2018 (5) TMI 1071 - HC - Customs

SAD Refund - N/N. 102/2007-Customs dated 14.09.2007 - Whether transformation of the imported rough logs into sawn timber in different sizes and length by the importer before subsequent sale to domestic market would vitiate the condition of subsequent sale prescribed in exemption N/N. 102/2007-Customs dated 14.09.2007? Held that - the issue is covered by the judgement of Division Bench of this Court in case of Commissioner of Customs vs. M/s. Variety Lumbers Pvt. Ltd 2013 (11) TMI 1013 - GUJARAT HIGH COURT in which, identical issue came up for consideration, where it was 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. 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. The benefit of notification is to be allowed - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Interpretation of exemption notification regarding transformation of imported rough logs into sawn timber for domestic sale.
2. Consideration of different tariff headings for imported goods and subsequent sale.
3. Application of legal precedents and judgments in determining eligibility for exemption.
4. Failure to consider grounds of appeal by the Customs Department.

Issue 1 - Interpretation of Exemption Notification:
The Customs Department filed an appeal challenging the CESTAT judgment on whether transforming imported rough logs into sawn timber for domestic sale would violate the conditions of an exemption notification. The High Court referred to a previous case where a similar issue was addressed. The Court held that cutting logs into smaller pieces before sale did not result in a new product, and the identity of the article remained unchanged. The Court noted that the importers were required by law to reduce the length of timber for transportation, and sawing operations were carried out to comply with regulations. Consequently, the Court found no breach of the exemption conditions and dismissed the appeal.

Issue 2 - Different Tariff Headings and Subsequent Sale:
The Customs Department argued that the goods imported and sold by the respondent fell under different tariff headings, making them ineligible for the benefit of a specific exemption notification. The Tribunal's decision was challenged for allegedly ignoring this fact. However, the High Court upheld the Tribunal's decision, emphasizing that the transformation of logs into smaller pieces did not change the fundamental nature of the goods. The Court concluded that the actions taken by the importers to comply with transportation regulations did not violate the exemption conditions, regardless of any differences in tariff headings.

Issue 3 - Application of Legal Precedents and Judgments:
The High Court considered legal precedents and judgments in its analysis, particularly referencing a Division Bench ruling in a similar case. The Court highlighted definitions of terms like "timber" and "logs" from various dictionaries to support its interpretation. By examining the statutory definitions and previous court decisions, the High Court concluded that the importers did not breach the exemption conditions by cutting the logs into smaller pieces for sale. The Court's decision was based on a thorough analysis of legal definitions and precedents.

Issue 4 - Failure to Consider Grounds of Appeal:
One of the Customs Department's arguments was that the Tribunal had not adequately considered the grounds of appeal submitted by the department. Despite this contention, the High Court found no error in the Tribunal's decision and dismissed the appeal. The Court's ruling was based on the premise that the importers had not violated the conditions of the exemption notification by sawing the timber into smaller pieces for transportation and sale. Consequently, the Court found no merit in the Customs Department's argument regarding the consideration of grounds of appeal.

In conclusion, the High Court dismissed the Tax Appeal filed by the Customs Department, affirming the Tribunal's decision regarding the transformation of imported rough logs into sawn timber for domestic sale and upholding the eligibility of the importers for the exemption under scrutiny.