C.C. (Seaport-Export), Chennai v. Enterprises International Ltd.

[Order per : R. Periasami, Member (T)]. - All these batch of appeals filed by Revenue are taken up together as the issues are identical. Revenue has filed 66 appeals as listed above against the Commissioner (Appeals) orders.

2. The brief facts of the case are that respondents have filed Bill of Entries for clearance of silk yarn, silk fabrics classifiable under Chapter 30 to Chapter 50 of Customs and Central Excise Tariff. The Bills of Entries were assessed without extending the exemption of CVD vide Notification No. 30/2004-C.E., dated 9-7-2004 as amended. The appellants preferred appeals before Commissioner (Appeals) against the assessment order passed on the Bill of Entry claiming benefit of CVD exemption under said Notification. The Commissioner (Appeals) allowed the CVD exemption under the said notification and set aside the assessment order and allowed the appeals with consequential relief. LAA in his order relied various Tribunal’s decisions and this Tribunal’s Division Bench order in the case of Prashray Overseas Pvt. Ltd. v. CC, Chennai - (Tri.-Chen.) and Prashray Overeseas Pvt. Ltd. v. CC, Chennai - (Tri.-Chennai). The department had reviewed all the orders and filed the present appeals against granting CVD exemption benefit.

3. Heard both sides. Ld. Advocate Dr. S. Krishnanandh represented for M/s. Sun Star International and M/s. Elegant Fabric. Ms. Sridevi represented for M/s. Enterprises International Ltd. and Shri Selvakumar, Advocate appeared for appellants as at Sl. Nos. 64 to 66.

4. Ld. AR Shri M. Rammohan Rao, Jt. Commissioner appeared for the Revenue and reiterated the grounds of appeal which is reproduced as under :-

(a)     The Commissioner (Appeals)’s order is contrary to the Board’s Circular No. 37/2001, dated 18-6-2001 clarifying that the imported goods will not be eligible for the benefit of conditional Central Excise Notification, when it is not possible to verify the condition of the notification. The Commissioner (Appeals) has not taken into consideration the judgment of the Tribunal in the case of M/s. Priyesh Chemicals and Metals v. Collector of Central Excise reported in (Tri.-LB).

(b)     The exemption Notification should have been taken into broader prospective rather than sticking to a particular goods. When the condition/proviso talks about Cenvat Credit Rules, 2002, it is obvious that the exemption Notification is for locally manufactured goods and not for the imported goods.

(c)     The Commissioner (Appeals) has relied on the judgment of Tribunal in the case of M/s. Prashrary Overseas Pvt. Ltd. v. CC, Chennai which is appealed by the department in Hon’ble High Court, Madras and is pending. As the order of the Tribunal has not attained finality, the same cannot be relied upon by the Commissioner (Appeals).

(d)    A similar order of Commissioner (Appeals), Kolkata Custom House allowing the benefit of Notification No. 30/2004-C.E. to M/s. Mahalakshmi Silk Trading Company has been stayed by the Hon’ble CESTAT-East Regional Bench, Kolkata vide their Order No. M-128/Kol/2012/S-1356/Kol 2012, dated 19-3-2012.

5. He further submits that the Apex Court decision of AIDEK Tourism Services Pvt. Ltd. v. CC, New Delhi - (S.C.) relied by the respondents is not directly relevant to the present issue. The said case law considered the case of treating an importer on par with a manufacturer and by relying Thermax Pvt. Ltd. case, extended the benefit of notification to import of car to be put to use as a Taxi. Whereas the present appeal is dealing with a condition precedent of not availing the Cenvat credit to claim the exemption. He further submits that SRF case of Supreme Court relied upon by respondent is distinguishable. The scope of Supreme Court decision in the case of Thermax is relevant to the extent of treating an importer on par with a manufacturer for the purposes of CVD exemption. The same is not the case in the present appeals. The Apex Court in the case of Hyderabad Industries relied by the Supreme Court where the issue was exigibility of imported goods to additional duty of customs in a case where similar goods were not manufactured in India. The issue of exemption or interpreting the terms of exemption notification was not before the Hon’ble Supreme Court in the case of Hyderabad Industries. He further submits that Apex Court decision in SRF case is in direct conflict with the Supreme Court decision in the case of Motiram Tolaram - (S.C.). In the case of Motiram Tolaram the Apex Court has laid down the law relating to complying with a condition precedent to an excise notification in case of an import. That was not brought to the notice of the Hon’ble Supreme Court in SRF case. He further submits that Motiram Tolaram case was again approved by the constitutional Bench in the case of Dhiren Chemical Industries - (S.C.). He relied on the following citations :-

(i)      Priyesh Chemicals & Metals v. CCE, Bangalore - (Tri.-LB)

(ii)    Motiram Tolaram v. UOI - (S.C.)

