2025 (6) TMI 1680 - AT - Customs

Rectification of mistake application - seeking re-adjudication of matter - Benefit of exemption under Notification no. 12/2012-CE for the Additional duty of customs was under S.No. 332 and 332A of the notification - appellant claims that that the benefit of exemption does not depend on the classification - Revenue submitted that the appellant is seeking re-adjudication of the matter which is not permissible in an application for rectification of mistake - HELD THAT - Notification no. 12/2012-CE (S.No. 32) will not apply to this case because only goods were imported and not Non-Conventional energy systems. We do find that the appellant had claimed the benefit of notification no.12/2012-CE (S.No. 332A) for the additional duty of customs. This benefit was available regardless of the classification of the goods (goods could fall under any Chapter) if the goods were used within the factory of manufacture to manufacture goods in List 8 of the notification. If the goods are not so used but the procedure prescribed as per condition no. 2 was fulfilled the exemption would still be available. In this case undisputedly the goods were manufactured outside India and imported. So they were not used within the factory of manufacture. In this case the imported goods were not used within the factory of production. It is also not the case of the appellant that the goods were used in another factory but condition no. 2 was fulfilled. The appellant s submission is that since it imported goods it is entitled to the benefit of the exemption notification for Additional Duty of Customs even without fulfilling condition no. 2. Such an argument cannot be accepted. All exemption notifications must be strictly interpreted and in case of any doubt about the eligibility of the exemption it must be decided in favour of the Revenue and against the assessee as held by the larger five member bench of Supreme Court in Commissioner of Cus. (Import) Mumbai versus Dilip Kumar Company 2018 (7) TMI 1826 - SUPREME COURT (LB) . In view of the conflicting decisions regarding strict and liberal interpretations of exemption notifications the matter was decided by the larger bench of Supreme Court in Dilip Kumar. This decision was followed by a bench of this Tribunal in Solgen Energy Pvt. Ltd. 2024 (5) TMI 1063 - CESTAT BANGALORE to interpret and apply notification no. 12/2012-CE (S.No. 332A read with condition no. 2). Respectfully following Dilip Kumar and Solgen Energy Pvt. Ltd. it is found that the benefit of exemption notification no. 12/2012-CE (S.No. 332A) is not available to the appellant. However it is noted that finding on entitlement of benefit of S.No. 332 A of Notification no. 12/2012-CE was not in the Final Order. Conclusion - The rectification application cannot be used to re-adjudicate classification or entitlement issues but can be used to correct mistakes apparent on record. It is found that the Final Order did not address the appellant s claim under S.No. 332A of Notification no. 12/2012-CE which was an omission amounting to a mistake apparent on record. The mistake apparent on record is rectified - The miscellaneous application is disposed of by substituting paragraph 15 of the Final Order for the reasons stated in this order.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in the application for rectification of mistake in the Final Order dated 27.9.2024 are:

• Whether the appellant is entitled to the benefit of exemption under Notification no. 12/2012-CE (S.No. 332 and 332A) for Additional Duty of Customs notwithstanding the classification of the disputed goods decided against the appellant;
• Whether the benefit under S.No. 332A of Notification no. 12/2012-CE, which provides exemption for parts consumed within the factory of production for manufacture of goods specified in List 8, is available to imported goods that are not used within the factory of manufacture and where the prescribed procedural condition (Condition no. 2) is not fulfilled;
• The applicability and interpretation of Condition no. 2 of Notification no. 12/2012-CE in the context of imported goods;
• Whether the appellant's claim for exemption under the said notification can be allowed despite the absence of fulfillment of the condition and the fact that the goods were imported and not domestically manufactured;
• The scope and limits of rectification of mistake applications, specifically whether re-adjudication of the matter is permissible under such application.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to exemption under Notification no. 12/2012-CE (S.No. 332 and 332A) irrespective of classification

The appellant contended that their claim for full exemption under Notification no. 12/2012-CE for Additional Duty of Customs was under S.No. 332 and 332A, which apply to "any chapter" and thus are independent of the classification of goods. The appellant argued that even though the classification was decided against them, they remain entitled to exemption benefits.

