Custom, Excise & Service Tax Tribunal
Pepsico India Holdings Pvt Limited vs Tuticorin on 29 October, 2020
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT NO. III
Customs Appeal No. 40891 of 2018
(Arising out of Order-in-Appeal No. 55/2017-TTN(CUS) dated 27.12.2017 passed by the
Commissioner of Customs & Central Excise (Appeals), No. 1, Williams Road,
Cantonment, Tiruchirappalli - 620 001)
M/s. Pepsico India Holdings Pvt. Ltd., : Appellant
Level 3-6, Pioneer Square, Sector-62,
Near Golf Course Extension Road,
Gurgaon - 122 101
VERSUS
The Commissioner of Customs, : Respondent
Custom House,
Tuticorin - 628 004
APPEARANCE:
Shri B.L. Narasimhan, Advocate for the Appellant
Shri M. Jagan Babu, Authorized Representative (A.R.) for the Respondent
CORAM:
HON'BLE MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL)
HON'BLE MR. P. ANJANI KUMAR, MEMBER (TECHNICAL)
FINAL ORDER NO. 40831 / 2020
DATE OF HEARING: 26.10.2020
DATE OF DECISION: 29.10.2020
Order Per : Hon'ble Ms. Sulekha Beevi C.S.
Brief facts are that the appellant imported oats in
bulk packs of 25 kilograms from Australia. These bulk
packs were re-packed into smaller retail packs after
fumigation and resold in the domestic market. The
appellant then applied for refund of the 4% SAD paid at
the time of clearance of the imported oats. The refund
claims were filed under Notification No. 102/2007-Cus.
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dated 14.09.2007. Subsequently, vide letter dated
21.10.2016, the appellant intimated the Department that
claims to the tune of Rs. 4,43,589/- relating to Oats Plus
and Flavoured Oats were inadvertently included in the
refund claim by the appellant and requested the
Department to exclude the same while sanctioning
refund.
1.2 Show Cause Notice dated 07.02.2017 was issued to
the appellant proposing to reject the refund claims.
Thereafter, the Original Authority vide Order-in-Original
No. 686/2017 dated 09.05.2017 rejected the refund
claims on the ground that the imported „oats‟ have been
re-packed, fumigated and affixed with brand name and
not sold "as such". Penalty under Section 114AA of the
Customs Act, 1962 was also imposed. On appeal, the
Commissioner (Appeals) vide order impugned herein
upheld the same. Aggrieved, the appellant has preferred
the present appeal before this forum.
2.1 Shri B.L. Narasimhan, Learned Counsel appearing
on behalf of the appellant, made various submissions,
which can be broadly summarized as under :
(i) During the period in dispute, the appellant had filed
a total of 23 SAD refund claims for an amount of
Rs. 5,90,67,534/-, whereas, what has been taken
on record is only the refund claims for an amount
of Rs. 5,42,34,576/-. That the appellant ought to
be allowed the refund claim for an amount of
Rs. 5,90,67,534/-;
(ii) There is no requirement in Notification No.
102/2007-Cus that the goods have to be sold "as
such". This requirement is being read into the
Notification by the Commissioner (Appeals), which
is impermissible. He further submitted that the
expression "as such" was used only in the erstwhile
Notification No. 56/1998-Cus. dated 01.08.1998
and not in Notification No. 102/2007-Cus;
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(iii) A comparison of Notification No. 56/1998-
Cus. with Notification No. 102/2007-Cus. would
show that the term "as such" is conspicuously
absent in Notification No. 102/2007-Cus. Instead,
the words "for subsequent sale" and "such
imported goods" have been used;
(iv) That, in any case, the processes undertaken
on the oats after import namely, re-packing,
fumigation and affixation of brand name, do not
change the character of the product. That
therefore, even if the requirement of being sold "as
such" is applied to the imported oats, the same
would stand satisfied in the present case;
(v) Further, the Department has assumed that the
processes of re-packing, fumigation and affixation
of brand name undertaken on the imported „oats‟
amount to "deemed manufacture" within the
meaning of Section 2(f)(iii) of the Central Excise
Act, 1944. More specifically, the Department has
relied on Sub-heading Note to Chapter 11 of the
Central Excise Tariff which states that "in relation
to the products of Sub-heading 1108 11 or 1108 12
or 1108 13 or 1108 14 or 1108 19, labelling or re-
labelling of containers or repacking from bulk packs
to retail packs or the adoption of any other
treatment to render the product marketable to the
consumer, shall amount to manufacture."
