2014 (6) TMI 335 - AT - Customs

Imported Intravenous Fluids Face 5% Countervailing Duty Rate

The Tribunal determined that imported Intravenous fluids are subject to a Countervailing Duty (CVD) rate of 5% ad valorem under Notification No. 2/11-C.E. ... Levy of CVD - effective rate of CVD equal to excise duty - Notification No. 1/2011 and 2/2011-C.E - rate of duty - whether the Excise duty rate prescribed for goods falling under Chapter Heading Nos. 5004 and 5005 subject to the condition that no credit of duty on inputs and capital goods have been taken under the provisions of Cenvat Credit Rules, 2002, could be applied for the levy of CVD in respect of imports of the said goods - Held that:- benefit of 1% ad valorem is available subject to the condition of non-availment of CENVAT credit of the duty paid on inputs or the tax paid on input services under Cenvat Credit Rules, 2004. Unless this condition is satisfied, the benefit of 1% of duty cannot be granted. The question of taking CENVAT credit under the CENVAT Credit Rule, 2004 does not arise in the case of imported goods and, therefore, this condition cannot be satisfied in respect of imported goods. Hence, the imported goods will not be eligible for the benefit of duty exemption under this Notification. CVD is leviable on Intravenous fluid @ 5% ad valorem under Notification No. 2/2011-C.E., dated 1-3-2011 and not @ 1% ad valorem under Notification No. 1/2011-C.E., dated 1-3-2011 as claimed by the appellant - Decided against assessee. Issues Involved:1. Determination of the applicable rate of Countervailing Duty (CVD) on imported Intravenous fluids.2. Interpretation of conditions stipulated in Notification No. 1/11-C.E. and Notification No. 2/11-C.E.3. Applicability of the CENVAT credit condition to imported goods.4. Relevance of judicial precedents and administrative instructions in determining the applicable CVD rate.Detailed Analysis:1. Determination of the applicable rate of Countervailing Duty (CVD) on imported Intravenous fluids:The appellant, M/s. Fresenius Kabi India Pvt. Ltd., imported Intravenous fluids classified under Chapter 30 of the Customs Tariff and claimed a concessional CVD rate of 1% ad valorem under Notification No. 1/11-C.E. The department assessed the goods at a 5% CVD rate under Notification No. 2/11-C.E., leading to the appellant's appeal. The Tribunal held that the applicable CVD rate for the imported Intravenous fluids is 5% ad valorem as per Notification No. 2/11-C.E., rejecting the appellant's claim for the 1% rate.2. Interpretation of conditions stipulated in Notification No. 1/11-C.E. and Notification No. 2/11-C.E.:Notification No. 1/11-C.E. prescribes a 1% ad valorem rate for Intravenous fluids, subject to the condition that no CENVAT credit is availed. Notification No. 2/11-C.E. prescribes a 5% ad valorem rate without any conditions. The Tribunal noted that the benefit of the 1% rate is contingent upon the non-availment of CENVAT credit, a condition that cannot be satisfied by imported goods as CENVAT credit rules apply only to domestic manufacturers.3. Applicability of the CENVAT credit condition to imported goods:The Tribunal emphasized that the condition of non-availment of CENVAT credit under Notification No. 1/11-C.E. cannot be met by imported goods, as the CENVAT Credit Rules, 2004, apply solely to manufacturers in India. Consequently, the imported goods are ineligible for the 1% concessional rate, and the highest rate of 5% ad valorem under Notification No. 2/11-C.E. must be applied.4. Relevance of judicial precedents and administrative instructions in determining the applicable CVD rate:The Tribunal referred to several judicial precedents, including the Supreme Court's decisions in Thermax Pvt. Ltd. v. Collector of Customs and Malwa Industries Ltd., and the Larger Bench decision in Priyesh Chemicals & Metals v. Commissioner of Central Excise. It was noted that the imported goods must satisfy both the description and the conditions of the exemption notification to avail the concessional rate. The Tribunal also considered the C.B.E. & C. Circular B-1/3/2011-TRU, which clarified that the 1% rate under Notification No. 1/11-C.E. does not apply to imported goods for CVD purposes, reinforcing the decision to apply the 5% rate.Conclusion:The Tribunal concluded that the imported Intravenous fluids are subject to a CVD rate of 5% ad valorem under Notification No. 2/11-C.E., as the condition of non-availment of CENVAT credit under Notification No. 1/11-C.E. cannot be fulfilled by imported goods. The appeals were dismissed, affirming the department's assessment.