(iii)   Dhiren Chemical Industries - (S.C.).

6. On the other hand, ld. Advocate representing counsel for appellants submits that they are eligible to the Notification No. 30/2004, dated 9-7-2004. He further submits that proviso to the notification stipulates the condition that nothing contained in the notification shall apply to the goods in respect of which credit of duty on inputs or capital goods has been taken under the provisions of CCR, 2002. This condition is not applicable in the case of imports. As per Section 3 of the Customs Tariff Act, the levy of additional duty is imposed equivalent to the excise duty. He drew our attention to the Chapter 50 of CETA, the Chapter Headings 50.01 to 50.03 attracts Nil rate of duty on the raw material i.e. cocoon & raw silk and no excise duty is leviable on these inputs. Therefore, the question of taking any Cenvat credit on the inputs does not arise and they are eligible for the benefit of the notification.

7. He further submits that in the ICES-EDI system the Notification No. 30/2004 has not been uploaded till date and the Bills of entries were automatically assessed by the system and CVD has been charged to tariff rate. Therefore, they have no other option and filed appeals before the Commissioner (Appeals) and he correctly relied on Tribunal’s decision in the case of Nhava Sheva v. Ashima Dyecot Ltd. - (Tri.-Mumbai) and Mapsa Tapes Pvt. Ltd. v. CC & CCE, Delhi - (Tri.-Del.) and has rightly relied this Tribunal’s decision in the case of Prashray Overseas Pvt. Ltd. v. CC, Chennai and allowed the notification benefit. He submits that this Tribunal’s above orders has not been set aside by High Court and binding on the LAA and he has rightly followed the Tribunal’s decisions.

8. He relied on the recent Supreme Court’s decision in SRF Ltd. v. CC, Chennai - 2015-TIOL-74-SC-CUS = (S.C.). He also relied in the case of AIDEK Tourism Services Pvt. Ltd. v. CC, New Delhi - (S.C.). He submits that Hon’ble Supreme Court in both these cases has settled the issue on the identical issue of availing exemption from CVD. Ld. Advocate Smt. Sridevi appearing for M/s. Enterprises International Ltd. and Shri Selvakumar, Advocate appearing for M/s. Prashray Overseas Pvt. Ltd., Shiv Shanti Exim Pvt. Ltd. and Texworth International reiterated the arguments advanced by Shri Krishnanandh, Advocate for their appeals also. The counsels relied on the following case law :-

(i)      Elegant Fabric v. CC, Chennai - (Tri.-Chennai)

(ii)    Prashray Overseas Pvt. Ltd. v. CC, Chennai - (Tri.-Chennai)

(iii)   Prashray Overseas Pvt. Ltd. v. CC, Chennai - (Tri.-Chennai)

(iv)   Mapsa Tapes Pvt. Ltd. v. CC, Delhi - (Tri.-Del.)

(v)     CC, Nhava Sheva v. Ashima Dyecot Ltd. - (Tri.-Mumbai).

9. Ld. AR countered the arguments and submitted that even though raw material raw silk/silk yarn is charged at Nil rate of duty, the manufacturer producing of yarn can avail Cenvat credit on any goods during the production of silk yarn. The Hon’ble Supreme Court has not gone into any discussion on the Explanation to Section 3 of Customs Tariff Act. He further submits that Hon’ble Supreme Court case in the case of Thermax decision which is relied on in SRF case only lays down the principle whereas in the case of Motiram Tolaram the Supreme Court has discussed all the conditions of the notification.

10. Ld. Advocate in his rejoinder, relied on Para 13 of the Supreme Court in AIDEK Tourism case wherein the Hon’ble Supreme Court has clearly discussed the Explanation to Section 3 of the Customs Tariff Act. He also referred to Paras 15 & 16 of the order wherein the Apex Court has considered the decision of Motiram Tolaram v. UOI (supra).

