Customs, Excise and Gold Tribunal - Bangalore
Vigiram Chem. Pvt. Ltd. vs Cc on 8 February, 2001
Equivalent citations: 2001(96)ECR542(TRI.-BANGALORE)
ORDER S.S. Sekhon, Member (T)
1. This appeal has been filed by the appellants who are importers and traders of aromatic chemicals and ingredients for cosmetics. These imported items are repacked into smaller containers and thereafter sold. They had claimed exemption on payment of Special Additional Duty of Customs (here-in-after referred to as SAD) as per notification No. 56/98 dated 01.8.1998. The exemption was claimed under serial No. 12 of the table annexed to this notification which read as follows:
All goods falling within the said First Schedule, which are imported for sale as such, other than by way of high seas sale and the importer at the time of importation or at the time of clearances of warehoused goods for home consumption under the provisions of Section 68 of the Customs Act 1962 (No. 52 of 1962), as the case may be, makes a specific declaration to that effect in the bill of entry in the manner specified below:
Provided that the rate specified herein shall not apply if the importer sells the said imported goods from a place located in area where no tax is chargeable on sale or purchase of goods."
DECLARATION I/We hereby declare that the goods of description----------------imported under Bill of Entry No. ----------------dt.----------------are for sales purpose only. I/We also declare that sale of said goods will not be effected from a place located in an area where no tax is chargeable on sale or purchase of goods. In case the said goods are disposed of any manner in contravention of the conditions specified in notification No. 56/98-Customs, dt. 1.8.1998, without prejudice to any other action that may be taken under any law for the time being in force, I/We undertake to pay the special additional duty of Customs of Rs. -which is leviable on these goods, but for exemption contained in the said notification.
2. This exemption was claimed on 14 of the Bills of Entries, which were assessed and cleared during the period from 14.11.1998 to 26.12.1998. Show cause notice was issued on 25.8.1999 by Asst. Collector of Customs, Bangalore. It was reported to him that chemicals cleared under these Bills of Entries had been used as inputs in the manufacture of final products; therefore, it appeared, that the exemption under Customs notification No. 56/98 of SAD on the strength of the declaration on the bills of entry that the particular goods are for sale purpose only and the exemption claimed there has been abused by wilful mis-statement. Therefore, the notice issued under Section 28(1) of the Customs Act 1962 proposed as to why:
(a) duty benefit of an amount of Rs. 7,47,832.00 availed under Customs Notification No. 56/98 should not be demanded under Section 28(1).
(b) Interest at the rate of 20% on the duty amount should not be demanded from the date of clearance under Section 28(AB) and
(c) Penalty under Section 114(A) of the Customs Act, 1962 should not be imposed.
3. The appellant replied vide letter dated 11.10.1999, denying the allegations in the show cause notice and submitting that since their clients had requested benefit of modvat credit in respect of these aromatic chemicals and cosmetic ingradients which are inputs to them, they got them registered and started issuing invoices with effect from 1.7.1999. Due to a levy by virtue of Chapter note 11 in the Central Excise Tariff Act, re-packing, re-labelling, etc. amounting to manufacture and in terms of this artificial definition, they came under the levy of the Central Excise Duty, even though there is no change in the activity undertaken by processing the chemicals. They had paid taxes as well as other local taxes. As no process is undertaken so as to amount to manufacture and the artificial definition of the Central Excise Tariff cannot be borrowed while interpreting the notification under the Customs law, their declaration made on the Bill of Entry in respect of SAD was correct and proper. Therefore, the allegation of wilful mis-statement was not sustainable and the demand for limitation and penalty proposed was not warranted.
4. The Commissioner's office letter dated 10.1.2001 informed them that the show cause notice issued by Asst. Collector would be adjudicated by Commissioner of Customs, Bangalore and accordingly the hearing was granted The Ld. Commissioner after consideration of the memorandum in regard, and submissions made, came to the findings-
It is evident that all the goods falling within the first Schedule of the Customs Tariff Act, which are imported for sale 'as such', and in respect of which the importer, at the time of importation/clearance gives a declaration in the prescribed form, would be fully exempted from special additional Customs duty.
In the present case, M/s VCPL have admitted that the goods are sold only after they are repacked to smaller packs and containers. Further, these packs/containers are relabelled. Therefore, the chemicals which are imported cannot be held to have been cleared 'as such' since the condition in which they were imported is not the same at which they are sold. The word "such" occurring in the notification must be read as referring to the goods being in the same condition as when imported. In other words "such" represents the object which are already particularised in terms which is not mentioned and therefore is a descriptive and a relative word, referring to the last antecedent. M/s. VCPL have admitted to have subjected the goods to the process of repacking and relabelling and therefore the imported goods are not traded, 'as such'. As a result, the exemption flowing from the aforementioned notification would not be eligible.
