2021 (5) TMI 129 - HC - Customs

Refund of SAD - Process amounting to manufacture or not - sterilization, re-packing, re-labelling etc. - refund of SAD under Notification No.102/2007-Cus dated 14.09.2007 when the importer has not fulfilled the conditions 2(d) and 2(3)(ii) stipulated in the said Notification - CBEC Circular No.34/2010- Customs, dated 15.09.2010 - HELD THAT - The effect of Circular No.34/2010 has not been considered by the Tribunal. The learned Senior Standing Counsel for the Revenue lays emphasis on the Circular, which clarifies the position that there is no intention to omit / delete the words as such from the Notification, which continues to remain as condition though implied. The Circular is not under challenge in any of the proceedings, nor its applicability has been questioned by the assessee. The Adjudicating Authority, namely, Commissioner of Customs has taken note of Circular No.34/2010. However, the Tribunal has not considered the correctness of the order passed by the Adjudicating Authority qua the applicability of the Circular, which explains the intention of the Notification. The Tribunal found fault with the Adjudicating Authority in not granting relief in respect of the imports after 11.07.2014 and while granting the relief to the assessees proceeded on the basis that the earlier Notification No.56/1998 required the imported goods to be sold as such and it had a more stringent condition and there is no such requirement in the Notification No.102/2007 - this finding prima facie appears to be not sustainable as the issue whether the Notification No. 102/2007 was in supersession of Notification No.56/1998 was required to be considered and decided. From the reply given by the assessees to the show cause notice, dated 01.10.2015, it appears that the assessees did not raise the plea that the Notification No.102/2007 was in supersession of the earlier Notification nor there was any argument made by the assessees with regard to the effect of the Circular No.34/2010-Customs, dated 15.09.2010. Thus the matters requires to be re-examined, for which purpose, we are inclined to remand the matter back to the Commissioner of Customs to reconsider the entire issue afresh. Appeal allowed by way of remand.

Summary

Issues Involved:
1. Whether the process of sterilization, re-packing, and re-labeling amounts to manufacture under the Central Excise Tariff.
2. Eligibility for refund of Special Additional Duty (SAD) under Notification No.102/2007-Cus.
3. Interpretation of the term "subsequently sold" in Notification No.102/2007-Cus.
4. Maintainability of writ petitions filed by the assessees challenging the orders of the Assistant Commissioner of Customs.

Detailed Analysis:

1. Whether the process of sterilization, re-packing, and re-labeling amounts to manufacture under the Central Excise Tariff:
The Revenue's contention was that processes such as packing, re-packing, labeling, re-labeling, and sterilization of imported latex gloves amounted to manufacture under Section 2(f)(iii) of the Central Excise Act, 1944. The assessees argued that these processes did not change the character or use of the gloves, and therefore, did not constitute manufacture. The Tribunal, relying on the Supreme Court's decision in M/s. Servo Med Industries Pvt. Ltd., held that sterilization does not amount to manufacture as it does not result in a new product.

2. Eligibility for refund of Special Additional Duty (SAD) under Notification No.102/2007-Cus:
The assessees claimed a refund of SAD under Notification No.102/2007-Cus, which was initially granted for some bills of entry but denied for others. The Revenue argued that the assessees did not fulfill the conditions of the notification, which required the goods to be sold "as such" without further processing. The Tribunal found that the notification used the term "subsequently sold" and not "as such," thus allowing the refund claims. However, the High Court noted that the Tribunal failed to consider Circular No.34/2010-Customs, which clarified that the goods must be sold without any further processing to qualify for the refund.

3. Interpretation of the term "subsequently sold" in Notification No.102/2007-Cus:
The Tribunal interpreted "subsequently sold" to mean that the goods could undergo processes like sterilization and re-packing before being sold. The High Court disagreed, emphasizing that an exemption notification must be interpreted strictly, and any deviation from the conditions specified in the notification would disqualify the assessees from claiming the refund. The High Court noted that the Tribunal's interpretation was inconsistent with the Circular No.34/2010-Customs, which implied that the goods should be sold "as such."

4. Maintainability of writ petitions filed by the assessees challenging the orders of the Assistant Commissioner of Customs:
The High Court found that the writ petitions were not maintainable as the assessees had an effective alternate remedy of appeal before the Commissioner (Appeals), which they did not pursue within the stipulated time. The Court held that the Assistant Commissioner of Customs did not have the power to review his own orders, and the assessees' explanation for not filing an appeal was not acceptable. Consequently, the writ petitions were dismissed.

Conclusion:
(i) The High Court allowed the civil miscellaneous appeal (C.M.A.(MD) No.687 of 2019), set aside the Tribunal's order, and remanded the matter to the Commissioner of Customs for fresh consideration.
(ii) The writ petitions filed by the assessees were dismissed as not maintainable, but the orders rejecting the refund applications were set aside, and the refund applications were restored to the Assistant Commissioner of Customs for reconsideration after the Commissioner of Customs' de novo adjudication.
(iii) No costs were imposed, and the connected miscellaneous petitions were closed.