Supreme Court of India
M/S. LOHIA SHEET PRODUCTSversusCOMMISSIONER OF CUSTOMS, NEW DELHI
- Citation
- 2008 INSC 317
- Decided
- 5 March 2008
- Disposal
- Appeal(s) allowed
- Bench
- ASHOK BHAN
Holding
The exemption under Notification No.8/96‑CE (Entry 74.04) applies to copper/brass waste and scrap used within the factory of production irrespective of whether it is imported, entitling the appellants to a NIL rate of additional customs duty and a refund of duty paid.
Summary
M/s. Lohia Sheet Products imported copper/brass waste and scrap for making handicrafts and claimed exemption under Notification No.8/96‑CE (Entry 74.04) which provides a NIL rate of additional customs duty. The Customs authorities and the Tribunal rejected the claim, holding that the exemption applied only to waste generated within the factory of production. The Supreme Court examined the language of Entry 74.04, the explanation to Section 3(1) of the Customs Tariff Act, 1975, and the purpose of the exemption to avoid double payment of duty. It held that the entry does not require the waste to be generated in the factory; the phrase “used within the factory of production” merely describes where the material is employed. Consequently, the imported waste qualifies for the exemption, and the appellants are entitled to a refund of the duty paid. The Court set aside the Tribunal’s order and allowed the appeals.
Issues considered
- Whether copper/brass waste and scrap imported and used within the factory of production is covered by the exemption under Notification No.8/96‑CE (Entry 74.04).
- Whether the phrase “used within the factory of production” presupposes that the waste must be generated in that factory.
- Interpretation of Section 3(1) of the Customs Tariff Act, 1975 and its explanation regarding the levy of additional duty.
- Whether the exemption aims to prevent double payment of duty and thus applies to imported waste.
Legislation cited
Subjects
customs dutyadditional dutyexemptioncopper wastescrapEntry 74.04Section 3 Customs Tariff Actdouble taxationrefundimportmanufacturing
Judgment
[2008] 3 S.C.R. 948
A M/S. LOHIA SHEET PRODUCTS
II. ' -
COMMISSIONER OF CUSTOMS, NEW DELHI
(Civil Appeal No. 2411 of 2002)
MARCH 5, 2008
B
[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
c 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 of production entitled
to the benefit - Held: Not sustainable - Assessee satisfied all
the conditions of Entry 74. 04 as they had used copper/brass
D ....
waste and scrap within the factory of production for manufacture f
- Entry nowhere uses word 'generated' or 'imported' -
Assessee paid amount equivalent to excise duty at the time
of import of waste or scrap- Mere fact that goods were imported
would not make any difference - Intention behind grant of
E 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.
,,..
F 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
G
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 . '
H 948
M/S. LOHIA SHEET PRODUCTS v. COMMISSIONER 949
OF CUSTOMS, NEW D.ELHI
present appeals. A
)
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
c
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
.. t
if a manufacturer uses copper waste and scrap within the
factory of production for the manufacture of unrefined or
unwrought c.opper, copper sheets or circles and
D
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 E
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 F
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, G
'within' used in the heading 74.04. According to them, the
word, 'within' pre-supposes thaf the copper waste and
1 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] H
950 SUPREME COURT REPORTS [2008) 3 S.C.R.
A 1.3 The test laid down by the tribunal that the benefit <
of the notification/tariff heading would be admissible to
only that 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 of the exemption
8 notification, heading 74.04 or any other authority.
[Para 16) [956-D]
t l
1.4 In the instant case, an amount equivalent to the
excise duty had been paid by the appellants at the time of
import on the waste and scrap. Mere fact that the goods
C were imported would not make any difference. The
intention behind the grant of exemption under the
notification was to prevent the duty being paid at two
stages. If the benefit of the notification is not given to the
appellants it would mean double payment of duty.
D [Para 17] [957-A, BJ
{
Hyerabad Industries Ltd. v. Union of India 1999 (108)
ELT 321 (SC) - followed.
1.5 The order of the Tribunal as well as that of the
E authorities below is set aside and it is held that the
appellants would be entitled to the benefit of the exemption
notification no.8/96-CE dated 23.07 .1996 and
consequently to the refund of the duty already paid in
accordance with law. [Para 18) [958-F, G]
F Thermax Pvt. Ltd. v. Commissioner of Customs 1992
(61) ELT 352 (SC) - referred to. r
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 2411
of 2002.
G From the final Order No. 547/2001-8 dated 11/12/2001
of the Customs, Excise &Gold (Control) Appellate Tribunal, New
Delhi in Appeal No.C/383/2001-8.
