New User   Login      
Tax Management India .com TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (11) TMI 313 - MADRAS HIGH COURT

2015 (11) TMI 313 - MADRAS HIGH COURT - 2016 (331) E.L.T. 561 (Mad.) - Exemption from levy of additional duty (CVD) where the manufactured goods are exempted from duty of excise - Amendments to nullify the decision of Apex Court - Notification No.30/2004-CE, dated 9.7.2004 provides the exemption subject to no cenvat credit - Apex Court in the case of Aidek Tourism Services Private Limited v. Commissioner of Customs [2015 (3) TMI 690 - SUPREME COURT], and S.R.F. Limited v. Commissioner of Customs .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ough the amending Notification No.34/2015 dated 17.07.2015 is null and void in the light of Section 3(1) of the Customs Tariff Act, 1975 and Section 5A of the Central Excise Act, 1944 - Request of release the goods covered by 6 Bills of Lading, by extending the total exemption from payment of additional duty in terms of the original exemption Notification dated 9.7.2004.

Held that:- Wherever the Notifications prescribed conditions, which were merely procedural in nature, but did not i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r of the Revenue (except perhaps in the case of AIDEK and SRF).

A Notification such as the one bearing No.030/2004 dated 9.7.2004, which merely stipulates a condition that no CENVAT credit ought to have been availed in respect of the duties paid on the inputs, is in no way different from a Notification, which stipulates a condition that the inputs ought to have suffered a duty and no CENVAT credit should have been claimed on the same - Only restriction imposed upon a contracting party .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

an the domestic manufacturer, neither Section 3 nor the provisions of GATT would stand breached. Therefore, we have no hesitation in rejecting the arguments on the basis of Article III of GATT.

Merely because an organization representing the interests of domestic manufacturers made a representation to the Government, the amendments issued to the exemption notification cannot be said to be a malafide exercise of power. As a matter of fact by the impugned amendment notifications dated 1 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d be absolute and unconditional. If an exemption notification is absolute and unconditional, all domestic manufacturers, will be entitled to the benefit of the same. As a consequence, the importers will also be entitled to the benefit of the same. - in cases where the exemption is only conditional, it is only those domestic manufacturers who fulfill the conditions, who will be entitled to the benefit of the exemption notification. A domestic manufacturer who does not fulfill the condition prescr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ile the importer does not pay anything. Neither Section 3 of the Customs Tariff Act, 1975, nor Article III of GATT required that an importer should be placed in a more advantageous position than the domestic manufacturer. The only requirement under GATT and even under Section 3 of the Customs Tariff Act is that the importer should not be put to a disadvantageous position than the domestic manufacturer. But what the petitioners want is to place the importer in an advantageous position. This is no .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

such power is questioned by the writ petitioners. The impugned amendments are not in excess of the delegated power conferred under Section 5A(1). Therefore, at the outset, the amendments are not ultra vires Section 5A(1).

The amendments are not ultra vires Section 3 since the importers are not placed in a more disadvantageous position than that of the domestic manufacturers. By prescribing certain conditions for availing the benefit of exemption, the impugned amendments treat even th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mposed, the classification is reasonable and it has a nexus with the object sought to be achieved by the notification. It must be remembered that the notifications do not seek to differentiate between the importers and domestic manufacturers. They actually seek to discriminate one set of domestic manufacturers from another set of domestic manufacturers. A decision as to the category into which an importer will fall cannot therefore be taken to be discriminatory offending Article 14 of the Consti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n the notification. If some of them are not entitled, due to non fulfillment of the conditions, the importers, for whom it is impossible of complying with those conditions, are also not entitled to the benefit. It is this position that is sought to be clarified by the impugned amendment notifications dated 17.7.2015 and 21.7.2015. Hence, there are no merits in the writ petitions. - Decided against assessee. - W.P.Nos.24507, 26010 and 26011 of 2015 , and all connected pending MPs Cont. Petn. No.2 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

