Pradeep Jain - Chartered Accountant

PJ/CASE STUDY/2010-11/04

01 May 2010

PJ/CASE STUDY/2010-11/04

Case Study

Prepared By: -

CA. Pradeep Jain

Sukhvinder Kaur, LLB

and CA. Ridhi Anchalia

Introduction: -

There is always a belief that when there are specific provisions, they will always prevail over the general one. But if the specific ones are not beneficial to the assessee will they prevail over the general one? This is a question which should be answered before making the specific provisions not advantageous than the general one. This type of situation mostly leads to a matter of disagreement between the assessee and the department. As the assessee always want to have the full benefit of the notifications and circulars issued by the Government, they will never prefer to go for something which is not good for them and the department never wants to loose its revenue. So what to do in these situations? The Apex Court also in such situations has said that it depends on the assessee to choose the most beneficial provisions among the available. One such assessee was also facing the same circumstances. We are discussing their case in this case study.

M/s Mangalam Alloys v/s CC, Ahmedabad

[Final Order No. A/308-314/WZB/AHD/2010 Dated 22.04.2010]

Relevant Legal Provisions:-

Notification No. 21/2002-Cus, dated 1.3.2002 (Relevant Entries): -

No.

Chapter or

Heading or

sub - heading

Description of goods

Standard

rate

Additional

duty rate

Condition

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

Nil

202.

7204.21

Scrap of stainless steel, for the purpose of melting

Heading of “Steel” and “Stainless Steel” under Chapter 72 of the First Schedule to Customs Tariff Act, 1985: -

Steel

Ferrous materials other than those of 7203 which (with the exception of certain types produced in the form of castings) are usefully malleable and which contain by weight 2% or less of carbon. However, chromium steels may contain higher proportions of carbon.

Stainless steel

Alloy steels containing, by weight, 1.2% or less of carbon and 10.5% or more of chromium, with or without other elements.

Brief Facts of the Case: -

§ Appellant are engaged in the manufacture of SS Bright Bars and SS Flats. They were importing of stainless steel melting scrap and claiming the benefit of Notification No. 21/2002-Cus dated 1.3.2002.

§ Earlier, before August 2004, the Notification No. 21/2002-Cus, provided equal levy of 5% custom duty on both “Melting scrap of iron/steel (other than stainless steel or heat resisting steel), for use in, or supply to, a unit for the purpose of melting” falling under entry 200 and for “scrap of stainless steel, for the purpose of melting” falling under entry 202.

§ In 2004, the duty of melting scrap of steel at entry 200 was reduced to ‘Nil’ rate but no change was affected for scrap of stainless steel falling under entry 202.

§ In 2006, the duty was again increased to 5% for melting scrap of iron or steel falling under entry 200. Thus, both the goods falling under entry 200 and entry 202 were bearing the same rate of customs duty again.

§ Another change was that in 2006, the specific exclusion of stainless steel scrap from entry 200 was removed. The entry which read as “Melting scrap of iron or steel (other than stainless stell or heat resisting steel), for use in, or supply to, a unit for the purpose of melting” was changed to ‘Melting scrap of iron or steel’.

§ Thereafter on 01.03.2008, the entry at 200 was amended and the duty for melting scrap of iron or steel was reduced to ‘Nil’ rate of duty.

§ The Assessee-appellant sought benefit of ‘Nil’ rate of duty under entry 200 by classifying the stainless steel scrap imported by them. But the Department was of the view that the goods that were imported by the assessee were covered under Entry Serial No. 202 of the said notification.

§ The appellant went for provisional assessment of the Bill of Entry.

§ Thereafter, a show cause notice demanding the differential duty and stating that the goods were covered under Entry Serial No. 202 was issued to the appellant.

§ The Adjudicating Authority confirmed the demand for differential duty and the Commissioner (A) upheld the demand in appeal.

§ Hence, the appellant is before the Tribunal.

Appellant’s Contention:-

· The appellant contended before the Tribunal that the section notes/chapter notes, which are in the nature of definition, would be relevant to when the terms defined in the Section notes/Chapter note appear in an exemption notification.

