2014 (12) TMI 401 - HC - Customs

Court rules against appellant in benefit claim for imported Ball Clay under Notification 25/99; strict interpretation applied.

M/s. Saravana Insulators Ltd. Versus The Customs, Excise and Service Tax Appellate Tribunal

The court upheld the decision that the appellant was not entitled to the benefit of Notification 25/99 for imported Ball Clay as it did not meet the ... User of imported Ball Clay in the manufacture of Ceramic core that are captively consumed for the manufacture of Porcelain insulators - Benefit of Notification 25/99 Cus dated 28.2.1999 - Import of ball clay - Captive consumption - concessional rate of duty for the manufacture of excisable goods) Rules, 1996 - Rejection of registration - Held that:- Tribunal has rightly held that the registration obtained by the appellant was for the manufacture of 'electric insulators' and not for the manufacture of 'resistors' nor they claimed that 'resistors' are the same as 'insulators'. It also held that to avail the benefit of concession under the Notification, the appellant should have claimed that the imported ball clay is to be used in the manufacture of 'ceramic cores/substrates for resistors'. Since the appellant had not claimed so, they are not entitled to the benefit of the above entry. In our view, the said findings of the Tribunal are perfectly in order, as the entries in the exemption Notification should be strictly construed. when the Notification clearly provides the benefit of concessional duty only for manufacture of ceramic cores/substrates for resistors, which is not the claim of the appellant, we are not inclined to accept the case of the appellant that ceramic cores are nothing but porcelain insulators. As has been rightly held by the Apex Court [2008 (3) TMI 452 - SUPREME COURT OF INDIA], we are not inclined to read something more into the Notification, which are not found therein. Accordingly, we answer the first substantial question of law in favour of the department and against the assessee. Tribunal has rightly upheld the order of the original authority for rejecting the application of the appellant for manufacture of porcelain insulator, inasmuch as the porcelain insulator to be manufactured by the appellant is not known in the market / trade parlance as 'ceramic core' and therefore the concessional rate of customs duty cannot be extended to the imported ball clay for the manufacture of porcelain insulator. Accordingly, the second substantial question of law is answered in favour of the department and against the assessee. Finding of the appellate Commissioner has no relevance to the issue, because the original authority has not granted the benefit of registration for import of ball clay for the manufacture of ceramic cores used in the insulators. If the appellant manufactures ceramic cores, there can be no difficulty in granting the exemption. But what the appellant, in their letter dated 30.10.2003, requested was for import of ball clay for the manufacture of various types of high tension porcelain insulators, which cannot be allowed under the Notification. Therefore the relief was rightly denied by the original authority. However, the first appellate authority, on a misreading of the Notification, relying upon the certificate issued by the Chartered Engineer, wrongly set aside the order of the original authority. In our view, the said error has been rightly corrected by the Tribunal on the facts of this case. Substantial question of law is answered in favour of the department and against the assessee. If the import of ball clay is used in ceramic core/substrate for resistors, the appellant would be entitled to get the benefit of the Notification and in that case, there is no need to manufacture porcelain insulator. But the appellant is trying to confuse the issue by stating that ceramic core is being captively consumed in the manufacture of porcelain insulator and therefore the import of ball clay should be allowed. The said claim of the appellant cannot be accepted for the reasoning given by the Tribunal. Accordingly, the last substantial question of law is also answered in favour of the department and against the assessee. - Decided against assessee. Issues Involved:1. Entitlement to benefit of Notification 25/99 for imported Ball Clay.2. Rejection of registration under Customs Rules for excisable goods.3. Interpretation of exemption notification beyond its scope.4. Liberal interpretation of exemption notification.5. Setting aside the appellate authority's order.6. Logic behind rejecting registration for Ball Clay used in ceramic cores.Issue-wise Detailed Analysis:1. Entitlement to Benefit of Notification 25/99 for Imported Ball Clay:The appellant-assessee claimed that Ball Clay imported was used in manufacturing Ceramic cores, which were then used to produce Porcelain insulators. The first respondent held that the appellant was not entitled to the benefit of Notification 25/99 dated 28.2.1999, as the appellant did not claim that the ceramic core or substrate manufactured from the imported Ball Clay was to be used in resistors. The court upheld this decision, stating that the entries in the exemption Notification should be strictly construed. The appellant's claim that ceramic cores are equivalent to porcelain insulators was not accepted, as the Notification specifically mentioned ceramic cores/substrates for resistors.2. Rejection of Registration under Customs Rules for Excisable Goods:The original authority rejected the appellant's application for registration under the Customs Rules for importing Ball Clay for manufacturing porcelain insulators. The reasoning was that porcelain insulators are not known in the market as ceramic cores. The Tribunal upheld this decision, and the court agreed, stating that the appellant's product did not fit the description in the exemption Notification.3. Interpretation of Exemption Notification Beyond Its Scope:The Tribunal considered grounds 1 and 4 of the department's appeal, which emphasized that the exemption Notification was intended for electronic industry products like resistors, not for insulators. The Tribunal's interpretation was that the Notification's language was clear and unambiguous, and the benefit could not be extended to items not mentioned in the Notification. The court supported this interpretation, stating that the Notification should be strictly construed as per established legal principles.4. Liberal Interpretation of Exemption Notification:The appellant argued for a liberal interpretation of the exemption Notification. However, the court found no scope for such an interpretation, citing various Supreme Court decisions that emphasized strict construction of exemption Notifications. The court ruled in favor of the department, denying a liberal interpretation.5. Setting Aside the Appellate Authority's Order:The appellate authority had allowed the appellant's appeal, relying on a Chartered Engineer's certificate and the admitted use of Ball Clay in manufacturing ceramic cores. However, the Tribunal reversed this decision, interpreting the Notification strictly and ruling that the appellant's claim did not fit the exemption criteria. The court agreed with the Tribunal, stating that the appellate authority's reliance on the certificate was misplaced and the original authority's decision was correct.6. Logic Behind Rejecting Registration for Ball Clay Used in Ceramic Cores:The appellant argued that if Ball Clay used in ceramic cores was allowed for registration, it should also be allowed if the ceramic cores were used in manufacturing porcelain insulators. The court found this argument illogical, stating that the Notification clearly specified the use for resistors, not insulators. The Tribunal's reasoning was upheld, and the appellant's claim was rejected.Conclusion:The court found no error in the Tribunal's order and dismissed the civil miscellaneous appeal, along with the accompanying motion. The court ruled in favor of the department on all substantial questions of law, emphasizing strict interpretation of exemption Notifications and rejecting the appellant's claims.