1. The appellant M/s. Priyesh Chemicals & Metals imported in February, 1995 Zinc Ash which was liable to Additional Customs Duty (Counter-vailing duty) under Section 21 of Customs Tariff Act, 1975.
The additional duty so leviable is equal to the excise duty for the time being leviable on a like article if produced or manufactured in India. Domestic production of Zinc Ash was liable to Central Excise Duty under Chapter 26 of Central Excise Tariff subject to the exemption under notification 19/88 during the period of import. The appellants eligibility to this exemption is the subject matter of the present appeal.
2. The proviso to Notification No. 19/88 as amended by Notification No.27/91, contained the following condition: "Provided that no credit of duty paid on the inputs, used in the manufacture of said goods, has been taken under Rule 56A or 57A of the Central Excise Rules, 1944." 3. The appellant's claim to the exemption was rejected on the ground that the goods did not satisfy the aforesaid condition.
3.1 The appellant's claim was that, since the like article produced in India was wholly exempted from Central Excise Duty, there is no equivalent additional duty to be collected. They have also submitted that their claim could not be rejected under the Proviso to the Notification as they satisfied the condition stipulated in the Proviso.
They submitted that the condition in the Proviso was that no credit of duty paid on the inputs used in the manufacture of the Zinc Ash should be availed of. In the instant case the importers have not availed themselves of any Modvat Credit. Therefore, it could not be said that their claim is contrary to the condition/prohibition in the Proviso to the Notification. The appellants had also contended that their claim for exemption is covered by the decision of the Tribunal in the case of Chandigarh Zinc & Residue Pvt. Ltd v. C.C.E. reported in 1995 (78) E.L.T. 102. When the matter came before the South Regional Bench of the Tribunal, it took the view that the appellant is not eligible for the exemption, in view of the decision of the Supreme Court in the case of Thermax (P) Ltd. v. Collector - 1992 (61) E.L.T. 352. The Bench also felt that the issue remains covered in favour of the Revenue in terms of the decision of the Bombay High Court in the case of Ashok Traders v. Union of India 1987 (32) E.L.T. 262. The Bench, however, referred the case to a Larger Bench as the decision of the Tribunal in the case of Chandigarh Zinc (P) Ltd. was at variance with ratio of the decision of the Supreme Court in Thermax case (Supra) and the decision of Bombay High Court in the case of Ashok Traders (Supra).
4. When the case came up for hearing on 29-3-2000 before us none appeared for the appellant. However, they have filed written submission vide letter dated 18-3-2000 and prayed that the case may be decided after taking into account the written submission. Accordingly, we are deciding the case after hearing the ld. D.R. for the Revenue and perusing the written submission of the appellant.
5. As already stated the issue involved is the levy of additional customs duty on imported goods. The appellants do not contest dutiability of the goods to additional customs duty. They are only claiming that their import is not liable to the additional duty, as like goods produced in India remain exempt though subject to certain conditions. They have contended that the conditional exemptions in respect of goods manufactured in India are also applicable for the purpose of deciding the Additional Duty of customs leviable on imported goods. They also submitted that their import satisfied the conditions in Notification No. 19/88 inasmuch as no credit of duty paid on the inputs, used in the manufacture of the said goods, has been taken under Rule 56A or 57A. They have also relied on the following decisions : -Collector of Customs v. Carborandum Universal - 1985 (34) E.L.T. 300 (Tribunal), date of decision 28-1-1988.Thermax (P) Ltd. v. Collector of Customs - 1992 (61) E.L.T. 353 (S.C.), date of decision 19-8-1992; (3) Amar Steel Industries -1993 (67) E.L.T. 44, date of decision 16-4-1993; (4) Mysore Petro Chemicals - 1994 (73) E.L.T. 33, date of decision 17-3-1994;Chandigarh Zinc & Residue Pvt. Ltd. v. C.C.E.Based on these decisions they have submitted that South Zonal Bench was in error in holding that they were not eligible for the exemption.
6. As against the aforesaid submissions of the appellant, the ld. D.R.has contended that even as exempted rates of Central Excise Duty are applicable for levy of additional customs duty, the importers would be eligible for the exempted rates only if they fulfilled the conditions stipulated in the exemption Notification. He has submitted that this position remains confirmed by the decision of the Supreme Court in Thermax case (Supra). He drew our attention in particular to the reference made by the CEGAT to South Regional Bench to the Thermax decision in its order. He pointed out that in the Thermax case also, benefit of central excise exemption was claimed on imported goods. The Supreme Court held that the exemption will be available only if importers met the conditions in the exemption Notification. In the facts of that case, the Central Excise exemption was available to Industrial Consumers of excisable goods and it was a requirement under the exemption that they should be in possession of L-6 licence. The Apex Court held that the exemption will not be available in the absence of L-6 Licence. Ld. D.R. submitted that in the present case it is a condition of the Exemption Notification that no credit of duty paid on inputs (used in the manufacture of Zinc Ash) should have been taken under Rule 56A or Rule 57A of the Central Excise Rules. Thus, only if the Zinc Ash in question was manufactured from duty paid inputs, it would be eligible for the exemption. In respect of imported Zinc Ash, the ld. D.R. submitted that there could be no question of it being produced abroad without availing of Modvat Credit, as Central Excise duties as stipulated in the Central Excise Tariff or Modvat Provisions contained in Central Excise Rules 1944 are not applicable in a foreign country of production. He submitted that the South Regional Bench of the Tribunal had correctly relied on the decision of the Bombay High Court in an identical case and had held that the exemption could not be available to the Zinc Ash imported by the appellants. He has strongly urged that the appeal is required to be dismissed.
