ORDER
T.K. Jayaraman, Member (T)
Page 0585
1. This appeal has been filed against Order-in-Appeal No. 209/2005 dated 20.10.2005 passed by the Commissioner of Central Excise (Appeals), Madurai.
Page 0586
2. The facts of the case are as follows:
The appellants imported crude palm oil with intention to avail the benefit of Notification No. 21/2002-Cus. dated 1.3.2002. Further, the appellants wanted to refine the imported crude palm oil by utilizing the facility available at the refinery owned by the M/s. K.T.V. Oil Mills on job work basis. They applied to the jurisdictional Assistant Commissioner for issue of registration certificate for availing the concessional rate of customs duty. The lower authority rejected the application on the ground that the registration certificate under Rule 3(1) of the Customs (Imported Goods Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 can be issued to a Manufacturer whose factory is under the jurisdiction of the office and the appellants do not have a factory of their own and as there is already another factory in the above premises. The appellants approached the first appellate authority. The first appellate authority decided the issue against the appellants. Hence they have come before this Tribunal for relief.
3. Shri N. Venkatraman, ld. Counsel appeared for the appellants and Shri Meena, ld. SDR for the Revenue.
4. The ld. Advocate adduced the following arguments.
i) The Commissioner (Appeals) has interpreted the expression “his factory” has used in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 and held that in the absence of any factory of the appellants the Registration cannot be granted.
ii) In the Exim Policy actual user is defined to mean “a person who utilizes the imported goods for manufacturing in his industrial unit or manufacturing for his own use in another unit including a jobbing unit”. Hence the expression “importer” and “his factory” employed in Rule 3 and 4 of the said Rules should have been interpreted by the Commissioner with reference to the meaning attached to the expression “Actual User (Industrial)” in the import policy.
iii) CBEC in its circular dated 6.2.2002 has clarified that goods received duty free could be removed to another unit without payment of duty in the context of implementing Central Excise (Removal of Goods at Concessional Rate Duty for Manufacture of Excisable Goods) Rules, 2001. These instructions could be applied on the Customs side also because the Rules on the excise side are pari material with those on the customs side.
iv) The exemption under the Notification is dependent upon the use of the imported goods and the use is with reference to the manufacture of any excisable commodity. Hence the instructions that are applicable for such manufacture in the parallel excise Rules would be equally applicable to the imported goods. Under the Excise Law and Rules, if a person does not have a factory of his own, he is permitted to send the goods procured duty free outside for completion of manufacture. It would be illogical to say that an importer under the parallel rules in the Customs side should Page 0587 be having his own factory and is not permitted to send the goods outside for any manufacture.
v) The Tribunal in the case of CCE Bangalore v. Electronic Research Limited while interpreting identical Rules under the Customs Act held that neither the Notification nor the Rules prohibit use of goods in another factory and in the absence of any communication that the goods have not been used for any other purpose the benefit under the Notification could not be denied. The Tribunal has also observed in the context of subject rules the spirit of the same should be looked into rather than literal meaning of the words.
vi) In the impugned order the Commissioner relied on Tribunal’s decision in the case of Panacea Biotech Ltd. v. Commissioner of Customs, New Delhi . It is seen that the decision of the Gujarat High Court in the case of India Lab P. Ltd. and subsequent decision in Sarabhai Chemicals , the decision in Truechem Pharma were not cited before the Tribunal. Further Board’s clarification dated 6.2.2002 was also not cited. Again the definition of actual user under the Exim Policy followed by the Customs while interpreting the Notification where the actual user condition is invoked has not been cited.
vii) The Hon’ble Gujarat High Court in the case of India Lab P. Ltd (supra) has held that for the purpose of the Excise Act and Rules there could be manufacturer who gets his goods manufactured on his own account from other persons meaning thereby utilizing the infrastructure of others.
viii) Though it was brought to the notice of the Commissioner (Appeals) that in identical cases Registration has been given by the Chennai Commissionerate, he has ignored the same. The Chennai Commissionerate after taking the decision informed CBEC who appear to have accepted the Chennai practice.
ix) The fact that the factory at which the appellants is going to use the imported oil is already registered or not is not relevant to the granting of another fresh registration.