(vi) That „oats‟ falling under Central Excise Tariff
Heading 1104 would not be hit by the deeming
fiction created under Section 2(f)(iii) of the Central
Excise Act, 1944 since deemed manufacture in
terms of Section 2(f)(iii) only applies to those
goods which fall within the third Schedule. Goods
falling under Central Excise Tariff Heading 1104,
which covers imported „oats‟, are not covered
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under this list. Thus, the said provisions are not
applicable to the instant case;
(vii) Further, the imported „oats‟ are classifiable
under CTH 1104 and not under CTH 1108.
Therefore, the Sub-heading note is also not
applicable to the imported „oats‟. Without
prejudice, legal fiction of manufacture incorporated
in the Chapter note of the Excise Tariff cannot be
invoked to interpret a Notification under the
Customs Tariff Act;
(viii) Without prejudice to the above, it is
submitted that the deeming fiction created under
Section 2(f)(iii) of the Central Excise Act, 1944 and
the Sub-heading Note to Chapter 11 cannot be
invoked to interpret the present Notification No.
102/2007-Cus.
2.2.1 The Learned Counsel for the appellant relied on the
decision of the Tribunal in the case of M/s. Kanam
Latex Industries (P) Ltd. v. Commissioner of Cus.,
Tuticorin reported in 2018 (362) E.L.T. 882 (Tri. -
Chennai) and argued that it is therein held that there is
no requirement in Notification No. 102/2007-Cus. that the
imported goods should be sold "as such". The Tribunal
has held that refund of SAD would be admissible on
imported latex gloves sold after sterilization, re-labelling
and repacking even after introduction of deeming clause,
deeming the activities of packing, repacking, etc., to be
manufacture. The said decision has been followed by the
Tribunal in the case of M/s. Olam Agro India Pvt. Ltd.
v. Commissioner of Customs, Tuticorin reported in
2019 (370) E.L.T. 902 (Tri. - Chennai). It is stressed
by the Learned Counsel that the process of fumigation
undertaken on the imported „oats‟ does not amount to
manufacture.
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2.2.2 That it is the assumption of the Department that
the process of fumigation undertaken on the imported
„oats‟ amounts to manufacture and that it has resulted in
a change in the product. It is also the contention of the
Department that irrespective of whether fumigation or
retail repacking amounts to manufacture from Central
Excise point of view, imported oats no longer remain "as
such" but have undergone a change and resulted in a
product that has a different commercial identity. In
addition, it is also the contention of the Department that
the processes undertaken on the imported oats have
resulted not only in value addition, but also in the
presentation of the product to make it attractive to the
ultimate consumers.
2.3.1 The Learned Counsel for the appellant submitted
that the impugned order, insofar as it has rejected refund
on the grounds of value addition and presentation, is
beyond the scope of the Show Cause Notice dated
07.02.2017 and that therefore, it is liable to be set aside
on this ground itself. He stated that the process of
fumigation is undertaken only to get rid of the
impurities/fungal contamination, if any. No manufacturing
activity is done through the process of fumigation and the
goods remain the same. Hence, it cannot be alleged that
fumigation has changed the nature of the oats.
2.3.2 He relied on the decision in the case of M/s.
Servo-Med Industries Pvt. Ltd. v. Commissioner of
C.Ex., Mumbai reported in 2015 (319) E.L.T 578
(S.C.) wherein the Hon‟ble Supreme Court has held that
where the goods remain exactly the same even after a
particular process, there is obviously no manufacture
involved. Accordingly, the Hon‟ble Court held that the
process of sterilization did not amount to manufacture.
That, in the present case, the imported oats are subjected
to fumigation so that they can be made ready for
consumption. Like sterilization is used to kill
microorganisms, fumigation is a process to remove fungal
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contamination. Therefore, „oats‟ which are subjected to
fumigation cannot be considered as having undergone
any manufacturing process.
2.4.1 In regard to the allegation that re-packing from
bulk to retail changes the character of the goods in
question, Learned Counsel for the appellant argued that
the identity of the goods remains the same. There is no
change in the goods and the imported goods are sold as
such.
2.4.2 He pointed out that Notification No. 102/2007-Cus.
only requires that the imported goods should be "for
subsequent sale" and does not require the imported
goods to be sold in the same packing as imported. The
exemption is qua goods and the goods in this case is oats
and not the packing materials thereof. Therefore,
interpreting the terms "for subsequent sale" to mean sold
in the same packing as imported is reading a non-existent
condition into the Notification which is not permitted in
law.
