Custom, Excise & Service Tax Tribunal
M/S. Srf Polymers Ltd vs Commissioner Of Customs, (Export), ... on 27 September, 2017
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
C/224/2007
(Arising out of Order-in-Appeal C. Cus. No. 156/2007 dated 12.3.2007 passed by the Commissioner of Customs (Appeals), Chennai)
M/s. SRF Polymers Ltd. Appellant
Vs.
Commissioner of Customs, (Export), Chennai Respondent
Appearance Shri C. Saravanan, Advocate for the Appellant Shri A. Cletus, Addl. Commissioner (AR) for the Respondent CORAM Honble Ms. Sulekha Beevi C.S., Member (Judicial) Honble Shri Madhu Mohan Damodhar, Member (Technical) Date of Hearing : 18.09.2017 Date of Pronouncement: 27.09.2017 Final Order No. 42204 / 2017 Per Bench The brief facts of the case are that the appellants imported 51 consignments of Nylon filament yarn under various Bills of Entry claiming concession of Additional Duty of Customs (ADC) equal to Central Excise Duty (CVD) @ 8% available under Sl. No. 5 A of Central Excise Notification No. 29/2004-CE dated 09.07.2004, as amended. The Department took the view that the imported goods do not satisfy the conditionalities of the said notification and hence the concessional rate of duty would not be available to them. Accordingly, a SCN was issued in terms of Section 28 of the Customs Act, 1962, proposing demand of differential duty of customs amounting to Rs. 34,60,822/- along with interest liability thereon, which was confirmed by the original authority vide order dated 14.11.2005. The Commissioner (Appeals) vide an order dated 10.04.2006 dismissed the appeal under Section 129 E of the Customs Act, 1962, filed by the appellants for non-compliance of Interim Order directing payment of pre-deposit. On further appeal before the Tribunal, by Final Order No. 869/2006 dated 13.09.2006, Tribunal remanded the matter back for denovo consideration by the Commissioner (Appeals) on merits. In the denovo proceedings the Commissioner (Appeals) vide the impugned order dated 12.03.2007 held that the appellants are not eligible for the benefit of Notification No. 29/2004-CE, hence, upheld the order of the lower authority. Aggrieved, appellants are once again before this forum.
2.1 Appellant challenging the OIA dt. 12.03.2007 submits that the appellant imported Nylon Filament Yarn to manufacture yarn in India through a manufacturer who had facility to do so since appellant did not have such facility. In such circumstance, Notification No.29/04-CE dt. 9.7.2004 as amended by Notification No.10/05-CE dt.1.3.2005 governed its imports in terms of Sl.No.5A of the Table appended to the notification which reads as under:
Table S.No. Chapter of heading No. Description of goods Rate under the First Schedule (1) (2) (3) (4) . . .
5A 54 All Filament yarn procured from 8% outside and subjected to any process by a manufacturer who does not have the facilities in his factory (including plant and equipment)for the manufacture of filament yarns of chapter 54. Explanation.- For the purpose of this exemption, 'manufacture of yarns' means manufacture of filaments of organic polymers produced by, - (a) polymerization of organic monomers, such as polyamides, polyesters, polyurethenes, or polyvinyul derivatives; or (b)chemical transformation of natural organic polymers (cellulose, casein, proteins or algae), such as viscose rayon, cellulose acetate, cupro or alginates.
2.2 Placing reliance on the notification, it is the submission on behalf of the appellant that condition of the notification having been fulfilled, it is entitled to the concessional rate of additional duty of customs @ 8% instead of normal rate of such duty payable.
2.3 The goods, namely filament yarns have been imported. The definition of import as per Section 2 (23) of the Customs Act, 1962 is as under:-
import, with its grammatical variations and cognate expressions, means bringing into India from a place outside India The goods imported by them are therefore satisfies the first condition of the said notification No. 29/04, that the impugned goods have been procured from outside India.
2.4 Appellants contend that they are principal manufacturers, that they import nylon yarn and directly supply it to job workers to get the same converted into Nylon Fish Net Twine (in short twine) and that after receiving the twine from the job workers are subjected to the process of inspection, segregation and repacking for sale to manufacturers of fish net. It is argued that the process of conversion of filament yarn into twine by the job workers exemplifies the fact that they do not have the facilities for such conversion in their factory. This satisfies the second condition of the said notification No. 29/2004-CE.
