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2017 DIGILAW 358 (GUJ)

Proflex Systems v. Commissioner of Customs

2017-02-13

B.N.KARIA, M.R.SHAH

body2017
JUDGMENT : M.R. Shah, J. 1. Feeling aggrieved and dissatisfied with the impugned Miscellaneous Order No. M/10134-10137/2016 dated 17.03.2016 and Order No. A/10842-10845/2014 dated 22.04.2014 passed by the Central Excise & Service Tax Appellate Tribunal, Ahmedabad (hereinafter referred to as the "CESTAT"), by which, the learned Tribunal has dismissed the said appeal and Miscellaneous Application preferred by the assessee-appellant herein, the appellant has preferred present appeal with the following proposed question of law. "A. Whether the Hon'ble Tribunal clearly erred in law in not granting the refund to the appellant under Notification No. 102/2007-Cus, dated 14.09.2007 of Special Additional Duty on the ground that the steel sheets in coils were subjected to "VAT" as such only on account of the fact that the bill was a composite bill for laying of Proflex Roof with material on the building? B. Whether the Hon'ble Tribunal clearly erred in holding that the sheets in coils became a different product merely by virtue of the fact that the same were corrugated at the stage of placing them on the roof? C. Whether the Hon'ble Tribunal clearly erred in law in adjudicating that the corrugation led a product different from the original sheet? D. Whether the Hon'ble Tribunal clearly erred in law in not granting the said refund on the ground that the actual quantity of sheets used is not known till the same is used?" 2. The facts leading to the present appeal in nutshell are as under: 2.1 That the appellant-assessee is engaged, inter alia, in the activity of importing prime quality pre-painted aluminum zinc alloy quoted steel sheet in coil falling under Tariff Heading No. 7210. It is the case on behalf of the assessee that the appellant is also carried out works contract of laying Proflex Roof with material on the building. That the assessee imported the coils on payment of imported duty as well as on payment of Special Additional Duty. That thereafter, the coils are converted into Roof on which, on further sale, the assessee has also paid Value Added Tax. According to the assessee, he was entitled to refund of Special Additional Duty paid at the time of import as per the Notification No. 102/2007-Cus, dated 14.09.2007 on payment of VAT by the assessee. However, the same was denied and therefore, the assessee filed application for refund. According to the assessee, he was entitled to refund of Special Additional Duty paid at the time of import as per the Notification No. 102/2007-Cus, dated 14.09.2007 on payment of VAT by the assessee. However, the same was denied and therefore, the assessee filed application for refund. The adjudicating authority adjudicated the claim of the assessee for refund of SAD on the ground that the assessee has not paid the VAT on the imported goods i.e. coils and what is sold subsequently by the assessee and on which VAT is paid is altogether different goods i.e. roof and therefore, the assessee is not entitled to refund of SAD as claimed as the conditions of the notification dated 14.09.2007 are not fulfilled/satisfied. 2.2 Feeling aggrieved and dissatisfied with the Order in Original passed by the Assistant Commissioner of Customs disallowing the refund of SAD claimed by the assessee, the assessee preferred appeal before the Commissioner of Customs (Appeals). The Commissioner of Customs (Appeal) rejected the said appeal by order dated 16.09.2011. 2.3 Against the order passed by the Commissioner of Customs (Appeals) rejecting the appeal preferred by the assessee and confirming the Order in Original disallowing the refund claim of SAD claimed by the assessee, the assessee preferred appeal before the learned Tribunal. By impugned judgment and order dated 22.04.2016, the learned Tribunal has rejected the said appeal. That thereafter, the assessee preferred Miscellaneous Application for review of the order dated 22.04.2016 before the learned Tribunal. The Miscellaneous Application has been rejected by the learned Tribunal by impugned order dated 17.03.2016. 2.4 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned CESTAT confirming the Order in Original as well as order passed by the learned Commissioner of Customs (Appeals) disallowing the refund claim of SAD claimed by the assessee, the assessee has preferred present appeal with the following proposed questions of law. "A. Whether the Hon'ble Tribunal clearly erred in law in not granting the refund to the appellant under Notification No. 102/2007-Cm, dated 14.09.2007 of Special Additional Duty on the ground that the steel sheets in coils were subjected to "VAT" as such only on account of the fact that the bill was a composite bill for laying of Proflex Roof with material on the building? B. Whether the Hon'ble Tribunal clearly erred in holding that the sheets in coils became a different product merely by virtue of the fact that the same were corrugated at the stage of placing them on the roof? C. Whether the Hon'ble Tribunal