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TMI Blog2017 (10) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... otification, that the imported goods should be sold as such, so as to qualify for exemption. All that the notification says is that the imported goods should be sold locally and that the conditions stipulated in para-2 should be fulfilled - the timber logs imported by any one, when cut into smaller logs, do not lose the character of being timber logs. More over, the size of timber logs that could be imported in huge ships, will be so large that they cannot be transported locally in trucks on roads. What the department had done, is to read one more condition into the exemption notification, which is not found in the notification itself. It is not the case of the department that goods falling under one classification are entitled to exemption and the goods falling under another classification are not entitled to exemption. What is claimed is only the refund of the special additional duty. The special additional duty is payable on the goods that fall under the First Schedule to the Customs Tariff Act 1975, in terms of Section 3 (5) of the Act. The fact that the imported logs fall under the First Schedule to the said Act and the fact that as a consequence special additional duty was pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alour in challenging the ratio laid down by the Gujarat High Court, could have simply allowed all the refund claims with a brief order to the effect that the refund claims are allowed (i) subject to the outcome of the appeal before the Supreme Court and (ii) subject to the further condition that a bank guarantee is furnished for half of the amount claimed as refund. The Original Authority did not adopt such a course of action - As a matter of fact, if the adjudicating authority had passed orders-in-original incorporating the same conditions as found in the interim order of the Supreme Court in Variety Lumbers Pvt. Ltd., incorporating a condition that the refund was ordered subject to the outcome of the decision before the Supreme Court, the department would have been better of. If the original authority had passed such an order, the department would have become entitled to recover the amount of refund, in the event of their success before the Supreme Court in Variety Lumbers Pvt. Ltd. The department let go this opportunity and invited an order on merits from the Tribunal - the Tribunal was right in rejecting the Miscellaneous Applications - decided against the appellant/revenue. Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 24-09-2012 Rs.13,91,801.80ps Rs.9,10,318.00 ps 75 of 2017 05-11-2012 Rs.7,84,837.00 ps Rs.2,07,219.00 ps 6. The disallowance of a part of the refund claim was on two grounds viz., (1) that the timber logs imported by the respondentassessee were not sold as such by them, but were sold locally after sawning them and cutting them into smaller sizes; and (2) that the logs cut into smaller sizes could not correlate to the items described in the import packing list. 7. Contending that the grounds of rejection were not traceable to the exemption notification and that the imported material did not lose their character merely because of being cut into smaller pieces, the respondent-assessee filed statutory appeals before the Commissioner (Appeals). The Commissioner (Appeals), dismissed all the appeals forcing the respondent-assessee to file second appeals before CESTAT. The CESTAT allowed all the appeals relying upon the decision of the Gujarat High Court in Commissioner of Customs v. Variety Lumbers Private Limited (2012 TIOL-821-HC-AHM-CUS). The Tribunal took note of the fact that as against the judgment of Gujarat High Court, Special Leave Petitions were filed and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d., (supra) where the appellant Department had filed Appeal before the Supreme Court and the same is pending for adjudication? 2. Whether the CESTAT was justified in allowing the respondent's appeal and declaring that the respondent is eligible for refund of SAD relying on the judgment in Commissioner of Customs Vs. M/s. Variety Lumbers Pvt. Ltd., and C.C. Kandla Vs. M/s. Agarwala Timbers Pvt. Ltd., without imposing any condition to protect the interests of the appellant and thereby departing from the order of the Supreme Court wherein the Supreme Court imposed a condition that the respondent should furnish bank guarantee security for half of the amount to the satisfaction of the appellant department's Assessing Officer? 12. A careful look at the above questions of law would show that the first question of law revolves around the entitlement of the respondent-assessee to refund. The second question of law, even if answered in favour of the revenue, would still entitle the respondentassessee to receive the refund, but after furnishing bank guarantee to the extent of 50% of the amount refunded, in the light of the interim order passed by the Supreme Court in the appeal arising o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question of law, we would also go into the more fundamental question, to test the genuineness of the grievance of the appellant/revenue. The grievance of the appellant/revenue is that a person not entitled to the benefit of exemption notification, cannot walk away with a refund. According to the appellant/revenue, the department was fair enough to order refund of a portion of the claim, wherever the jurisdictional Customs Officer noted that the imported timber logs were sold as such in the local market without being cut into smaller sizes and wherever they matched with the description contained in the packing list. The claim of the department is that an importer is not entitled to exemption, if the imported material was converted into something else and if the goods sold locally do not match the description contained in the packing list. 18. But, unfortunately, for the appellant/revenue, the requirement to sell the imported goods as such in the local market, is not one of the conditions stipulated in the exemption notification. It will be useful to extract the exemption notification dated 14-09-2007 as follows: "In exercise of the powers conferred by sub-section (1) of Section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oads. What the department had done, is to read one more condition into the exemption notification, which is not found in the notification itself. 