2025 (1) TMI 749 - AT - Customs

Refund of the Special Additional Duty (SAD) paid on imported raw cashew nuts, which were processed into cashew kernels before being sold - denial of refund on the ground that description of the imported goods and sold goods were not tallying - HELD THAT - On perusal of N/N. 102/2007-Cus, it is observed that there are certain conditions which are required to be satisfied for getting refund. On perusal of these conditions it would indicate that time and again reference has been made to said goods , which in this context would indicate imported goods . The documents required also, interalia, requires them to produce documents evidencing payment of appropriate sales tax or VAT as the case may be by the importer on sale of such imported goods (emphasis supplied). Therefore, notification is exempting all the goods when they are imported for subsequent sale and subject to following various conditions including payment of VAT in respect of said goods. Therefore, if the wordings used in notification are read conjointly, it would be obvious that the notification is applicable only when the imported goods itself is sold and at the time of said sale appropriate sales tax are also paid. Admittedly, the word as such has not been mentioned in the notification, but strict interpretation of this notification having regard to the wordings used would indicate that the exemption is available only when the goods are sold as such and not after certain processing. In AGARWALLA TIMBERS (P) LTD., MITTAL TIMBERS PRODUCTS (P) LTD., VARIETY LUMBERS (P) LTD. AND ASHIRWAD IMPEX (P) LTD. VERSUS CC 2013 (11) TMI 1013 - GUJARAT HIGH COURT , in a given factual matrix, it was held that cutting of log/timber into smaller pieces does not bring into account any new product nor identity of original timber has underwent any fundamental change. They also took into account that as per the Statutory conditions, the importer/transporter cannot carry the logs of length more than 40 feet and therefore having regards to these submissions, a view was taken. These facts are clearly distinguished in the present appeal. A notification has to be interpreted strictly as held in catena of judgments of Hon ble Supreme Court and in fact in the case of COMMISSIONER OF CUSTOMS (IMPORT) , MUMBAI VERSUS M/S. DILIP KUMAR AND COMPANY ORS. 2018 (7) TMI 1826 - SUPREME COURT (LB) , it was, interalia, observed that in case there is any ambiguity in the notification, the benefit should go to the Revenue. In this case, though the word as such has not been used in Notification No. 102/2007, the reading of the detail notification would collectively indicate that it was only intended for goods sold as such and not after manufacture/process. Conclusion - The appellant is not entitled to a refund of SAD under Notification No. 102/2007-Cus, as the goods sold were not the same as those imported. Appeal dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the appellant is entitled to a refund of the Special Additional Duty (SAD) paid on imported raw cashew nuts, which were processed into cashew kernels before being sold.
• Whether the conditions of Notification No. 102/2007-Cus, which provides for a refund of SAD on goods imported for subsequent sale, are satisfied when the imported goods undergo a manufacturing process before sale.
• Whether the interpretation of the term "imported goods" in the context of the notification should include goods that have undergone processing or manufacturing.
• Whether the reliance on CBEC Circulars No. 15/2010 and No. 34/2010 to deny the refund claim is justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Refund of SAD

• Relevant Legal Framework and Precedents: The legal framework revolves around Notification No. 102/2007-Cus, which allows for a refund of SAD on goods imported for subsequent sale. The appellant contends that the notification does not explicitly require the goods to be sold "as such" without processing. Precedents cited include judgments from various courts interpreting similar notifications.
• Court's Interpretation and Reasoning: The court interpreted the notification to mean that the refund is applicable only when the imported goods are sold in the same form as they were imported. The term "imported goods" was interpreted strictly, indicating that any transformation or processing disqualifies the goods from the refund benefit.
• Key Evidence and Findings: The court relied on the fact that the imported raw cashew nuts were processed into cashew kernels, which are classifiable under different tariff headings, indicating a change in the nature of the goods.
• Application of Law to Facts: The court applied the strict interpretation principle to conclude that since the goods sold were not the same as those imported, the refund claim does not meet the conditions of the notification.
• Treatment of Competing Arguments: The appellant's argument for a liberal interpretation was countered by the court's reliance on the strict interpretation principle, supported by precedents that emphasize the need for a narrow reading of exemption notifications.
• Conclusions: The court concluded that the appellant is not entitled to a refund under Notification No. 102/2007-Cus because the goods were not sold in the same form as imported.

Issue 2: Interpretation of "Imported Goods"

• Relevant Legal Framework and Precedents: The interpretation of "imported goods" is central to the application of Notification No. 102/2007-Cus. The court considered precedents where the transformation of goods was deemed significant enough to deny refund claims.
• Court's Interpretation and Reasoning: The court reasoned that the notification's repeated reference to "imported goods" implies that the goods must remain unchanged to qualify for a refund. The absence of the term "as such" in the notification does not alter this interpretation.
• Key Evidence and Findings: The court noted the classification difference between raw cashew nuts and cashew kernels, reinforcing the view that the goods were not the same post-processing.
• Application of Law to Facts: The court applied the legal principle that exemption notifications should be construed strictly, leading to the conclusion that the processed goods do not qualify as "imported goods" under the notification.
• Treatment of Competing Arguments: The appellant's reliance on judgments advocating a broader interpretation was addressed by the court's adherence to the principle of strict interpretation, which is supported by Supreme Court rulings.
• Conclusions: The court held that the processed cashew kernels do not qualify as "imported goods" for the purposes of the notification, thus denying the refund claim.

Issue 3: Reliance on CBEC Circulars

• Relevant Legal Framework and Precedents: The CBEC Circulars No. 15/2010 and No. 34/2010 provide clarifications on the application of Notification No. 102/2007-Cus. The appellant challenged the validity of these circulars in altering the notification's scope.
• Court's Interpretation and Reasoning: The court found that the circulars merely clarified the notification's intent and did not alter its fundamental requirements. The circulars were deemed consistent with the notification's strict interpretation.
• Key Evidence and Findings: The court emphasized that the circulars highlighted the necessity for the goods to be sold in the same form as imported, which aligns with the notification's wording.
• Application of Law to Facts: The court applied the principle that circulars cannot amend statutory notifications but can clarify their application, which was the case here.
• Treatment of Competing Arguments: The appellant's argument that the circulars improperly expanded the notification's conditions was rejected, as the court found the circulars to be consistent with the notification's language.
• Conclusions: The court upheld the validity of the circulars in clarifying the notification's requirements, supporting the denial of the refund claim.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: "The exemption is available only when the goods are sold as such and not after certain processing."
• Core principles established: The judgment reinforces the principle that exemption notifications must be interpreted strictly, and any ambiguity should favor the Revenue. It also clarifies that the transformation of goods through processing disqualifies them from being considered the same as "imported goods" under Notification No. 102/2007-Cus.
• Final determinations on each issue: The court determined that the appellant is not entitled to a refund of SAD under Notification No. 102/2007-Cus, as the goods sold were not the same as those imported. The reliance on CBEC Circulars was justified, and the interpretation of "imported goods" was upheld as requiring the goods to remain unchanged.