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PJ/Case Laws/2011-12/1552

Import of Brass scrap not arising out of manufacturing activity - levy of Countervailing duty thereon

Case: Ilesh Exports v. Commissioner of C.Ex. Bhavnagar 
 
Citation: 2012 (276) E.L.T. 243 (Tri.- Ahmd.)
 
Issue:- Whether Countervailing Duty levied on clearance of brass scrap by a 100% EOU on the ground that at time of import of said goods CVD stands levied and no objection is raised by the assessee when it is not clear that the imported brass scrap was manufactured or produced?
 
Brief Facts:- Appellant is a 100% EOU, engaged in manufacture of various brass article falling under Chapter 74 of Schedule to Central Excise Tariff Act, 1985. They were importing brass scrap etc. without payment of Customs duty under 100% EOU scheme, for the purpose of utilizing the same for manufacture of bass ingots, brass rods, brass granules etc. in their 100% EOU.
 
During visit by excise officers on 27.07.05 certain shortages of brass scrap imported by appellant were detected, HDPE or jute sacks showing brass scrap in them were stacked on one corner of factory. On interrogation, the proprietor of appellant-unit deposed that they were clearing the imported mix-brass scrap in local market, against cash, without raising any invoices and without payment of any duty. Further investigations were conducted and statements of various ersons were taken.
 
Demand of Customs Duty was confirmed in respect of diversion of duty free material against the appellant in Adjudication proceedings.
 
In appeal before the Tribunal is not regarding the confirmation of demand but the issue raised is related to levy of Countervailing Duty (CVD) on clearance of Brass Scrap in local market as the appellant is a 100% EOU.
 
Appellant’s Contention:- According to the appellant, no countervailing duty was required to be paid in respect of such clearances, in view of the fact that the brass scrap imported by them was not manufactured scrap leviable to duty of excise, but the same was mixed brass scrap consisting of old and obsolete scrap of manufactured articles, which did not attract any duty of Excise. For the above proposition, he relies upon the Supreme Court’s judgment in case of HyderabadIndustries v. UOI-1999 (108) E.L.T. 321(S.C.).
 
Appellant submits that the observations made by Hon’ble Supreme Court in the case of Hyderabad Industries v. UOI are very clear. The same are to the effect that if the articles cannot be subject to Excise levy, because it is not produced and manufactured, then on import of like articles, no additional duty can be levied.
 
As regard the objection of Respondent that it is not clear as to whether the scrap imported by the appellant was of old and damaged pieces of various articles or the same was brass scrap emerged as result of manufacture, appellant submits that the very description of the scrap being “mixed brass scrap” or “mix zinc scrap”, itself leads to inevitable conclusion that the same was not the scrap originated as a result of manufacture, but was a mix of scrap of various worm out and obsolete articles.
 
Respondent’s Contention:- Revenue contended that the imported mix brass scrap/mix zinc scrap was cleared by the appellant by filling a Bill of Entry claiming exemption in term of Notification No. 53/1997-Cus., dated 31.6.97 and Notification No. 62/2003-Cus., dated 31.3.03. In the said Bills of Entry, the additional duty of Customs stands levied and the appellants never disputed the levy of the same. As the appellant have not challenged the said assessed Bill of Entry for levy of additional Customs duty on the imported goods at the time of import, it is not open to them to challenge the levy of CVD at this stage.
 
Revenue also submits that there is no evidence on record that the mix scrap imported by the appellant consisted of old and obsolete pieces of article and was not brass scrap emerged as a result of manufacturing activity.
 
It was submitted that reliance placed on Khandelwal Metal & Engineering Works is appropriate as the judgment of the Supreme Court was not overruled by subsequent decision in Hyderabad Industries.
 
Reasoning of Judgment:- The Tribunal found that appellant has not disputed the fact of clandestine clearance of duty free imported brass scrap/zinc scrap in DTA without payment of duty. As such duty demand confirmed against them is not challenged.
 
The Tribunal held that the order of the Commissioner (A) is not acceptable. The Bills of Entry were filed at the time of import of goods for taking the goods to 100% EOU, which has the status of warehouse. It is only when the goods leave the premises of warehouse, the duty liability in respect of the same is required to be adjudged. It was noted that this is not a case of refund of duty being claimd by importer so as to apply the ratio laid down in Flocks (India) Ltd [2004 (120) ELT 285 (SC)] or Priya Blue Industries [2004 (172) ELT 145 (SC)]. The duty liability of importer has to be adjudged at the time of clearances of goods from 100% EOU. As such, the Tribunal was of the view that when duty is now being demanded from appellant in respect of clearance of duty free imported material into DTA, the same is required to be adjudged and calculated according to law applicable at that point of time.
 
Tribunal agreed with Appellant that non-challenge to Bills of Entry ill not have any bearing on the issue as to whether CVD is leviable or not on such goods.
 
As regards confirmation of CVD, it was found that decision in Khandelwal Metal & Engineering Works is overruled by judgment in Hyderabad Industries.
 
The duty liability of the importer has to be adjudged at the time of clearance goods from 100% EOU. As such, when duty is now being demanded from the appellant in respect of clearance of duty free importable material into DTA, the same is required to be adjudged and calculated according to the law, applicable at the point of time.
 
The only question which remains is as to whether the brass scrap imported by the appellant was a brass scrap emerged as a result of any manufacturing activity or the same was mix brass scrap, consisting of old, worn out and damaged articles of brass, and it cannot be said to be a result of any manufacturing activity.
 
The Supreme Court’s decision in case of Hyderabad Industries applicable in the present case. Appeal remanded to Commissioner for fresh decision on the point of leviability of CVD.
 
Decision:- Appeal allowed accordingly.  

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