b-section (1) of Section 5A of the Central Excise Act, 1944 read with sub-section (3) of Section 3 of the Additional Duties of Excise Act, 1957, the excisable goods of the description specified in the table given under the Notification were exempt from payment of the whole of the Duty of Excise leviable thereon under the Central Excise Act, 1944. However, a proviso to the Notification restricted the availability of the benefit of exemption only to goods in respect of which Credit of Duty on Inpu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y not have any application to importers, as they could not in any case, avail CENVAT credit. 3. The aforesaid decisions were rendered by the Supreme Court on 19.3.2015 and 26.3.2015 respectively. Thereafter, the Central Government issued two Notifications, one bearing No.34/2015 on 17.07.2015 and another bearing No.37/2015 dated 21.07.2015. By the first Notification dated 17.07.2015, the proviso as it existed in the Notification No.30/2004 dated 9.7.2004 was replaced by a new proviso. By the new .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f such goods (and not the buyer of such goods), under the provisions of the CENVAT Credit Rules, 2004. 4. By the next Notification dated 21.07.2015, an explanation was inserted to the original Notification, clarifying that for the purposes of this Notification, appropriate duty or appropriate additional duty includes nil duty or concessional duty, whether or not read with any relevant exemption notification for the time being in force. 5. The Notifications bearing Nos.34 and 37 of 2015 dated 17. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n dated 9.7.2004, are now denied the benefit of the same. 6. Therefore, two importers, have come up with these three writ petitions. The first writ petition W.P.No.24507 of 2015 is filed by a company by name HLG Trading, involved in the business of wholesale trading of yarn, fabric etc. The prayer made in W.P.No.24507 of 2015 is to quash the Notifications bearing Nos.34 and 37 of 2015 dated 17.07.2015 and 21.07.2015 with a consequential direction to the respondents to extend the benefit of the o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

order passed by us on 26.8.2015. In the meantime, the petitioner in W.P.No.24507 of 2015 came up with a Contempt Petition in Contempt Petition No.2069 of 2015 alleging wilful disobedience of the interim order dated 26.8.2015. However, since the Union of India came up with a petition to modify the interim order and also since the pleadings were completed and both parties got ready for arguments in the main writ petition, the main writ petition W.P.No.24507 of 2015 itself was taken up for hearing .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

2015 is null and void in the light of Section 3(1) of the Customs Tariff Act, 1975 and Section 5A of the Central Excise Act, 1944. In the second writ petition W.P.No.26011 of 2015, the prayer is for a direction to the Assistant Commissioner of Customs to release the goods covered by 6 Bills of Lading, by extending the total exemption from payment of additional duty in terms of the original exemption Notification dated 9.7.2004. 8. Since all the three writ petitions revolve around either a challe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Solicitor General, assisted by Mr.T.Chandrasekaran, learned Senior Panel Counsel for the Department and Mr.S.Haja Mohideen Gisthi, learned Senior Penal Counsel for the Department. 10. As we have stated earlier, there are three writ petitions on hand, one filed by one importer and two filed by another importer. The writ petition W.P.No.26011 of 2015, is for a prayer which is only consequential to the prayer made in the other writ petition. Therefore, we are primarily concerned only with two writ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f Act, 1975, the imported goods can be made to suffer an additional duty of Customs, commonly known as CVD, equivalent only to the duty of Excise leviable on goods manufactured domestically and that therefore if the domestically manufactured goods are exempt from payment of duty of Excise, no additional duty of Customs can be levied on the importers; (ii) that the impugned amending Notifications have been issued to overreach the decisions of the Supreme Court in Aidek Tourism Private Limited and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

impossible of being complied with by him; and (iv) that at least in so far as the petitioners are concerned, goods that they import, if manufactured in India, would not have suffered any duty of Excise even on their inputs, as no duty is leviable on those inputs in India. 12. In response to the above contentions, it is submitted by Mr.G.Rajagopalan, learned Additional Solicitor General that if a Notification for exemption is made contingent upon the compliance with certain conditions, which an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e next level, it is contended by Mr.S.Murugappan, learned counsel for the petitioner in two writ petitions that the impugned portion of the amending Notification dated 17.07.2015, runs contrary to the provisions of the General Agreement on Tariffs and Trading, to which India was a party. Therefore, the offending portion of the Notification that runs contrary to the International Agreement to which India is a party, cannot be sustained. In support of the said contention based upon the provisions .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

at seem to support both views. Therefore, we shall take them up in the same order, for consideration. THE FUNDAMENTAL PREMISE FOR CVD: 15. The fundamental premise on which additional duty of Customs is levied under Section 3(1) of the Customs Tariff Act, 1975 is to ensure that due to the imposition of a duty of Excise on an article manufactured in India, a domestic manufacturer does not suffer a disadvantage than the importer of the same article. This is why the additional duty of Customs is lev .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

such a manner as to imagine the importer as a domestic manufacturer and to find out what he would have been subjected to, had he manufactured the same item in India. Keeping this fundamental premise in mind, let us move on to the next portion of our discussion relating to the statutory prescription and the Notifications. STATUTORY PROVISIONS, EXEMPTION NOTIFICATION AND AMENDMENTS THERETO: 17. There are certain items, which if manufactured in India, do not even attract a duty of Excise. The Cent .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