2.5 The manufacture of twine has therefore been cast to be done not by themselves but at the job workers end. Pursuant to such conversion, they have subjected the twine to processes of inspection, testing, segregation, packing etc. Thus all the conditions precedent for availment of concessional rate of duty extended under notification No. 29/2004-CE are satisfied and hence the benefit thereof will translate to them require to pay additional duty of customs @ 8% only.
3. To the above submission of appellant, Revenue's objection is that ld. Commissioner (Appeals) having examined the condition prescribed in the notification thoroughly held that the appellant did not fulfill the conditions of the notification for which it is not entitled to the grant thereof. The authority has properly understood that the notification was issued under Central Excise law and the goods manufactured in a factory not belonging to the manufacturer-appellant, is liable to excise duty @ 8%. Such concessional rate of duty prescribed by the notification is not available to the importer who has not subjected its imported goods to "manufacture". Ld. Commissioner (Appeals) has therefore correctly recorded in para-11 of his order that benefit is only available in respect of the manufactured goods but not the raw material imported. The grant of benefit of the notification having confined its scope to central excise duty, appellant is absurdly praying for extending the concession to the additional duty of customs.
4.1 We have gone through the facts and submissions of both sides.
4.2 The issue that has come up for decision is whether the goods imported by the appellants will fall under the beneficial impact of Central Excise exemption Notification No. 29/04-CE, Sl.No. 5A for the purpose of discharging additional duty of customs (CVD).
4.3 In the first place, it would be useful to appreciate the scope of additional duty of customs which is the subject matter of controversy in this appeal. The mandate for additional duty of customs on imported goods is enshrined under Section 3 of the Act, as follows:-
SECTION 3.?Levy of additional duty equal to excise duty, sales tax, local taxes and other charges. (1) Any article which is imported into India shall, in addition, 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 that in case of any alcoholic liquor for human consumption imported into India, the Central Government may, by notification in the Official Gazette, specify the rate of additional duty having regard to the excise duty for the time being leviable on a like alcoholic liquor produced or manufactured in different States or, if a like alcoholic liquor is not produced or manufactured in any State, then, having regard to the excise duty which would be leviable for the time being in different States on the class or description of alcoholic liquor to which such imported alcoholic liquor belongs. The important takeaway from the above statutory provisions is that the additional duty of customs is levied equal to the excise duty leviable to like articles if produced/manufactured in India. The duties of customs are levied at rates as specified in the Customs Tariff Act, 1975.
4.4 Additional duty of customs, also known as countervailing duty (CVD) is imposed to provide a level playing field for the indigenous goods who have to bear the brunt of local taxes, in particular central excise duty levied on manufacture of identical goods in India. Also, goods imported into India in most cases benefit from export incentives like duty drawback in the concerned country of export. The important factum, however, is that the additional duty of customs has to be equal to the excise duty for the time being leviable.
4.5 With this understanding, we shall take up the Notification 29/2004-CE, Sl.No. 5A. As seen from the relevant portion reproduced under para-2 as above, the said notification emphasizes the following conditionalities for eligibility:-
(i) The input filament yarn should be procured from outside.
(ii) Yarns so procured should be subjected to any process by the manufacturer
(iii) Such manufacturer does not have the facility (for manufacture of filament yarn of chapter 54)
(iv) The resultant goods emerging out of the process so subjected to will also fall under Chapter 54.
4.6 With regard to the requirement that the filament yarn should be procured from outside, neither the said notification nor the Central Excise Act or Rules define the words procured from outside. This being so, the commonly understood connotation of the word, in its most literal sense, will require to be adopted and understood accordingly. There is no requirement in the notification that filament yarn should be procured from outside and only from any other manufacturer within India or for that matter, that it should be procured from outside, but not from outside India. In the event, in our opinion, the impugned goods which have been imported, satisfy the requirement of having been procured from outside.
4.7 Coming to the other requirements of the exemption notification, the 8% reduced rate of central excise duty is extended only to yarns which have been subjected to a process by a manufacturer who himself does not have the facility for manufacture of filament yarns of Chapter 54. Hence the requirement for the input filament yarn to be procured from outside. Further, the process to which such input filament yarn is subjected to will not take out the final product out of the Chapter Heading 54. What is manufacture of yarns for the purposes of Notification is explained in (a) and (b) of Explanation thereto.
