because they had imported the said waste/scrap and then
used it within the factory of production for the manufacture of final product.
11. As against this, counsel for the respondent contended that the phrase,
'within the factory of production' pre-supposes that only that waste and scrap
is exempted from payment of duty which is generated and then used within the
factory of production and since in the present case the waste and/or scrap had
been imported from abroad, it cannot be said that it is being used in the
factory of production.
12. Counsel for the parties have been heard.
13. Admitted facts are that the appellants had imported copper/brass waste
and/or scrap.
They had used the imported waste and scrap in the manufacture of
handicrafts; had paid duty on the imported copper waste and scrap. The only
dispute is whether they are required to pay countervailing duty under Section
3(1) of the Customs
Tariff Act.
14. The explanation to the sub-section (1) of Section 3 clarifies the
expression, "the excise duty for the time being leviable on a like article
if produced or manufactured in India"
C.A.No.2411/02 .... (contd.) - 7 - used in the said Section that excise duty
which would be leviable on a like article if produced or manufactured in India.
It further clarifies that if a like article is not so produced or manufactured
which in turn clarifies that for the purpose of levy of additional duty actual
production or manufacture of like article is not necessary.
15. Entry 74.04 can be divided into three parts, viz., (i) copper waste and
scrap; (ii) used within the factory of production; and (iii) for the
manufacture of unrefined or unwrought copper, copper sheets or circles and
handicrafts. The sum and substance of the entry, in our opinion, is that if a
manufacturer uses copper waste and scrap within the factory of production for
the manufacture of unrefined or unwrought copper, copper sheets or circles and
handicrafts, then it would be entitled to the exemption under the impugned
notification. In the present case, the appellants satisfy all the three conditions
as they had used the copper/brass waste and/or scrap within the factory of
production, and for the manufacture of handicrafts. The entry nowhere uses the
word 'generated' or 'imported'.
The condition that only that scrap would be entitled to exemption which has
been generated in the factory of production is, therefore, unwarranted and
unsustainable. The word, 'within' occurs after the word, 'used'. The assessing
authority as well as the Tribunal have arrived at the finding C.A.No.2411/02
.... (contd.) - 8 - that only that scrap/waste of copper would be entitled to
the exemption which had been generated in the same factory because of the word,
'within' used in the heading 74.04.
According to them, the word, 'within' pre-supposes that the copper waste and
scrap was generated in the same factory. We are unable to read the entry in the
manner as suggested by the Revenue.
16. The test laid down by the Tribunal that the benefit of the
notification/tariff heading would be admissible to only that copper waste and
scrap which is generated in the factory of production and not the imported
waste and scrap, is not supported either by the text of the exemption
notification, heading 74.04 or any other authority.
17. This Court in the case of Thermax Pvt. Ltd. v. Commissioner of Customs
1992 (61) ELT 352 (SC) has held that since the concession under Rule 192 turns
only on the nature and use to which the goods are put by the user or purchaser
thereof and whether he has gone through the procedure outlined in Chapter X, it
would not be correct to deny it to a supplier of such goods on the ground that
he was an importer and not a manufacturer.
In other words, this Court stated in specific terms that one has to forget
that the goods are imported, imagine that the importer had manufactured the
goods in India, determine the amount of excise duty that he would have been
called upon to pay in that event. The decision of the Tribunal C.A.No.2411/02
.... (contd.) - 9 - that the assessee could not get a refund because the
procedure of Chapter X of the Rules is inapplicable to importers as such was
held to be wrong. It was further held that the benefit of the exemption or
concession should be granted wherever the intended use of the material can be
established by the importer or by other evidence. In the present case, it is a
matter of fact that duty was paid by the appellant at the time of import of
waste or scrap. Mere fact that the goods were imported would not make any
difference. The intention behind the grant of exemption under the notification
was to prevent the duty being paid at two stages. In the present case, an
amount equivalent to the excise duty had been paid by the appellants at the
time of import on the waste and scrap. If the benefit of the notification is
not given to the appellants it would mean double payment of duty which goes
contrary to the law laid down by the decision of the Constitution Bench of this
Court in the case of Hyderabad Industries Ltd. (supra). This Court in the said
judgment held as under :
"10. Section 3(1) of the Customs Tariff
Act, 1975 provides for levy of an additional duty. The duty is, in other
words, in addition to the customs duty leviable under Section 12 of the Customs Act
read with Section 2 of the Customs Tariff Act.
Secondly this duty is leviable at a rate equal to the excise duty for the time
being leviable on a like article to the one which is imported if produced or
manufactured in India. The explanation to this sub-section expands the meaning
of the expression "the excise duty for the time being leviable on a like
article if produced or manufactured in India". The explanation to Section
3 has two limbs. The C.A.No.2411/02 .... (contd.) - 10 - first limb clarifies
that the duty chargeable under sub-section (1) would be the excise duty for the
time being leviable on a like article if produced or manufactured in India. The
condition precedent for levy of additional duty thus contemplated by the
explanation is that the article is produced or manufactured in India. The second
limb to the explanation deals with a situation where "a like article is
not so produced or manufactured". The use of the word "so"
implies that the production or manufacture referred to in the second limb is
relatable to the use of that expression in the first limb which is of a like
article being produced of (sic) manufactured in India.
11. The words "if produced or manufactured in India" does not mean
that the like article should be actually produced or manufactured in India. As
per the explanation if an imported article is one which has been manufactured
or produced then it must be presumed, for the purpose of Section 3(1), that
such article can likewise be manufactured or produced in India. For the purpose
of attracting additional duty under Section 3 on the import of a manufactured
or produced article the actual manufacture or production of a like article in
India is not necessary. As observed by this Court in Thermax Private Limited v.
Collector of Customs, Bombay [1992(61) E.L.T. 352 (S.C.) = [1992] 4 SCC 440]
at page 452-453 that Section 3(1) of the Customs Tariff Act
"specifically mandates that the CVD will be equal to the excise duty for
the time being leviable on a like article if produced or manufactured in India.
In other words, we have to forget that the goods are imported, imagine that the
importer had manufactured the goods in India and determine the amount of excise
duty that he would have been called upon to pay in that event." To our
mind the genesis of Section 3(1) of Customs Tariff Act
has been brought out in the aforesaid observations of this Court, namely, for
the purpose of saying what amount, if any, of additional duty is leviable under
Section 3(1) of the Customs Tariff Act,
it has to be imagined that the articles imported had been manufactured or
produced in India and then to see what amount of excise duty was leviable
thereon."
18. For the reasons stated above, we accept these appeals, C.A.No.2411/02
.... (contd.) - 11 - set aside the order of the Tribunal as well as that of the
authorities below and it is held that the appellants would be entitled to the
benefit of the exemption notification no.8/96- CE dated 23th July 1996 and
consequently to the refund of the duty already paid in accordance with law.
No costs.
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