se Tariff Act, 1985. Therefore, if certain goods are not included in the Schedule to the Central Excise Tariff Act, 1985 or if a nil rate of duty is stipulated in those Schedules in respect of certain goods, those goods are not excisable or excisable at nil rate of duty. 18. Though all goods manufactured or produced in India and which are included in the Schedule to the Central Excise Tariff Act, 1985 are primarily excisable goods in view of the provisions of Section 3(1) of the Central Excise A .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ation in the Official Gazette exempt generally either absolutely or subject to such conditions (to be fulfilled before or after removal) as may be specified in the notification, excisable goods of any specified description from the whole or any part of the duty of excise leviable thereon : Provided that, unless specifically provided in such notification, no exemption therein shall apply to excisable goods which are produced or manufactured - (i) in a free trade zone and brought to any other plac .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es of an exceptional nature to be stated in such order, any excisable goods on which duty of excise is leviable." 19. A combined reading of Section 3(1) and 5A (1) of the Central Excise Act, 1944 together with the Schedules under the Central Excise Tariff Act, 1985 would show that all goods produced or manufactured in India can be classified into the following categories: (i) Goods which are not excisable, in view of the fact that they are not even mentioned in the Schedules to the Central .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

or produced in India may have to be classified into two broad categories, with one of those categories being divided into sub-categories and the sub-categories getting further divided. This can be easily understood by looking at the following chart:- 21. A careful look at sub-section (1) of Section 5A would show that there are different types of exemptions that could be granted by the Central Government. They are as follows: (i) absolute exemption (ii) exemption subject to fulfillment of certai .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

) If the exemption is absolute, all domestic manufacturers will be entitled to the benefit of the notification. (ii) If the exemption is not absolute but made subject to certain conditions, it is only those domestic manufacturers who fulfill those conditions either before or after removal, who will be entitled to the benefit of the exemption notification. Persons who do not fulfil the conditions may not be entitled to the benefit of the notification. 23. Keeping these distinctions in mind (i) be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

amendments issued to the same under the notifications dated 1.3.2006, 30.12.2006, 1.3.2007, 7.7.2009, 1.3.2011, 24.3.2011, 1.3.2013, 17.07.2015 and 27.07.2015. 25. Under the notification No.30/2004 dated 9.7.2004, all goods under certain Chapter headings such as 50.04, 50.05, 51.05, 51.06.11 to 51.06.13 etc., were exempt from the whole of the Duty of Excise. But in so far as goods falling under certain Chapter headings such as 54.02, 54.03, 54.02.10 etc., are concerned, not all goods falling un .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n taken under the provisions of the CENVAT Credit Rules, 2002. 27. To the notification dated 09.7.2004, a corrigendum was issued under notification No.334/3/2004, on the very same date, namely 09.7.2004. By this corrigendum, the words "inputs or capital goods" were directed to be read as "inputs". 28. By the next notification bearing No.10/2005 dated 01.3.2005, the Central Government amended the Table under many notifications of the years 2003 and 2004. The Table under the no .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed only to the entries in the Table given under each of those notifications. 30. The next notification No.13/2007 dated 01.3.2007, the notification No.12/2009 dated 07.7.2009, the notification No.12/2011 dated 01.3.2011, the notification No.30/11 dated 24.3.2011, the notification No.11/2013 dated 01.3.2013 were also of the same type, in the sense that the entries in the Table were amended. In a few cases, all goods under certain Chapter Headings were included in column (3). In certain other amen .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nation was inserted after the proviso to the original notification. 32. The proviso, as it existed under the notification dated 09.7.2004, the new proviso inserted by the first amendment notification dated 17.7.2015 and the explanation inserted by the second amendment notification dated 21.7.2015 are presented in a tabular column for easy appreciation of the transition that has taken place in the case on hand. Original proviso under notification dated 09.7.2004 New proviso under the notification .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

toms under section 3 of the Customs Tariff Act, 1975 (51 of 1975) has been paid and no credit of such excise duty or additional duty of customs on inputs has been taken by the manufacturer of such goods (and not the buyer of such goods), under the provisions of the CENVAT Credit Rules, 2004. Explanation.- For the purposes of this notification, appropriate duty or appropriate additional duty includes nil duty or concessional duty, whether or not read with any relevant exemption notification for t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

