Non melting controversy on Melting scrap

NON-MELTING CONTROVERSY ON MELTING SCRAP

INTRODUCTION:-

The Current budget has granted exemption on melting scrap of iron and steel. This will definitely reduce the cost of raw material of steel units and will lead to reduction in prices of iron and steel. But there is always a dispute whenever the exemption notification is introduced or amended.

THE DISPUTE:-

There are two entries available for the exemption. These are listed at serial number 200 and 202 of the exemption notification. Prior to budget, it read as follows:-

*S. No.*	*Chapter Heading*	*Description of Goods*	*Standard Rate*	*Additional* *Duty Rate*	*Condition* *No.*
200	7204	Melting Scrap of Iron or Steel	5%	-	-
202	7204.21	Scrap of stainless steel, for the purpose of melting	5%	-	-

There was absolutely no dispute prior to Budget as both the entries contain 5% rate of Basic custom duty. But from this budget, the entry number 200 has been

altered and nil rate of duty has been introduced at this place. After amendment, the entry read as follows:-

200	7204	Melting Scrap of Iron or Steel	‘Nil’	-	-
202	7204.21	Scrap of stainless steel, for the purpose of melting	5%	-	-

Now there are two entries for the melting scrap of stainless steel. One levies the duty @ 5% but the other exempts the same. The department is contending that when there is specific entry for the scrap of stainless steel then it will be classified under the same. Further, it is not clear whether the scrap of stainless steel will fall under the general entry listed at serial number 200.

PAST HISTORY:-

Notification no. 21/2002-Cus., dated 1-3-2002 allows the exemption from payment of custom duty on import of certain products falling under Chapter Headings from 1 to 99.

Earlier the entry at serial number 200 read as follows:-

200.

72.04

Melting scrap of iron or steel (other than stainless steel or heat resisting steel), for use in, or supply to, a unit for the purpose of melting

And the entry at serial number 202 read as follows:-

202.

7204.21

Scrap of stainless steel, for the purpose of melting

Thus, it was clear that the entry at 200 does not include the melting scrap of stainless steel. It was exempt under entry number 202 separately. But later on, the Government altered the entry at serial number 200 by notification number 11/2006-cus, dated 11.03.2006. The exemption after the amendment read like this:-

200

7204

Melting scrap of iron or steel

Thus, all scrap of iron and steel was exempt under this entry. Since steel is wider term and as such included all types of scrap of steel whether mild steel, alloy steel or stainless steel. Even the tariff heading also supported the same as broad heading of scrap 7204 was mentioned and subheading was not mentioned. But still there was no dispute as the duty at serial number 200 and 202 were same.

But from the amendment in this budget as stated above, the different rate has been prescribed. The assessee contends that he falls under both the categories and as such can choose any one entry. On the other hand, the department contends that there is specific entry for stainless steel melting scrap and as such the exemption can not be claimed under the other entry.

Whether scrap of steel includes scrap of stainless steel also?

The melting scrap of stainless steel falls under both the categories. The entry at 200 includes melting scrap of all types of steel whether it is stainless steel or any other type of steel. Hence, scrap of stainless steel falls under both the entries. Thus, importer can claim the exemption under this entry.

Now, the next question arises whether the assessee has option to claim exemption under any one category of exemption notification?

The judicial pronouncements are in favour of the assessee. The Hon’ble Chennai Tribunal has held in the case of M/s Cipla Ltd. vs. Commissioner of Customs, Chennai reported at 2007 (218) ELT 547 (Tri.-Chennai) that where the two entries in an exemption notification are applicable to the given goods, the assessee can legitimately claim under the more advantageous entry.

Similarly, while deciding the stay application of TTK Healthcare Ltd. vs. Commissioner of Customs, Aurangabadreported at 2005 (191) ELT 373 (Tri.-Mumbai), it was held that each entry being the independent one should be construed as separate one. Accordingly, all the entries should be considered separately for the purpose of determining the eligibility of assessee’s claim.

Even the Tax research unit letter explaining the budget provisions has clearly underlined the same analogy. It reads as under:-

“Since the reduction in the general rate has been carried out by notification, the possibility of the same product/item being covered by more than one notification cannot be ruled out. In such a situation, the rate beneficial to the assessee would have to be extended if he fulfills the attendant conditions of the exemption.”

Although it was relating to Excise but the ration of the same is very clear and it can be applied in this context also.

Conclusion:-

On the basis of above, it is crystal clear that the exemption is available to the importers. But the department will not accept the same and it will lead to litigation. The board should intervene and clarify the position so that the unwarranted litigation can be avoided.

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Non melting controversy on Melting scrap

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