4.8 Evidently, therefore the reduced rate of central excise duty of 8% is to such yarn which has undergone any process referred to in the S. No. 54 of the Notification.
4.9 Discernably, the filament yarn procured from outside will not be available to the manufacturer at a reduced rate of central excise duty, but only the resultant product manufactured using such input filament yarn will be eligible for notification benefit.
4.10 By implication, the manufacturer of the input filament yarn, who clears and sells such yarn to the manufacturer availing of Entry 5A of the notification also will not be eligible to avail of the 8% duty liability extended therein.
4.11 In the instant case, the imported nylon filament yarn is being used as an input by the importer, in their own factory for subjecting to some process. This being so, it is only the resultant of the imported yarn after such processing in the factory, provided further that such resultant goods also fall under Chapter 54, that will attract the benefit of reduced 8% duty liability under Entry 5A of the Notification.
4.12 Additional duty of customs on the imported will necessarily be on par with the excise duty leviable on a like article produced / manufactured in India. This being so, the additional duty of customs will be equal to the central excise duty liability in respect of the input filament yarn manufactured and cleared to the manufacturer availing Entry 5A. We are therefore of the considered opinion that filament yarn imported by the appellant will have to necessarily pay the additional duty of customs equal to the merit rate of central excise duty, and not, the reduced rate of excise duty extended vide notificationNo.29/2004-CE as amended.
4.13 In arriving at the conclusion, we draw sustenance on the ratio laid down by the Honble Supreme Court in the case of Thermax Pvt. Ltd. Vs. Collector of Customs 1992 (61) ELT 352 (S.C), held that CVD will be equal to excise duty for the time being leviable on a like article if produced or manufacture in India. The Honble Apex Court went on to further observe that we have to forget that the goods are imported and imagine that the importer had manufactured the goods in India and determine the amount of excise duty that he would have been called to pay in that event.
4.14 The Honble Supreme Court in the case of Hyderabad Industries Vs. Union of India (supra), while following the ratio laid down in their earlier judgment in the case of Thermax Private Limited (supra) inter alia held as follows:-
.. 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. 4.15 In the case of M/s. Vareli Weaves Pvt. Ltd. Vs. UOI - 1996 (83) E.L.T. 255 (S.C.), Honble Court unequivocally held that the countervailing duty must be levied only in the state in which they are when imported. The relevant portion of the judgment is reproduced as under:-
6.?Countervailing duty must be levied on goods in the state in which they are when they are imported. Section 3 of the Customs Tariff Act so mandates. The POY imported by the appellants fell in the slot of 100 deniers and above but not above 750 deniers. It was, therefore, liable to that rate of countervailing duty as was provided for in the said clause (iv) of the exemption notification. There was no warrant for the levy of countervailing duty as provided for in the said clause (iii) upon the basis that, subsequent to the process of texturizing the POY that was imported would have the denierage therein stated. 4.16 We find that the above ratio has been reiterated by the Honble Apex Court in subsequent judgments like AIDEK Tourism Services Pvt. Ltd. Vs. Commissioner of Customs, New Delhi 2015 (318) ELT 3 (SC) and in the case of UOI Vs. ENGEE Industrial Serviced Co. Ltd. 2016 (335) ELT 197 (S.C).
4.17 In the case of the present appellants themselves, the Honble Apex Court in the case of SRF Ltd Vs. CC, Chennai followed the ratio earlier laid down in Hyderabad Industries Ltd. and Thermax judgments and held that for additional duty, actual manufacture or production of a like article was not necessary and for that quantification of additional duty imported article has to be imagined as to be manufactured or produced in India and then to see what excise duty was leviable there on.
5. In the light of the discussions herein above and also respectfully following the ratio laid down by the Honble Apex Court in the judgments cited supra, we do not find merit in the appeal.
6. In the result, the impugned order is upheld and the appeal is dismissed.
(Pronounced in open court on 27.09.2017) (Madhu Mohan Damodhar) (Sulekha Beevi C.S.) Member (Technical) Member (Judicial) Rex 11