But, all notifications from 2004 did not provide for absolute exemptions. They provided for conditional exemptions, some of which were capable of being complied with and some are not. Keeping in mind the purport of the various exemption notifications, we shall now move over to the next part of our discussion, where we shall deal with judicial pronouncements. JUDICIAL PRONOUNCEMENTS 34. Interestingly, both sides rely upon the very same decisions to drive home their respective view points. Hence w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r any chemical derived therefrom and (ii) that on such raw material, the appropriate amount of duty of excise should have already been paid. In other words, the benefit of exemption was available under the Notification only to a manufacturer, who used a particular raw material, on which, an appropriate amount of duty of excise had already been paid. Therefore, rejecting the claim of the importer for exemption, the Division Bench of the Bombay High Court held that "a tax payer, who desires t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r the purpose of using the same for refrigeration/air conditioning of two factories, claimed the benefit of two exemption Notifications bearing Nos.93/ 76 and 63/85, which provided concession of 25% ad valorem. The Notifications stipulated two conditions to be fulfilled namely (a) that the parts indicated therein should be used for refrigeration and air conditioning appliances in any one of the places set out in the Table and (b) that the procedure specified in Chapter X of the Central Excise Ru .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, the claim was rejected. 37. Their appeals against two orders of rejection, suffered different consequences at the hands of the First Appellate Authority. Therefore, both the assessee as well as the Department filed appeals. The Tribunal allowed the Department's appeal and dismissed the assessee's appeal. When the matter landed up in the Supreme Court, the Supreme Court pointed out that for deciding the question of eligibility, one must forget the fact that the goods are imported, but i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ld that the Tribunal was wrong in denying the benefit to the assessee merely on the ground that the procedure stipulated in Chapter X of the Rules is inapplicable to importer as such. 38. In Hyderabad Industries Limited Vs. Union of India [1995 (5) SCC 338], an importer of asbestos fibre, that was separated from its parent rock, was aggrieved by a demand of additional duty of customs made under Section 3(1) of the Customs Tariff Act, 1975. The Department took a stand that the process, by which, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e. The assessee argued that additional duty of customs under Section 3(1) could be levied only if an article, which was imported into India, could be manufactured in India or elsewhere. This argument was rejected in Khandelwal by holding that the levy stipulated in Section 3(1) is a supplementary one and that it is only an enhancement of the levy charged by Section 12 of the Customs Act. In other words, the decision in Khandelwal was to the effect that an additional duty of customs is leviable e .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e article had not undergone a process of manufacture or production, it is still subjected to the levy of additional duty, was held, in Hyderabad Industries Limited, to be incorrect. 41. In Motiram Tolaram Vs. The Union of India [1999 (6) SCC 375], the Supreme Court was concerned with an exemption Notification No. 185/83, which reduced the rate of duty on polyvinyl alcohol manufactured from duty paid vinyl acetate monomer to 10% ad valorem. The Department refused the benefit of the Notification t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eing complied with by an importer. While rejecting the said contention, the Supreme Court held as follows : "Vinyl acetate monomer is an item which is manufactured in India and a rate of excise duty is leviable thereon. On the polyvinyl alcohol which has been imported, vinyl acetate monomer has not been subjected to the appropriate amount of duty payable under the Indian law. Because this condition had not been satisfied in the present case, therefore, the appellants are unable to get the b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ount of duty of excise had already been paid'. The Department took a stand that in cases where the raw material had attracted -NIL- duty, the condition stipulated in the Notification cannot be fulfilled and that therefore, the benefit of the exemption Notification may not be available in respect of products, on whose inputs, no duty was paid. But, this stand of the Department was rejected by the Court in Usha Martin Industries on the ground that the expression 'appropriate' cannot be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hiren Chemical Industries are extracted as follows : "In our view, the correct interpretation of the said phrase has not been placed in the judgment in the case of Usha Martin. The stress on the word 'appropriate' has been mislaid. All that the word 'appropriate' in the context means is the correct or the specified rate of excise duty. An exemption notification that uses the said phrase applies to goods which have been made from duty paid material. In the said phrase, due em .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ch duty is nil, no excise duty is, as a matter of fact, paid upon it. To goods made out of such material, the notification will not apply." 44. In Commissioner of Customs, Amritsar Vs. Malwa Industries Limited [2009 (235) ELT 214 SC], the Supreme Court was concerned with a Notification dated 1.3.2006. As per the said Notification issued in exercise of the powers conferred by Section 5A(1) of the Central Excise Act, 1944, an exemption was granted subject to the condition that the product is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