2.4.3 That the imported oats are merely re-packed into
smaller packs for the purposes of retail sale in the
market. Oats, which are imported in bulk packs of 25
kgs., cannot be sold to the consumers, as such in the
same packing. It necessarily has to be re-packed into
smaller packs, for the purpose of selling the same to the
consumers.
2.4.4 He relied on the decision in the case of M/s.
Vijirom Chem. Pvt. Ltd. v. Commr. of Cus.,
Bangalore reported in 2006 (199) E.L.T. 751 (Tri. -
Bang.). It has been held that the goods remained "as
such" even on re-packing as they had not undergone any
change. The decision in M/s. Agarwalla Timbers Pvt.
Ltd. v. Commissioner of Customs, Kandla reported in
2014 (299) E.L.T. 455 (Tri. - Ahmd.), as affirmed by
the Hon‟ble High Court of Gujarat in Commissioner of
Customs v. M/s. Variety Lumbers Pvt. Ltd. reported
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in 2014 (302) E.L.T. 519 (Guj.) was also relied. It is
submitted that in the said case, the Hon‟ble High Court
held that cutting of round logs into smaller pieces by
sawing does not change the identity of the article. He
stated that the Hon‟ble Supreme Court approved the
above proposition dismissing the appeal filed by the
Department, as reported in 2018 (360) E.L.T. 790
(S.C).
2.5 The act of affixing brand name would not take the
goods out of category of oats classifiable under CETH
1104. It is submitted that affixation of a brand name
cannot be construed as a manufacturing process, since
identity of the goods remains the same. Reliance in this
regard is placed on the decision of the Tribunal in M/s.
Sika India Pvt. Ltd. v. Commr. of Central Excise, Goa
reported in 2018 (361) E.L.T. 1033 (Tri. - Mum.).
2.6.1 The second ground for rejection of refund is that
the refund claims for the 7 Bills-of-Entry are barred by
limitation. Notification No. 93/2008-Cus. was issued with
a view to amend Notification No. 102/2007-Cus. and
provide a limitation period for filing SAD refund claims.
Notification No. 93/2008-Cus. required that the SAD
refund claims are to be filed within one year from the
date of payment of SAD. However, the above period
prescribed for filing refund claim by limiting the time
period to one year from the date of payment of SAD has
been set aside by the Hon‟ble Delhi High Court in M/s.
Sony India Pvt. Ltd. v. Commissioner of Customs,
New Delhi reported in 2014 (304) E.L.T. 660 (Del.).
Though the Department filed appeal before the Hon‟ble
Apex Court against this order, the appeal was dismissed
on the ground of limitation, leaving the question of law
open. Merely because the SLP against the said decision
has been dismissed by the Hon‟ble Apex Court and the
question of law has been kept open it cannot be a reason
for the authorities below to not follow the binding decision
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of the Hon‟ble Delhi High Court. The said decision has
been followed by the Tribunal on various occasions.
2.6.2 He therefore contended that the limitation period
will not be applicable for filing of SAD refund claims and
that the seven Bills-of-Entry must be taken on record for
the purpose of SAD refund.
2.7 It is pointed out that penalty under Section 114AA
of the Customs Act, 1962 has been ordered on the
ground that the fact of processing activity done by co-
packers on behalf of the appellant was revealed only
during investigation by SIIB. The penalty under Section
114AA ibid. can be imposed only when goods are
exported by forging documents knowingly or intentionally
and this is not the dispute in the present case. Hence,
Section 114AA of the Customs Act is not invokable. In
any case, a mere claim for refund cannot be construed as
making a declaration, statement or document which is
false or incorrect in any material particular. Therefore,
penalty under Section 114AA is not imposable on the
appellant.
2.8 He prayed that the appeal may be allowed.
3.1 Shri M. Jagan Babu, Learned Authorized
Representative (A.R.) appeared and argued on behalf of
the Revenue. He submitted that the appellants have
undertaken three types of job work as detailed below:
(a) Retail packing of imported oats after fumigating the
oats for certain days and repacked in various
packing like 1 kilogram, 500 grams, 200 grams,
etc., under the brand „Quaker‟;
(b) In the second type of job work, oats mixed with
other cereals like wheat, ragi and barley flakes
cleared as Oats Plus and Oats Grain;
(c) The third type of job work relates to mixing of
masala oats, wherein oats are mixed with flavours
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like Home Style masala, kesar, lemony, etc., and
dehydrated materials are added and finally packed
in retail packing from 40 grams to 400 grams and
these masala oats were cleared from job work
premises after payment of Central Excise Duty.
