1. Whether duty can be imposed when the imported goods are not redeemed by the importer on payment of redemption fine?
The assessee imported medical equipments without payment of customs duty under a conditional notification. However, as the conditions of the notification was not fulfilled, a notice was issued to the assessee under Section 124 of the Customs Act, 1962 proposing to confiscate the goods and subsequent release of the same on the payment of redemption fine and duty. The assessee did not choose to redeem the goods and pay the redemption fine and the duty therein. The CESTAT held that the duty was payable only when the goods were redeemed under Section 125 of the Act after payment of redemption fine. The Revenue appealed to the High Court and the High Court allowed the Revenue’s appeal holding that under Section 125(2), the duty has to be paid on the imposition of redemption fine and it was immaterial whether the option of redeeming the goods was exercised or not. The assessee preferred an appeal to the Supreme Court.
Whether duty was payable when the assessee did not choose to redeem the goods on payment of redemption fine under Section 125 of the Customs Act?
The Supreme Court held in the instant case, firstly, there was no proposal to demand the duty and the same could not have been demanded in the subsequent proceedings.
Further, the Court, after going through the Section 125 of the Act, held in para 15 of the decision that the said provision would not apply in a case where option to pay fine in lieu of confiscation is not exercised by the importer. The trigger point for the payment of duty is the positive option to pay the fine and redeem the confiscated goods. Only when such a contingency is met, the duty becomes payable. In the instant case, as this option of redeeming the goods was not exercised and fine was not paid, the duty could not be held to be payable by the assessee.
[Fortis Hospital Ltd. v. Commissioner of Customs, 2015-TIOL-57-SC-CUS]
2. Whether MODVAT credit could be availed under the erstwhile Rule 57Q of the Central Excise Rules, 1944 on railway track material used for handling raw materials or process goods?
The appellant was engaged in the manufacture of pig iron and was availing MODVAT credit on various capital goods and parts thereof under Rule 57Q. A Show Cause Notice was issued by the Department seeking to deny credit on the railway track material used for handling and process goods. The Commissioner and the CEGAT denied MODVAT on the railway track material. The Appellant preferred an appeal before the Supreme Court.
Whether MODVAT credit could be availed under the erstwhile Rule 57Q of the Central Excise Rules, 1944 on railway track material used for handling raw materials or process goods?
The Supreme Court, after relying on its own decision in J&K Spinning & Weaving Mills v. STO, 1965 (1) SCR 900, held that as railway tracks were so integrally connected with the ultimate production of goods, without which such production would be commercially inexpedient, MODVAT credit could not be denied on the same. The Court further held that even though the railway tracks was used for some other incidental purpose, it did not lose the character of being an integral part of the manufacturing process.
[M/s. Jayaswal Neco Ltd. v. CCE, 2015-TIOL-70-SC-CX]
3. Whether an importer or the manufacturer is entitled to the refund of Counter Vailing Duty (CVD) in terms of Notification No.64/93?
The appellant imported cars for using the same as taxis and filed a refund claim on the ground that it was eligible for concessional rate of CVD in terms of Notification No. 64/93, as per which the ‘manufacturer’ of the said car was to be entitled to the concessional CVD, subject to certain conditions.
According to the Department, only the manufacturer of the car was entitled to the said exemption in terms of the wording of the Notification. However, according to the Appellant, it was, for the purposes of the Notification, a deemed manufacturer.
Whether the Appellant importer could, in terms of the Notification, be regarded as a deemed manufacturer for the purposes of claiming refund of CVD?
The Supreme Court, after relying on its own decision in Thermax Pvt. Ltd. v. Collector, 1992 (61) ELT 352 (SC), held that for the purpose of exemption notifications, especially which provides exemption from additional duties, the word ‘manufacturer’ used in such Notifications is to be construed as the deemed manufacturer who pays the additional duty to counter balance the excise duty. The Court could not imagine a situation where a foreign manufacturer would import the cars in India and use the same as taxis.
[Aidek Tourism Services Pvt. Ltd. v. CC, 2015-TIOL-23-SC-CUS]
4. Whether the CESTAT could deny the exemption from CVD on the ground that Cenvat Credit was not admissible?
The Appellant had imported yarn after claiming nil rate of additional duty of customs in terms of Notification No.6/2002-CE dated 1-3-2002. The Commissioner held that the appellant was not entitled for the exemption from CVD since it did not fulfil the condition of the said notification which provided that no credit should be taken in respect of inputs used in the manufacture of the imported goods. The appellant did not avail the cenvat credit on such goods. However, the CESTAT concluded that when the credit under Cenvat Credit Rules was itself not admissible to the appellant, the question of fulfilling the condition did not arise and consequently, the Appellant was not entitled to the exemption from CVD.