11. We have carefully considered the submissions of both sides and also perused the records, case laws and the Revenue’s grounds of appeal. The short issue in all these Revenue appeals against the admissibility of CVD exemption on the imported goods i.e. Silk Yarn and Silk Fabrics under Notification No. 30/2004-C.E., dated 9-7-2004 where LAA has allowed the benefit. We find that the respondents appealed against the assessment of Bill of Entries where CVD has been charged without giving the benefit of the notification. The LAA in the impugned orders while allowing the appeal has discussed the issue in detail and also relied on this Tribunal’s Division Bench decisions in the case of Prashray Overseas Pvt. Ltd. (supra) and also relied Tribunal’s decision in Nhava Sheva v. Ashima Dyecot Ltd. (supra) and Mapsa Tapes Pvt. Ltd. case (supra).

12. On perusal of the grounds of appeal already reproduced above, the Revenue’s contention that LAA has not considered the Tribunal’s Larger Bench decision in the case of Priyesh Chemicals & Metals v. CCE, Bangalore (supra) and further contended that this Chennai Tribunal’s Bench decision in the case of Prashray Overseas Pvt. Ltd. (supra) relied by LAA has not attained finality as Revenue preferred appeal against Tribunal order before the Hon’ble High Court, Madras which is still pending. Revenue also contended that notification in question should have been given effect to prospectively and the condition stipulated in the notification is only for local manufacturer of goods and not for importer. We find that this very ground advanced by the Revenue has already been dealt with in detail and decided by this Tribunal Bench in the case of M/s. Prashray Overseas Pvt. Ltd. in the orders reported in (Tri.-Chen.) and (Tri.-Chennai) where the issue of grant of CVD exemption under Notification No. 30/2004-C.E., dated 9-7-2004 has been discussed and allowed appeals. The LAA has rightly relied on the Tribunal’s orders (supra) which is binding on him and allowed the appeals. Merely for the reason Revenue filed appeal before Hon’ble High Court, Madras cannot be a ground to deny the benefit allowed by this Bench as no stay granted by the High Court. Therefore, once the Tribunal has already decided the issue and the decision has not been set aside and there appears to be no error on the part of the LAA relying on this Tribunal’s decision. In view of Hon’ble Supreme Court relying in the case of Union of India v. Kamlakshi Finance Corporation Ltd. - (S.C.), this Bench decision is binding on the jurisdictional lower authorities and they are bound to follow the said decision. On this account alone, the Revenue’s appeals are liable to be rejected.

13. On the question of admissibility of CVD exemption, we find the Notification No. 30/2004-C.E., dated 9-7-2004 at Sl. No. 5 of table exempts excise duty on silk yarn and silk fabrics falling under Chapters 54.01 to 54.07. The proviso to the notification stipulates a condition that “nothing contained in this notification shall apply to the goods in respect of which credit of duty on inputs or capital goods has been taken under the provisions of the CCR, 2002.” This very issue was discussed in the case of Prashray Overseas Pvt. Ltd. [ (Tri.-Chennai). The relevant Paragraph 3 of the order is reproduced as under :-

“3. We find that no Central Excise duty is payable on raw silk produced in India. Yarn manufactured from such silk is also exempt under Notification No. 30/2004 as no credit availed input is used to manufacture silk yarn. Therefore indigenous silk fabrics manufactured from indigenous silk yarn are exempt from Central Excise duty. Another stream in which silk fabrics get manufactured in India is using imported silk yarn. Neither party disputes that imported silk yarn was exempt from CVD during the material period in terms of Notification No. 20/2006-Cus., dated 1-3-2006. We find that the levy of CVD on imports is regulated by the following provisions of the Customs Tariff Act, 1975.

“3. Levy of additional duty equal to excise duty. - Any article which is imported into India shall, in addition, be liable to a (1) duty (hereafter to this section referred to as the additional duty) equal to the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article.”