21. Mrs. Sundari R. Pisupati, learned senior standing counsel placed heavy reliance upon a Circular bearing No.15/2010-Customs, dated 29-6-2010, wherein the Government imposed certain conditions in order to prevent fraudulent claims by unscrupulous importers. Paragraphs 2 to 4 of the said circular read as follows: "2. Instances have come to notice of the Board where some importers of 'timber logs' have undertaken certain processes and subsequently sold 'sawn' or 'cut logs' after payment of VAT. These importers are claiming the refund of 4% SAD paid at the time of importation of goods in terms of Notification No.102/2007-Customs dated 14.09.2007. As per the said Notification, refund of SAD is available only in case the imported goods are subsequently sold on payment of VAT, without carrying out any process. However, at the time of claiming refund of 4% SAD, these importers have manipulated the facts by showing that goods sold were imported timber logs only and not 'sawn' or 'cut logs'. In terms of the classification of the First Schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose that are obtained after a process, may fall under a different classification. In the case of the assessee itself, the round and square logs of wood come under classification Heading 4403, whereas sawn wood falls under classification Heading 4407. Therefore, it is contended by the learned senior standing counsel for the department that the moment the imported goods are subjected to some process, they would go out of the purview of the exemption notification. 23. But, we do not agree. It is not the case of the department that goods falling under one classification are entitled to exemption and the goods falling under another classification are not entitled to exemption. What is claimed is only the refund of the special additional duty. The special additional duty is payable on the goods that fall under the First Schedule to the Customs Tariff Act 1975, in terms of Section 3 (5) of the Act. The fact that the imported logs fall under the First Schedule to the said Act and the fact that as a consequence special additional duty was paid and the importer became entitled to refund, are all not denied. It is not the case of the department that round/square logs falling under Heading 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of imagination. Hence, even on merits, we find that the ultimate conclusion reached by the Gujarat High Court in Variety Lumbers Pvt. Ltd., appears to be the probable view. 28. In fact, we have chosen to go into the merits, despite the department not raising the aforesaid two issues as substantial questions of law before us. This was just to ensure that the assessee does not walk away with a payment that they are not entitled to. 29. We should also add that today the department is not even entitled to raise the first substantial question of law before us. If the department wanted to raise the first substantial question of law, they should have come up with the appeals under Section 130A of the Act immediately after the CESTAT disposed of the appeals, but the department did not do so. On the contrary, they moved the Tribunal with Miscellaneous Applications for modification. What was prayed for in the Miscellaneous Applications for modification was only to impose a condition that the assessee should furnish bank guarantee for 50% of the amount of refund. It is only after the Miscellaneous Applications were dismissed by the Tribunal that the department has chosen to come up with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he refund claims with a brief order to the effect that the refund claims are allowed (i) subject to the outcome of the appeal before the Supreme Court and (ii) subject to the further condition that a bank guarantee is furnished for half of the amount claimed as refund. The Original Authority did not adopt such a course of action, despite having the benefit of the interim order of the Supreme Court passed in Variety Lumbers Pvt. Ltd. Even the Commissioner (Appeals) did not take recourse to such an option. Therefore, today the department cannot find fault with the CESTAT not passing a similar order as passed by the Supreme Court in Variety Lumbers Pvt. Ltd., especially when the Original Authority as well as the Appellate Authority themselves did not choose to follow the interim order of the Supreme Court. 36. As a matter of fact, if the adjudicating authority had passed orders-in-original incorporating the same conditions as found in the interim order of the Supreme Court in Variety Lumbers Pvt. Ltd., incorporating a condition that the refund was ordered subject to the outcome of the decision before the Supreme Court, the department would have been better of. If the original authori ..... X X X X Extracts X X X X X X X X Extracts X X X X
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