Whether the CESTAT could deny the exemption from CVD on the ground that Cenvat Credit was not admissible?
The Supreme Court, after relying upon its decision in Aidek Tourism Services Pvt. Ltd. v. CC, 2015-TIOL-23-SC-CUS held that for the purpose of attracting additional duty on the import of a manufactured article, the actual manufacture of a like article in India is not necessary. 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 is leviable thereon. As a result, it was held that the appellant was entitled to exemption from CVD in terms of the Notification.
[M/s SRF Ltd. v. CC, 2015-TIOL-74-SC-CUS]
5. Whether excise duty was liable to be paid on the needles and syringes post sterilisation, at the time of their removal?
The appellant purchased syringes and needles in bulk from the open market and sterilised the same. One needle and syringe were placed in a printed plastic pouch. The same was capable of use only once and were disposable. These plastic pouches were then sold to an industrial consumer. A Show Cause Notice (SCN) was issued to the appellant asking why the syringes and needles should not be made liable to excise duty again as a result of sterilisation. It was argued that sterilisation did not amount to manufacture as no new product came into existence. The Asst. Commissioner confirmed the duty on the ground that sterilisation was an integral part of the manufacturing process to make the goods marketable. However, the Commissioner (Appeals) set aside the order of the Asst. Commissioner on the ground that no new product came into existence even though the value of the goods was enhanced post sterilisation. The Respondent preferred an appeal before the CESTAT and the CESTAT set aside the order of the Commissioner (Appeals) on the ground that a new article had come into existence post sterilisation and as the commercial identity of the product had changed, there was a manufacturing activity and thus, excise duty was attracted. The appellant appealed to the Supreme Court against the order of the CESTAT.
Whether excise duty was liable to be paid on the needles and syringes post sterilisation, at the time of their removal?
The Supreme Court, after referring to the various decisions on manufacture, held that there are four situations to determine whether manufacture or not has taken place. They are as follows:
(1) Where the goods remain exactly the same even after a particular process, no manufacture is involved. Processes which remove foreign matter and/or processes which clean goods that are complete in themselves fall within this category.
(2) Where the goods remain essentially the same after the particular process, again there can be no manufacture. This is for the reason that the original article continues as such despite the said process and the changes brought about by the said process.
(3) Where the goods are transformed into something different and/or new after a particular process, but the said goods are not marketable.
(4) Where the goods are transformed into goods which are different and/or new after a particular process, such goods being marketable as such. It is in this category that manufacture of goods can be said to take place.
The Court noted that the present case fell into the first category and held that syringes and needles were articles/goods which were complete in themselves and that the process of sterilisation would not amount to manufacture.
[M/s Servo Med Industries v. CCE, 2015-TIOL-103-SC-CX]
6. Whether the combination of raw rice, dehydrated vegetables and certain spices and condiments mixed in a pre-determined proportion and blended together in a mixer for uniformity amounts to ‘manufacture’?
The appellant was engaged in the packing combination of mixture of raw rice, dehydrated vegetables and spices in the name of ‘Rice and Spice’ which was a combination of raw rice, dehydrated vegetables and certain spices and condiments mixed in a pre-determined proportion and that blended together in a mixer for uniformity and the blended mixer is heated, if required, to sterilize the product. The mixed product is the packed in pouches with nitrogen for a longer shelf life. As per the Show Cause Notice issued to the Appellant, the Department contended that the product was to be classified under Heading 2108 of the Central Excise Tariff Act, 1985, as Miscellaneous Edible preparation not elsewhere specified or included. However, the appellant argued that the process did not amount to ‘manufacture’ within the meaning of Section 2(f) of the Central Excise Act, 1944. It was also argued that, in any case, the product was not classifiable under Heading 2108 of the Central Excise Tariff Act, 1985 but it should be covered under Heading 11.01, on which nil duty was payable. The argument of the Department was upheld by the lower adjudicating authorities as well as the CESTAT.
Whether the combination of raw rice, dehydrated vegetables and certain spices and condiments mixed in a pre-determined proportion and blended together in a mixer for uniformity amounts to ‘manufacture’?
