Cus - Notf. 16/2000 - Exemption notification is to be construed strictly - Catalyst is required for initiating a chemical reaction & is not required for manufacture of machinery, instruments, equipment or appliances - Benefit not available: CESTAT
By TIOL News Service
MUMBAI, NOV 10, 2014: THERE are two appeals, one filed by the Revenue against an O-in-A & another by the importer against another O-in-A. Both involve common issues.
The assessee imported 16,400 Ltrs of Catalyst HTZ-5 from M/s. Haldor Topsoe A/S Denmark claiming the benefit of exemption under notification No. 16/2000-Cus (Serial No. 182). The adjudicating authority denied the exemption on the ground that the catalyst imported by the assessee is a chemical used in the process of manufacture of fertilizers and cannot be considered as machinery, instrument, apparatus and appliances or parts or raw materials for the manufacture of the aforesaid items. The assessee importer filed an appeal before the lower authority, who held that since the said catalyst is for the first/initial charge and is required for renovation or modernization of a fertilizer plant and machinery and the same was certified by the officer not below the rank of a Deputy Secretary to the Government of India in the Department of Fertilizers, the appellant is eligible for the benefit of aforesaid exemption.
Revenue is not happy with this decision and, as mentioned, is before the CESTAT.
As a consequence of the o-in-a, the importer filed a refund claim before the adjudicating authority, which was rejected. The appeal was also rejected by the Commissioner(A) on the ground that catalyst cannot be considered as machinery, apparatus, appliances or equipment or the part thereof.
So, the appellant importer is also before the CESTAT.
The AR justified the denial of the exemption and the refund claim and also submitted that although the appellant has produced the required certificate from the Dy. Secretary, since the catalyst is a chemical facilitating a chemical reaction, it has nothing to do with the manufacture of machinery, plant, apparatus and appliances and, therefore, the findings of the lower appellate authority in this regard is incorrect and cannot be sustained in law.
The importer submitted that since the requisite certificate recommending exemption has been produced, the benefit of exemption cannot be denied in view of the Bombay High Court decision in Bombay Chemical Pvt. Ltd. Vs. Appellate Collector of Customs - Miscellaneous Petition 923/1969 - 2003-TIOL-515-HC-MUM-CUS .
The Bench extracted the entry 182 of the exemption notification & the condition no. 27 in question and observed-
++ It is a settled position of law that the exemption notification should construed strictly since the exemption is in the nature of an exception. In the present case the goods on which the exemption is claimed is a catalyst, which is a chemical. The catalyst is required for initiating a chemical reaction. It is not required for manufacture of machinery, instruments, equipment or appliances. It is after the manufacture of machinery, instruments, or appliances, the catalyst is charged into machinery for initiating the chemical reaction and, therefore, the argument that catalyst is a machinery, instrument or appliance or a raw material or part for the manufacture of the aforesaid items does not stand to any logic.
Relying on the apex Court decision in the case of Mangalore Chemicals & Fertilizers Ltd. vs. Deputy Commissioner - 2002-TIOL-234-SC-CX, the Bench further observed -
++ It can be seen that at the first stage whether catalyst is eligible for the exemption or not, a strict view has to be taken. If that is done, it can be seen that catalyst does not answer to the description of the goods eligible for the exemption. Merely, because an officer from the Department of Fertilizers has certified, catalyst cannot be considered as machinery, instrument or appliances or a part thereof. Certification from the Ministry is required only for the limited purpose of essentiality of the goods for purposes specified.
Holding that the order of the appellate authority allowing the exemption is clearly unsustainable in law, the same was set aside and the Revenue appeal was allowed.
Consequently, it was held that the appellant would not be eligible for the refund of any duty paid in pursuance to the said decision of Commissioner(A) [which was appealed by Revenue] & the appeal of the importer was dismissed.
(See 2014-TIOL-2218-CESTAT-MUM)
