SAD exemption under notification no. 21/2012-Cus not available on import of parts of articles of jewellery

Kinjal Precious Pvt. Ltd. Vs Commissioner, Customs (CESTAT Delhi)

CESTAT Delhi held that exemption from special additional duty (SAD) of customs under the Notification No. 21/2012-CUS dated 17.03.2012 is not available on import of parts of articles of jewellery.

Facts- The issue involved in all the six customs appeals is as to whether gold/platinum/silver findings, which are parts of jewellery, are eligible for exemption from countervailing duty under the Notification No. 12/2012-CE dated 17.03.2012, as amended from time to time, and from special additional duty of customs under the Notification No. 21/2012-CUS dated 17.03.2012.

Conclusion- An exemption notification has to be strictly construed and the burden of proving that the case falls within the parameters of the exemption clause or the exemption notification is on the assessee; and if there is any ambiguity in the notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the assessee and it must be interpreted in favour of the revenue.

Similar would be the position with regard to the SAD exemption notification. Entry at serial no. 78 of Chapter heading 7113 describes the goods as articles of jewellery and not as parts of articles of jewellery. The Commissioner (Appeals) has recorded a finding that since they are different articles, an assessee cannot claim the benefit of SAD exemption notification on import of parts of articles of jewellery. The finding recorded by the Additional Commissioner and the Commissioner (Appeals), therefore, does not suffer from any legality.

FULL TEXT OF THE CESTAT DELHI ORDER

The issue involved in all the six customs appeals is as to whether gold/platinum/silver findings, which are parts of jewellery, are eligible for exemption from countervailing duty ¹ under the Notification No. 12/2012-CE dated 17.03.2012², as amended from time to time, and from special additional duty of customs³ under the Notification No. 21/2012-CUS dated 17.03.2012⁴.

2. The effective rates of duty of CVD for (i) Articles of jewellery and (ii) Articles of silver jewellery are prescribed in Entry No. 199 of the CVD exemption notification and the relevant portion of this notification is as follows:

“Notification No. 12/2012-Central Excise

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) and in supersession of the notification of the Government of India. xxxxxxxxxx, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the excisable goods of the description specified in column (3) of the Table below read with relevant List appended hereto and falling within the chapter, heading or sub-heading or tariff item of the First Schedule to the Central Excise Act, 1985 (5 of 1986) (hereinafter referred to as the Excise Tariff Act), as are given in the corresponding entry in column (2) of the said Table, from so much of the duty of excise specified thereon under the First Schedule to the Excise Tariff Act, as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table and subject to the relevant conditions annexed to this notification, if any, specified in the corresponding entry in column (5) of the Table aforesaid.”

3. Condition No. 25 is as follows:

4. However, by Finance Act of 2012, the aforesaid CVD exemption notification was given retrospective amendment by amending entry (I) of serial No. 199, so as to give Articles of jewellery‟ unconditional ^„NIL‟ rate of duty. Thus, after the amendment entry no. 199 reads as follows:

5. Entry No. 199 of the CVD exemption was substituted on 01.03.2016 by Notification No. 12/2016-CE dated 01.03.2016 and the entry no. 199 reads as follows:

6. Condition No. 16 is as follows:

7. Condition No. 16 was amended on 17.07.2015 and it is as follows:

8. Thereafter, entry no. 199 was again amended by notification dated 26.07.2016 and it is as follows:

9. The SAD exemption notification provides concessional rate of duty at 1% as follows:

“Notification No. 21/2012-Customs

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962) and in supersession of the notification xxxxxxxxxx, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the excisable goods of the description specified in column (3) of the Table below, falling within the chapter, heading, sub-heading or tariff item of the First Schedule to the customs Tariff Act, 1975 (51 of 1975) as are specified in the corresponding entry in column (2) of the said Table, when imported into India, from so much of the additional duty of customs leviable thereon under sub-section (5) of section 3 of the said Customs Tariff Act, as is in excess of the amount calculated at the standard rate specified in the corresponding entry in column (4) of the Table aforesaid.”

10. Customs Appeal No. 52073 of 2019 has been filed by M/s. Kinjal Precious Pvt. Ltd; Customs Appeal No. 52074 of 2019 has been filed by M/s. Sumangalam Gold Creations Pvt. Ltd; Customs Appeal No. 52075 of 2019 has been filed by M/s. Lalita Jewellers; Customs Appeal No. 52076 of 2019 has been filed by M/s. Ira Jewels to assail the common order dated 10.05.2019 passed by the Commissioner (Appeals). The appeal filed by M/s. Kinjal Precious Pvt. Ltd. has been dismissed, whereas the other three appeals filed by M/s. Sumangalam Creations Pvt. Ltd., M/s. Lalita Jewellers and M/s. Ira Jewels have been remanded for re-quantification of the demand with reduced penalty.