CVD is therefore payable on imported silk fabrics at the rate central excise duty is leviable for the time being on such silk fabrics produced or manufactured in India. Additional duty is imposed on imported goods to counter balance the central excise duty leviable on like articles made indigenously, this being a measure intended to safeguard the interests of the manufacturers in India. As no duty was payable on silk yarn either indigenous or imported, indigenous silk fabrics were not subject to central excise duty during the material period in terms of Notification No. 30/04-C.E. (supra). Therefore imported silk fabrics imported during the material period need not beat any CVD. The impugned imports are eligible for the exemption contained in Notification No. 30/2004. This was also the ratio of our final order Nos. 941, 942/2008, dated 28-8-2008 [ (Tribunal)] in respect of the same appellants for 44 consignments imported earlier. The appeal is allowed.”

14. We find that Revenue relied on the Supreme Court’s decision in the case of Motiram Tolaram v. UOI (supra) and the Tribunal’s Larger Bench decision in Priyesh Chemicals & Metals (supra). In this regard the Hon’ble Supreme Court in their recent order in the case of SRF Ltd. v. CC, Chennai (supra) held that the appellants are entitled to exemption from payment of CVD under Notification No. 6/2002 and allowed the civil appeal. The relevant Paras 3 to 8 of the said Supreme Court’s order is reproduced as under :-

“3. Entry/Serial No. 122 in the Notification No. 6/2002 reads as under -

4. As per the aforesaid entry, the rate of duty is nil. Condition No. 20 of this Notification, which was relied upon by the authorities below in denying the exemption from payment of CVD, is to the following effect :

“20. If no credit under rule 3 or rule 11 of the Cenvat Credit Rules, 2002, has been taken in respect of the inputs or capital goods used in the manufacture of these goods.”

5. The aforesaid condition is to the effect that the importer should not have availed credit under rule 3 or rule 11 of the Cenvat Credit Rules, 2002, in respect of the capital goods used for the manufacture of these goods.

6. In the present case, admitted position is that no such Cenvat credit is availed by the appellant. However, the reason for denying the benefit of the aforesaid Notification is that in the case of the appellant, no such credit is admissible under the Cenvat Rules. On this basis, the CEGAT has come to the conclusion that when the credit under the Cenvat Rules is not admissible to the appellant, question of fulfilling the aforesaid condition does not arise. In holding so, it followed the judgment of the Bombay High Court in the case of Ashok Traders v. Union of India [], wherein the Bombay High Court had held that “it is impossible to imagine a case where in respect of raw naphtha used in HDPE in the foreign country, Central Excise duty leviable under the Indian Law can be levied or paid.” Thus, the CEGAT found that only those conditions could be satisfied which were possible of satisfaction and the condition which was not possible of satisfaction had to be treated as not satisfied.

7. We are of the opinion that the aforesaid reasoning is no longer good law after the judgment of this court in Thermax Private Limited v. Collector of Customs (Bombay), New Customs House [1992 (4) SCC 440] = 2002-TIOL-683-SC-CUS-LB which was affirmed by the Constitution Bench in the case of Hyderabad Industries Limited v. Union of India [1999 (5) SCC 15] = 2002-TIOL-369-SC-CUS-CB. In a recent judgment pronounced by this very Bench in the case of AIDEK Tourism Services Private Limited v. Commissioner of Customs, New Delhi (Civil Appeal No. 2616 of 2001) = 2015-TIOL-23-SC-CUS, the principle which was laid down in Thermax Private Limited and Hyderabad Industries Limited was summarised in the following manner :-

“15. The ratio of the aforesaid judgment in Thermax Private Limited (supra) was relied upon by this Court in Hyderabad Industries Ltd. (supra) while interpreting Section 3(1) of the Tariff Act itself; albeit in somewhat different context. However, the manner in which the issue was dealt with lends support to the case of the assessee herein. In that case, the court noted that Section 3(1) of the Tariff Act 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 Tariff Act. The explanation to Section 3 has two limbs. The first limb clarifies that the duty chargeable under Section 3(1) would be the excise duty for the time being leviable on a like article if produced or manufactured in India. The condition precedent for levy of additional duty thus contemplated by the explanation deals with the 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 or manufactured in India. The words ‘if produced or manufactured in India’ do 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 an 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. For quantification of additional duty in such a case, it has to be imagined that the article imported had been manufactured or produced in India and then to see what amount of excise duty was leviable thereon.”

(Emphasis supplied)

8. We are of the opinion that on the facts of these cases, these appeals are squarely covered by the aforesaid judgments. We accordingly hold that appellants were entitled to exemption from payment of CVD in terms of Notification No. 6/2002. The appeals are allowed and the demand of CVD raised by the respondents-authorities is set aside.”

