M-S. LOHIA SHEET PRODUCTS v. COMMISSIONER OF CUSTOMS, NEW DELHI

Citation: [2008] 3 S.C.R. 948

Court: Supreme Court of India

Bench: ASHOK BHAN, J.M. PANCHAL

Case summary

M-S. LOHIA SHEET PRODUCTS v. COMMISSIONER OF CUSTOMS, NEW DELHI.pdf

Judgment text

[2008] 3 S. C. R. 948 M/S. LOHIA SHEET PRODUCTS II. ' - COMMISSIONER OF CUSTOMS, NEW DELHI (Civil Appeal No. 2411 of 2002) MARCH 5, 2008 [ASHOK BHAN AND J. M. PANCHAL, JJ. ] t ' Customs Tariff Act, 1975 - s. 3 - Levy of additional duty equal to excise duty-Assessee importing copper/brass waste and scrap - Benefit of exemption from duty under the Notification/Tariff Heading - Entitlement of - Assessing Authorities as well as tribunal holding that only copper/brass waste and scrap generated in the factory ofproduction entitled to the benefit - Held: Not sustainable - Assessee satisfied all the conditions of Entry 74. 04 as they had used copper/brass ....

waste and scrap within the factory ofproduction for manufacture f - Entry nowhere uses word 'generated' or 'imported' - Assessee paid amount equivalent to excise duty at the time ofimport ofwaste orscrap- Mere fact that goods were imported would not make any difference - Intention behind grant of exemption is to prevent double payment of duty - Thus, assessee entitled to benefit of Notification - Notification No. 8196 CE dated 23. 7. 1996 - Central Excise Tariff Act, 1985 - Tariff Heading 7404. 10. ,,.. Appellants imported copper/brass waste and scrap for use in the manufacture of handicrafts. They claimed r benefit of exemption from duty under the Notification No. 8/96-CE dated 23. 07. 1996. However, they paid the duty on the scrap Imported under protest and filed refund claim. Authorities below and the tribunal rejected the refund claim.

The tribunal held that the copper waste and scrap used by the appellants had been imported and not generated in the factory of production, thus the appellants ' ' were not entitled to exempti~n Notification. Hence the . OF CUSTOMS, NEW D. ELHI present appeals. ) Allowing the appeals, the Court HELD: 1. 1 The explanation to the sub-section (1) of Section 3 of the Customs Tariff Act, 1975 clarifies the expression, 'the excise duty for the time being leviable 8 on a like article if produced or manufactured in India' used in the said section to mean the excise duty for the time + being in force which would be leviable on a like article if produced or manufactured in India. It further clarifies that if a like article is not so produced or manufactured which in turn clarifies that for the purpose of levy of additional duty actual production or manufacture of like article is not necessary. [Para 14] [955-0, E, F] 1. 2 The sum and substance of the Entry 74.

04 is that if a manufacturer uses copper waste and scrap within the . factory of production for the manufacture of unrefined or t unwrought c. opper, copper sheets or circles and handicrafts, then it would be entitled to the exemption under the impugned notification. In the instant case, the appellants satisfied all the three conditions as they had used the copper/brass waste and/or scrap within the factory of production, and for the manufacture of handicrafts. The entry nowhere uses the word 'generated' or 'imported'. The condition that only that scrap would be entitled to exemption which has been generated in the y factory of production is, therefore, unwarranted and unsustainable. The word, 'within' occurs after the word, ~ 'used'. The assessing authority as well as the tribunal have arrived at the finding that only that scrap/waste of copper would be entitled to the exemption which had been generated in the same factory because of the word, 'within' used in the heading 74. 04.

According to them, the word, 'within' pre-supposes thaf the copper waste and scrap was generated in the same factory. The entry cannot ' be read in the manner as suggested by the Revenue. [Para 15] [955-F, G, H; 956-A, B, C] 1. 3 The test laid down by the tribunal that the benefit n, is that if amiinufacturE! r uses copper waste iind $Qr<iP within the factory of production for the manufacture of unrefined or unwrought copper. copper sheets or circles 1rnd handicrafts. then it would Ile entitled to the l:lxemption under the! Impugned notification. In the present cC1se.. the appellants satisfy C!! I the three conditions C! S they had used the copper/brass waste and/or scrap within the factory of ( production, and for the manufacture of handicrafts. The entry nowhere uses the word 'generated' or 'imported'. The condition that only that scrap would be entitled to exemption which has been generated in the factory of production is, therefore, unwarranted and unsustainable.