se of the assessee, the same should be construed liberally. The expression 'same factory' found in the Notification was interpreted by the Supreme Court in Malwa Industries Limited, to mean factory belonging to the importer where the manufacturing activity took place. 45. In Commissioner of Central Excise Vs. Hari Chand Shri Gopal [2010 (260) E.L.T. 3 (SC)], a Five Member Bench of the Supreme Court held that a provision in a fiscal statute providing for an exemption, concession or except .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d. But, the Court pointed out that this doctrine is a judicial invention equitable in nature, designed to avoid hardship, where a party does all that can reasonably be expected of it, but failed or faulted in some minor or inconsequential aspects, which cannot be described as the "essence" or the "substance" of the requirements. In other words, if there are certain statutory requirements, the fulfillment of which would not constitute the essence or substance, then the same ca .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f inputs had not discharged fully the duty liability for the period covered by the invoices. Therefore, the benefit availed earlier was disallowed. The First Appellate Authority concurred with the view of the Adjudicating Authority. But, the Tribunal (CESTAT) reversed the decisions of the Adjudicating and Appellate Authorities on the ground that there was sufficient compliance of the conditions enumerated in the Notification. The High Court, in an appeal filed by the assessee, answered the quest .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of Rule 57A of the Rules, dealing with the availing of MODVAT credit. Therefore, the Court held that the decision of the Constitution Bench in Dhiren Chemical Industries would have no application to cases of that nature. 49. After nearly two years of the decision in Kay Kay Industries, the Supreme Court had occasion to consider the very same issue, in three decisions, within a span of a few days in March 2015. On 16.3.2015, the Supreme Court rendered a decision in Ahujasons Shawl Wale (P) Ltd. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

CVD can be imposed on an importer when no Excise Duty was payable by the domestic manufacturer. 50. Within three days of the decision in Ahujasons Shawl, the Supreme Court dealt with a case relating to the importer of Honda Accord Cars. In the said case decided on 19.3.2015, in Aidek Tourism Services Pvt. Ltd. Vs. Commissioner of Customs [2015 (7) SCC 429], the assessee, which had imported Honda Accord cars, filed a claim for refund on the ground that in terms of the Notification No.64/93, they .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tion. A Two Member Bench of the Supreme Court, allowing the claim of the assessee, held that the ratio of the decision in Thermax Private Limited would be squarely applicable to the case, going by the spirit and objective behind the Notification. 51. Aidek Tourism Services Pvt. Ltd. was followed immediately by a decision rendered on 26.3.2015 in S.R.F. Limited Vs. Commissioner of Customs [2015 (318) ELT 607 (SC)]. In S.R.F. Limited, the assessee was an importer of nylon filament yarn of 210 deni .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e manufacture of those imported goods would not have suffered any duty of excise, making the assessee even eligible for a CENVAT credit. But, the Supreme Court held in S.R.F. Limited that the contention of the Department was completely contrary to the judgment in Thermax Private Limited. Accordingly, the Supreme Court allowed the claim of S.R.F.Limited. 53. As we have pointed out earlier, the Central Government did two things, after the decision of the Supreme Court in S.R.F. Limited (rendered o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

l Excise Tariff Act or additional duty of customs under Section 3 of the Customs Tariff Act, 1975 (51 of 1975) has been paid and no credit of such excise duty or additional duty of customs on inputs has been taken by the manufacturer of such goods (and not the buyer of such goods), under the provisions of CENVAT Credit Rules, 2004." By the second amendment, under Notification No.37/2015, an Explanation was inserted under the above proviso. This Explanation reads as follows : "Explanati .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ly so. 55. But, a careful look at the various types of Notifications issued by the Central Government from time to time in exercise of the powers conferred by Section 5A(1) of the Central Excise Act, 1944 and the manner in which the Supreme Court interpreted the Notifications, would make clear one important fact. This fact is that all the Notifications so far issued and which had so far come up for consideration, could be categorised into four types, as follows : (i) Notifications, which have st .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

suffered a duty of excise, but the manufacturer should not also have claimed CENVAT credit on the quantum of such duty of excise suffered on the inputs and (iv) Notifications, which contain a condition that the manufacturer should not have claimed CENVAT credit on the duty of excise leviable on the inputs. 56. That the Notifications that came up for consideration so far before the Supreme Court could be classified into the above four types, can be easily from the following table : Decision Notif .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

stion was whether in respect of such an article, Section 3(1) of the Tariff Act could be invoked Thermax Private Limited Notifications 93/76 and 63/85. The product should be used for a particular purpose in any one of the places set out in the table under the Notification and the procedure specified in Chapter X of the Central Excise Rules, 1944 should have been followed Hyderabad Industries Limited Even in this case, the Supreme Court was not concerned with any notification, but primarily conce .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