5. The ld. SDR reiterated the Order-in-Appeal. He also relied on the Tribunal’s decision in the case of Panacea Bio-tech mentioned supra.
6. We have gone through the records of the case carefully. The Customs Notification No. 21/2002-Cus provides concessional rate of duty for imported Page 0588 Crude Palm oil for the manufacture of refined oil. Condition 5 of the Notification stipulates that the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisabled Goods) Rules, 1996. Before the introduction of the above Rules in 1996, each Notification was having end use condition and the importer was normally required to produce the end use certificate. However, the above rules were framed as an improvement over the earlier procedure. The above Rules are applicable to an importer who intends to avail of the benefit of an exemption Notification and where the benefit of such exemption is dependent upon the use of imported goods covered by the Notification for the manufactured of any excisable commodity. As per Rule 3 a manufacturer intending to avail the benefit of the exemption notification shall obtain a Registration from the Assistant Commissioner of Central Excise having jurisdiction over his factory. Lower authorities have done their job by a very literal interpretation of Rule 3. Their argument is that the Rule 3 uses the expression “his factory”. In other words the lower authorities interpret that the importer should own a factory and he has to use the imported material only in his factory. Otherwise, the importer would not be entitled for the concessional assessment under the above Notification. If the importer uses the imported goods in a factory belonging to some other person he would not be entitled for the concessional assessment. The Tribunal’s decision in the Panacea Bio-tech Ltd. case relied on by the Commissioner has broadly followed the above line of argument. In our view, the above approach is not at all in consonance with the philosophy of liberalization and globalisation embraced by the Government of India in all its policies relating to Customs, Excise and Foreign Trade as revealed in a plethora of policy documents, legislation, and procedures. In the Exim Policy actual user includes a person who utilizes the imported goods for his own use in another unit including a jobbing unit. Gujarat High Court in the case law cited by the ld. Advocate has clearly spelt out that for excise purposes manufacturer includes a person who gets his goods manufactured from the facilities owned by another person. The Board’s Circular dated 6.2.2002 enables a manufacturer to send duty free goods received to another manufacturer having registration for carrying of repairs/reconditioning etc. In the above said Circular the Board has clarified that the goods received duty free can be removed to another eligible manufacturer under the Central Excise (Removal of Goods under the Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. However, the recipient manufacturer would require Registration under Rule 3 of the said Rules. In our view, denial of Registration under Rule 3 of the Customs (Import of Goods at Concessional Rate of Duty for Manufacturer of Excisable Goods) Rules, 1996 to the importer on the ground that he does not have own a factory in which the imported goods are to be used is very much against the Exim Policy, Board’s Circular and the Hon’ble Gujarat High Court interpretation of manufacturer under Section 2(f) of the Central Excise Act, 1944. Page 0589 There is nothing strange or illegal in a person utilizing the manufacturing facilities of another. In order to be a manufacturer one need not own a factory. The practice of more than one manufacturer using a factory is recognized as can be seen in the SSI Notification with regard to clubbing of clearances. The expression “his factory” should be interpreted to mean the factory where the importer wants to utilize the imported goods in terms of the Notification. The Department can not insist on ownership of the factory and deny registration for the purposes of the Notification. The Tribunal, in the case of Commissioner of Central Excise, Bangalore v. Electronic Research Ltd. cited by the ld. Advocate, has held that literal meaning of statute should be abandoned if it leads to unjustified results, In that case, goods imported under Concessional rate of duty for Use in one factory were transferred to the factory of the importer at another place under certain circumstances. The Commissioner (Appeals) decided in favour of the importer. Revenue came in appeal before the Tribunal. The Tribunal held that the importer was entitled to exemption as neither the Rules nor the Notifications itself prohibited such transfer. The above decision was held in the context of the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. The ratio of the above decision is applicable to the present case also. The fact that Chennai Commissionerate has permitted Registration in respect of the importer who does not own the factory where the imported Crude Palm Oil is utilized is also supporting the appellants’ case. Hence we allow the appeal with consequential relief, if any.
(Order dictated and pronounced in open Court)