clearly erred in law in adjudicating that the corrugation led a product different from the original sheet? D. Whether the Hon'ble Tribunal clearly erred in law in not granting the said refund on the ground that the actual quantity of sheets used is not known till the same is used?" 3. Shri Devan Parikh, learned Senior Advocate appearing for the appellant-assessee has vehemently submitted that the impugned judgment and order passed by the learned Tribunal is contrary to the object and purpose of the Notification dated 14.09.2007 which provides for refund of SAD. 3.1 It is further submitted by Shri Devan Parikh, learned Senior Advocate for the assessee that all the authorities below have materially erred in holding that the assessee had not paid VAT on the imported goods i.e. coils and therefore, the assessee is not entitled to the refund of SAD as claimed. 3.2 It is further submitted by Shri Devan Parikh, learned Senior Advocate for the assessee that as such what is used in manufacturing the roof is the coil only which were imported goods and the only activity carried out thereafter is to corrugate the same, before the same are installed on the building. It is submitted that therefore, the roof supplied/installed on the building as per the requirement of the custom is basically the coil which has been subsequently corrugated and thereafter installed on the building. It is submitted that therefore, it cannot be said that by corrugated coils there is new product manufactured and supplied. It is submitted that therefore, when the assessee had paid the VAT on the coils which are subsequently corrugated, the same can be said to have been paid on the goods imported i.e. coils and therefore, the conditions contained in Notification dated 14.09.2007 can be said to have been complied with. It is submitted that therefore, the assessee is entitled to the refund on Special Additional Duty on payment of VAT on the corrugated sheets which is basically coil before corrugated. It is submitted that therefore, the assessee is entitled to the refund on Special Additional Duty on payment of VAT on the corrugated sheets which is basically coil before corrugated. 3.3 It is further submitted by Shri Devan Parikh, learned Senior Advocate for the assessee that Special Additional Duty is imposed under the Customs Tariff Act to compensate the local taxes being levied on the very same product, if manufactured locally. It is submitted that if the VAT is payable on such coils along with other local taxes, then, Special Additional Duty is levied on the import of such coils at an estimated quantity of such tax. It is submitted that there were cases in which, the commodities imported were sold and, at the time of sale, "VAT" was paid thereon, which resulted into double taxation i.e. in the form of Special Additional Duty and also in the form of VAT. It is submitted that in order to avoid such double taxation that the Notification No. 102/2007-Cus, dated 14.09.2007 was issued. It is submitted that as per the provision of Notification dated 14.09.2007, the importer has, in the first place, to pay Special Additional Duty on making a declaration that no credit will be taken thereof. That thereafter, he has to produce a proof of payment of "VAT" and on that basis, he would be granted refund of Special Additional Duty paid by him. It is submitted that therefore, in the present case when the assessee submitted the proof of payment of "VAT", the assessee is entitled to refund of SAD as per the Notification dated 14.09.2007. 3.4 It is further submitted by Shri Devan Parikh, learned Senior Advocate for the assessee that instead of granting such refund, a technical view was taken that the invoice is a composite invoice including for sale of materials, and "VAT" is paid thereon, therefore, the refund would not be available. 3.5 It is submitted that after the coils are imported by the assessee, the assessee enter into the contract of turn-key work. It is submitted that the assessee supplies the material specifically mentioned in the purchase order and the invoices and also charging the amount of turn-key works which includes the costing material. It is submitted that thus, when VAT is paid thereon, the same would be on the material supplied. It is submitted that the assessee supplies the material specifically mentioned in the purchase order and the invoices and also charging the amount of turn-key works which includes the costing material. It is submitted that thus, when VAT is paid thereon, the same would be on the material supplied. It is submitted that under the VAT Act, when the VAT is paid under the contracts, a deduction of labour cost is allowed, so that, "VAT" would only be charged on the material. It is submitted that as such VAT is levied on the sale of goods and not on service. It is submitted that therefore, what is charged by the assessee is the cost of the material/coils as well as service provide of turn-key work. It is submitted that only activities which is carried out by the assessee is corrugated as per the requirement and same is installed on the building/roof. It is submitted that therefore, what is actually used is the coils and imported goods and the VAT is paid on the same. It is submitted that therefore, the appellant-assessee is entitled to the refund of SAD as per the Notification dated 14.09.2007, on payment of VAT by the assessee. 