1997 (9) TMI 104 - SC - Customs

Exemption - Duty Exemption Scheme (Customs) - Materials - Meaning of - Interpretation of statute - Explanation

Summary

Issues Involved:
1. Eligibility for duty exemption under Notification No. 210/82-Cus.
2. Interpretation of Notification No. 116/88-Cus.
3. Definition and scope of "materials" in the context of duty exemption.

Detailed Analysis:

1. Eligibility for Duty Exemption under Notification No. 210/82-Cus.

The appellant, a manufacturer and exporter of Lightening Arrestors, claimed duty-free clearance for Crystar Beams under Notification No. 210/82-Cus., dated September 10, 1982. This notification exempts raw materials and components required for manufacturing goods supplied to specified international and development organizations from customs duty. The appellant argued that the Crystar Beams, used in kilns for manufacturing Porcelain Housings, should qualify as such components. However, the Additional Collector of Customs and the Tribunal held that the beams are capital goods, not raw materials or components of the resultant product, and thus do not qualify for the exemption.

2. Interpretation of Notification No. 116/88-Cus.

Notification No. 116/88-Cus., dated March 30, 1988, exempts materials required for the manufacture of resultant products or for replenishing materials used in their manufacture from customs duty. The appellant contended that Crystar Beams fall within the scope of this notification as "materials required to be imported for the purpose of manufacture of products." The Tribunal, however, upheld the Additional Collector's view that the exemption applies only to materials directly used in the manufacture of the resultant products, not to materials used in the manufacturing process, such as kiln furniture.

3. Definition and Scope of "Materials" in the Context of Duty Exemption

The appellant's counsel argued that the term "materials required for the manufacture" should include materials necessary for the manufacturing process, even if not directly used in the final product. The counsel for the Revenue countered that the exemption should apply only to materials directly used in the manufacture of the resultant products, as defined in Notification No. 116/88-Cus. The court considered the purpose of the notification, which is to encourage exports by exempting necessary materials from customs duty. The court concluded that the term "materials required for the purpose of manufacture" should be interpreted broadly to include materials necessary for the manufacturing process, such as Crystar Beams.

Conclusion

The Supreme Court allowed the appeal, holding that the appellant is entitled to exemption from customs duty and additional duty on the import of Crystar Beams under Notification No. 116/88-Cus. The judgment of the Tribunal and the order of the Additional Collector were set aside. The court emphasized that the exemption should be interpreted in a manner that aligns with the notification's objective of encouraging exports by exempting necessary materials, including those required for the manufacturing process. The appeal was allowed with no order as to costs.