2018 (6) TMI 651 - AT - Customs

Refund of SAD - N/N. 102/07-Cus., dated 14.09.2007 - denial of refund on the ground that the appellants have not sold the imported goods as such - Revenue entertained a view that inasmuch as latex gloves imported by the appellant, were subsequently put to certain processes like quality inspection visually, placing them in wallet/pouches and further in boxes/packages, which were being subject to process of sterilization, which process amounts to manufacture in terms of section 2(f)(iii) of the Central Excise Act, 1944. Whether the process undertaken by the appellant amounts to manufacture or not? - Held that - The Hon ble Supreme Court in the case of M/s. Servo-Med Industries Pvt. Ltd. Vs Commissioner of Central Excise, Mumbai 2015 (5) TMI 292 - SUPREME COURT has held that the process of sterilization does not amount to manufacture. The said process does not convert the gloves to any other product than the gloves except that they are sterilized, which is not a lasting character and when the gloves are opened from the packing, the same tend to become desterlized. Apart from the fact that it is well settled principle of law that no extraneous conditions can be introduced in the notification which has to be interpreted on its own wordings, we also take note of the fact that though the earlier notification required the imported goods to be sold as such , there is no such condition in the present Notification No. 102/07, which only used the expression subsequently sold . Inasmuch as, the imported gloves have been sold by the assessee as gloves and it is only by deeming fiction of law that the activities of labeling, relabeling, packing, repacking etc., has been made as amounting to manufacture, we find that there is no justification to hold that the gloves have undergone any change - there is no justification for denial of the refund of SAD. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Interpretation of Notification No. 102/07-Cus regarding refund of SAD paid on imported goods
- Determination of whether certain processes undertaken on imported goods amount to manufacture
- Impact of the deeming clause introduced in the Central Excise Act post-11.07.2014 on refund eligibility

Analysis:

Issue 1: Interpretation of Notification No. 102/07-Cus
The case involved the interpretation of Notification No. 102/07-Cus, which grants a refund of SAD paid on imported goods subject to specific conditions. The appellant imported latex gloves and cleared them, seeking a refund as per the notification. The revenue contended that certain processes undertaken on the gloves, like sterilization, constituted manufacture, thereby challenging the refund claims.

Issue 2: Determination of Manufacturing Process
The question arose whether the processes undertaken by the appellant, including repacking, relabeling, and sterilization, amounted to manufacture as per the Central Excise Act. The appellant argued that these processes did not alter the fundamental character of the imported gloves and that sterilization did not amount to manufacture. Various judicial precedents were cited to support the contention that such processes did not disqualify the appellant from claiming the SAD refund.

Issue 3: Impact of Deeming Clause Post-11.07.2014
The adjudicating authority held that post-11.07.2014, certain activities like packing and repacking were deemed to be manufacture under the Central Excise Act. This raised the question of whether the introduction of the deeming clause affected the eligibility of the importer for the SAD refund. The Tribunal analyzed the wording of the notification and concluded that the goods were sold as gloves, despite the activities deemed as manufacture, thereby justifying the refund of SAD.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the impugned orders and allowing both appeals. The judgment emphasized that the processes undertaken did not change the essential nature of the imported goods, and the deeming clause introduced post-11.07.2014 did not preclude the appellant from claiming the refund as per the provisions of Notification No. 102/07-Cus.