2013 (4) TMI 51 - AT - Customs

Refund Claims of SAD levied u/s 3(5) Customs Tariff Act, 1975) - Notification No. 102/2007-CUS - Sale after processing - HR/CR coils - process of cutting and slitting - change in the classification - Held that It is a settled law that what is required to be seen while considering whether the process amounts to manufacture is whether a new article with distinct name, character and use has emerged or -not and not whether the tariff heading has changed. Therefore, just because after cutting and slitting, the tariff heading changes we cannot say that the -products do not remain the same. No doubt there is an obligation on the importer to show that what he has sold are the goods which were imported by him. When the importer imports goods, for further manufacture they would get modvat credit or cenvat credit of SAD paid by them. In the case of an importer who imports the goods for selling, the SAD was exempted under Notification No.34/98 and under Notification No. 102/2007 they are eligible for refund. The domestic manufacturers are not affected by the SAD since they can take cenvat credit whereas the importer who sells the goods as such does not get the benefit of credit and therefore either exemption has to be extended or he is to be given refund. On this account also the appellant is eligible for refund. In view of the above discussions, the impugned order is set aside and appeals are allowed and the matter is remanded to the original adjudicating authority for the limited purpose of verifying as to whether the appellant is able to show that the imported goods only have been sold by them after cutting and slitting and nothing else.

Issues Involved:

1. Eligibility for refund under Notification No. 102/2007-CUS.
2. Impact of further processing (cutting and slitting) on eligibility for refund.
3. Correlation between imported goods and sold goods.
4. Interpretation of "the said goods" in the notification.
5. Examination of whether the process amounts to manufacture.
6. Intention behind the exemption provided in the notification.

Issue-wise Detailed Analysis:

1. Eligibility for Refund under Notification No. 102/2007-CUS:

The appellant, a dealer of steel items, imported HR/CR coils and electrical steel, claiming a refund under Notification No. 102/2007-CUS, which exempts goods imported for subsequent sale from the whole of the additional duty of customs, subject to certain conditions. The refund claims were rejected by the lower authority on the ground that the goods sold were not the same as those imported due to further processing.

2. Impact of Further Processing (Cutting and Slitting) on Eligibility for Refund:

The Revenue argued that the appellant's cutting and slitting of the coils changed the classification and description of the goods, making them ineligible for the refund. The appellant contended that cutting and slitting do not amount to manufacture, citing Circular No. 811/2005 and several judicial precedents, including the Tribunal's decision in M/s. Agarwalla Timbers Pvt. Ltd. and others, which held that such processes do not change the identity of the goods.

3. Correlation Between Imported Goods and Sold Goods:

The original adjudicating authority found that the goods sold by the appellant could not be correlated with the imported goods due to changes in classification and description. The Tribunal examined whether the goods sold after cutting and slitting retained their identity as "flat rolled products/coils" despite changes in thickness, length, and width.

4. Interpretation of "the said goods" in the Notification:

The Tribunal considered the interpretation of "the said goods" in Notification No. 102/2007. The Revenue argued that the goods sold must be the same as those imported, without any further processing. However, the Tribunal noted that judicial precedents, including the Supreme Court's decision in the case of timber, supported the view that goods remain the same despite changes in form or description.

5. Examination of Whether the Process Amounts to Manufacture:

The Tribunal reviewed several decisions, including those in the cases of M/s. Rajpurohit GMP India Ltd. and Faridabad Iron & Steel Traders Association, which held that processes like cutting and slitting do not amount to manufacture as they do not result in a new and distinct commodity. The Tribunal concluded that the appellant's cutting and slitting processes did not change the identity of the goods.

6. Intention Behind the Exemption Provided in the Notification:

The Tribunal considered the intention behind the exemption in Notification No. 102/2007, which aimed to create a level playing field for domestic manufacturers and importers. The Finance Minister's speech indicated that the additional duty was intended to compensate for state-level taxes on domestic goods. The Tribunal concluded that the appellant was eligible for the refund as the cutting and slitting processes did not amount to manufacture, and the goods remained the same.

Conclusion:

The Tribunal set aside the impugned order and allowed the appeals, remanding the matter to the original adjudicating authority to verify whether the appellant could show that the imported goods were sold after cutting and slitting. The Tribunal emphasized that the notification should be interpreted based on the words used, not the intention behind it, but noted that the intention supported the appellant's eligibility for the refund.

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