Case Law Details

Case Name : SRF Ltd. Vs. Commissioner Of Customs, Chennai [2015-TIOL-74-SC-CUS]
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CA Bimal Jain

CA Bimal JainExemption from CVD cannot be denied on not fulfilling the condition that Cenvat Credit not taken, when the Credit itself was not admissible

SRF Ltd. (the Appellant) imported Nylon Filament Yarn of 210 deniers falling under Chapter 54 of the Customs Tariff Act, 1975 and claimed nil rate of additional duty of Customs/ Countervailing Duty (CVD” by virtue of Serial No. 122 of Notification No. 6/2002-CE dated March 1, 2002 (the Notification). The Deputy Commissioner of Customs denied the benefit of the Notification on the account of non fulfillment of that condition that, no Cenvat credit under Rule 3 or Rule 11 of the Credit Rules, 2002 has been taken in respect of the inputs or capital goods used in the manufacture of Nylon Filament Yarn or polypropylene multifilament yarn of 210 deniers with tolerance of 6 per cent.

Being aggrieved, the Appellant preferred an appeal before the Hon’ble Commissioner (Appeals) who confirmed the order of the Deputy Commissioner of Customs.

Thereafter, the Appellant preferred appeal before CEGAT who had also, affirmed the order of the Authorities below. Hence, the Appellant preferred an appeal before the Hon’ble Supreme Court.

The Hon’ble Supreme Court took reliance on the decision in case of AIDEK Tourism Services Private Limited Vs. Commissioner of Customs, New Delhi [2015-TIOL-23-SC-CUS] read with Thermax Private Limited Vs. Collector of Customs (Bombay), New Customs House [2002-TIOL-683-SC-CUS-LB], wherein it was held that:

15. The ratio of the aforesaid judgment in Thermax Private Limited (supra) was relied upon by this Court in Hyderabad Industries Ltd. (supra) while interpreting Section 3(1) of the Tariff Act itself; albeit in somewhat different context. However, the manner in which the issue was dealt with lends support to the case of the assessee herein. In that case, the court noted that Section 3(1) of the Tariff Act provides for levy of an additional duty. The duty is, in other words, in addition to the customs duty leviable under Section 12 of the Customs Act read with Section 2 of the Tariff Act. The explanation to Section 3 has two limbs. The first limb clarifies that the duty chargeable under Section 3(1) would be the excise duty for the time being leviable on a like article if produced or manufactured in India.

The condition precedent for levy of additional duty thus contemplated by the explanation deals with the situation where ‘a like article is not so produced or manufactured’. The use of the word ‘so’ implies that the production or manufacture referred to in the second limb is relatable to the use of that expression in the first limb which is of a like article being produced or manufactured in India.

The words ‘if produced or manufactured in India’ do not mean that the like article should be actually produced or manufactured in India. As per the explanation if an imported article is one which has been manufactured or produced, then it must be presumed, for the purpose of Section 3(1), that such an article can likewise be manufactured or produced in India. For the purpose of attracting additional duty under Section 3 on the import of a manufactured or produced article the actual manufacture or production of a like article in India is not necessary. For quantification of additional duty in such a case, it has to be imagined that the article imported had been manufactured or produced in India and then to see what amount of excise duty was leviable thereon

Hence, based on the aforesaid judgment and facts of the instant case, the Hon’ble Supreme Court allowed the appeal in favour of the Appellant and held that the Appellant is entitled to exemption from payment of CVD in terms of the Notification.

(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)

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0 responses to “Exemption from CVD cannot be denied on not fulfilling the condition that Cenvat Credit not taken, when the Credit itself was not admissible”

  1. N.D.Jain says:

    Very good.

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