2025 (6) TMI 1430 - AT - Central Excise

Goods cleared in DTA qualify as similar goods under Board Circular, eligible for concessional duty rates under N/N. 23/2003-CE

M/s. Same Deutz-Fahr India Pvt. Ltd. Versus Commissioner of GST & Central Excise, Chennai

CESTAT Chennai held that goods cleared by the appellant in DTA qualified as 'similar goods' under Board's Circular 7/2006-Cus and were eligible for ... Benefit of concessional rate of duty under N/N. 23/2003-CE dated 31.03.2003 - goods cleared by the noticee in DTA fall under the definition of “similar goods” as specified under Board's Circular number 7/2006-Cus dated 13.01.2006 - HELD THAT:- In terms of the FTDR Act, it is the DGFT who has the final word on interpretation of the FTP. It has also been held by the Hon’ble Supreme Court in Atul Commodities Pvt. Limited v. CC, Cochin [2009 (2) TMI 18 - SUPREME COURT] that if any doubt or question arises in respect of interpretation of Foreign Trade Policy or in the matter of classification of any item of the ITC (HS) or in the Handbook, the said question or doubt shall be referred to DGFT, whose decision thereon shall be final and binding. The Apex Court in Maheshwari Fish Seed Farm Vs T.N. Electricity Board [2004 (4) TMI 632 - SUPREME COURT], held that it is settled rule of interpretation that the words not defined in a statute are to be understood in their natural, ordinary or popular sense. In determining, therefore, whether a particular import is included within the ordinary meaning of a given word, one may have regard to the answer which everyone conversant with the word and the subject-matter of statute and to whom the legislation is addressed, will give if the problem were put to him. It is the end use which has troubled the Ld. Commissioner in returning a finding of the goods not being similar, perhaps burdened by the Boards Circular for adopting the definition of ‘similar goods’ provided in the CVR 1988 - the EOU scheme under the FTDR Act is a part of beneficial legislation for facilitating imports and increasing exports. It needs to be read in a liberal way in the context of the FTDR Act. Hence one does not need to go deep into the matter and by a process of hairsplitting and semantic niceties deny the benefit of the exemption notification. Conclusion - The impugned goods fall under the definition of “similar goods” as per paragraph 6.8 of the Foreign Trade Policy, 2009-14 and are eligible for concessional rate of duty under N/N. 23/2003-CE dated 31.03.2003. The impugned order is set aside - appeal disposed off. Issues Presented and ConsideredThe core legal questions considered by the Tribunal were:Whether the goods cleared by the appellant in the Domestic Tariff Area (DTA)-specifically stationary engines used in construction equipment and water pumps-fall under the definition of 'similar goods' as per the Foreign Trade Policy (FTP) 2009-14, thereby qualifying for concessional duty under Notification No. 23/2003-CE dated 31.03.2003.Whether the definition of 'similar goods' as provided in the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 (CVR 1988), and Board's Circular No. 7/2006-Cus dated 13.01.2006, is applicable for interpreting the term 'similar goods' in the context of the FTP and the EOU scheme.Whether the difference in end-use applications of the engines (tractors versus stationary engines) is relevant in determining similarity of goods for the purpose of concessional duty under the EOU scheme.Whether the appellant was entitled to the benefit of concessional duty on clearances of stationary engines to DTA despite the alleged dissimilarity with exported goods.Whether penalty and interest imposed under the Central Excise Act and Rules were justified.Issue-wise Detailed Analysis1. Applicability and Interpretation of 'Similar Goods' under FTP vis-`a-vis Customs Valuation RulesLegal Framework and Precedents: The appellant's entitlement to concessional duty depends on the interpretation of 'similar goods' under the Foreign Trade Policy 2009-14, specifically paragraph 6.8. The department relied on Board's Circular No. 7/2006-Cus dated 13.01.2006, which adopts the definition of 'similar goods' from the CVR 1988. The Hon'ble Supreme Court in Atul Commodities Pvt. Ltd. v. CC, Cochin held that the Director General of Foreign Trade (DGFT) has the final authority on interpretation of FTP provisions. Additionally, the Supreme Court in Jagatram Ahuja vs. C.I.T. clarified that definitions in one statute cannot be imported into another unless statutes are pari materia or expressly provide so. The Kerala High Court in Abbas Ali v. Secretary reiterated that undefined statutory terms must be interpreted contextually, considering the purpose and object of the statute.Court's Interpretation and Reasoning: The Tribunal observed that the Commissioner erred in relying on the Customs Valuation Rules for interpreting 'similar goods' in the FTP context. The FTP and Customs Act serve different purposes-FTP facilitates foreign trade, while Customs is a tax statute. The Tribunal emphasized that the correct interpretative approach is to apply the natural, ordinary meaning of 'similar goods' in the FTP context, guided by the object of the legislation to promote exports and facilitate trade.Key Findings: The Tribunal noted that no definition of 'similar goods' exists in either the FTP or Notification 23/2003-CE. It held that the Board Circular's reliance on CVR 1988 was misplaced for this context. The Tribunal referred to the Supreme Court's decision in Nat Steel Equipment Pvt Ltd., which held that 'similar' means goods that resemble or correspond in many respects, not necessarily identical. The Tribunal further underscored that the DGFT's interpretation should have been sought but was not.Application of Law to Facts: The Tribunal