3.6 It is further submitted by Shri Devan Parikh, learned Senior Advocate for the assessee that the learned Tribunal has not properly appreciated the fact that supply made by the assessee is of turn-key solution which includes material i.e. sheets in coils. It is submitted that supply of material i.e. agreed is not corrugated roofing, but sheets in coils. It is submitted that the aforesaid is clear from the description of the material stated in the invoice itself. It is submitted that therefore, what is to be supplied is material as specified in the invoice. It is submitted that corrugating is a part of service on which the VAT is not required to be paid under the VAT Act. It is submitted that what is sold/what is to be sold under the contract is not corrugated piece of roof, but coil itself. It is submitted that corrugating is a part of service on which the VAT is not required to be paid under the VAT Act. It is submitted that what is sold/what is to be sold under the contract is not corrugated piece of roof, but coil itself. It is submitted that therefore, the learned Tribunal has materially erred in observing that VAT paid by the assessee is not on the imported goods/coils sheets but is paid on the corrugated piece of roof and therefore, as the VAT is not paid on the imported goods/coils sheets, the assessee is not entitled to refund of SAD under the Notification dated 14.09.2007. 3.7 It is further submitted by Shri Devan Parikh, learned Senior Advocate for the assessee that that the finding recorded by the learned Tribunal that as it is not known what is the actual quantity of coils used till completion of contract work, refund is not available, is quite irrelevant to the issue on hand. 3.8 It is further submitted by Shri Devan Parikh, learned Senior Advocate for the assessee that the learned Tribunal has clearly erred in holding that as rate to be paid on the basis of square meter of the roofing including value of material, what is sold is corrugated roofing. It is submitted that the aforesaid is also absolutely irrelevant to the issue on hand. It is submitted that in all cases where a turn-key project is to be completed, the rate would be on the basis of square meter. 3.9 It is further submitted by Shri Devan Parikh, learned Senior Advocate for the assessee that then in any case, even if it is presumed for the sake of argument that what is supplied is corrugated roofing, the same would still not be supply of a different material. It is submitted that mere corrugation of coils would not change the same to a different material. In support of above submission, learned counsel for the appellant has heavily relied upon the following decisions. (1) In the case of Commissioner of Customs vs. Variety Lambers Pvt. Ltd. reported in 2014 (302) ELT 519. (2) In the case of Commissioner of Customs vs. Posco India Delhi Steel Processing Centre Pvt. Ltd. reported in 2014 (299) ELT 263. In support of above submission, learned counsel for the appellant has heavily relied upon the following decisions. (1) In the case of Commissioner of Customs vs. Variety Lambers Pvt. Ltd. reported in 2014 (302) ELT 519. (2) In the case of Commissioner of Customs vs. Posco India Delhi Steel Processing Centre Pvt. Ltd. reported in 2014 (299) ELT 263. (3) In the case of Shri Ashok Jindal (Member) J. Eqvinox Solution Ltd. vs. Commissioner of Customs (Import) Mumbai reported in 2011 (272) ELT 310. (4) In the case of Vijrom Chem Pvt. Ltd. vs. Commissioner of Custom, Bangalore reported in 2006 (199) ELT 751 , (5) In the case of Agarwalla Timbers Pvt. Ltd. vs. Commissioner of Customs, Kandla reported in 2014 (299) ELT 455. Making above submissions and relying upon the above decisions, it is requested to allow/admit, the present appeal. 4. Present Appeal is vehemently opposed by Shri Dhaval Vyas, learned advocate for the Department/Revenue. It is vehemently submitted by Shri Vyas, learned advocate for revenue that in the facts and circumstances of the case all the authorities below, including the learned Tribunal have rightly denied the refund to the appellant under the Notification No. 102/2007-Cus, dated 14.09.2007 of Special Additional Duty. 4.1 It is vehemently submitted by Shri Vyas, learned advocate for the revenue that as per the Notification No. 102/2007-Cus, dated 14.09.2007 only in a case where it is established and proved that on the imported goods, for which, Special Additional Duty is paid, subsequently the VAT is paid, in that case only the set off of Special Additional Duty is required to be given. It is submitted that therefore, for claiming set off/refund of Special Additional Duty, the importer has to prove that he has paid the VAT on the very goods imported. It is submitted that in the present case it has come on record that VAT paid by the appellant is not on the imported goods but altogether a different goods, other than the goods imported. It is submitted that therefore, the conditions mentioned in the Notification No. 102/2007-Cus, dated 14.09.2007 are not satisfied and therefore, the appellant is rightly denied the refund of Special Additional Duty claimed under the Notification No. 102/2007-Cus, dated 14.09.2007. It is submitted that therefore, the conditions mentioned in the Notification No. 102/2007-Cus, dated 14.09.2007 are not satisfied and therefore, the appellant is rightly denied the refund of Special Additional Duty claimed under the Notification No. 102/2007-Cus, dated 14.09.2007. 