2023 (3) TMI 1180 - HC - Customs

Eligibility for SAD exemption - Classification of imported goods - import of Rock Phosphate from Egypt for manufacturing copper under the description Natural Calcium Phosphate - to be classified under the tariff head 25101010 or under the classification of Minerals or Chemical Fertilizer Phosphotic falling under Tariff head 3103? - HELD THAT - By exempting Special Additional Duty on fertiliser or raw material used for manufacturing fertilizers, the end user namely the farmers will be getting the benefit of the said exemption. Whereas if fallacious interpretation for the term 'fertilizer' unconnected to the context is given, then may lead to miscarriage of the object for which the concession granted. The importer admits that the goods imported required in the process of manufacturing copper. They admit that they are not involved in manufacturing fertilizer nor holder of any license to manufacture fertilizers. At the time of import, they declared that the goods is covered under Tariff 25101010 and the name of the product is natural calcium Phosphate . It is admitted by the importer that no permission obtained under FCO, since the product 'rock phosphate' imported does not require such permission being not within the specification for rock phosphate to be qualified as 'fertiliser' under FCO. It is well settled principle of law that in case of exemptions, law should be strictly interpreted and liberal interpretation detrimental to revenue is not advocated. In the present case, the impugned order due to the infirmities noted has caused injury to the revenue hence to be redressed. The order of the Customes Department declining to grant SAD exemption is upheld - Appeal allowed.

Summary

Issues Involved:
1. Classification of Rock Phosphate under the correct Tariff Head.
2. Applicability of Fertilizer Control Order (FCO) to the imported Rock Phosphate.
3. Eligibility for Special Additional Duty (SAD) exemption under Notification No:21/2012.
4. Binding nature of earlier CESTAT orders and judicial precedents.

Summary:

1. Classification of Rock Phosphate:
The primary issue was whether Rock Phosphate imported by M/s. Sterlite Industries falls under Tariff Head 25101010 (Natural Calcium Phosphate) or under Tariff Head 3103 (Minerals or Chemical Fertilizer Phosphatic). The Customs Department argued that the importer declared the goods under Chapter 25 for paying lesser Basic Customs Duty but later sought to classify it under Chapter 31 for SAD exemption.

2. Applicability of Fertilizer Control Order (FCO):
The Customs Department contended that under Clause 35(4) of the Fertilizer Control Order, the importer should have informed the Director of Agriculture about the import of Rock Phosphate (fertilizer grade). The importer argued that the Fertilizer Control Order, 1985, did not apply as the Rock Phosphate imported did not meet the size specifications set out in the FCO, and it was imported in bulk for manufacturing Phosphoric Acid, which was then sold to fertilizer manufacturers.

3. Eligibility for SAD Exemption:
The importer sought exemption from SAD under Notification No:21/2012, which exempts fertilizers and raw materials for fertilizers. The Customs Department declined the exemption, arguing that the goods were classified under Chapter 25 and not Chapter 31. The Court noted that the exemption notification should be strictly interpreted, and the importer's claim did not satisfy the conditions for exemption as the Rock Phosphate was not used directly for manufacturing fertilizers.

4. Binding Nature of Earlier CESTAT Orders:
The importer relied on an earlier CESTAT order and judgments from the Bombay High Court, which had granted exemption under similar circumstances. However, the Court held that these precedents were based on earlier notifications and could not be perpetually applied, especially after the issuance of a new exemption notification (12/2012). The Court emphasized that each case should be considered based on the current notification and the specific facts.

Conclusion:
The Court concluded that the importer's request to classify Rock Phosphate as a fertilizer for the sake of exemption was not reasonable and amounted to a colorable request. It upheld the Customs Department's decision to decline the SAD exemption, setting aside the Single Judge's order that had favored the importer. The Court stressed the need for strict interpretation of exemption laws to prevent revenue loss. Consequently, the writ appeals were allowed, and the connected miscellaneous petitions were closed. The related writ petition (W.P.(MD)No.16271 of 2012) was also dismissed based on the same findings.