By TIOL News Service

NEW DELHI, MAR 20, 2015: IN these appeals the question of law which arises for determination is identical and even the assessee is the same. However, it so happened that the same issue was considered by the Delhi Bench as well as Mumbai Bench of the CESTAT and they have given conflicting opinions.

The issue relates to the eligibility for concessional rate of additional duty [also known as Counter Vailing Duty (CVD)] in terms of Notification No. 64/93-CE. The assessee is in the business of tourism, which operates taxis to ferry the tourists from one place to another. Way back in the year 1995, it had imported Honda Accord cars and filed refund claim on the ground that it was eligible for concessional rate of CVD in terms of the aforesaid Notification. In this refund claim the assessee sought refund of 10% of total CVD. The refund claim of the assessee was rejected. Questioning the veracity of this decision of the Assistant Commissioner of Customs, Refund Department, Mumbai, as well as Delhi, the assessee approached the Commissioner (Appeals) at both the places. The Commissioner (Appeals) in Mumbai allowed the appeal of the assessee and granted the benefit of the aforesaid Notification with a direction to the lower authority to sanction the refund to the assessee as claimed. Against this order, the Revenue preferred appeal before CEGAT. CEGAT, vide orders dated November 13, 2000 rejected the appeal of the Revenue. Against these orders, Revenue is in appeal in the Supreme Court.

On the other hand, in the proceedings emanating from the rejection of the refund by the Assistant Commissioner of Customs (Refund), New Delhi, the appeal of the assessee was dismissed by the Commissioner of Customs (Appeals), New Delhi. This order of the Commissioner was challenged by the assessee before CEGAT. The Delhi Bench of CEGAT, however, dismissed the appeal of the assessee vide orders dated January 08, 2001. Against these orders the assessee is in appeal before the Supreme Court.

As per Notification No. 64/93-C.E., dated 28.2.1993, saloon cars are given an additional exemption of 10 percentage points if the manufacturer gives a certificate from the Transport Authority that the saloon car is for use solely as a taxi. The exemption operates by a refund mechanism.

Now, what is the position if the saloon car is imported and used as a taxi? Is the importer eligible for refund of 10 percentage points? The doubt is because the exemption is for manufacturer - can the importer be treated as a deemed manufacturer?

Interestingly both the benches of the Tribunal relied on the same Supreme Court judgement to arrive at the contradictory decisions.

The Mumbai Bench of CEGAT relied upon and extracted from the judgment of the Supreme Court in Thermax Private Limited and accepted the plea of the assessee thereby giving benefit of the Notification to the assessee.

The Delhi Bench, on the other hand, though took note of judgments in Thermax Private Limited and was of the opinion that those judgments did not apply to the facts of this present case. According to the Delhi Bench, the importer was to be treated as manufacturer only to the extent of granting the benefit of levying CVD @ 40% in terms of the Notification and the ratio of the said judgments could not be stretched to hold that the importer is to be treated as a manufacturer for the purpose of Notification No. 64/93-CE, which extends further concession of 10% only to the manufacturers.

In Thermax, the Supreme Court had held that we have to forget that the goods are imported, imagine that the importer had manufactured the goods in India and determine the amount of excise duty that he would have been called upon to pay in that event. Thus, if the person using the goods is entitled to the remission, the importer will be entitled to say that the CVD should only be the amount of concessional duty and, if he has paid more, will be entitled to ask for a refund.

The Supreme Court had reiterated this position in several judgements and the present Bench was inclined the follow them.

The Supreme Court asked the Revenue Counsel as to the effect that if the importer is not deemed as manufacturer for the purpose of applicability of the said notification, then there cannot be a situation where such benefit of this Notification would be extended to any person, inasmuch as, it was almost impossible to visualise a situation where a foreign manufacturer would import the saloon cars in this country and would utilise those cars for tourist taxis. The counsel for the Revenue had no answer or reply to the query.

Held: It is obvious that the purpose of exemption Notification No. 64/93-CE was to extend benefits to the importers of saloon cars to use the said cars for tourist taxis. Going by the spirit and the objective behind this Notification, the irresistible conclusion would be to apply the principle of Thermax Private Limited in the present case as well. Mumbai Bench Order is upheld, Delhi Bench order is reversed.

The assessee shall be entitled to refund of 10% CVD paid by him.

(See 2015-TIOL-23-SC-CUS)