The Tribunal examined the relevant entries of the notification, which provide exemption at nil rate for:

• S.No. 332: Non-conventional energy devices or systems specified in List 8;
• S.No. 332A: Parts consumed within the factory of production for manufacture of goods specified in List 8.

List 8 includes "Solar photovoltaic module and panel for pumping and other applications."

The Tribunal noted that the appellant had imported goods which were not non-conventional energy devices or systems themselves but parts or goods that could be used in such systems. The Tribunal held that S.No. 332 exemption does not apply as the goods imported are not the devices or systems specified.

The appellant's claim under S.No. 332A was also scrutinized under the conditions of use within the factory of manufacture or compliance with Condition no. 2.

Issue 2: Applicability of Condition no. 2 of Notification no. 12/2012-CE to imported goods under S.No. 332A

Condition no. 2 states: "Where such use is elsewhere than in the factory of production, the exemption shall be allowed if the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 is followed."

The appellant argued that this condition applies only to domestically manufactured goods and not to imports, thus exemption should be available even if the condition is not fulfilled for imported goods. The appellant relied on the Supreme Court judgment in Lohia Sheet Products, which held that exemption was available for imported copper scrap used in manufacture, as the notification did not restrict exemption to goods generated within the factory.

The Revenue contended that the appellant's goods were imported and not used within the factory of manufacture, and the procedural condition was not fulfilled. Reliance was placed on the Supreme Court judgment in Bata India Ltd., where exemption was denied because the goods were not used within the factory and the condition was not met. The Revenue also cited a Tribunal decision in Solgen Energy Pvt. Ltd. denying exemption under similar facts.

The Tribunal analyzed the Lohia Sheet Products case and distinguished it on facts. In Lohia, the exemption was for copper waste and scrap used within the factory, and the Court held that the exemption extended to imported scrap as the notification did not specify "generated" within the factory. However, in the present case, the appellant did not use the goods within the factory of manufacture, nor did it fulfill the procedural condition required for use outside the factory.

The Tribunal further noted the principle of strict interpretation of exemption notifications as laid down by the larger bench of the Supreme Court in Commissioner of Customs (Import), Mumbai versus Dilip Kumar & Company. In cases of doubt, the benefit of exemption must be denied to the assessee and allowed to the Revenue.

Applying this principle, the Tribunal held that the appellant cannot claim exemption under S.No. 332A without fulfilling the condition of use within the factory or compliance with Condition no. 2.

Issue 3: Scope of rectification of mistake application and re-adjudication

The Revenue argued that the appellant was effectively seeking re-adjudication of the matter through the rectification application, which is impermissible. Rectification is limited to correcting errors apparent on record and cannot be used to re-open or re-decide issues already adjudicated.

The Tribunal agreed that the rectification application cannot be used to re-adjudicate classification or entitlement issues but can be used to correct mistakes apparent on record. The Tribunal found that the Final Order did not address the appellant's claim under S.No. 332A of Notification no. 12/2012-CE, which was an omission amounting to a mistake apparent on record. Therefore, rectification was appropriate to clarify the position on this issue.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"The appellant's claim of the benefit of notification no. 24/2005-Cus dated 1.3.2015 and Notification no. 21/2012-Cus are based on their claim of this classification. Having decided this classification in favour of the Revenue, we cannot hold that the appellant will be entitled to the benefit of these two notifications. As for the benefit of notification no. 12/2012-CE dated 17.3.2012 (S.No. 332A), it is available to goods falling under any Chapter but only if they are used within the factory of manufacture or if they are not so used, if the condition no. 2 is fulfilled. The imported goods were not used within the factory manufacture (which is outside India) nor has the condition no. 2 been fulfilled. Therefore, the appellant will not be entitled to the benefit of this notification for the Additional Duty of Customs."

The Tribunal reaffirmed the principle of strict interpretation of exemption notifications, citing the larger bench Supreme Court decision:

"All exemption notifications must be strictly interpreted and in case of any doubt about the eligibility of the exemption, it must be decided in favour of the Revenue and against the assessee."

The Tribunal clarified that the exemption under S.No. 332A is conditional and cannot be extended to imported goods not used within the factory or without compliance with prescribed procedural rules.

The Tribunal also emphasized the limited scope of rectification applications, allowing correction of omissions or mistakes apparent on record but disallowing re-adjudication of substantive issues.