.185/83, which imposed a condition that the input used for the manufacture of the product should have suffered an Notification No. and condition stipulated therein appropriate amount of duty under the Indian Law. Usha Martin Industries Exemption Notification dated 30.11.1963 as amended upto 7.4.1981, which imposed a condition that the exempted product should contain a raw material, on which, appropriate amount of duty of excise had already been paid. Dhiren Chemical Industries It arose out of a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the raw material is not liable to excise duty, no excise duty could have been paid upon it and that therefore, to such goods made out of such material, the Notification will not apply. Malwa Industries Limited The exemption Notification No.4/2006, which imposed a condition that the exempted goods are used in the same factory fell for consideration. The expression 'same factory' was interpreted to mean 'factory' where the goods are actually manufactured. In case of imported goods, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Notification. It was concerned with Notification No. 58/97 issued in exercise of the powers conferred by Rule 57A(6). Ahujasons Shawl Decision It is not clear from the report of the decision as to what type of a notification the supreme court was concerned about in this case. From the facts narrated in the first para of the law report, it can be Notification No. and condition stipulated therein presumed that exemption was available to unbranded shawls domestically manufactured. Aidek Tourism Se .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n the light of what is reflected in the above table, it can safely be concluded that the interpretation given by the Supreme Court to the Notifications that were in question, depended primarily upon two important facts namely (a) as to whether the Notification imposed a condition that the input used for the manufacture of the exempted goods had already suffered a duty of excise or not and (b) as to whether the manufacturer of the exempted goods had claimed CENVAT credit in respect of a duty paid .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ii) a condition that duty ought to have been paid and CENVAT credit not claimed, the Court interpreted such Notifications in favour of the Revenue (except perhaps in the case of AIDEK and SRF). 59. It must be pointed out at this stage that one cannot make a distinction between (i) a Notification, which merely stipulates a condition that the manufacturer ought not to have claimed CENVAT credit in respect of the duties paid on the inputs and (ii) a Notification that imposes a condition that a duty .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, which merely stipulates a condition that no CENVAT credit ought to have been availed in respect of the duties paid on the inputs, is in no way different from a Notification, which stipulates a condition that the inputs ought to have suffered a duty and no CENVAT credit should have been claimed on the same. 61. In simple terms, we can understand the proposition by looking at the different alternative scenarios as follows : S. No. Conditions stipulated in the Notification Possible scenarios Resu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d have been taken, then the Department cannot improve upon the condition, irrespective of whether a person falls under the first scenario or the second scenario. The Department is obliged to give the benefit of the exemption Notification to all persons, who manufacture exempted goods with inputs, which have suffered a duty of excise 2 A Notification with the only stipulation that no CENVAT credit has been availed on the duties leviable on the inputs In this type of a case there can be only one s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

used by him had suffered duty and (ii) that he had not claimed CENVAT credit on them 3 A condition, which incorporates both (1) and (2) above. In other words, a condition that stipulates that the inputs should have suffered a duty and no CENVAT credit had been taken Even in this type of Notification, there is only one possible scenario Consequently, a person will be entitled to the benefit of the exemption Notification only if both conditions are satisfied. 62. Therefore, the interpretation to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ations, one stipulating the sufferance of duty on the inputs and another merely stipulating that no CENVAT credit should have been claimed, is to ensure that though the goods by themselves are exempt, some element of duty has been paid on the inputs that were used in their manufacture. 63. However, drawing our attention to the original text of the General Agreement on Tariffs and Trade (GATT) 1947, to which India was a signatory, it was contended by Mr.S.Murugappan, learned counsel that the prod .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production. 2. The products of the territory of any contracting party imported into the territory of any other contracting party shall not be subject, directly or indirectly, to internal taxes or .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in which the import duty on the taxed product is bound against increase, the contracting party imposing the tax shall be free to postpone the application of the provisions of paragraph 2 to such tax until such time as it can obtain release from the obligations of such trade agreement in order to permit the increase of such duty to the extent necessary to compensate for the elimination of the protective element of the tax. 4. The products of the territory of any contracting party imported into th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the nationality of the product. 64. After the issue of the original text, certain Supplementary Provisions were added to GATT 1947. It was clarified by the Supplemental Provisions that any internal tax or other internal charge which applies to an imported product and to the like domestic product and is collected in the case of imported product at the time or point of importation is to be regarded as an internal tax. Therefore, the learned counsel contended that by depriving the benefit of the e .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e "Measures Affecting Alcoholic Malt Beverages" dated 19.6.1992. 66. Let us first deal with the submission based upon the report of the GATT Panel between Canada and USA. What happened in that case was that under a statute known as the Omnibus Budget Reconciliation Act, 1990, the Excise tax of beer was increased. But the breweries located in United States with an annual production not exceeding 2 Million Barrels, had the benefit of a lower rate of tax for the first 60,000 barrels. This .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