That these masala oats were mentioned in the
invoice as "Oats" - HM/KF/SF with appeal/lemony.
HSM;
3.2 That the appellant sold the imported goods after
undertaking certain processes and repacked the same; it
is presumed that the importer had not fulfilled the
conditions of the Notification No. 102/2007-Cus. dated
14.09.2007 as imported and the items imported
mismatched with the item sold. Hence, after due process
of law, the Lower Appellate Authority rejected the SAD
claim of Rs. 5,42,34,576/- and rejected refund claim in
respect of 7 Bills-of-Entry as they were time-barred and
also imposed a penalty of Rs. 25,00,000/- on the
appellant under Section 114AA of the Customs Act, 1962.
3.3 He submitted that SAD exemption is given under
the Notification No. 102/2007-Cus. Paragraph 1 of the
Notification specifically states that the SAD exemption is
available only to the imported goods which are sold
subsequently. Without ambiguity, it is clear that the
goods should be sold "as such" without any modification,
change or process made on the imported product. Here
the products of the appellant were brought into India in
bulk 25 kilogram packages and not sold in bulk packages.
Secondly, after the import, the product has undergone
processes of fumigation and re-packing in small retail
packages with a specific brand name; that the imported
product is not sold as such. SAD paid on the imported
product can be refunded only when such products are
sold as such after import.
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3.4 With regard to the rejection of refund in respect of
7 Bills-of-Entry, he argued that statutory time limits
cannot be relaxed by the Lower Appellate Authority,
which is beyond his scope. The decision of the Hon‟ble
Supreme Court in the case of Commissioner v. Sony India
Pvt. Ltd. - 2016 (337) E.L.T. A102 (S.C.)] is not
applicable as the appeal filed by Department was
dismissed on limitation and the merits/questions of law
were still kept open.
3.5 Regarding the imposition of penalty under Section
114AA of the Customs Act, he submitted that the claim of
the appellant is that their case is one of interpretation. It
is observed that while filing the refund claims, the
appellant suppressed the fact of processing activity done
by the job workers viz. M/s. Christy Fried Grams Industry
on behalf of the appellant, which was revealed only by
the investigation of the SIIB, Custom House, Tuticorin.
That the said suppression with a mala fide intention
deserves penalty under Section 114AA.
3.6 He argued that the appeal deserves to be
dismissed.
4. We have heard both sides and perused the records.
5.1 The refund claims have been rejected on two
grounds: Firstly, for the reason that the goods imported
had not been sold "as such" and secondly, that the refund
claims are time-barred. Before we proceed to discuss the
above issues, it is noteworthy to mention that though the
appellants had filed refund claims in respect of multi-
grain oats and flavoured oats sold by them, they have
withdrawn their contest in respect of refund of SAD paid
on these oats and is confining their challenge to the
refund of SAD paid on Plain Oats imported and sold as
such only.
5.2 In paragraph 13 of the reply to the Show Cause
Notice, the appellant has stated that out of the total claim
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filed by the appellant, sales of 1,83,382 kilograms of
flavoured oats was inadvertently included in the total
sales and that they forego the claim of refund of SAD in
respect of such flavoured oats and multi-grain oats. So,
we do not consider the refund claim, if any, of flavoured
oats and multi-grain oats.
6.1 To understand the first issue, it is necessary to
reproduce the relevant part of the Notification No.
102/2007 dated 14.09.2007, which is as under :
"Exemption from Special CVD to all goods imported for
subsequent sale when VAT/Sales Tax paid by importer
- In exercise of the powers conferred by sub-section (1)
of section 25 of the Customs Act, 1962 (52 of 1962), the
Central Government, on being satisfied that it is
necessary in the public interest so to do, hereby
exempts the goods falling within the First Schedule to
the Customs Tariff Act, 1975 (51 of 1975), when
imported into India for subsequent sale, from the whole
of the additional duty of customs leviable thereon under
sub-section (5) of section 3 of the said Customs Tariff
Act (hereinafter referred to as the said additional duty).
