CA Pradeep Jain & Sukhvinder Kaur, LLB[FYIC]
The rate of customs duty on the import of Stainless Steel Scrap under exemption Notification No. 21/2002-Cus dated 01.03.2002 has always been surrounded by controversies. There has been an amendment in the rate of duty on the import of SS scrap in almost all the Budgets announced in the recent years. We wrote article earlier on this controversy titled as “Non- Melting Controversy on Melting Scrap”
Legislative Changes: –
In 2002, there were two separate entries existed in Notification No. 21/2002-Cus, dated 01.03.2002. In the entry at serial no. 200 the description of goods was “Melting of scrap of iron or steel (other than stainless steel or heat resisting steel), for use in, or supply to, a unit for the purpose of melting” falling under heading 72.04.
And the entry at serial no. 202 read as “Scrap of stainless steel for the purpose of melting” falling under heading 7204.21. On both the entries the standard rate of duty prescribed was uniform i.e. @ 5%. Also, the stainless steel scrap was specifically excluded from entry at serial no. 200.
In the year 2003, the rate of duty for Melting scrap of iron or steel as listed at Serial no. 200 was reduced to Nil. But there was no change in the rate of duty for Scrap of Stainless Steel listed at serial no. 202. The stainless steel scrap was still specifically excluded from entry at serial no. 200.
Then in the year 2006, the Notification No. 21/2002-Cus was again amended in this regard. The description of goods of the serial no. 200 read as “Melting scrap of iron or steel”. Thus, the stainless steel was not specifically excluded from the said entry. Also, the rate of duty was changed and from Nil duty again a duty @ 5% was levied.
No change was made in the entry at serial no. 202. Although the with regard to rate of duties, both the entries were at par. But now, the stainless steel scrap could fall under either of the entries as the phrase excluding stainless steel scrap from entry at serial no. 200 was removed.
The next amendment in the said entries was brought in the year 2008. Again the rate of basic customs duty for entry at serial no. 200 i.e. for Melting scrap of iron or steel was again reduced to Nil. While the rate of duty for entry at serial no. 202 i.e. for scrap of stainless steel was maintained at 5%.
However, there was a significant development this time. Since the scrap of stainless steel was not excluded from entry at serial no. 200, the importer who was importing stainless steel scrap for melting could avail exemption from payment of BCD under the said entry saying that there are two exemption notifications. Stainless steel is also type of steel and hence the exemption is available under the entry scarp of iron or steel.
As per the amended provisions the importer claimed the benefit of importing stainless steel scrap for melting at Nil rate under entry at serial no. 200. However, the Department objected to the same on the ground that stainless steel scrap would specifically fall under entry at serial no. 202 and the assessee was liable to pay duty at the rate of 5% on the import of the said goods.
The dispute reached the Tribunal level in case of Mangalam Alloys Limited [Final Order No. A/308-314/WZB/AHD/2010 Dated 22.04.2010]. We have brought a case study on the same which is still available on our website www.capradeepjain.com. The department assessed the duty @ 5% duty and importer filed appeal against the assessment orders claiming benefit under entry at serial no. 200. The basis for challenging the levy was that as there were two entries, the assessee would claim benefit of more beneficial entry. The appeals against the assessment order filed before the Commissioner (Appeals) were rejected denying the benefit of paying Nil rate of duty under serial no. 200.
Decision of the Tribunal: –
Thereafter, the appeal was preferred by the assessee before the Tribunal. The Tribunal accepted the contentions raised by us that steel covers stainless steel. Although there is difference in their composition but the base metal is steel in both goods. It was held that stainless steel is only a form of steel.
Further, following the Apex Court decision in case of Share Medicine Vs. UOI [2007 (209) ELT 321 (SC)], CCE Vs. Indian Petrochemicals [1997 (92) ELT 13 (SC)], HCL Vs. CCE [2001 (130) ELT 405 (SC)], Coca Cola India Pvt. Ltd. v/s CCE, Pune–III [2009 (242) ELT 168 (Bom.)] and IOCL v/s CCE [1991 (53) ELT 347 (Tri)], it was held that when there are two exemption notifications then option lies with assessee to choose anyone of them. The general or specific exemption does not make any difference.
Relief was granted to the assessee that he could claim exemption under the entry 200 or 202. The tribunal held that since he has opted for nil entry, hence the refund should be granted to him. But the department took the matter into Highest Court of India and matter is still pending over there.
Later Development: –
In the year 2010 vide Notification No. 54/2010-Cus dated 29.04.2010, the rate of duty on the import of Scrap of stainless steel for melting listed at serial no. 202 was reduced from 5% to 2.5%. But this time again the amendment was done in the entry of scarp of iron or steel. The words “other than stainless steel scrap” have been added. This implied that the exemption of iron and steel will not be applicable to stainless steel. Thus, the dispute was settled by the Board.
Thus, the drafting of legal provisions is very important. The government himself gave rise to litigation by drafting in erroneous manner. Further, the constant changes in the said relevant entries have only resulted in confusion. We had suggested in our Article that the separate entry at serial number 202 should be deleted. But board has separated the entries and held that exemption is not available to S.S. scrap.
Budget Changes in 2011: –
Now, in Budget 2011-12 the Basic customs duty on Stainless steel scrap listed at serial no. 202 has been removed and the import of said item is now fully exempted. When the exemption was to given to both the entries then only one entry should have kept i.e. Scarp of iron or steel.
The constant changes in the entries at serial no. 200 and 202 have lead to confusion as stated hereinabove. Only the Government can understand as to how this situation works. The pattern noted in these two entries is that the duty is once imposed at the rate of 5% and in the next amendment full exemption is granted. And next time again the rate of 5% customs duty is imposed.
Now, we are standing at same place where we have started in the beginning. Now again exemption is given under both the entries. The single entry should be kept instead of two entries so that dispute does not arise in future. But who can tell the board. Further, the history repeats itself and we fear again the dispute should not arise. Otherwise it will again go to Apex Court.