WITH
H Civil Appeal No. 2416 of 2002.
M/S. LOHIA SHEET PRODUCTS v. COMMISSIONER 951
OF CUSTOMS, NEW DELHI [ASHOK BHAN, J.]
Rupesh Kumar (for Tara Chandra Sharma) for the A
Appellant.
I. Venkatanarayana, Binu Tamta and B. Krishna Prasad
for the Respondent.
The Judgment of the Court was delivered by B
ASHOK BHAN, J. 1. The appellants have filed these
appeals under Section 130-E of the Customs Act, 1962 against
the Final Order No.547-548 of 2001-B dated 11th December
2001 passed by the Customs, Excise & Gold (Control) Appellate
Tribunal [for short, 'the Tribunal'], New Delhi whereby the Tribunal C
has rejected the appeals filed by the appellants and held that
the appellants had not satisfied the conditions for availing the
benefit of the Notification No.8/96-CE dated 23rd July 1996 on
the ground that the copper waste and scrap used by the
appellants had been imported and had not been generated in D
the factory of production.
2. The issue involved in these appeals is as to whether the
scrap imported by the appellants is chargeable to 'NIL' rate of
additional customs duty under Section 3 of the Customs Tariff E
Act 1975. .
3. The facts of the case, in brief, are enumerated
hereinbelow.
4. In the year 1996-97, the appellants imported copper/
brass waste and scrap for use in the manufacture of handicrafts F
and filed bills of entry and claimed benefit under Exemption
Notification No.8/96-CE dated 23rd July 1996. In order to avoid
unnecessary delay and demurrage, the appellants paid the duty ·
under protest and filed refund claim before the Asst.
Commissioner, ICD, Tughlakabad. G
5. Department questioned the refund claim of the appellants
by issuing notice dated 1oth September 1998 to show cause
: '
as to why their refund claim be not rejected as the Tariff Heading
7404.10 would be applicable to the waste which was generated H
952 SUPREME COURT REPORTS [2008] 3 S.C.R.
A during the process of production only in the factory and then (
used in the same factory of production for the manufacture of
unrefined or unwrought copper, copper sheets or circles and
handicrafts and hence, the imported goods fall outside the
purview of exemption under Central Excise Tariff Heading
B 7404.10. Despite the opportunity of personal hearing having
been given to the appellants, no one appeared before the
t
Asstt.
Commissioner (Refund) who, having gone through the
record and the facts of the case rejected the claim of the
C appellants by an order dated 15th October 1998 by observing
thus:
"..... The tariff heading 7404.10 exempts waste and scraps
which is generated during the process of production in the
o· factory and then used in the same factory of production for
the manufacture of unrefined or unwrought copper, copper
sheets or circles and handicraft. Therefore; there is no
substance and legal force in the claimant's contention that
the brass/copper scrap imported by them is covered under
Chapter Heading 7404.10 and is exempted from payment
E of CVD. Hence, the duty has been charged and paid
correctly in the case under reference and there is no
question of incidence of any refund. The refund claim
therefore merits rejection."
F 6. This finding arrived at in the order in original was
confirmed by the Commissioner of Customs (Appeals) by an
order dated 13th June 2001. Being aggrieved, the appellants
filed appeal before the Tribunal which has been dismissed by
the impugned order, holding that the condition of the notification
G of the Tariff Heading 7404.10 had not been satisfied by the
appellants as the copper waste and scrap had been imported
by the appellants from foreign country and the same had not
been generated in the factory of the appellants. Hence, this
· appeal.
H 7. Relevant portion of Section 3 of the Customs Tariff Act
M/S. LOHIA SHEET PRODUCTS v. COMMISSIONER 953
OF CUSTOMS, NEW DELl-jl [ASHOK BHAN, J.]
1975 provides as under : A
"3. Levy of additional duty equal to excise duty.-(1) Any
article which is imported into India shall, in addition, be
liable to a duty (hereafter in 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 8
India and if such excise duty on a like article is leviable
at any percentage of Jts 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. C
Provided ........ .
Explanation.- In this section, the expression "the excise
duty for the time being leviable on a like article if produced
or manufactured in India" means the excise duty for the D
time being in force which would be leviable on a like article
if produced or manufactured in India, or, if a like article is
not so produced or manufactured, which would be leviable
on the class or description of articles to which the imported
article belongs, and where such duty is leviable at differer:it E
rates, the highest duty."