The Supreme Court held that a mere addition in the value, after the original product has undergone certain process, would not bring it within the definition of ‘manufacture’ unless its original identity also undergoes transformation and it becomes a distinctive and new product. It was further held that mere addition of dehydrated vegetables and certain spices to the raw rice, would not make it a different product. Its primary and essential character still remains the same as it is continued to be known in the market as rice and is sold as rice only. Further, this rice, again, remains in raw form and in order to make it edible, it has to be cooked like any other cereal. The process of cooking is even mentioned on the pouch which contains cooking instructions. This amply demonstrated that it is to be cooked in the same form as any other rice is to be cooked. Therefore, it would not be correct to say that the same amounted to manufacture. The Court further clarified that the product would be classifiable under sub-heading 11.01 on which the duty, in any case, was ‘nil’.
[Satnam Overseas Ltd. v. CCE, 2015-TIOL-66-SC-CX]
7. Whether Section 14 of the Limitation Act (exclusion of time of proceeding bona fide in Court without jurisdiction) would apply to an appeal filed under Section 128 of the Customs Act? Is Section 128 a complete code in itself which necessarily excludes the application of Section 14 of the Limitation Act?
The appellant imported a vessel and filed a Bill of Entry. The Light Displacement tonnage of the vessel was lesser than what was determined by the Department. However, the appellant cleared the vessel on payment of customs duty based on the tonnage determined by it and executed a bank guarantee for the differential duty which was to be paid had the vessel been cleared at the tonnage determined by the authorities. On 25-3-1992, the Collector communicated to the Asst. Collector to encash the bank guarantee and the Superintendent of Customs issued a letter dated 2-4-1992 to the appellant, informing the latter of such enashment. The bank guarantee was encashed and the appellant preferred an appeal against this letter against this letter and the Collector’s order before the CEGAT. The CEGAT, on 26-3-1998, allowed the appeal and the Department preferred an appeal before the Supreme Court against the order of CEGAT. The Supreme Court, on 12-3-2003, allowed the appeal of the Respondent holding that even though the order dated 2-4-1992 was based on the decision of the Collector, however, the order remained that of the Superintendent of Customs. In view of this, the Supreme Court held that the appellant should have filed an appeal before the Collector (Appeals) instead of CEGAT. The appellant then filed an appeal before the Commissioner (Appeals). However, the appeal was dismissed on the ground that the appeal was filed by the appellant after 11 years of the receipt of order of the Supdt. of Customs, which was way beyond the 60 plus 30 days limitation period provided under the Customs Act. Against this order, the CESTAT dismissed the appeal of the appellant stating that the Commissioner (Appeals) had no power to condone the delay beyond the period specified under Section 128.
Whether Section 14 of the Limitation Act (exclusion of time of proceeding bona fide in court without jurisdiction) would apply to an appeal filed under Section 128 of the Customs Act? Is Section 128 a complete code in itself which necessarily excludes the application of Section 14 of the Limitation Act?
The Supreme Court held that though Section 14 of the Limitation Act would not apply to appeals filed before a quasi-judicial authority such as the Collector (Appeals) mentioned in Section 128 of the Customs Act, the principles on which Section 14 is based, being principles which advance the cause of justice, would get attracted. Thus, the time taken in such proceedings which are bona fide would be excluded and the appellant was not precluded from filing an appeal before the Commissioner (Appeals). The matter was thus remanded back to the Commissioner (Appeals) for deciding the matter on merits.
[M.P. Steel Corporation v. CCE, 2015-TIOL-89-SC-CUS]
Whether the Petitioner would have to deposit the amount of 7.5% of the tax confirmed against him, as required after the amendment to the Finance Act, 1994 on 6-8-2014, as a condition for pursuing the appellate remedy before the Tribunal?
The Kerala High Court held that as the lis in question had commenced prior to the introduction of the amendment to the Finance Act, 1994, with effect from August 2014, the Petitioner’s right of appeal as per the erstwhile provisions of law would not be affected by the provisions introduced by the amendment of 2014. The Court held that it is well settled law that the institution of a suit carries with it an implication that all rights of appeal then in force are preserved to the parties thereto till the rest of the career of the suit and, further, that the right of appeal that is vested is to be governed by the law prevailing at the date of institution of the suit or proceeding, and not by the law that prevails at the date of its decision or at the date of filing of the appeal. The Court therefore held that the Petitioner would not be to deposit the amount of 7.5%, as required pursuant to the 2014 amendment, and in that respect, the Petitioner would have an efficacious alternate remedy before the Tribunal where he can file an appeal, together with an application for waiver of pre-deposit and stay of recovery of the amounts confirmed against the Petitioner
[Muthoot Finance v. Union of India & Ors., 2015-TIOL-632-HC-KERALA-ST]