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CX - Notfn No 32/99 is meant for encouraging industrial growth in N-E, hence deserves to be interpreted liberally - Revenue seeking denial of refund on ground that caps are not integral part of tubes, is illogical - appeal dismissed: CESTAT

By TIOL News Service

KOLKATA, OCT 16, 2012: THIS is a Revenue appeal.

The facts of the case are that the appellant had filed a refund claim for Rs.20,55,749/-paid by them through their account current (PLA) during the month of March, 2006. The said refund claim was filed in terms of paragraph 3(A) of the Notification No.32/99-CE dated 08.07.1999 being a new industrial unit which commenced its commercial production on or after 24.12.1997. After due verification, the adjudicating authority had sanctioned part of the refund claim.

In reducing the refund claim the adjudicating authority had put forth the following reasons -

+ the appellant purchased caps and availed CENVAT Credit on the same and after fitting it on the tubes cleared the same on payment of duty.

+ caps of the empty tubes are not an integral part of such tubes and the value of such caps are not includible in the assessable value.

+ that since no manufacturing activity is involved in the process of procuring and selling out the caps along with manufactured tubes hence the amount paid against clearance of such caps is not admissible for refund in terms of Notification No.32/99-CE dated 08.07.1999.

The Commissioner(A)allowed the appeal filed by the assessee by observing that the caps along with sized laminates and shoulders are placed in the machine and what comes out is a complete tube fitted with cap and hence the value had been correctly included and refund was correctly claimed. The apex court decisions in UOI vs. Metal Box - 1996 (87) ELT 327 (SC) and Burn Standard Co. v. UOI - 1992 (60) ELT 671 (SC) were relied upon by the lower appellate authority.

As mentioned, Revenue is not pleased with this order and is, therefore, before the CESTAT.

The Revenue representative reiterated the findings of the adjudicating authority and also placed reliance inter alia on the decision in M/s. Plasmac Machine Co. Pvt. Ltd. Vs. CCE - (2002-TIOL-455-SC-CX) wherein the judgement of the Supreme Court in M/s. Burn Standard Co. Ltd. had been distinguished.

The respondent submitted that the issue relates to availability of exemption Notification No.32/99 dt. 08.07.1999 and did not relate to determination of value of excisable goods, namely, Lamitubes fitted with the caps; that the duty paid caps are purchased by them from open market and used in the automatic process of manufacture of Lamitubes and the complete product cleared by them is Lamitubes fitted with caps on which excise duty was paid by them; that the cases cited by the Revenue are distinguishable; that the department for subsequent period has allowed refund on the said Lamitubes in remand proceedings and the said order has been accepted as no appeals were filed against those orders.

The Bench observed -

“6. Heard both sides and perused the records. The issue involved in the present case revolves around a narrow compass. It relates to the eligibility of exemption Notification No.32/99-CE dt.08.07.1999 extended to the industrial units situated in north-east area. The applicants are manufacturers of Lamitubes which are used in packaging of goods, namely, cosmetics. The applicant manufactured the bare tube in their factory and purchased the caps from outside and after fitting the caps on the Lamitubes in an integrated manufacturing process cleared the Lamitubes fitted with caps on payment of duty. The Revenue has not disputed the said payment of duty but objected that benefit of Notification No.32/99-CE dated 08.07.1999 could not be entered to the value of caps as the said caps were not manufactured in the factory of the applicants, but procured from outside. We do not find merit in the contention of the Revenue....

7. On a plain reading of the said Notification, it is clear that the manufacturers situated in north-eastern region were entitled to the benefit as allowed under the said Notification on the duty leviable on the goods manufactured and cleared by them from their factory. Hence it is illogical and incorrect to allege that the Lamitubes fitted with caps were not subjected to levy of any duty but only the bare Lamitubes which were manufactured and cleared by the applicant and leviable to duty....”

Placing reliance on the Supreme Court decisions in Commissioner of Customs, Kolkata vs. Rupa & Co. Ltd. (2004-TIOL-65-SC-CUS) & Commissioner of Customs(Preventive), Mumbai vs. M.Ambalal and Company (2010-TIOL-111-SC-CUS) that a beneficial Notification should be given a liberal interpretation, the Bench further observed -

“10. Applying the principles laid down in the above cases we find that the present Notification No.32/99-CE dated 08.07.1999 is meant for encouraging industrial growth as well as expansion of existing industrial units in the north-eastern sector. Therefore, the Notification No.32/99-CE deserves to be interpreted liberally so as to give effect to its objective and purpose. Hence, we are of the view that for calculating the refund amount as per the said Notification No.32/99-CE dated 08.07.1999 the value of the complete tube is relevant but not the bare tube excluding the value of caps. We find that refund of the duty paid through PLA during the relevant period had not been disputed in the present case. Also, we find that for the subsequent period, the adjudicating authority on de novo adjudication of order-in-original No. 54/R-03/2006 dated 31.03.2006 on a remand from this Tribunal had accepted the interpretation that for extending the benefit of Notification No.32/99-CE dated 08.07.1999, the value of caps ought to be included in the total value of Lamitubes. In these circumstances, we do not find any merit in the appeal filed by the Revenue, and accordingly, the same is dismissed...”

In fine, the Revenue Appeal was dismissed.

(See 2012-TIOL-1424-CESTAT-KOL)