2006 (9) TMI 75 - HC - Customs

Court Upholds Countervailing Duty on Reprocessed Goods Sold Domestically

The Court upheld the imposition of countervailing duty on reprocessed goods sold in the domestic market, rejecting the appellants' argument that the duty ... CVD – Appellant contended that once the government exempted excise duty on plastic granules so manufactured by the indigenous manufacturer such excise duty in the nature of CVD could not imposed – Held appellant contention was not correct and imposed CVD Issues:Appeal involving identical question of fact and law, imposition of countervailing duty on reprocessed goods sold in DTA area, exemption of excise duty for indigenous manufacturers, legality of notification imposing countervailing duty, interpretation of relevant legal provisions and precedents.Analysis:The appellants were engaged in manufacturing plastic items in an Export Processing Zone under an agreement with the Union of India exempting them from paying Customs Duty on imported plastic granules for reprocessing and export. However, to sell a portion of reprocessed goods in the domestic market (DTA), they were required to pay countervailing duty as per a notification. The appellants sought a refund of the countervailing duty collected, arguing that it should not be imposed until the reprocessed goods left the Export Processing Zone. They also contended that since indigenous manufacturers were exempt from Excise Duty on similar goods, countervailing duty should not apply to them. The Single Judge dismissed their petitions, upholding the imposition of countervailing duty to prevent unfair competition faced by indigenous manufacturers.In a previous case, the Apex Court had ruled that countervailing duty could be imposed on imported goods sold in the domestic market to prevent unfair competition with indigenous manufacturers. The Court clarified the definition of 'manufacturing' and upheld the authority to collect countervailing duty on like articles. The appellants argued that since no Excise Duty was payable by indigenous manufacturers due to an exemption, countervailing duty should not apply to them. However, the Court rejected this argument, stating that the exemption was specific to indigenous manufacturers and did not extend to imported goods reprocessed for sale in the DTA area. The Court also considered additional judgments and upheld the imposition of countervailing duty on the appellants.The Court further emphasized that excise duty exemptions were meant for specific entities and did not apply to imported goods reprocessed for export. As the appellants did not re-export the goods and sold them in the DTA area, they were liable to pay the applicable duties, including countervailing duty. The Court concluded that the appeals failed, dismissing them with no order as to costs. The judgment was agreed upon by another judge, and urgent copies were to be provided to the parties upon request.This detailed analysis covers the legal issues surrounding the imposition of countervailing duty on reprocessed goods sold in the domestic market, the exemption of excise duty for indigenous manufacturers, and the interpretation of relevant legal provisions and precedents in the context of the case.