The ratio of the Apex Court’s decision is squarely applicable to the present case where CVD exemption was denied under Notfn. No. 30/2004 where the proviso to the notification stipulated the condition that the exemption is not applicable if credit of duty on inputs or capital goods has been taken under CCR.

15. Further, we find the Hon’ble Apex Court in the case of AIDEX Tourism Services Pvt. Ltd. v. CC (supra) has not only considered the cases of Thermax Private Ltd. and Hyderabad Industries Ltd. but also discussed the Apex Court’s decision in the case of Motiram Tolaram v. UOI (supra). The relevant para is extracted hereinunder :-

“ ..... ... ..... ...

This position has been reiterated in Motiram Tolaram v. Union of India - (1999) 6 SCC 375 = (S.C.), CCE v. J.K. Synthetics - (2000) 10 SCC 393 = (S.C.), Lohia Sheet Products v. Commr. of Customs - (2008) 11 SCC 510 = (S.C.) and Collector of Customs (Preventive) v. Malwa Industries Ltd. - (2009) 12 SCC 735 = (S.C.). In fact, in Lohia Sheets and Malwa Industries cases (supra), this Court was considering exemption notifications envisaging use of certain material within a “factory” and still held that an importer would be entitled to the benefit of the exemption notifications in view of Section 3 of the Tariff Act and the decisions in Hyderabad Industries and Thermal cases. As such, 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.

16. We may mention that in the case of Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal & Ors. - (2011) 1 SCC 236 = (S.C.), a three Judge Bench of this Court had raised certain doubts on the correctness of the principle contained in Thermax Private Limited (supra) as well as in J.K. Synthetics (supra) and referred the matter to a larger Bench. Reference order is reported as (2005) 8 SCC 164 = (S.C.). The Constitution Bench decided the said case, which is reported as (2011) 1 SCC 236. From the reading of paras 39 to 41 of the said judgment it becomes clear that though these cases were held not applicable to the fact situation and were distinguished, the Court did not say that the aforesaid judgments were incorrectly decided. In fact, by distinguishing the ratio of the said cases, the Constitution Bench impliedly gave its imprimatur to the principle laid down in the aforesaid judgments.”

16. In view of the above ruling by Apex Court, we are unable to accept the Revenue’s plea that the Apex Court decision of SRF Ltd. and M/s. Motiram Tolaram are in direct conflict. Hon’ble Supreme Court has clearly considered all the previous decisions of Apex Court including the decision in the case of Motiram Tolaram v. UOI (supra). Therefore, the Revenue relying on the above case law and also the LB decision in the case of M/s. Priyesh Chemicals & Metals (supra) are not relevant. In view of the latest decision of Apex Court in SRF case & AIDEK Tourism Services Pvt. Ltd., the issue of CVD exemption under Notfn. No. 30/2004 on imported goods has attained finality. This Tribunal Bench decisions in the case of M/s. Prashray Overseas Pvt. Ltd. v. CC, Chennai stands confirmed by the Hon’ble Supreme Court in the above decision.

17. Before parting, we wish to record that the respondents repeatedly pleaded that under ICES-EDI system the Notification No. 30/2004-C.E., dated 9-7-2004 has not yet been uploaded and not figuring in the system for assessment even after a decade. This fact was already reported in this Tribunal order dated 10-8-2010 in the case of M/s. Elegant Fabric v. CC, Chennai (supra). Therefore, we bring to the notice of the Chairman, C.B.E. & C. & DG (Systems), C.B.E. & C., New Delhi to rectify and upload the said notification in the EDI system at the earliest so that the Trade need not seek every time for manual assessment of Bill of Entry or file appeal against every assessed Bill of Entry under EDI before Commissioner (Appeals) as is happening at present in the Custom House.

18. By respectfully following the ratio of the Apex Court decisions (supra), we hold that the respondents are eligible for CVD exemption under Notification No. 30/2004-C.E., dated 9-7-2004. In view of the foregoing discussions, we hold that there is no infirmity in the orders of LAA and the same are upheld and all the Revenue’s appeals are rejected. The cross objections filed by respondent get disposed. Copy of order be forwarded to the Chairman, C.B.E. & C. and D.G. System, New Delhi.

(Dictated and pronounced in open Court)