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Bpl Display Devices Ltd. v. Commissioner Of Central Excise, Ghaziabad .
Factual and Procedural Background
This opinion concerns an appeal on the availability of customs exemption benefits under Notification No. 13/97-Cus. (as amended by Notification No. 25/99-Cus.), which grant benefits to specified goods imported into India “for use” in the manufacture of other specified items. The appellant imported parts of picture tubes for manufacturing colour picture tubes, and both the imported inputs and the final manufactured goods were covered by the notifications. A small percentage of the imported parts was damaged in transit and therefore could not be used for manufacture during the year 2000–01.
The appellant nonetheless claimed exemption for the entire consignment, relying (among other things) on an earlier CEGAT decision in National Organic Chemical Indus. Ltd. v. Collector of Customs (Import) (2000) 126 ELT 1072 (cegat), which had held that exemption could not be denied where goods were intended for use in manufacture but could not be so used due to shortage or leakage. Although the Department’s appeals from that Tribunal decision were dismissed by this Court on 20-2-2002 in Commr. of Customs (Import) v. National Organic Chemical Industries Ltd. (2005) 10 SCC 277, the Tribunal in the present matter relied instead on its earlier decision in CCE v. B.P.L Display Devices Ltd. (2002) 147 ELT 912 (cegat) to decide against the appellant. The present opinion resolves the appellant’s appeal against that outcome.
Legal Issues Presented
- Whether the appellant was entitled to the benefit of Notification No. 13/97-Cus., as amended by Notification No. 25/99-Cus., for imported parts that were covered by the notifications but could not be used in manufacture due to damage in transit, given that the notifications apply to goods imported “for use” in manufacture.
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| National Organic Chemical Indus. Ltd. v. Collector of Customs (Import) (2000) 126 ELT 1072 (cegat) | Exemption under similar “for use” notifications cannot be denied where goods were intended for use in manufacture but could not be used due to shortage or leakage. | Treated as governing because the notifications involved were stated to be substantially similar; supported granting the exemption despite the inability to use a small portion of inputs. |
| Commr. of Customs (Import) v. National Organic Chemical Industries Ltd. (2005) 10 SCC 277 | This Court dismissed the Department’s appeals from the Tribunal’s decision in National Organic Chemical Indus. Ltd. (affirming the Tribunal’s reasoning). | Cited to show that the Tribunal’s reasoning in National Organic Chemical Indus. Ltd. had been affirmed by this Court (dismissal dated 20-2-2002), and therefore should be followed in the present appeal. |
| CCE v. B.P.L Display Devices Ltd. (2002) 147 ELT 912 (cegat) | This precedent was relied upon by the Tribunal to decide against the appellant. | The Court did not apply it to uphold the Tribunal’s conclusion; instead it allowed the appeal by following the affirmed reasoning in National Organic Chemical Indus. Ltd.. |
| State Of Haryana v. Dalmia Dadri Cement Ltd. 1987 Supp SCC 679 | Construction of the words “for use” in similar exemption notifications as meaning “intended for use”; the object of exemption is to exclude those who divert imported goods for other purposes without intention to use them in the specified manufacture. | Used to interpret “for use” in the present notifications as “intended for use,” supporting exemption where goods were imported for the specified manufacturing purpose and not diverted, even if some became unusable due to damage. |
Court's Reasoning and Analysis
The Court noted that there was no dispute that (i) the appellant imported parts of picture tubes for manufacturing colour picture tubes, and (ii) both the inputs and final product fell within the scope of the relevant exemption notifications. The only complication was that a small percentage of the imported parts was damaged in transit and therefore could not be used in manufacture during 2000–01.
The Court considered the approach adopted in National Organic Chemical Indus. Ltd. v. Collector of Customs (Import) (CEGAT), where exemption had been held available even when the imported goods, though intended for manufacture, could not be so used due to shortage or leakage. The opinion states that the notifications in that case were substantially similar to those at issue here, and that this Court had dismissed the Department’s appeals against that decision (dated 20-2-2002).
Despite the Tribunal’s reliance on CCE v. B.P.L Display Devices Ltd. to deny the appellant the benefit, the Court held that the appeal must “necessarily” be allowed in view of the affirmed reasoning in National Organic Chemical Indus. Ltd.. It further found that no material distinction could be drawn between loss due to leakage (as in the earlier case) and loss due to damage (as here), indicating that both situations involve inability to use goods for reasons not amounting to diversion.
The Court also relied on its earlier construction of the phrase “for use” in State Of Haryana v. Dalmia Dadri Cement Ltd., where “for use” was interpreted to mean “intended for use.” On that construction, the exemption is directed at denying benefit only to importers/manufacturers who diverted imported goods for other purposes and had no intention to use them for manufacturing the specified items at any stage. Applying this understanding, the Court accepted that the appellant’s claim should not fail merely because a small portion of the goods became unusable due to transit damage.
Holding and Implications
ALLOWED: The appeal was allowed, and there was no order as to costs.
The direct effect is that the appellant was held entitled to the benefit of Notification No. 13/97-Cus. (as amended by Notification No. 25/99-Cus.) even in respect of the portion of imported parts that could not be used in manufacture due to transit damage, since “for use” was treated as “intended for use” and there was no indication of diversion. The opinion does not discuss any broader implications beyond applying existing interpretations and the affirmed reasoning in the cited precedents.
Order
1. The question in this appeal is whether the appellant is entitled to the benefit of Notification No. 13/97-Cus. as amended by Notification No. 25/99-Cus. These two notifications provide for certain benefits to specified items if they are imported into India “for use” in the manufacture of other items specified in the notifications.
2. It is not in dispute that the appellant had imported parts of picture tubes for manufacture of colour picture tubes. Both the input and the manufactured items are covered by the notifications. It is also not in dispute that a small percentage of the imported parts were damaged in transit and could not be used to manufacture picture tubes during the year 2000-01. The appellant claimed the benefit of the aforesaid notifications in respect of the entire lot of the parts imported relying, inter alia, upon the earlier decision of the Tribunal in National Organic Chemical Indus. Ltd. v. Collector of Customs (Import) (2000) 126 ELT 1072 (cegat) which had held that the benefit of the notifications could not be denied in respect of goods which were intended for use for manufacture of the final product but could not be so used due to shortage or leakage. The notifications relied upon in the decision in National Organic Chemical Indus. Ltd. (2000) 126 ELT 1072 (cegat) are substantially similar to the present notification. The appeals preferred by the Department from the decision of the Tribunal were dismissed by this Court on 20-2-2002 (Commr. of Customs (Import) v. National Organic Chemical Industries Ltd. (2005) 10 SCC 277). The Tribunal, however, relied upon its earlier decision in the case of CCE v. B.P.L Display Devices Ltd. (2002) 147 ELT 912 (cegat) to hold against the appellant. This Court following the affirmation of the Tribunal's reasoning in National Organic Chemical Indus. Ltd. (2000) 126 ELT 1072 (cegat) on 20-2-2002, allowed the appellant's appeal. This appeal must therefore be necessarily allowed. We are of the view that no material distinction can be drawn between the loss on account of leakage and loss on account of damage. The words “for use” used in similar exemption notifications have also been construed by this Court earlier in State of Haryana v. Dalmia Dadri Cement Ltd. 1987 Supp SCC 679 to mean “intended for use”. According to this decision the object of grant of exemption was only to debar those importers/manufacturers from the benefit of the notifications who had diverted the products imported for other purposes and had no intention to use the same for manufacture of the specified items at any stage.
3. In the circumstances, the appeal is allowed but without any order as to costs.
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