2. The exemption contained in this notification
shall be given effect if the following conditions are
fulfilled:
(a) the importer of the said goods shall pay all
duties, including the said additional duty of
customs leviable thereon, as applicable, at the
time of importation of the goods;
(b) the importer, while issuing the invoice for
sale of the said goods, shall specifically indicate
in the invoice that in respect of the goods
covered therein, no credit of the additional duty
of customs levied under sub-section (5) of
section 3 of the Customs Tariff Act, 1975 shall be
admissible;
(c) the importer shall file a claim for refund of
the said additional duty of customs paid on the
imported goods with the jurisdictional customs
officer before the expiry of one year from the
date of payment of the said additional duty of
customs;
(d) the importer shall pay on sale of the said
goods, appropriate sales tax or value added tax,
as the case may be;
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(e) the importer shall, inter alia, provide copies
of the following documents alongwith the refund
claim:
(i) document evidencing payment of the said
additional duty;
(ii) invoices of sale of the imported goods in
respect of which refund of the said additional
duty is claimed;
(iii) documents evidencing payment of
appropriate sales tax or value added tax, as the
case may be, by the importer, on sale of such
imported goods.
3. The jurisdictional customs officer shall sanction
the refund on satisfying himself that the conditions
referred to in para 2 above, are fulfilled."
[Emphasis added]
It can be seen from the above Notification that there is no
condition that the goods imported have to be sold as
such. The word used is "subsequent". Thus, when an
assessee pays VAT on the subsequent sale of imported
goods, he may file an application for refund of the SAD
paid at the time of import.
6.2.1 In the present case, the appellant has done the
processes of re-packing, fumigation, affixation of brand
name, etc. The Department has denied refund alleging
that such processes amount to manufacture and that the
goods have not been sold as such. This issue has been
considered by the Tribunal in various decisions, as
pointed out by the Learned Counsel for the appellant.
6.2.2 In the case of M/s. Kanam Latex Industries (P) Ltd.
(supra), the Tribunal has held as under :
"3. Revenue entertained a view that inasmuch as latex
gloves imported by the appellant, were subsequently put
to certain processes like quality inspection visually,
placing them in wallet/pouches and further in
boxes/packages, which were being subject to process of
sterilization, which process amounts to manufacture in
terms of Section 2(f)(iii) of the Central Excise Act, 1944.
It cannot be concluded that the appellants have sold the
imported goods as such, thus entitling them to the
refund of SAD paid. Accordingly, they were issued show
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cause notice dated 1-10-2015 proposing to deny the
refund claims so filed by them.
.
.
.
.
.
5. After hearing both sides, we find that the issue has been the subject-matter of various decisions. First of all, we will examine as to whether the process undertaken by the appellant amounts to manufacture or not, in the ordinary sense. The Hon'ble Supreme Court in the case of M/s. Servo-Med Industries Pvt. Ltd. v. Commissioner of Central Excise, Mumbai reported in 2015 (319) E.L.T. 578 (S.C.) has held that the process of sterilization does not amount to manufacture. The said process does not convert the gloves to any other product than the gloves except that they are sterilized, which is not a lasting character and when the gloves are opened from the packing, the same tend to become desterlized. Further, the Hon'ble Gujarat High Court, while examining the applicability of Notification No. 102/07 in the case of Commissioner of Customs v. M/s. Posco India Delhi Steel Processing Centre P. Ltd. reported in 2014 (299) E.L.T. 263 (Guj.) as also in the case of Commissioner of Customs v. M/s. Variety Lumbers Pvt. Ltd. reported in 2014 (302) E.L.T. 519 (Guj.) has observed that the object of the notification was to create a level playing field for domestic manufacturers and importers and that the domestic manufacture were not affected of SAD as they could avail Cenvat credit, whereas, the importer, who sold such goods without undertaking further manufacture thereon would be facilitated by the benefit of SAD refund. In the case of M/s. Variety Lumbers Pvt. Ltd., it was held that the round logs imported if subsequently sold in small pieces as sawn timber, the benefit of exemption under Notification No. 102/2007- Cus., could not have been denied despite the fact that imported goods, subsequently, after cutting into small pieces, had fallen in a different tariff entry. Tribunal in the case of M/s. Agarwal Timbers Pvt. Ltd., has observed that as long as the identify of the article did not undergo any fundamental change, so as to conclude that what was imported by the importers were different from the item which ultimately was sold by them in the local market, the importer would be eligible for exemption under Notification No. 102/2007-Cus. Similarly in the case of Commissioner of Customs, Amritsar v. M/s. Hero Exports reported in 2013 (298) E.L.T. 410 (Tri. - Del.), the Revenue's stand that imported e-bikes in CKD condition were subsequently assembled and sold as e-bikes, thus disentitling the importer to refund of SAD was not accepted. Similarly, in the case of M/s. Posco India Delhi Steel Processing Ltd. v Commissioner of Customs, Kandla reported in 2012 (285) E.L.T. 410 (Tri.-Ahmd.), it was held that 14 Appeal. No.: C/40891/2018-DB cutting and slitting of imported HR/CR coils would not disentitle the claim of refund under Notification No. 102/2007.
