By TIOL News Service
AHMEDABAD, DEC 04, 2012: THE appellant is a dealer of steel items and import HR/CR coils and also electrical steel of various descriptions. The coils are imported on payment of duty including additional duty and customs duty levied under Section 3(5) of Customs Tariff Act, 1975 (SAD). Under Notification No.102/2007-Cus dated 14/09/2007 SAD is refundable if the goods are sold on payment of VAT/Sales Tax. Appellant filed several refund claims which have been rejected by the lower authority on the ground that the appellant had undertaken further working/processing on the imported goods before the goods are sold. According to the Revenue, the imported goods have completely lost their identity and co-relation between the goods imported and the goods sold cannot be established thereby rendering appellant ineligible for exemption by way of refund.
After examining various case laws cited by the appellants, the CESTAT observed:
The common thread in all cases that for the purpose of levy whether sales tax or central excise, where the products remain the same, whether it amounts to manufacture or not and even if the goods were sold in changed form, goods have to be treated as same. In the case of sales-tax, the tax is not on manufacture. Therefore in the case of levy of sales-tax, consideration of the facts as to whether sales-tax has to be levied depends upon as to whether goods remained the same after process. In respect of timber and in respect of steel cut and sold, in all the above decisions, it has been held that the goods have remained same even though it may be different in form and description also may have changed. Under these circumstances, it has to be "held that the goods remained the same even after slitting/cutting excepting the width and the length of the sheet which may change but not identity”. Even after slitting and cutting, the products remain cold rolled/hot rolled sheets/coils.
It is a settled law that what is required to be seen while considering whether the process amounts to manufacture is whether a new article with distinct name, character and use has emerged or not and not whether the tariff heading has changed. Therefore, just because after cutting and slitting, the tariff heading changes we cannot say that the products do not remain the same.
When the importer imports goods, for further manufacture they would get MODVAT credit or CENVAT credit of SAD paid by them. In the case of an importer who imports the goods for selling, the SAD was exempted under Notification No.34/98 and under Notification No. 102/2007 they are eligible for refund. The objective is to create level playing field for domestic manufacturer and the importer who imports goods for sale. The domestic manufacturers are not affected by the SAD since they can take CENVAT credit whereas the importer who sells the goods as such does not get the benefit of credit and therefore either exemption has to be extended or he is to be given refund. Obviously cutting and slitting process does not amount to manufacture. If an importer undertakes such process or because of problems of transportation as in the case of timber in M/s. Agarwala Timbers Pvt. Ltd. 2010-TIOL-1378-CESTAT-AHM and in the present case because of the requirement of the trade, domestic manufacturer gets extra benefit of SAD credit. This is not the intention. Therefore when the process does not amount to manufacture and no excise duty is leviable and therefore SAD credit is not available, the intention of the government at the time of the introduction of the Notification seems to be to give refund of SAD paid for the goods subsequently sold. On this account also the appellant is eligible for refund.
Accordingly, the CESTAT has remanded the matter to the original adjudicating authority for the limited purpose of verifying as to whether the appellant is able to show that the imported goods only have been sold by them after cutting and slitting and nothing else.
(See 2012-TIOL-1769-CESTAT-AHM )