7. We have perused the records and have considered the submission made by both the sides. There is no dispute that exemption notification under Central Excise Act and Rules applied to imported goods for the purpose of levy of additional duty of Customs. There is also no dispute that the imported goods/importers should satisfy the conditions of exemption Notifications if they claim the benefit of exemption. This is the law laid down by the Supreme Court in the Thermax case (supra) and the Bombay High Court in the Ashok Traders case (Supra). We are in complete agreement with the Revenue on this issue. In the present case, the appellants are contending that they satisfied the condition stipulated in the Proviso to Notification No. 19/88 by stating that they had not availed themselves of Modvat credit on the inputs used in the manufacture of the imported consignment of Zinc Ash. This is not the correct understanding of the requirement of this notification. The exemption notification stipulates that "no credit of duty paid on the inputs used in the manufacture of said goods have been taken under Rule 56A or Rule 57A of Central Excise Rules 1944". In order to satisfy this condition it has to be shown that the Zinc Ash in question had been manufactured from inputs on which no credit of duty has been taken. The goods were manufactured abroad. It is common knowledge that the Central Excise Act of India and Central Excise Rules of India do not apply to manufacture abroad. Therefore, the appellant's claim that the imported consignments fulfil the requirement of the Notification has no substance or basis in facts. In other words, it is clear from the exemption notification that it exempts only Zinc Ash which is produced from duty paid inputs. In order to satisfy this condition, it is necessary that a manufacturer seeking exemption should show that the Zinc Ash was produced from duty paid inputs. Imported goods are incapable of fulfilling this condition and therefore, could not claim the exemption under notification 19/88.
8. We find that the view we have taken above is entirely inconformity with the decision of the Bombay High Court in the case of Ashok Traders (Supra) . The issue involved in that case was the claim to an exempted rate of additional duty of excise on account of exemption Notification No. 302/79. A condition of the said Notification was that artificial or synthetic resins is manufactured from raw Naphtha "on which the appropriate amount of duty of excise has already been paid". The High Court held that imported goods would not be eligible for the exempted rates under the notification as it is obvious that imported goods cannot satisfy the condition relating to payment of excise duty on raw-material. We read the relevant observation in the judgment :- "7...The submission was advanced by urging that the rate of countervailing duty should be in accordance with the exemption Notification No. 302/79, dated December 4,1979 issued by the Central Govt. in exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excises Rules, 1944.... The perusal of the Notification indicates that in respect of high Density polyethylene the rate of duty prescribed is 27 per cent instead of normal duty of 42 per cent. This partial exemption from payment of duty is prescribed by the Notification provided the two conditions are satisfied, and those conditions are (i) artificial or synthetic resins are manufactured from raw Naphtha or any chemical derived therefrom, and (ii) on which the appropriate amount of duty of excise has already been paid... Shri Bulchandani submitted that the other condition that "on which the appropriate amount of duty of excise has been paid" is not satisfied nor indeed can be satisfied in respect of the imported goods, and therefore, the advantage of the notification is not available. We find merit in the submission advanced by Shri Bulchandani. The advantage of the notification dated December 4,1979 is available provided both the conditions are satisfied, the conditions being that the goods are imported from raw naphtha and on which the appropriate amount of excise duty has already been paid. It is obvious that the imported goods cannot satisfy the second condition, because the payment of excise duty on raw naphtha can never arise in respect of imported goods.... In our judgment, as the condition of payment of excise duty on raw naphtha could never be satisfied in the case of imported HDP, the advantage of the exemption notification dated December 4, 1979 is not available, and therefore, the second contention of Dr. Kantawala deserves to be repelled." 9. In view of what has been stated above, we hold that the Zinc Ash imported by the appellant was not eligible for the exemption under notification No. 19/88. In doing so we confirm the view expressed by the South Regional Bench in the case of Kwality Asbestos Products and Ors. v. Commissioner of Customs, Bangalore [Order Nos. 1989 to 2009/1996 dated 13-8-1996] and with respect hold that the legal position stated in Chandigarh Zinc and Residue Pvt. Ltd. v. CCE (supra) to be not correct law. The reference is thus answered in favour of the Revenue and appeal of M/s. Priyesh Chemicals & Metals is dismissed.