2013 (11) TMI 1013 - HC - Customs

Import of timber - Notification No.102/07 - Refund of SCVD paid upon sale of the goods in local market (SAD) - Whether the respondents fulfilled all the conditions of exemption notification dated 14.9.2007 or not - Held that - whether the conditions are to be satisfied or not, has to be viewed from attending facts and circumstances of the case. The words when imported into India for subsequent sale or the sale of said goods , cannot be seen in isolation. It is not in dispute that except for the above mentioned objection of the department, all other conditions specified in the exemption notification, have been fulfilled by the respondents. It is also not in dispute that the proper documents were filed and that the goods were imported after paying the SCVD, upon which ultimately the goods were sold in the local market and Sales tax or VAT, as applicable, was also paid. Respondents imported the goods after paying SCVD. At the time of its sale in the local market, they also paid local taxes such as sales tax or the Value Added Tax as may be applicable. Before transportation of timber, they were required to reduce its size since the RTO rules did not permit transportation of logs longer than 40 feet. If only for cutting length of the logs, which were in excess of 40 feet, sawing operations were carried out and after some cleaning and scaring was done, timber logs of smaller pieces were sold, we do not see how respondents can be stated to have breached any of the conditions of the exemption notification dated 14.9.2007 - Decided against Revenue.

Issues Involved:
1. Whether transformation of imported round logs into sawn timber vitiates the condition of subsequent sale prescribed in exemption notification No.102/2007-Customs.
2. Whether the Tribunal committed a substantial error of law by relying solely on the decision in Vijrom Chem Pvt. Ltd. v. Commr. of Cus., Bangalore.
3. Whether the Tribunal erred by not considering the interpretation of exemption notification as per the ratio laid down by the Apex Court in Novopan India Ltd. v. CCE & Cus., Hyderabad.
4. Whether the Tribunal's order, which allegedly did not address all submissions and precedents pointed out by the Departmental Representative, is in accordance with law.

Issue-wise Detailed Analysis:

1. Transformation of Imported Round Logs into Sawn Timber:
The primary issue was whether the transformation of imported round logs into sawn timber before subsequent sale in the domestic market vitiates the condition of subsequent sale prescribed in exemption notification No.102/2007-Customs. The Assistant Commissioner and Commissioner (Appeals) had rejected the refund claim on the grounds that the imported timber (classified under Customs Tariff Heading 44.03) was sold as sawn wood (classified under Customs Tariff Heading 44.07), implying that the goods were not sold in the same physical form as imported. However, the Tribunal concluded that no new product resulted from the transformation, and thus, the respondent was eligible for the refund of SCVD. The High Court upheld this view, emphasizing that the process of cutting timber into smaller pieces does not amount to manufacturing and does not fundamentally change the identity of the article.

2. Reliance on Vijrom Chem Pvt. Ltd. Decision:
The Tribunal relied on the decision in Vijrom Chem Pvt. Ltd. v. Commr. of Cus., Bangalore, where the product was repacked before sale. The High Court noted that the Tribunal's reliance on this decision was appropriate as the essential condition of the exemption notification was fulfilled, and the process undertaken by the respondents did not amount to manufacturing.

3. Interpretation of Exemption Notification as per Novopan India Ltd.:
The Department argued that the Tribunal failed to apply the ratio laid down by the Apex Court in Novopan India Ltd. v. CCE & Cus., Hyderabad, which mandates a strict interpretation of exemption notifications. The High Court, however, found that the conditions of the exemption notification were satisfied, and the interpretation should consider the purpose of the notification, which is to nullify the effect of local taxes on imported goods.

4. Tribunal's Order and Consideration of Submissions:
The Department contended that the Tribunal's order did not address all submissions and precedents pointed out by the Departmental Representative. The High Court reviewed the Tribunal's judgment and found that it had adequately considered the relevant facts and legal principles. The High Court concluded that the Tribunal's decision was in accordance with law and did not warrant interference.

Conclusion:
The High Court dismissed the appeals, upholding the Tribunal's decision that the respondents were entitled to a refund of SCVD. The Court emphasized that the transformation of imported timber into smaller pieces did not constitute a manufacturing process and did not alter the identity of the goods. The Court also dismissed the civil applications for stay as they did not survive following the dismissal of the main appeals.

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