2016 (1) TMI 1176 - AT - Customs

Refund claim - Special Additional Duty levied on import of 10 consignment of used tyres - eligibility of N/N. 102/2007-Cus dated 14th September 2007 - Held that - The appellant is no different from a domestic entity who is subject to VAT on purchase of used tyres and to VAT on sale of crumb rubber. The claim of the appellant to the effect that the discharge of the latter VAT obligation immunizes it from the former obligation is not tenable - In its role as countervailing duty, Special Additional Duty paid on used rubber tyre is not offset by a sale of used rubber tyre. It is consumed by the importer whether it results in manufacture is not relevant. Manufacture determines excisability. What is of relevance is whether a producer of crumb rubber in India who uses indigenously procured used rubber tyre in the process is put to disadvantage of tax on purchase of used tyre and sale of crumb rubber. It seems to be so. Consequently, the discharge of VAT on the resultant crumb rubber does not absolve it of liability of Special Additional Duty on used rubber tyre. Appeal dismissed - decided against appellant.

Summary

Issues:
Appeal against order-in-appeal allowing Revenue's appeal on sanction of refund of Special Additional Duty on import of used tyres.

Analysis:
1. The first issue involves the refund of Special Additional Duty on the import of used tyres. The first appellate authority set aside the refund sanctioned by the lower authority, stating that the goods were consumed by the importer and thus not eligible for the refund available to trading importers under notification no. 102/2007-Cus dated 14th September 2007. Additionally, it was noted that the goods had been cleared against an import license issued under the Foreign Trade Policy, making them permitted for import only on actual user condition.

2. The second issue pertains to the appellant's contention that the conditions of the notification were complied with, including the payment of Special Additional Duty and the sale of goods against an invoice after discharging VAT liability. The appellant argued that the conversion of used tyres into crumb rubber should not be considered a manufacturing activity.

3. The third issue raised by the appellant was the claim that used radial tyres are imported for conversion into crumb rubber, which is essential for manufacturing various rubber products and for road construction. The process involves shredding the tyres and separating the steel using a magnet. The appellant cited previous tribunal decisions to support the argument that this process does not constitute manufacturing activity.

4. The fourth issue focuses on the legal aspects of the case. The appellant compared itself to a domestic entity subject to VAT on the purchase of used tyres and on the sale of crumb rubber. However, the tribunal emphasized that the discharge of VAT on the resultant crumb rubber does not absolve the appellant from the liability of Special Additional Duty on used rubber tyres.

5. Finally, the tribunal concluded that the findings of the first appellate authority were legal and proper, leading to the dismissal of the appeal. The judgment highlighted that the Special Additional Duty paid on used rubber tyres is not offset by the sale of such tyres, and the liability remains with the importer regardless of whether the imported tyres are used in manufacturing processes.