11. Customs Appeal No. 52088 of 2019 has been filed by PP Alloys and Findings Suppliers to assail the order dated 06.06.2019 passed by the Commissioner (Appeals), by which the appeal has been dismissed.

12. Customs Appeal No. 52242 of 2019 has been filed by Derewala Industries Ltd. to assail the order dated 10.06.2019 passed by the Commissioner (Appeals), by which the matter has been remitted for re-quantification of the demand with reduced penalty.

13. A summary of the six appeals, the orders impugned, and the period involved is as follows:

14. The issues that arise for consideration in these appeals are as follows:

(i) Whether ^„parts of Articles of jewellery‟ are covered in the phrase ^„Articles of jewellery‟, when not separately specified?

(ii) Whether ^„parts of Articles of silver jewellery‟ are covered in the phrase ^„Articles of silver jewellery‟, when not separately specified?

15. The relevant facts of all six appeals are similar and so the facts of the appeal filed by M/s. Kinjal Precisous Pvt. Ltd. are stated. The appellant filed Bills of Entry for clearance of gold/silver findings and claimed exemption from payment of CVD under the CVD exemption notification, as amended from time to time as also exemption from payment of SAD under the SAD exemption notification. The Bills of Entry were appraised and the appellant discharged the customs duty, but subsequently it was observed by the officers that the appellant was not entitled to avail the benefit of CVD exemption notification or the SAD exemption notification. Accordingly, a show cause notice was issued for recovery of CVD and SAD with interest and penalty. The adjudicating authority confirmed the demand and imposed penalty.

16. The Commissioner (Appeals) held that the appellant was not entitled to avail the benefit of the CVD exemption notification. The relevant portions of the findings recorded in regard to CVD are as follows:

“5. xxxxxxxxx. I observe that it is not disputed that the imported goods involved in these appeals namely Gold/Platinum/Silver Findings imported by the appellants are parts of Articles of Jewellery and that the ^„Articles of Jewellery‟ and ^„Parts of Articles of Jewellery‟ made of Silver, Gold, Plantinum all are classifiable separately under respective sub heading of Customs Tariff. Since the ‘Articles of Jewellery’ and ‘Parts of Articles of Jewellery’ have specifically been classified separately in the Customs Tariff Act 1975, therefore, both the items can not be considered as one and same.

6. xxxxxxxxxxxx

The adjudicating authority after discussing the various provisions of Notification No. 12/2012 –CE dated 17.03.2012 as amended time to time has concluded that;

(i) Articles of Jewellery and Articles of Silver Jewellery, whether studded with precious stones or not, were exempted from duty conditionally from 17.03.2012 to 28.02.2016.

(ii) W.e.f. 01.03.2016, Articles of Jewellery were given concessional rate of duty @1% advalorem after fulfilling condition no. 16 of the Notification, whereas Articles of silver jewellery; other than those studded with diamond, ruby, emerald, or sapphire, continued to enjoy unconditional ‘Nil’ rate of duty.

(iii) ‘Parts of Articles of Jewellery’ were also included in the exemption list and they were also prescribed concessional rate of duty @1% advalorem after fulfilling condition no. 16 of the Notification.

7. The appellant has not disputed the above conclusion of the adjudicating authority and has simply contended that Article of Jewellery for the purpose of the Exemption Notification covers parts of Jewellery also and that no prudent legislature can levy higher duty on import of parts for indigenous production and lesser duty on import of finished good. The contention of the appellant is not acceptable as the exemption Notification No. 12/2012-CE dated 17.03.2012 speaks about exemption of the ‘Articles of Jewellery’ only not about ‘Parts of Articles of Jewellery’. The ‘Articles of Jewellery’ and ‘Parts of Articles of Jewellery’ can not be considered as one and same as discussed in para (5) above which is also confirm from the notification no. 26/2016-CE dated 26.07.2016 wherein concessional rate of 1% was extended for the first time to ‘Parts of Articles of Jewellery’ falling under heading No. 7113. If the intention of the statue was that the Article of Jewellery for the purpose of the Exemption Notification covers parts of Articles of Jewellery also, then there was no need for issuance of notification no. 26/2016-CE dated 26.07.2016 and inclusion of separate entry for “Parts of articles of jewellery”. The appellant has also contended that no prudent legislature can levy higher duty on import of parts for indigenous production and lesser duty on import of finished goods. The question of levy higher duty on import of parts and lesser duty on import of finished goods by the statue is beyond the jurisdiction of this appellate authority. The words and phrases provided under the exemption notification are to be interpreted strictly and the exemption notifications are required to be strictly read and are required to be complied with strictly so as to be eligible for the exemption contained therein.

xxxxxxxxx.