The word, 'within' occurs after the word, 'used'. The assessing authority as well as the Tribunal have arrived at the finding that only that scrap/waste of copper t ~ would be entitled to the exemption which had been generated in the same factory because of the word, 'within' used in the heading 74. 04. According to them, the word, 'within' presupposes that the copper waste and scrap was generated in the same factory. We are unable to read the entry in the manner as suggested by the Revenue. 16. The test laid down by the Tribunal that the benefit of the notification/tariff heading would be admissible to only that I"copper waste and scrap which is generated in the factory of • production and not the imported waste and scrap, is not supported either by the text ofthe exemption notification, heading 74. 04 or any other authority. 17. This Court in the case of Thermax Pvt. Ltd. v.

Commissioner of Customs 1992 (61) ELT 352 (SC) has held that since the concession under Rule 192 turns only on the nature and use to which the goods are put by the user or purchaser thereof and whether he has gone through the procedure outlined ~ in Chapter· X, it would not be correct to deny it to a supplier of such goods on the ground that he was an importer and not a 'i manufacturer. In other words, this Court stated in specific terms that one has to forget that the goods are imported, imagine that the importer had manufactured the goods in India, determine the amount of excise duty that he would have been called upon to pay in that event. The decision of the Tribunal that the assessee could not get a refund because the procedure of .. Chapter X of the Rules is inapplicable to importers as such was ~ held to be wrong.

It was further held that the benefit of the exemption or concession should be granted wherever the intended use of the material can be established by the importer ~ or by other evidence. In the present case, it is a matter of fact " that duty was paid by the appellant at the time of import of waste or scrap. Mere fact that the goods were imported would not makeany difference. The intention behind the grant of exemption under the notification was to prevent the duty being paid at two stages. In the present case, an amount equivalent to the excise ~ duty had been paid by the appellants atthe time of import on the waste and scrap. If the benefit of the notification is not given to the appellants it would mean double payment of duty which goes contrary to the law laid down by the decision of the Constitution Bench of this Court in the case of Hyderabad Industries Ltd. (supra). This Court in the said judgment held as under: · "10.

Section 3(1) of the Customs Tariff Act, 1975 provides for levy of an additional duty. The duty is, in other words, .. in addition to the customs duty leviable under Section 12 ~ of the Customs Act read with Section 2 of the Customs Tariff Act. Secondly this duty is leviable at a rate equal to the excise duty for the time being leviable on a like article to the one which is imported if produced or manufactured in India. The explanation to this sub-section expands the meaning of the expression "the excise duty for the time being leviable on a like article if produced or manufactured in India". The explanation to Section 3 has two limbs. The first limb clarifies that the duty chargeable " under sub-section (1) would be the excise duty for the time being leviable on a like article if produced or r . manufactured in India. The condition precedent for levy of additional duty thus contemplated by the explanation is that the article is produced or manufactured in India.

The second limb to the explanation deals with a situation where ''a like article is not so produced or manufactured". The use of the word "so" implies that the production or ·~ manufacture referred to in the second limb is relatable to '· the use of that expression in the first limb which is of a like article being produced of (sic) manufactured in India. 11. The words "if produced or manufactured in India" does '( . , not mean that the like article should be actually produced or manufactured in India. As per the explanation if an Imported article Is one which has been manufactured or produced then It must be presumed, for the purpose of Section 3(1 ), that such article can likewise be manufactured or produced in India. For the purpose of attracting ~ additional duty under Section 3 on the import of a ' manufactured or produced article the actual manufacture or production of a like article in India is not necessary. As observed by this Court in Thermax Private Limited v.

Collector of Customs, Bombay [1992(61) E. L. T. 352 (S. C. ) =[1992] 4 SCC 440] at page 452-453 that Section 3(1) of the Customs Tariff Act "specifically mandates that the CVD will be equal to the excise duty for the time being leviable on a like article if produced or manufactured In o· .. India. In other words, we have to forget that the goods are "( imported, Imagine that the Importer had manufactured the goods in India and determine the amount of excise duty that he would have been called upon to pay In that event. " To our mind the genesis of Section 3(1) of Customs Tariff Act has been brought out in the aforesaid observations of this Court, namely, for the purpose of saying what amount, If any, of additional duty Is leviable under Section 3(1) of the Customs TariffAct, it has to be imagined that the articles imported had been manufactured or produced In India and then to see what amount of excise duty was levlable " thereon. " i 18.

For the reasons stated above, we accept these appeals, set aside the order of the Tribunal as well as that of the authorities below and It Is held that the appellants would be entitled to the benefit of the exemption notification no. 8/96-CE dated 23th July 1996 and consequently to the refund of the duty already paid In accordance with law. "- No costs. N. J. Appeals allowed.