2025 (6) TMI 1276 - AT - Customs

Applicability of N/N. 30/2004-CE dated 09/07/2004 as amended by N/N. 34/2015-CE dated 17/07/2015 and N/N. 37/2015-CE dated 21/07/2015 - applicability of additional customs duty upon import of mulberry silk fabrics without dyed without printed - HELD THAT - The Honb le Supreme Court in the case of AIDEK Tourism Services Pvt. Ltd. 2015 (3) TMI 690 - SUPREME COURT has held that for the purpose of levy of duty under Section 3 of the Customs Tariff Act actual production or manufacture of a like article in India is not necessary. It is to be imagined that article imported has been manufactured or produced in India and it then need to be seen as to what amount of excise duty was leviable thereon. Honb le Supreme Court held that the importer is to be treated as a manufacturer of the goods and thereafter the amount of Excise duty/Additional Duty that is required to be determined and paid. It is now settled that the rate of duty would be only that which an Indian Manufacturer would pay under the Excise Act on a like Article. Therefore the importer would be entitled to payment of concessional/reduced or NIL rate of Countervailing duty if any notification is issued providing exemption/remission of excise duty for a like article if produced/manufactured in India. Conclusion - The exemption notifications apply and the imported goods are not liable to additional customs duty. There are no reason to interfere with the impugned orders and accordingly the same is sustained - appeal filed by the appellant Revenue is dismissed.

Summary

The core legal questions considered by the Tribunal in this appeal are:

1. Whether Notification No. 30/2004-CE dated 09/07/2004, as amended by Notifications No. 34/2015-CE and No. 37/2015-CE, exempts the import of mulberry silk fabrics (undied and unprinted) from the levy of additional customs duty (countervailing duty or CVD).

2. Whether the conditions stipulated in the notifications, particularly regarding payment of excise duty on inputs and non-availment of CENVAT credit by the manufacturer, apply to the importer and affect the exemption.

3. The applicability and binding nature of judicial precedents, including the Supreme Court's decision in SRF Ltd., and whether the principle of res judicata and stare decisis preclude re-litigation of the issue.

4. The interpretation of the Customs Tariff Act, specifically Section 3, concerning the levy of duty on imported goods by treating the importer as a manufacturer and the corresponding excise duty liability on like goods produced in India.

5. The effect of conflicting High Court and Supreme Court judgments, notably the Madras High Court's decision in HLG Trading Co. and its subsequent overruling by the Supreme Court.

Issue 1: Applicability of Notification No. 30/2004-CE and its Amendments to Exempt Mulberry Silk Fabrics from Additional Customs Duty

The relevant legal framework includes Notification No. 30/2004-CE and its amendments by Notifications No. 34/2015-CE and No. 37/2015-CE, which provide exemption from excise duty and consequentially from additional customs duty on certain goods. The Supreme Court's ruling in SRF Ltd. is pivotal, where it was held that conditions in the notification that cannot be complied with by the importer cannot be imposed to deny exemption. The Court reasoned that if the importer is incapable of fulfilling a condition, such condition is deemed satisfied for the purpose of exemption.

The Tribunal noted that the appellant had self-assessed the imports claiming NIL CVD under these notifications, asserting that the goods were exempt from excise duty. The Supreme Court in SRF Ltd. confirmed that the importer is entitled to exemption if it meets the notification's conditions or if conditions are incapable of being met. The Tribunal relied on this precedent to affirm that the exemption applies to the imported mulberry silk fabrics.

In applying the law to facts, the Tribunal found that the appellant had fulfilled the conditions or that the conditions could not be imposed to deny exemption. The Tribunal also referenced prior decisions, including the Mumbai Bench's ruling in Commissioner of Customs (Import), Nhava Sheva Vs Ashima Dyecot Ltd., which held that when inputs are not subject to excise duty, no CVD is leviable on the finished imported goods.

The competing argument from the Revenue was that the exemption conditions were not met, but the Tribunal rejected this based on the binding Supreme Court precedent and consistent prior Tribunal decisions. The conclusion was that the exemption notifications apply, and the imported goods are not liable to additional customs duty.