omestic beer from qualifying domestic producers, without making such lower rate available in the case of imported beer was inconsistent with Article III.2. A similar conclusion was reached even in respect of Excise Tax credit on domestic wine. 67. We do not think that the said report is of any assistance. Apart from the fact that a report of the GATT Panel is not binding on us, it is also to be pointed out that we are concerned in this case only with an interpretation to be given to an exemption .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

l tax in excess of those applied to like domestic products. The principle behind Article III of GATT 1947 is what is incorporated in Section 3 of the Customs Tariff Act 1975. We have no quarrel with the proportion that an importer cannot be subjected to a tax which is in excess of those imposed upon like domestic products. But the real question is as to whether by granting the benefit of the exemption notification, we will be putting the importer to a more advantageous position than the domestic .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Manufacturers known as "MAIT" gave a representation to the Central Government on 15.7.2015, immediately after the decision of the Supreme Court in S.R.F., pointing out that the " make in India" policy of the Government would suffer a set back, if the benefit of the exemption notification is made available to importers of mobile hand sets and tablet computers. After obtaining a copy of the said representation under the Right to Information Act, the petitioner has come to the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t computers and mobile hand sets. But the said representation merely projected the view point of the domestic manufacturers. As a matter of fact, the representation submitted by them contains a condition that they wanted to incorporate in the exemption notification. The condition that MAIT wanted the Government of India to incorporate in the notification No.12/2012 dated 17.07.2015 is as follows:- "If manufactured in India and no credit under rule 3 or rule 13 of the CENVAT Credit Rules, 20 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

issued to the exemption notification cannot be said to be a malafide exercise of power. As a matter of fact by the impugned amendment notifications dated 17.07.2015 and 21.07.2015, the Government had done something that may hit some of the domestic manufacturers also. A domestic manufacturer who would have otherwise been entitled to the benefit of the exemption notification dated 9.7.2004, may not any more be entitled to the benefit of the notification, unless he satisfies the newly incorporate .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s follows:- "It may recalled that the Hon'ble Supreme Court, in the case of M/s. SRF Ltd., versus Commissioner of Customs, Chennai and M/s. ITC Ltd. v/s. Commissioner of Customs (I&G), New Delhi [2015 (318) E.L.T.607 (S.C.)] relating to CVD exemption, has held that the benefit of excise duty exemption [available to final products manufactured by the domestic manufacturer, subject to the condition of non-availment of CENVAT credit of duty on inputs or capital goods used by such manuf .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t to be eligible for such concessional rate. This would put the domestic manufacturers at a disadvantage visa- vis imports and would adversely impact the Make in India Policy of the Government. 3. The judgment of the Hon'ble Supreme Court was examined in CBEC and it was found that there were certain errors apparent on record/interpretational issues and, with the concurrence of the Ld. Attorney General, a Review Petition/Revision Application has been filed against the same. 4. However, keepin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ry of Law & Justice was also sought. With the concurrence of the Ld. Attorney General, notifications No. 34/2015-C.E., No.35/2015-C.E. and No.36/2015-C.E. all dated 17.7.2015 were issued amending the conditions in notifications No.30/2004-C.E., dated 9.7.2004, No.1/2011-C.E., dated 1.3.2011 and No.12/2012-C.E., dated 17.03.2012, respectively. 6. In the above context, apprehensions have been raised about the use of the phrase of "appropriate duty". In this regard. Explanations have .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

oods covered under these notifications/ entries continue to be exempt from excise duty or subject to concessional rate of excise duty, as the case may be, as they were prior to 17th July, 2015. 8. Trade Notice/Public Notice may be issued to the field formations and taxpayers. 9. Difficulties faced, if any, in implementation of this Circular may be brought to the notice of the Board." 74. Though para 7 of the Circular extracted above indicates that the domestic manufacturer would continue to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ccepted parameters. The validity of the notifications statutorily issued cannot be tested on the basis of a Circular issued by the department, post facto. Therefore, the above argument of the writ petitioners cannot be accepted. 75. One more contention raised by Mr.R.Yashodh Vardhan, learned senior counsel for the petitioner is that the Court should make a distinction between a condition precedent and a condition subsequent, before finding out whether the benefit of the exemption notification is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

