Supreme Court invalidates circular on customs duty for reprocessed plastics.

The Supreme Court quashed a circular by the Government of India regarding the levy of Additional Duty of Customs on reprocessed plastic materials by Export Oriented Units and Export Processing Zone units. The court held that the circular incorrectly imposed the liability of Additional Duty of Customs, stating that actual manufacture in India is not necessary for such duty. The circular was found to be not in accordance with the law, and the court ruled in favor of the petitioners, allowing the writ petitions.

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Issues:
The legality of circular dated 10th May, 2000 issued by the Government of India, Ministry of Finance, Department of Revenue regarding levy of Additional Duty of Customs (CVD) on Domestic Tariff Area (DTA) sale of reprocessed plastic agglomerates/granules by Export Oriented Units (EOU)/Export Processing Zone (EPZ) units.

Summary:
The petitioners, EOUs located in NOIDA EPZ, challenged the circular stating that the view expressed by the authorities is untenable. The circular implied that no CVD exemption would be available when reprocessed plastic materials are cleared in DTA by EOUs and EPZ units. The petitioners argued that they are paying duty in respect of the goods sold in DTA and also paying additional duty known as CVD under Section 3 of the Customs Tariff Act, which is equivalent to the Excise duty leviable on a like article if produced or manufactured in India.

The circular imposed the liability of CVD on the petitioners based on the conditions that reprocessing must have been done in India and goods must have been manufactured from scraps. The petitioners contended that they are engaged in reprocessing imported plastic scraps to produce goods falling under specific chapters. The Apex Court's decisions highlighted that for attracting additional duty under Section 3 of the Tariff Act, the actual manufacture or production of a like article in India is not necessary. The CVD should be equal to the excise duty leviable on a like article if produced or manufactured in India.

The impugned circular was found to be not in accordance with the law as it imposed the liability of CVD improperly. The court quashed the circular to the extent it imposed the liability of CVD, and the writ petitions were allowed accordingly.

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