2013 (11) TMI 857 - HC - Customs

Refund of SAD - import sawnwood - post-import sawing of wood and subsequent sale - Conversion factor - Conversion factor 1.8027 or conversion factor 1.416 - Applicability of clarification / circular dated 26-4-2012 - Notification No. 102/2007-Customs dated, 14-9-2007 - Held that - The conversion factor is, therefore, relatable to round timber logs which on import is liable to payment of Special Additional Duty and consequent refund, based on VAT paid thereon - it may not apply to a case of sawnwood. Therefore, the petitioner cannot make an issue by mixing and interchanging the conversion factor of round timber logs with that of the sawnwood. Both are independent of each other. If the import is round timber logs and sale is also the same, then, the clarification will apply. If the import is of sawnwood and sale is also sawnwood, the natural consequence is that VAT paid will be reckoned for the purpose of refund of Special Additional Duty. Two different factors cannot be clubbed together to confuse the issue on conversion of factor - Since the notification is specific and clear that it deals only with the round timber logs and not any other form, the writ petition filed by the petitioner on the misconception about the subsequent modification of the timber at his will is of no relevance to the circular/clarification - Following decision of Union of India v. Madras Steel Re-Rollers Association 2012 (8) TMI 788 - SUPREME COURT OF INDIA - Decided agsinst Petitioner.

Issues Involved:
1. Legality of the conversion factor for timber from Hoppus Ton to Cubic Meter.
2. Impact of the conversion factor on the refund of Special Additional Duty (SAD).
3. Authority and scope of the Central Board of Excise and Customs (C.B.E. & C.) under Section 151A of the Customs Act, 1962.
4. Prospective vs. retrospective application of the C.B.E. & C. clarification.

Detailed Analysis:

1. Legality of the Conversion Factor for Timber from Hoppus Ton to Cubic Meter:
The petitioner challenged the conversion factor of 1 Hoppus Ton = 1.8027 Cubic Meter (CBM) as clarified by the C.B.E. & C., arguing that it should be 1 Hoppus Ton = 1.416 CBM, a long-standing practice. The Kerala High Court had previously directed the C.B.E. & C. to clarify this issue due to inconsistencies across different Customs Houses. The C.B.E. & C. clarified that the conversion factor for "Roundwood" is 1.8027 CBM, while for "Sawnwood" it is 1.416 CBM, based on different calculation methods.

2. Impact of the Conversion Factor on the Refund of Special Additional Duty (SAD):
The petitioner contended that using the conversion factor of 1.8027 CBM would adversely affect the refund of SAD paid on imported timber. The C.B.E. & C. clarified that the conversion factor of 1.8027 CBM should be used for round timber logs, and the refund of SAD would be based on the volume declared and VAT paid on the sale of these logs. The court noted that this clarification was specific to round timber logs and did not apply to sawnwood, thus addressing the petitioner's concern about mixing conversion factors.

3. Authority and Scope of the Central Board of Excise and Customs (C.B.E. & C.) under Section 151A of the Customs Act, 1962:
The petitioner argued that the C.B.E. & C. had overstepped its authority under Section 151A by introducing a new system of measurement instead of merely clarifying the existing one. The court referred to several judgments, including *Commissioner of Customs, Calcutta v. Indian Oil Corporation Ltd.* and *Varsha Plastics Pvt. Ltd. v. Union of India*, which emphasized that the C.B.E. & C.'s role under Section 151A is to ensure uniformity and provide guidance without interfering with the quasi-judicial functions of assessing authorities. The court concluded that the C.B.E. & C.'s clarification was within its authority and aimed at ensuring uniformity in the conversion factor across different Customs Houses.

4. Prospective vs. Retrospective Application of the C.B.E. & C. Clarification:
The petitioner argued that the clarification should not be applied retrospectively, affecting past transactions. The court clarified that the C.B.E. & C.'s directive was intended to address ongoing and future transactions to ensure consistency. For past transactions, the petitioner would need to provide evidence of VAT paid on the sale of round timber logs to claim the refund of SAD. The court found no merit in the argument that the clarification was retrospective and emphasized that it applied to round timber logs imported and sold as such.

Conclusion:
The court dismissed the writ petition, finding that the C.B.E. & C.'s clarification was within its authority under Section 151A of the Customs Act, 1962, and aimed at ensuring uniformity in the conversion factor for round timber logs. The court noted that the clarification did not apply to sawnwood and addressed the petitioner's concerns about the impact on the refund of SAD. The challenge to the clarification was found to be without merit, and the petition was dismissed with no costs.

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