8. The ‘Parts of Articles of Jewellery’ were also included in the exemption list and they were also prescribed concessional rate of duty @1% advalorem after fulfilling condition no. 16 vide Notification no. 26/2016 CE dated 26.07.2016. The condition no. 16 (as amended vide Notification No. 36/2015-CE dated 17.07.2015) reads as “If the said excisable goods are manufactured from inputs or capital goods on which appropriate duty of excise leviable under the First Schedule to the Excise Tariff Act or additional duty of customs under section 3 of the Customs Tariff Act, 1975 (51 of 1975) has been paid and no credit of such excise duty or additional duty of customs on inputs or capital goods has been taken by the manufacturer such goods (and not the buyer of such goods) under rule 3 or rule 13 of the CENVAT Credit Rules, 2004.”

9. xxxxxxxx

10. From the above clarification, it is clear that the intention of the statue is that the conditions are to be satisfied by the manufacture only and not by the importer. Therefore, I hold that in the instant matter, fulfillment of the condition by the appellant is not required and the exemption of the notification on the “Parts of Articles of Jewellery” under Notification No. 12/12-CE dated 17.03.2012 as amended vide Notification no. 26/2016 CE dated 26.07.2016 are available w.e.f from 26.07.2016. I also find that period of demand involved in these four appeal are 12.10.2015 to 29.01.2016 in respect of appellant No.1, 23.10.2015 to 08.01.2017 in respect of appellant No. 2, 27.10.2015 to 28.12.2016 in respect of appellant no. 3 and 06.11.2015 to 25.11.2016 in respect of appellant no. 4. Since the exemption on the Parts of Articles of Jewellery’ under Notification No. 12/12-CE dated 17.03.2012 as amended vide Notification no. 26/2016 CE dated 26.07.2016 are available w.e.f from 26.07.2016, therefore demand in respect of appellant no. 2 to 4 are to be re-quantified by the adjudicating authority accordingly.

(emphasis supplied)

17. The Commissioner (Appeals) also held that the appellant was not entitled to avail the benefit of the SAD exemption notification and the following findings have been recorded:

11. Now I come to the issue of exemption of Special Additional Duty of – Customs under Notification No. 21/2012-Cus dated 17.03.2012 on import of Gold/Platinum /Silver Findings treating these goods as Articles of Jewellery’.

xxxxxxxxxxx

On perusal of the above entry No. 78, it can be seen that the notification prescribes duty @ 1% on Articles of jewellery falling under 7113 only and Parts of articles of jewellery falling under 7113 have not been included therein. Further it has already been held in the preceding paras that both the items i.e “Articles of jewellery” and “Parts of articles of jewellery” can not be considered as one and same. Therefore, I hold that exemption under Notification No. 21/2012-Cus dated 17.03.2012 is also not available on Gold/Platinum /Silver Findings.

(emphasis supplied)

18. Shri Arvind Birla, learned counsel for the appellant assisted by Shri Manoj Makkar made the following submissions:

(i) ^„Parts‟ are included as ^„articles‟, as would be clear from the following:

(a) Legislature could not have intended to exempt articles of jewellery/silver jewellery but levy duty on parts of articles of jewellery;

(b) Entry No. 199 does not specifically exclude ^„parts of articles of jewellery/silver jewellery‟; and

(c) Notification No. 26/2016-CE dated 26.07.2016, to overcome the disputes, inserted an entry for ^„parts of articles of jewellery‟ to explicitly provide the exemption;

(ii) In support of this contention reliance has been placed on the decisions of the Tribunal in Commissioner of Customs vs. Derewala Jewellery Industries ⁵ and Commissioner of Customs, Jaipur vs. V.K. International⁶; and

(iii) If the finding of the adjudicating authority and the appellate authority that articles of jewellery do not include ^„parts of articles of jewellery‟ is correct, then all items of chapter 71, except ^„parts of articles of jewellery‟ would enjoy exemption from SAD and that cannot be the intent of the legislature.