6. In fact, we note that the above decisions stand followed by the adjudicating authority for the period prior to 11-7-2014 and refund has been held to be proper. However, with effect from 11-7-2014, a deeming clause was introduced in the provisions of Section 2(f)(iii) of the Central Excise Act and the various activities of packing, repacking, etc. were held to be deemed manufacture. The issue to be decided is as to whether such deeming clause having been introduced in the Central Excise Act would result in denial benefit of refund of SAD paid by the importer at the time of import of the goods. On going through the notification, we find that there is no requirement that the imported goods should be sold "as such". In fact, the notification prior to the Notification No. 102/2007, i.e., the earlier Notification No. 56/98 required the imported goods to be sold "as such". The earlier Notification No. 56/98-Cus., which had a more stringent condition, came to be discussed by the Tribunal in the case M/s. Vijirom Chem. Pvt. Ltd. v Commissioner of Customs, Bangalore reported in 2006 (199) E.L.T. 751 (Tri.-Bang.) in an identical circumstances, i.e., the imported goods were repacked, which act amounted to deemed manufacture. The Tribunal observed that the legal fiction of manufacture incorporated in the Chapter note of the Excise Tariff cannot be invoked to interpret a notification under the Customs Tariff Act. The goods have not undergone any change by any process and they remained the same even after repacking. The Tribunal observed that the term "as such" referred to any notification is to mean that the goods should not have undergone any process of change. Therefore, inclusion of Chapter notes in Excise Act, is not sufficient to hold that the goods have not been sold "as such", inasmuch as, the goods have remained the same, in spite of the tact that they have been, deemed to have been manufactured.
7. Though, the Commissioner has taken note of the above decision of the Tribunal but he has not followed the same in the light of circular issued by the Board requiring that the goods should have been sold "as such". Apart from the fact that it is well settled principle of law that no extraneous conditions can be introduced in the notification which has to be interpreted on its own wordings, we also take note of the fact that though the earlier notification required the imported goods to be sold "as such", there is no such condition in the present Notification No. 102/2007, which only used the expression "subsequently sold". Inasmuch as, the imported gloves have been sold by the assessee as gloves and it is only by deeming fiction of law that the activities of labelling, relabelling, packing, repacking, etc. has been made as amounting to manufacture, we find that there is no justification to hold that the gloves have undergone any change, as held by the Tribunal in the above referred decision of M/s. Vijirom Chem. Pvt. Ltd. As such, we find no justification for denial of the 15 Appeal. No.: C/40891/2018-DB refund of SAD. According, the impugned orders are set aside and both the appeals are allowed."
[Emphasis added] 6.2.3 A similar decision was taken in the case of M/s. Vijirom Chem. Pvt. Ltd.(supra).
6.2.4 The Hon‟ble High Court of Gujarat in the case of M/s. Variety Lumbers Pvt. Ltd. [2014 (302) E.L.T. 519 (Guj.)] had held that the assessee was eligible for refund of SAD paid on imported timber logs even if the logs were cut to size for subsequent sale. The appeal filed by the Department against the said decision of the Hon‟ble Gujarat High Court was dismissed on merits, affirming the view taken by the Hon‟ble High Court, as reported in 2018 (360) E.L.T. 790 (S.C.) 6.3 Following the above decisions, we have no hesitation to hold that the rejection of refund claim alleging that the goods were not sold "as such" is unsustainable in law.
7.1 The second ground for rejection of refund is that the refund claims were filed beyond one year from the date of payment of SAD and therefore, are barred by limitation. Sub-clause (c) of the Notification, as reproduced in paragraph 6.1 of this order, would show that the refund claim has to be filed before the expiry of one year from the date of payment of additional duty of Customs. The issue of time limit for filing refund claim was subject matter of litigation before the Hon‟ble High court of Delhi in the case of M/s. Sony India Pvt. Ltd. [2014 (304) E.L.T. 660 (Del.)] The Hon‟ble High Court in the said judgement held that the time period prescribed in the Notification has to be read down. The SLP filed by the Department before the Hon‟ble Apex Court against such judgement was dismissed on the ground of limitation, leaving the question of law open.
