By TIOL News Service

MUMBAI, JULY 28, 2016: A refund of Rs.4,18,586/- being the Special Additional Duty levied on import of ten consignments of 'used tyres' between October 2013 and December 2013 was granted by the original authority.

However, in Revenue appeal, the Commissioner (A) set aside this order on the ground that the goods were consumed by the importer and hence not eligible for the refund which is available to trading importers under notification no. 102/2007-Cus. It was also held that the goods had been cleared against import licence issued under the Foreign Trade Policy and which rendered the goods to be permitted for import only on 'actual user' condition.

Before the CESTAT the Appellant contended that conditions of the notification had been complied with viz. payment of Special Additional Duty and sale of goods against invoice after discharging VAT liability. It is claimed that the conversion of 'used tyres' into 'crumb rubber' is not a manufacturing activity. Reliance is placed on the decisions in Gujarat Reclaim & Rubber Products Ltd - 2006-TIOL-283-CESTAT-MUM & followed in - 2009-TIOL-897-CESTAT-MUM.

Appellant also submitted that 'radial tyres' are used for making 'crumb rubber' and that, owing to its limited availability in India, used 'radial tyres' are regularly imported for the conversion to a material that is critical for manufacture of 'low end' rubber products, rubber sheets and rubber tiles as well as in road construction. It was pointed out that the tyres are passed through an automatic primary shedder and then put through a 'raspermachiner' which makes for smaller sizes while allowing the steel to be separated using a magnet.

The AR reliedon the notification no. 102/2007-Cusand Circular no. 15/2010-Customs dated 29th June 2010 titled 'Fraudulent claim of 4% SAD by unscrupulous importers' to buttress the department stand.

The Bench observed -

"7. The appellant is no different from a domestic entity who is subject to VAT on purchase of 'used tyres' and to VAT on sale of 'crumb rubber'. The claim of the appellant to the effect that the discharge of the latter VAT obligation immunizes it from the former obligation is not tenable.

8. In its role as countervailing duty, Special Additional Duty paid on 'used rubber tyre' is not offset by a sale of 'used rubber tyre'. It is consumed by the importer - whether it results in manufacture is not relevant. Manufacture determines excisability. What is of relevance is whether a producer of 'crumb rubber' in India who uses indigenously procured 'used rubber tyre' in the process is put to disadvantage of tax on purchase of 'used tyre' and sale of 'crumb rubber'. It seems to be so. Consequently, the discharge of VAT on the resultant 'crumb rubber' does not absolve it of liability of Special Additional Duty on 'used rubber tyre'."

Holding that the findings of the Commissioner (A) are legal and proper, the appeal was dismissed.

(See 2016-TIOL-1881-CESTAT-MUM)