Whether refund of SAD paid on imported timber logs sold as “cut sizes” admissible?

PJ/Case Law /2016-17/3235

Case:-GAYATRI TIMBER PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS, VISHAKAPATNAM
Citation:- 2016 (336) E.L.T. 173 (Tri. - Hyd.)
Brief Facts:-The appellant engaged in importing timber logs and its subsequent sale. The appellants filed refund claim of 4% Additional Duty of Customs (SAD) as per Notification No. 102/2007-Cus., dated 14-9-2007 for the goods imported. After verification and scrutiny of documents, the Department entertained a view that the appellants are not entitled to part of the refund for the reason that the imported timber logs were sold as “cut sizes”, which cannot be correlated with the imported goods. A show cause notice was issued raising the above allegation. After adjudication, the primary authority sanctioned part of the refund claim but rejected claim of refund in regard to timber logs sold as “cut sizes” on the ground that there was no correlation with the goods imported and the goods sold. The appellants carried the issue in appeal before the Commissioner (Appeals).
Appellant’s Contention:- The appellant appellants submitted that the appellants had satisfied all the requirements to be eligible for refund of SAD in terms of Notification No. 102/2007-Cus., dated 14-9-2007. The sole reasons for rejection of claim is based on CBEC’s clarification issued vide Circular No. 15/2010-Cus., dated 29-6-2010. It is stipulated in this Circular that the refund is admissible only if the goods imported are sold without carrying out any process. The adjudicating authority allowed refund on timber logs sold as such without cutting and sawing; but denied the refund on logs sold as “cut sizes”. It is submitted by the counsel for the appellant that the timber logs were cut into sizes only to facilitate transportation. The learned counsel adverted to their invoices and stated that the timber logs were not of uniform sizes and therefore some of them were cut to facilitate transportation.
Respondent Contention:- The learned AR Shri Venkatesh reiterated the findings in the impugned order and submitted that the appellant had imported timber logs which fall under Customs Tariff Heading 44.03 whereas the goods sold after sawing and cutting would fall under Customs Tariff Heading 44.07. The identity of the goods imported are completely changed by such cutting and sawing of timber logs. The exemption under the notification would be granted only if the importer sells the goods imported in the same physical form. That therefore the claim of the appellant has been rightly rejected by the authorities below.
Reasoning of Judgment:- The Tribunal pursued the submissions made by both sides. The invoices show that some of the logs were sold as such whereas some logs were cut into sizes. It is the case of appellant that the timber logs were cut and sawn only for the purpose of transportation and that it did not change the nature of the goods imported. The question is whether mere cutting and sawing of the goods for facilitating transportation would render the goods ineligible for refund of SAD. This issue has been considered and decided by the Tribunal in the case of M/s. Agarwalla Timbers Pvt. Ltd. v. CC, Kandla & M/s. Variety Lumbers Pvt. Ltd. v. CC, Kandla (supra). The Tribunal held that even when the imported timber was sawn and sold, if the sales tax liability was discharged, the appellants would be eligible for refund. The said judgment was challenged by Revenue before the Hon’ble High Court of Gujarat and the Hon’ble High Court has upheld the view taken by the Tribunal vide judgment reported in 2012-TIOL-821-HC-AHM-CUS = 2014 (302)E.L.T.519 (Guj.).Against the said judgment of Hon’ble High Court, the Revenue filed SLP before the Hon’ble Supreme Court and vide order dated 24-11-2011, the Hon’ble Apex Court ordered that the claims for refund of SAD shall be processed by the Assessing Officer and the amount due to the respondents therein shall be refunded within a period of 4 weeks subject to the condition that the respondents therein furnish a bank guarantee for half of the amount stated that the bank guarantee shall be kept alive till the disposal of the appeal before the Supreme Court. Thus it is noticed that the issue whether the appellants are eligible for refund when the imported timber logs were sawn and sold is pending decision of the Hon’ble Supreme Court. However, the Hon’ble Supreme Court has not passed any order staying the operation of the order passed by the Hon’ble High Court of Gujarat. Further the Hon’ble Apex Court has directed to process and grant the refund imposing condition of furnishing a bank guarantee. In this background, the order passed by the Tribunal which was confirmed by the Hon’ble High Court of Gujarat is binding even though the appeal is pending before the Hon’ble Apex Court. In obedience to judicial discipline following the dictum laid in the case of M/s. Agarwalla Timbers Pvt. Ltd. & M/s. Variety Lumbers Pvt. Ltd. (supra), it was found that the appellants are eligible for refund. In the result, the appeals are allowed with consequential relief.
Decision:-The appeal is allowed.
Comment:-The gist of the case the appellant are eligible for the refund of SAD on imported timber logs and it is subsequent sale by them because the timber logs were cut and sawn only for the purpose of transportation and it did not change the nature of the goods imported. Furthermore, the issue has been held by Gujarat High Court in favour of the assessee and since Supreme Court has not stayed the order of the Gujarat High Court, the same is required to be followed in view of judicial principle.
Prepared by:- Bharat Chouhan

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PJ/Case Law /2016-17/3235

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