19. Shri Rakesh Kumar, learned authorised representative appearing for the department, however, made the following submissions:

(i) The appellant has not disputed the classification of the goods and the dispute is only as to whether the appellant could avail the benefit to the two exemption notifications;

(ii) The goods involved in these appeals, namely gold/platinum/silver findings imported by the appellant are ^„parts of articles of jewellery‟ and that ^„articles of jewellery‟ and ^„parts of articles of jewellery‟ cannot be treated as one when they are classified separately under respective sub-headings of the Customs Tariff;

(iii) The contention of the appellant that articles of jewellery would cover parts of articles of jewellery also as parts of articles of jewellery have not been included in the exemption notification is without any basis;

(iv) The contention of the appellant that articles of jewellery always covered parts of articles of jewellery also and so the department came out with a clarifications w.e.f. 26.07.2016 so as to include parts of articles of jewellery is not correct; and

(v) The contention of the appellant that demand for SAD has to be set aside because if the findings of the adjudicating authority and that of the appellate authority is correct then all the goods other than articles of jewellery including parts of articles of jewellery would enjoy NIL rate of duty is not correct.

20. The submissions advanced by the learned counsel for the appellant and the learned authorised representative appearing for the department have been considered.

21. The issue in all the appeals is as to whether ^„parts of jewellery‟ can also avail exemption under the CVD exemption notification and the SAD exemption notification.

22. It is not in dispute that the goods involved in these appeals, namely gold/platinum/silver findings that have been imported by the appellant are ^„parts of jewellery‟. Chapter 71 contained in section XIV to the Customs Tariff Act deals with natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal, and articles thereof; imitation jewellery; coin.

23. It would be seen that articles of jewellery and parts of articles of jewellery have been separately classified under the restrictive sub­headings of the Customs Tariff. They should, therefore, be treated as separate articles.

24. A perusal of the CVD exemption notification also shows that entry no. 199 of Chapter heading 7113 contains (I) articles of jewellery and (II) articles of silver jewellery. It does not exempt ^„parts of articles of jewellery‟. When this entry is compared to entry no. 199, as amended by notification dated 26.07.2016, it is seen that ^„parts of articles of jewellery‟ have been included. Such being the position, there is no manner of doubt that it is only w.e.f. 26.07.2016 that parts of articles of jewellery have been included in the CVD exemption notification. It cannot be urged that the amendment made in entry 5 others no. 199 on 26.12.2016 is clarificatory in nature. The contention of the learned counsel for the appellant that the legislature could not have intended to only provide the benefit of the exemption notification to articles of jewellery and not to parts of articles of jewellery cannot be accepted. It is for the legislature, in its wisdom, to grant exemption from payment of CVD or SAD and an assessee cannot be permitted to urge that if articles of jewellery have been granted the benefit of exemption from payment of CVD or SAD, the benefit of such exemption should necessarily flow to ‘parts of articles of jewellery’ also.

25. The decisions of the Tribunal in Derewala Jewellery and K. International, on which reliance has been placed by the learned counsel for the appellant, do not support the case of the appellant. The issue involved in both the decisions was not whether ‘parts of articles of jewellery’ would be also entitled to benefit of the exemption notification if the benefit of such exemption was granted to articles of jewellery.

26. An exemption notification has to be strictly construed and the burden of proving that the case falls within the parameters of the exemption clause or the exemption notification is on the assessee; and if there is any ambiguity in the notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the assessee and it must be interpreted in favour of the revenue. This is what was observed by the Supreme Court in Commissioner of Cus. (Import), Mumbai Dilip Kumar & Company⁷.

27. The Additional Commissioner and the Commissioner (Appeals), therefore, committed no illegality in arriving at such a conclusion.

28. Similar would be the position with regard to the SAD exemption notification. Entry at serial no. 78 of Chapter heading 7113 describes the goods as articles of jewellery and not as parts of articles of jewellery. The Commissioner (Appeals) has recorded a finding that since they are different articles, an assessee cannot claim the benefit of SAD exemption notification on import of parts of articles of jewellery. The finding recorded by the Additional Commissioner and the Commissioner (Appeals), therefore, does not suffer from any legality.

29. Thus, all the six appeals deserve to be dismissed and are dismissed.

(Order pronounced on 24.02.2023)

Notes:-

1. CVD

2. the CVD exemption notification

3. SAD

4. the SAD exemption notification

5. 2018 (360) E.L.T. 100 (Tri.-Del.)

6. 2012 (279) E.L.T. 441 (Tri.-Del.)

7. 2018 (361) E.L.T. 577 (S.C.)