2008 (4) TMI 165 - AT - Customs

CVD charged on goods imported for use in mfg. of textile goods exemption sought u/not. no. 4/06 as the goods in question was chargeable to nil rate of excise duty revenue plea is that exemption is subjected to condition that goods must be used in the same factory in which they were manufactured respondent plea that the same factory only means that the imported goods must be used in the factory of the importer where manufacturing activity takes place, is acceptable exemption allowed

Issues Involved:
1. Applicability of additional duty (CVD) under Section 3(1) of the Customs Tariff Act, 1975.
2. Interpretation of Notification No. 4/2006-C.E., dated 1-3-2006 regarding 'nil' rate of excise duty.
3. Relevance of the term "same factory" in the context of imported goods.
4. Legal precedents and their applicability to the case.

Issue-wise Detailed Analysis:

1. Applicability of additional duty (CVD) under Section 3(1) of the Customs Tariff Act, 1975:
Section 3(1) of the Customs Tariff Act mandates that any imported article shall be liable to an additional duty equal to the excise duty for the time being leviable on a like article if produced or manufactured in India. The purpose of this provision is to ensure that importers are not placed in a more advantageous position compared to domestic producers/manufacturers. The Tribunal noted that if the goods fall under the exemption provided by Notification No. 4/2006-C.E., the respondent would not be liable for any additional duty as the goods would be chargeable to 'nil' rate of excise duty.

2. Interpretation of Notification No. 4/2006-C.E., dated 1-3-2006 regarding 'nil' rate of excise duty:
The Notification exempts certain excisable goods from duty if used in the same factory for manufacturing textiles and textile articles. The Revenue argued that the exemption applies only if the goods are used in the same factory where they were manufactured. The respondent contended that for imported goods, 'the same factory' should be interpreted as the factory of the importer where manufacturing activity takes place, as actual production or manufacture is not necessary to attract Section 3 of the Customs Tariff Act.

3. Relevance of the term "same factory" in the context of imported goods:
The Tribunal found that interpreting 'same factory' to mean the factory where the goods were manufactured would render the notification inapplicable to imported goods, as there is no question of the goods being manufactured in the same factory in the case of import. The Tribunal held that 'same factory' means that the goods should be used in the factory of the importer and not elsewhere, aligning with the respondent's interpretation.

4. Legal precedents and their applicability to the case:
The Tribunal relied on several legal precedents, including:
- Thermax Pvt. Ltd. v. CC: Established that for CVD, it must be imagined that the importer had manufactured the goods in India to determine the excise duty.
- Hyderabad Industries v. Union of India: Reinforced that actual production or manufacture in India is not necessary for levying additional duty.
- Lohia Sheet Products v. Commissioner of Customs: Clarified that the term 'within the factory of production' does not imply that the goods must be generated in the same factory.
- Plastic Processors v. Union of India: Affirmed that for additional duty, the actual manufacture or production of a like article in India is not necessary.

The Tribunal concluded that the interpretation of 'same factory' should not restrict the application of the notification to only domestically manufactured goods, thereby upholding the respondent's claim for exemption from additional duty.

Conclusion:
The Tribunal dismissed the appeals by the Revenue, affirming that the respondent was not liable to pay additional duty on the imported goods under Section 3 of the Customs Tariff Act, as the goods were eligible for a 'nil' rate of duty under Notification No. 4/2006-C.E. The Tribunal emphasized that actual production or manufacture in India is not a prerequisite for levying additional duty on imported goods.

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