M/s. VCPL have argued that the Chapter note 11 inserted in Chapter 29 with effect from 1.3.1997, according to which, repacking would amount to manufacture, would not be applicable to them, since their activity has remained to be the same all along and that no process undertaken by them would amount to manufacture in the real sense, since it does not bring into existence any new or different product, having a different name, character and use. I have considered this submission. I have already held in the preceding paragraph that the impugned goods not having been traded "as such" would not be entitled to the exemption of special additional Customs duty. The amendment to the Central Excise Tariff Act, 1985 with effect from 1.3.1997 by insertion of Chapter note 11 to Chapter 29 is of no direct consequence to the facts of the present case. However the fact remains that in the context of the amended provisions of Chapter 29 of CETA, 1985 with effect from 1.3.1997, the activity of repacking and relabelling would not amount to trading 'as such', since the definition under Section 2(0 CESA is not confined to the natural meaning of the word 'manufacture' but is an expansive definition. Certain processes, which may not have otherwise amounted to manufacture, are also brought within its purview, by the Parliament. Not only processes which are incidental and ancillary to the completion of manufacture of a product, but also those processes, as are specified in relation to any goods in the Section/Chapter notes of the Schedule to CET Act, 1985 are also brought within the ambit of the definition...The question whether a particular process does or does not amount to 'manufacture' is always a question of the fact to be determined in the facts of a given case. Therefore, in the facts and circumstances of the present case, repacking, relabelling and renaming does, amount to manufacture. As a result M/s. VCPL will not be entitled to the exemption of SAD. It is not correct on the part of the learned Advocate to have categorised the amendment of Chapter 29 to CETA, 1985, with effect from 1.3.1997 as an 'artificial'. Any amendment to any statute brought about by the Parliament cannot be termed as an artificial definition. As already stated, the amended provision of Chapter 29 have not been considered while determining the eligibility of the exemption from SAD. In fact, what is now highlighted is that, even in the event, that the provisions of CETA, 1985, pertaining to Chapter 29 are applied to the facts of the present case, then also they would not be entitled for the exemption from SAD. In terms of notification No. 56/98-Customs dt. 1.8.1998, the basic requirement for claiming the exemption under the said notification is that the imported goods are sold "as such" (emphasis is applied). It is apparent from the facts of the case that the importer in this case undertakes certain processes like repacking and relabelling before sale of the imported goods. What is important in this case is not whether the said processes amount to manufacture but whether because of these processes, the imported goods can be considered to have sold as such. As already stated earlier, the imported goods are not sold as such as they are subjected to clearly identifiable and distinct processes like repacking and relabelling.
I have perused the case law referred to by the learned Advocate. In the judgement the High Court in the case of Lipton India Ltd. v. State of Karnataka reported in 1994 (95) STC 225, referred to by the learned Advocate, the Hon'ble High Court of Karnataka had held that what is 'manufacture' under the Central Excise Act cannot be extended to the Karnataka Sales Tax, also. Relying on this judgement, the learned Advocate has argued that the provisions of the Central Excise Act and the legal fiction introduced cannot be made use of to levy Customs duty under the provisions of Customs Act, by interpreting the word "manufacture. I have considered this submission. In the show cause notice, there is no mention at all, regarding the provisions of the amended CETA, 1985 pertaining to Chapter 29, being made use of in alleging that the activity undertaken by M/s. VCPL amounted to 'manufacture'. What is alleged, is that the imported chemicals have been used as inputs by M/s. VCPL in the manufacture of final product. Therefore, there is no substance in the contention put forth that the legal fiction introduced in Chapter note 11 under Chapter 29 had been extended to the matters coming under the Customs Act, 1962. Hence this contention is not tenable and merits rejection.
I have also perused the other case laws submitted by the learned Advocate. I notice that none of these judgements in any way justify or further the case, on behalf of M/s. VCPL. In fact, these judgements do not exactly touch upon the issues involved in the present proceedings and hence are considered as not relevant to these proceedings.
Thereafter, he passed the impugned order, confirming the payment of duty by denying benefit of notification imposed penalty and interest under Customs Act 1968.
5. The appeal was heard on 29.1.2001, when Ld. Advocate Sh. M. S. Srinivas along with Sh. G.K.V. Murthy, Advocate appeared for them and Smt. Radha Arun, SDR appeared for Respondent. We have considered the submissions made and the case law relied by the appellants, and after considering the same we find:
(a) The argument of the appellants that the Ld. Commissioner ought to have held that the entire payment was time barred. From the impugned order before us, we do not find the Commissioner to have considered this submission, about the plea made on limitation. The law of limitation as provided under Section 28(1) of the Customs Act prescribes-
Short levy of duty the appropriate Officer from this relevant duty may serve notice from the charged duty or interest does not levy or charged and the relevant date in this case would be a date on which the order for clearance on the Bill of Entry was made. This period can be extended if the short levy was not result of a reason of any wilful mis-statement or implies 6 months period would be extendable to 5 years. In the present case the notice has been issued that the exemption notification was abused by wilful mis-statement. Therefore, it was imperative on the part of the Commissioner to have determined the mis-statement to have taken place. Absence of the same would render the order to be bad.
(b) The appellants have time and again submitted that they have not been told as to what are the inputs and what are the final products, and a copy of the report allegedly received by the Asst. Collector has not been supplied to them. The notice issued by the Asst. Collector, therefore, relying on a report received by him and proceedings consequent would be in contravention of principles of natural justice. A copy of this report on which the charge of the imported chemicals having been used as inputs in the manufacture of final product should be supplied to the appellants, so that they can effectively rebute the contention. In the view of this matter, we would set aside the present determination of the payment of duty, penalty and remand the matter back to the adjudicating authority for taking a decision after putting the appellants to a proper notice, by disclosing the contents of alleged report received by the Department.
(c) The appellants had taken various legal submissions before us viz. the interpretation of definition of 'manufacture' mentioned in the Central Excise Law, cannot be read in to interpretation of the Customs Notification; that the order has travelled beyond the show cause notice and also that the alleged activity does not amount to manufacture. Since no the order and remanding the matter back to the adjudicating authority for de novo decision. We refrain from giving any findings on the other issues; we leave them open for the appellant to argue before the adjudicating authority who should consider all the submissions made and arrive a findings thereon.
6. In view of the findings, this order in original is set aside and appeal is allowed by remand for de novo adjudication ordered accordingly.