· It was submitted that the expression ‘Steel’ appearing in serial no. 200 would cover ‘stainless steel’ also. The specific removal of words ‘other than’ means inclusion of stainless steel in Entry No. 200. The appellant has relied upon the definitions of ‘steel’ and ‘stainless’ as given in Chapter 72 of the Customs Tariff which covered ‘Iron and steel’. It was

· It was further submitted that the principle of specific over-rides general will not apply when there is more than one entry in exemption notification covering a product. When pluralities of exemption are available the assessee has the option to choose any of the exemption even if the exemption so choose is generic and not specific.

· It was further submitted that the products imported by the appellants would be covered under Sr. No. 200 and not under Sr. No. 200 of the said exemption notification.

· Further the appellant contended that for a case where there is an availability of two exemption notifications then it will be on the assessee to choose which is more beneficial to him.

· For his contentions the assessee relied on the following cases

o Share Medicine Vs. UOI [2007 (209) ELT 321 (SC)]

o CCE Vs. Indian Petrochemicals [1997 (92) ELT 13 (SC)]

o HCL Vs. CCE [2001 (130) ELT 405 (SC)]

Respondent’s Contention:-

§ The Revenue contended that the exemption notification has clearly distinguished the Chapter-heading of the goods and classified them in different entries and it is not a case that the description of the goods and chapter heading notes are clearly spelt out by the exemption notification and the goods imported by the assessee are covered under entry 202 of the exemption notification and not entry 200.

§ Revenue further contended that the cases relied by the appellant were not applicable in this case.

Judgment of the Tribunal:-

The Tribunal held as under: -

Ø The Tribunal considered the legal provisions for the respective notification and the entry as per Notification No. 21/2002. The various amendments made in the entries at serial no. 200 and 202 during the time were also considered.

Ø The Tribunal considered the main contention of the assessee that steel covers stainless steel also. That they both are steel only. That the only difference is in their composition i.e. the components of carbon and chromium. That the base metal is a steel and stainless steel is only specified steel which is nothing but a form of steel.

Ø The speech of the Finance Minister on Budget 2008-09 was also considered wherein it was stated that to improve the supply of raw material he proposed to reduce the duty on steel melting scrap and aluminium scrap from 5% to NIL. The Tribunal held that the intention of the Legislature was to improve the supply of raw material and with this intent the duty was reduced to nil. The Tribunal held that there is force in appellant’s contention that specific exclusion of the words ‘other than’ is inclusion of stainless steel.

Ø The Tribunal further considered the cases relied upon by the Appellant. The Tribunal further relied upon the judgments given in the following cases: -

§ In the case of Coco Cola India Pvt. Ltd. v/s CCE, Pune–III [2009 (242) ELT 168 (Bom.)], the Hon’ble High Court of Bombay had held that for the provisions which are in the nature of concessions or exemptions then the specific provision override the general one will not be applicable.

§ In the case of IOCL v/s CCE [1991 (53) ELT 347 (Tri)] the Larger Bench of the Tribunal had held that where there are simultaneous Notifications in force, the one beneficial to the assessee will apply.

Ø The Tribunal held that at Sr. No. 200 the entry is melting scrap of iron or steel which earlier excluded the stainless steel and at Sr. No. 202, the entry is scrap of stainless steel for the purpose of melting. As per Chapter 72, it has been clarified that steel covers stainless steel. Therefore, the appellant can claim exemption under the entry no. 200 or 202 as per the ratio of the judgments discussed hereinabove. The appellants herein have claimed the exemption under the entry no. 200 of the Notification No. 21/ 2002, which cannot be denied as per the law laid down by the Apex Court in the case of HCL Ltd.

Decision of the Tribunal:-

Impugned order set aside. Appeal allowed with consequential relief.

Comments:-

The Tribunal rightly upheld the right of the assessee to choose the exemption beneficial to him in case there are two separate benefits available to him. In the field of Taxation, the assessee has been given a right to choose the benefit which is more suitable to him. In this case, the Department was denying the right of choice to the assessee on the ground that steel and stainless steel were included in separate entries in the exemption Notification. However, the Tribunal has upheld the right of the assessee to choose. This is a very welcome judgment of the Tribunal upholding the interest of the assessee.

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PJ/CASE STUDY/2010-11/04
01 May 2010

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