16Appeal. No.: C/40891/2018-DB 7.2 It is also brought to our notice that the Hon‟ble High Court of Bombay in the case of M/s. CMS Info Systems Ltd. v. Union of India reported in 2017 (349) E.L.T. 236 (Bom.) has observed that the time period prescribed in the Notification is applicable. The SLP filed by the Department against the said judgement is pending before the Hon‟ble Supreme Court, as reported in 2018 (360) E.L.T. A190 (S.C.). Thus, we have contrary decisions of two different High Courts on the same issue.
7.3 However, the Principal Bench of the Tribunal in the case of Commissioner of Customs, New Delhi v. M/s. Radial Rubber Industries in Customs Appeal No. 52054 of 2019 vide Final Order No. 50378 of 2020 dated 25.02.2020 had occasion to analyse the application of both the above judgements. The Tribunal observed as under :
"25. It would be seen from the aforesaid paragraphs of the judgment of the Bombay High Court that the contention that an importer has to pay appropriate sales tax or value added tax on the sale and also provide copies of documents with the refund claim, otherwise the refund would not be admissible was not examined by the Bombay High Court for the reason that it was not C/52054/2019 possible to guess whether the refund application would be held non-maintainable on these grounds. The High Court also observed that this issue was not required to be decided by the High Court because High Court was dealing with a case where the refund application had been rejected because it was not filed within one year from the date of payment of Additional Duty. The Delhi High Court, on the other hand specifically dealt with such a situation and held that the limitation cannot start form the date of payment of Additional Duty since a refund application cannot be filed in the absence of a sale having subsequently taken place and the relevant documents concerning such sale were filed with the refund application.
26. In any view of the matter, the issue as to which judgment of the High Courts should be followed if conflicting views have been taken was decided by a Larger Bench (a five Member Bench) of the Tribunal in Collector of Central Excise, Chandigarh vs. Kashmir Conductors17. One issue that was addressed by the Larger Bench was what should be done when the Tribunal is faced with conflicting decisions of High Courts. The Larger Bench of the Tribunal held that if the jurisdictional High Court has taken a particular view on an interpretation or proposition of law, that view has to be followed but if the jurisdictional High Court has not 17 Appeal. No.: C/40891/2018-DB expressed any view in regard to the subject matter and there are conflicting views of other High Courts, then the Tribunal will be free to formulate its own view. The relevant paragraphs of the decision of the Larger Bench are reproduced below:-
17. 1997 (96) ELT 257 (Tri) C/52054/2019 "10.
The question as to how the Tribunal should proceed in the face of conflicting decisions of High Courts has been considered in M/s. Atma Steels P. Ltd. and others v. Collector of Central Excise, Chandigarh reported in l984 (17) E.L.T. 331 wherein the Larger Bench consisting of five Members held that, in view of its All India jurisdiction and peculiar features, the Tribunal cannot be held bound to the view of any one of the High Courts, but has the judicial freedom, to consider the conflicting views, reflected by different High Courts, and adopt the one considered more appropriate to the facts of a given case before the Tribunal. The Tribunal also indicated that this should be so, irrespective of the fact whether one particular assessee was within the jurisdiction of a specified High Court or the original adjudicating authority was located there. The judgment of the Apex Court in the case of M/s. East India Commercial Co. Ltd. v. Collector of Customs, Calcutta reported in 1983 (13) E.L.T. 1342 (S.C.) was brought to the notice of the Larger Bench, but, was not adverted to sufficiently in the course of discussion. In the East India Commercial Co. case, one of the questions for consideration was whether the interpretation given by the Calcutta High Court to Section 167 of the Sea Customs Act, 1878 would be binding on authorities functioning within the jurisdiction of the High Court and the Supreme Court held that "it is implicit in the power of supervision conferred on a superior Tribunal that all the Tribunals subject to its supervision should conform to the law laid down by it. ........We, therefore, hold that the law declared by the highest Court in the State is binding on authorities or Tribunals under its superintendence.........". This decision has been followed by the Bombay High Court in CIT v. Godavaridevi Saraf reported in 1978 (2) E.L.T. (J
624).
10.1 In the case of U.P. Laminations v. Collector of Central Excise, Kanpur reported in 1988 (35) E.L.T. 398 (T), the Tribunal has followed the Supreme Court judgment in the case of East India Commercial Co. case and set aside the show cause notice issued against the appellants therein as it was in direct violation of the law laid down by the Allahabad High Court within whose jurisdiction both the manufacturer and the Collector of Central Excise were situated.