8. In exercise of the powers conferred by sub-section (1)
of Section 5A of the Central Excise Act 1944, the Central
Government, in public interest, exempted goods specified fn
column. (3) of the Table annexed to the notification and falling F
within the Chapter, Heading No. or sub-heading No. of the
Schedule to the Central Excise Tariff Act, 1985, specified in the
corresponding entry in column (2) of the said Table, from so
much of the duty of excise leviable thereon which is specified in
the said Schedule, as is in excess of the amount calculated at G
the rate specified in the corresponding entry in column (4) of
the said Table, subject to the conditions, if any, laid down in the
corresponding entry in column (5) thereof or as mentioned in
the said column (5) and specified below the said Table. Entry
74.04 in the said Table reads thus : H
954 SUPREME COURT REPORTS . [2008] 3 S.C.R.
A "Refe- Chapter Description of goods
(
Rate
rence Heading
No. No. or
Sub-
heading
B No.
(1) (2) (3) (4)
74.04 Copper waste and Nil
scrap used within the
c factory of production
forthe manufacture of
unrefined or unwrought
copper, copper sheets
or circles and handicrafts."
D
~
9. Authorities below and the Tribunal have denied the relief
to the appellants holding that the exemption notification is not
applicable to the appellants.
10. Counsel for the appellants has contended that mere
E
fact that the goods were imported would not make any difference;
that the intention of the Legislature was to grant exemption under
the notification so as to prevent duty being paid at two stages.
In the present case, as the appellants have paid an amount
equivalent to the excise duty at the time of import of the waste
F and scrap, they could not be asked to pay the countervailing
..
duty; that if the benefit of the notification is not given to the 'f
appellants, it would mean double payment of duty which goes
contrary to the law laid down by a Constitution Bench decision
of this Court in the case of Hyderabad Industries Ltd. v. Union
G of India 1999(108) ELT 321 (SC). According to the counsel for
the appellants the Tribunal committed an error in restricting the
scope of the impugned notification to the copper/brass waste
..
) ..-
generated in the factory of production for the manufacture of
unrefined or unwrought copper, copper sheets or circles and
H handicrafts and thereby rejecting the appellants' claim for refund
M/S. LOHIA SHEET PRODUCTS v. COMMISSIONER 955
OF CUSTOMS, NEW DELHI [ASHOK BHAN, J.]
simply because they had imported the said waste/scrap and A
then used it within the factory of production for the manufacture
of final product.
11. As against this, counsel for the respondent contended
that the phrase, 'within the factory of production' pre-supposes
... . that only that waste and scrap is exempted from payment of B
duty which is generated and then used within the factory of
production and since in the present case the waste and/or scrap
had been imported from abroad, it cannot be said that it is being
used in the factory of production.
12. Counsel for the parties have been heard. c
13. Admitted facts are that the appellants had imported
copper/brass waste and/or scrap. They had used the Imported
waste and scrap in the manufacture of handicrafts; had paid
duty on the Imported copper waste and scrap. The only dispute
is whether they are required to pay countervailing duty under D
Section 3(1) of the Customs Tariff Act.
14. The explanation to the sub-section (1) of Section 3
.clarifies the expression, "the excise duty for the time being
levlable on a like article If produced or manufactured in India" E
used In the said Section to mean the excise duty for the time
being in force which would be levlable 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. · F
15. Entry 74.04 can be divided into three parts, viz., (i)
copper waste and scrap: (ii) used within the factory of proc.luctlon:
and (Iii) for the ml:lnufacture of unrefined or unwrought copper.
copper sheets or circles i:ind handicraft§, The sum and suost~mce
of the! entry. in our opinl!'>n, is that if a miinufacturE!r uses copper G
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 H
956 SUPREME COURT REPORTS [2008] 3 S.C.R.
A 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,
B 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
c supposes74.04.
heading According to them, the word, 'within' pre-
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
D 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 of the exemption notification, heading
74.04 or any other authority.
E 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 ~
F 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
G 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
H exemption or concession should be granted wherever the
M/S. LOHIA SHEET PRODUCTS v. COMMISSIONER 957
OF CUSTOMS, NEW DELHI [ASHOK BHAN, J.]
intended use of the material can be established by the importer A
~
" 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
make any difference. The intention behind the grant of exemption
under the notification was to prevent the duty being paid at two B
stages. In the present case, an amount equivalent to the excise
~
duty had been paid by the appellants at the 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 c
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 D
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 E
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 F
r 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 is
that the article is produced or manufactured in India. The
second limb to the explanation deals with a situation where
G
''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.
H
958 SUPREME COURT REPORTS [2008) 3 S.C.R.
A 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
B 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.
c 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
o·
leviable on a like article if produced or manufactured In
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
E 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 Tariff Act, it has to be imagined that the articles
imported had been manufactured or produced In India
F 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
a 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.
H N.J. Appeals allowed.
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