found that the appellant's engines, though used for different applications (tractors versus stationary equipment), shared common components, configuration, and technical characteristics. The difference in end-use did not negate the similarity of the goods for the purpose of concessional duty under the FTP.Treatment of Competing Arguments: While the department argued that the engines were not commercially interchangeable and thus not similar, the Tribunal rejected this on the ground that similarity is not negated by different end uses. The Tribunal also noted the appellant's argument that the Green Card under the FTP covered engines in general, not specific types, and that the same components and configuration supported similarity.Conclusion: The Tribunal concluded that the goods cleared to DTA were 'similar goods' within the meaning of paragraph 6.8 of FTP 2009-14 and eligible for concessional duty under Notification No. 23/2003-CE.2. Relevance of End Use in Determining Similarity of GoodsLegal Framework and Precedents: The Board Circular and the department's reliance on CVR 1988 suggested that end-use is relevant in determining similarity. However, the Supreme Court in Nat Steel Equipment clarified that 'similar' does not mean 'identical' and that goods may be similar even if not identical in all respects.Court's Interpretation and Reasoning: The Tribunal noted that the Commissioner's finding that the goods were not similar due to different end uses was influenced by the Board Circular's adoption of CVR 1988. However, the Tribunal held that end use alone cannot determine similarity, especially under the FTP scheme designed to facilitate exports.Key Evidence and Findings: The adjudicating authority acknowledged that the engines shared major components and only differed in customized settings (e.g., fuel injection pump and governor assembly) to suit specific applications. The Tribunal found this customization insufficient to deny similarity.Application of Law to Facts: The Tribunal applied the principle that 'similar' goods need only resemble each other in many respects, not be identical or interchangeable in all uses. The end-use difference was held to be immaterial to the eligibility for concessional duty.Treatment of Competing Arguments: The appellant's contention that engines have the same purpose, use, and construction was accepted against the department's argument emphasizing different commercial applications.Conclusion: The Tribunal held that the difference in end use does not disqualify the goods from being 'similar goods' under the FTP and therefore eligible for concessional duty.3. Entitlement to Concessional Duty and Penalty ImplicationsLegal Framework and Precedents: The appellant was permitted to clear 'similar goods' in DTA at concessional rates under Notification 23/2003-CE read with FTP 2009-14. The department issued a Show Cause Notice demanding differential duty and penalty under Section 11AC of the Central Excise Act and Rule 25 of Central Excise Rules, 2002.Court's Interpretation and Reasoning: Since the Tribunal held that the goods cleared were 'similar goods' under the FTP, the appellant was entitled to concessional duty. Consequently, the demand for differential duty was unwarranted. The penalty imposed under Section 11AC was also set aside in light of the appellant's entitlement.Key Evidence and Findings: The appellant cleared 1437 stationary engines to DTA at concessional rates, while exports of stationary engines were minimal. The department contended that this indicated misuse of the benefit. However, the Tribunal found the classification and clearance consistent with the FTP scheme and Green Card issued.Application of Law to Facts: The Tribunal applied the principle of liberal construction of beneficial legislation and the Supreme Court's guidance that statutory terms should be interpreted in light of the statute's object and purpose. The appellant's compliance with the FTP conditions entitled it to the benefit.Treatment of Competing Arguments: The department's reliance on classification differences and export quantities was rejected as insufficient to deny concessional benefit.Conclusion: The Tribunal set aside the impugned order demanding differential duty and penalty, holding the appellant eligible for concessional duty on clearances of stationary engines to DTA.Significant Holdings'The expression 'similar' is a significant expression. It does not mean 'identical' but it means corresponding to/resembling to in many respects; somewhat like; or having a general likeness. The statute does not contemplate that the goods classified under the words of 'similar description' shall be in all respects the same. If it did, these words would be unnecessary.''The words and expressions defined in one statute as judicially interpreted do not afford a guide to the construction of the same words or expressions in another statute unless both the statutes are pari materia legislations or it is specifically provided in one statute to give the same meaning to the words as defined in another statute.''If a word used in a statute is not defined in that statute itself, the definition clause in a different statute, which may have defined the same word for the purpose of that statute, cannot be imported to interpret or construe the said word in the statute where it is not defined.''The EOU scheme under the FTDR Act is a part of beneficial legislation for facilitating imports and increasing exports. It needs to be read in a liberal way in the context of the FTDR Act.''The appellant is eligible for concessional rate of duty under notification 23/2003-CE dated 31.03.2003 on the stationary engines cleared to DTA as they fall under the definition of 'similar goods' as per paragraph 6.8 of the Foreign Trade Policy, 2009-14.'