expected to comply with such a condition. A condition which is impossible of being complied with by an importer, such as the conditions that arise at the pre-production stage, cannot be put against the importers. 76. Though the aforesaid argument has a sound logical basis, it does not have a legal basis. This can be seen, if we take a relook at the nature of the exemptions contemplated under Section 5A. We have given in a previous paragraph, a chart. It can be found from the chart that certain .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the condition prescribed in the exemption notification, will not be entitled to the benefit of exemption. 78. Let us go by the very logical premise on which the Supreme Court decided Thermax or Hyderabad Industries. If we do so, we have to imagine the writ petitioners herein or all importers for that matter, as if they are domestic manufacturers. To this extent there is no difficulty. But after we imagine an importer to be a domestic manufacturer of a like product, the next question that we sho .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

efit of the exemption notification, then the question arises whether the importer would be placed along with those domestic manufacturers who got the benefit or whether they will be placed along with the domestic manufacturers who do not get the benefit. 80. An answer to the above question can be found out by taking a very interesting example provided by Mr.S.Murugappan, learned counsel for the petitioner in the course of his submissions. The learned counsel gave the example of a domestic manufa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

notification. In such an event, he need not pay ₹ 200/- as Duty of Excise on the product manufactured by him. But he would have used inputs which had already suffered a Duty of Excise to the extent of ₹ 100/-. In other words, he is a person who gets the benefit of an exemption from payment of ₹ 200/-, due to his refusal to claim CENVAT credit to the extent of ₹ 100/-. 81. The second option open to him is to claim CENVAT credit. In which case, he will not be entitled to t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he would equate himself with a person who has not claimed CENVAT credit and avail the benefit of the exemption notification. The result is that a domestic manufacturer pays an extra amount of ₹ 100/-, in the example given above, while the importer does not pay anything. Neither Section 3 of the Customs Tariff Act, 1975, nor Article III of GATT required that an importer should be placed in a more advantageous position than the domestic manufacturer. The only requirement under GATT and even .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

21.07.2015 are issued in exercise of the power conferred by Section 5A. Section 5A(1) itself empowers the Central Government to grant exemption either absolutely or subject to such conditions as they may stipulate. If the Central Government has the power to grant exemption subject to certain conditions, they have the power even to modify the conditions. This is why neither the source of power nor the method of exercise of such power is questioned by the writ petitioners. The impugned amendments .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

stic manufacturers who do not get the benefit of the exemption notification, does not strike at the root of Section 3. Therefore, the notifications do not offend Section 3. 85. The petitioners cannot even assail the impugned notifications on the strength of Article 14 of the Constitution. If the domestic manufacturers themselves are classified into two categories depending upon the nature of the conditions imposed, the classification is reasonable and it has a nexus with the object sought to be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the Central Excise Act or Section 3 of the Customs Tariff Act or even Article 14 of the Constitution, the petitioners cannot successfully maintain the challenge. 87. One last argument advanced is that the petitioners are importers of some material that are manufactured by the use of some raw-material which attract zero rate of Duty under the Schedules to the Central Excise Tariff Act. Therefore, it is contended that at least in so far as the case of the petitioners are concerned, the distinct .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nnotations. The raw materials, such as raw silk, etc. used for manufacturing the fabrics imported by the petitioner, may attract zero rate of duty as per the Schedules to the Act. But, it is not as though the producers of goods are entitled only to CENVAT credit on the raw materials used for the manufacture of the finished products. The expression "input" as defined in Rule 2(k) of the CENVAT Credit Rules, 2004, is as follows: (k) "input" means- (i) all goods, except light di .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

roducts or for any other purpose, within the factory of production; (ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service; Explanation 1.- The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever. Explanation 2.- Input include goods used in the manufacture of capital goods which are further used in the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

roduct or not, are deemed to be inputs. Even lubricating greases, cutting oils, coolants, accessories of the final products and goods used as paints or packing material or as fuel or for generation of electricity in relation to the manufacture of final products are deemed to be inputs. 89. It may be of interest to note that in the case of silk itself, the process of manufacturing of silk fabric from raw silk, involves the following steps: (i) sorting and softening the cocoons, (ii) reeling the f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version