Issue 2: Effect of Conditions Relating to Payment of Duty on Inputs and Non-Availment of CENVAT Credit

Notifications No. 34/2015-CE and No. 37/2015-CE introduced conditions concerning payment of duty on inputs and non-availment of CENVAT credit by the manufacturer. The Revenue contended these conditions should apply to the importer, affecting exemption eligibility.

The Tribunal examined these amendments in light of the Supreme Court's judgment in SRF Ltd., which was delivered prior to these amendments but was held to remain unaffected in its core principle. The Tribunal observed that Notification No. 37/2015-CE relaxed the condition by considering nil payment of duty on inputs as qualifying for exemption.

The Tribunal found that these amendments did not alter the fundamental interpretation that an importer cannot be denied exemption on grounds of conditions it cannot fulfill. The Commissioner (Appeals) had also considered these notifications and upheld the exemption, noting the importer satisfied all conditions or that conditions incapable of compliance were waived.

The Tribunal rejected the Revenue's argument that these conditions restricted exemption, concluding that the notifications and judicial pronouncements consistently support the exemption's applicability to the importer under the given facts.

Issue 3: Binding Effect of Judicial Precedents and Overruling of Conflicting Judgments

The Tribunal addressed the conflicting judgments, particularly the Madras High Court's decision in HLG Trading Co., which had questioned the vires of Notification No. 30/2004-CE and denied exemption. The Supreme Court admitted the Revenue's appeal but did not stay the operation of the notification or grant any relief.

Subsequently, the Supreme Court dismissed the Revenue's appeal arising from the Tribunal's Chennai Bench, effectively overruling the Madras High Court's decision. The Supreme Court's dismissal of the Revenue's Review Application in SRF Ltd. further cemented the binding nature of the exemption and the non-applicability of the conditions that cannot be met.

The Tribunal emphasized that the principle of res judicata and stare decisis applied, barring the Revenue from re-litigating the issue. The dismissal of the appeals and review applications by the Supreme Court was held to conclusively settle the matter in favor of the importer.

Issue 4: Interpretation of Section 3 of the Customs Tariff Act and Treatment of Importer as Manufacturer

The Tribunal referred to the Supreme Court's decision in AIDEK Tourism Services Pvt. Ltd., which clarified that for levy of duty under Section 3 of the Customs Tariff Act, it is not necessary that the like article is actually manufactured in India. The imported article is to be treated as if manufactured in India, and the excise duty payable on such like article is to be determined accordingly.

The Tribunal further cited a series of Supreme Court rulings (Motiram Tolaram, J.K. Synthetics, Lohia Sheet Products, Malwa Industries Ltd.) reinforcing that the importer is entitled to the same rate of excise duty or exemption as applicable to an Indian manufacturer of like goods.

This principle was applied to confirm that if a notification exempts excise duty on the like article in India, the importer is entitled to exemption from CVD on import. The Tribunal found that the appellant was entitled to the benefit of the notifications providing NIL rate of CVD, consistent with the excise exemption granted domestically.

Significant Holdings and Core Principles

The Tribunal held: "It was held by Hon'ble Court that the condition which cannot be complied with would not be made applicable to the imported goods. The importer has satisfied all the conditions of the amended notifications."

The core principles established include:

- Conditions in exemption notifications that are incapable of compliance by the importer cannot be imposed to deny exemption.

- The importer is to be treated as a manufacturer of the imported goods for the purpose of determining excise duty liability under Section 3 of the Customs Tariff Act.

- The rate of duty on imported goods corresponds to the excise duty payable on like goods produced in India, including entitlement to exemptions where applicable.

- Judicial precedents from the Supreme Court, including SRF Ltd. and AIDEK Tourism, are binding and override conflicting High Court decisions.

- The principle of res judicata and stare decisis precludes re-litigation of settled issues once the Supreme Court has rendered its judgment.

On these bases, the Tribunal dismissed the Revenue's appeal, sustaining the order granting exemption from additional customs duty on the imported mulberry silk fabrics under the relevant notifications.