10.2 In a recent decision of the Tribunal in the case of Madura Coats v. CCE, Bangalore reported 18 Appeal. No.: C/40891/2018-DB in 1996 (82) E.L.T. 512, it has been held that the decision of a particular High Court should certainly be followed by all authorities within the territorial jurisdiction of that High Court and that the authorities in another State are not bound to follow the views taken by a particular High Court in the absence of a decision by the jurisdictional High Court with regard to constitutionality of a provisions. The Tribunal has held that since the adjudication of vires of a provision of a statute or Notification is outside the jurisdiction of the Tribunal and the jurisdictional High Court i.e., the High Court having jurisdiction over the authority and the assessee, has not struck down the provision or Notification as ultra vires, the Tribunal has to follow the same and the assessee is entitled to take the stand that he is entitled to the benefit of the particular provision or Notification since the jurisdictional High Court has not struck it down, even C/52054/2019 though some other High Court may have done so. In case the conflict of decisions among High Courts does not relate to vires of any provision or Notification, it has been held that the Tribunal has to proceed in accordance with the decision in Atma Steels P. Ltd. in the light of the decision of Supreme Court in the East India Commercial Company case i.e. where the jurisdictional High Court has taken a particular view on interpretation or proposition of law, that view has to be followed in cases within such jurisdiction. If the jurisdictional High Court has not expressed any view in regard to the subject matter and there is conflict of views among other High Courts, then the Tribunal will be free to formulate its own view in the light of Atma Steels P. Ltd. case; however, there is a decision of only one High Court in regard to disputed interpretation or proposition of law, the Tribunal is bound to follow that order since it is not at liberty to disregard the solitary High Court decision."
27. Thus, in view of the decision of the Delhi High Court in Sony India, the Commissioner (Appeals) was justified in allowing the claim for refund of Additional Duty, even if the claim was filed beyond a period of one year from the date of payment of Additional Duty.
28. The order of the Commissioner (Appeals), therefore, does not call for any interference in this Appeal. The Appeal is accordingly, dismissed."
The Principal Bench of the Tribunal has relied on the decision of the Hon‟ble High Court of Delhi in the case of M/s. Sony India Pvt. Ltd. (supra) to hold that a refund claim under Notification No. 102/2007-Cus. cannot be rejected as time-barred even if it is filed beyond the 19 Appeal. No.: C/40891/2018-DB period of one year from the date of payment of additional duty.
7.4 Taking note of the discussions made in the above Final Order of the Principal Bench and also by judicial discipline, we hold that as per the decision rendered by the Hon‟ble Delhi High Court in the case of M/s. Sony India Pvt. Ltd. (supra), the rejection of refund on the ground of limitation cannot be sustained.
8. Both the issues are found in favour of the assessee and against the Revenue.
9. It is also seen that penalty of Rs. 25,00,000/- has been imposed on the appellant under Section 114AA of the Customs Act, 1962. We do not understand the logic of imposing penalty in an application for refund. This apart, it has been pointed out by the Learned Counsel for the appellant that there is no proposal in the Show Cause Notice to impose penalty. The imposition of penalty is without any ground and is, therefore, fully set aside.
10. From the foregoing, the impugned order rejecting the refund claims is set aside.
11. Before we part, we must say that the appellant contends that the refund claim was for an amount of Rs. 5,90,67,534/- and that the Department has erroneously taken on record as Rs. 5,42,34,576/-. On perusal of the appeal folder, in column 13(iii) of Form No. C.A.-3, the amount of refund is shown as Rs. 5,42,34,576/-. This contention of change in amount is not stated in the appeal grounds. The appellant cannot put forward a new plea by merely stating in the synopsis filed at the time of argument. No oral arguments were advanced on this count. Since the Department has not been put to notice regarding this contention, we are of the considered opinion that this plea deserves to be brushed aside. The refund claim considered in this appeal is as shown in column 13(iii) of Form No. C.A.-3 only.
20Appeal. No.: C/40891/2018-DB
12. The appeal is allowed with consequential benefits, if any.
(Order pronounced in the open court on 29.10.2020) Sd/-
(SULEKHA BEEVI C.S.) MEMBER (JUDICIAL) Sd/-
(P. ANJANI KUMAR) MEMBER (TECHNICAL) Sdd