4.2 It is further submitted by Shri Vyas, learned advocate for the Revenue that what was imported was the coil sheets, on which, the Special Additional Duty was paid at the time of import. Thereafter, what is manufactured is altogether different product i.e." Proflex Roof, on which the VAT is paid. It is submitted that therefore, as the VAT is not paid on the imported goods i.e. coil sheets, the appellant is not entitled to refund of Special Additional Duty paid on the imported goods i.e. coil sheets. 4.3 It is further submitted by Shri Vyas, learned advocate for the Revenue that even in the retail invoice what is charged by the appellant is for the Proflex Roof with the material charge and labour work etc. It is submitted that even what is charged by the appellant assessee is on the per square meter basis of "Proflex Roof including value of materials. It is submitted that therefore, when the appellant has not paid the VAT on the imported goods-coil sheets and the VAT has been paid altogether on a different product namely "Proflex Roof, it is rightly held that appellant is not entitled to refund of Special Additional Duty under the Notification No. 102/2007-Cus, dated 14.09.2007 as claimed by the appellant. Making above submissions, it is requested to dismiss the present appeal. 5. Heard the learned advocates for the respective parties at length. 6. At the outset, it is required to be noted that the appellant claimed the refund of Special Additional Duty paid on the imported goods, under the notification No. 102/2007-Cus, dated 14.09.2007. The Notification No. 102/2007-Cus, dated 14.09.2007 reads as under: "Special CVD-Exemption to all goods when imported for subsequent sale. 6. At the outset, it is required to be noted that the appellant claimed the refund of Special Additional Duty paid on the imported goods, under the notification No. 102/2007-Cus, dated 14.09.2007. The Notification No. 102/2007-Cus, dated 14.09.2007 reads as under: "Special CVD-Exemption to all goods when imported for subsequent sale. In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the goods falling within the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), when imported into India for subsequent sale, from the whole of the additional duty of customs leviable thereon under sub-section (5) of section 3 of the said Customs Tariff Act (hereinafter referred to as the said additional duty). The exemption contained in this notification shall be given effect if the following conditions are fulfilled: (a) the importer of the said goods shall pay all duties, including the said additional duty of customs leviable thereon, as applicable, at the time of importation of the goods; (b) the importer, while issuing the invoice for sale of the said goods, shall specifically indicate in the invoice that in respect of the goods covered therein, no credit of the additional duty of customs levied under sub-section (5) of section 3 of the Customs Tariff Act, 1975 shall be admissible; (c) the importer shall file a claim for refund of the said additional duty of customs paid on the imported goods with the jurisdictional customs officer; (d) the importer shall pay on sale of the said goods, appropriate sales tax or value added tax, as the case may be; (e) the importer shall, inter alia, provide copies of the following documents alongwith the refund claim: (i) document evidencing payment of the said additional duty; (ii) invoices of sale of the imported goods in respect of which refund of the said additional duty is claimed; (iii) documents evidencing payment of appropriate sales tax or value added tax, as the case may be, by the importer, on sale of such imported goods. 3. 3. The jurisdictional customs officer shall sanction the refund on satisfying himself that the conditions referred to in para 2 above, are fulfilled." 6.1 Thus, as per the aforesaid Notification, the importer has to pay first the Special Additional Duty on the goods so imported and thereafter if conditions mentioned in the said Notification are fulfilled, the importer is entitled to refund of Special Additional Duty. One of the condition is that the importer shall pay on the sale of said goods (imported goods) appropriate sales tax or value added tax, as the case may be. Thus, for claiming refund under the said Notification, the importer has to satisfy that the Value Added Tax/Sales Tax, as the case may be has been paid on the goods imported and only those goods imported are sold and the VAT is paid on such imported goods. 6.2 In the present case, what is imported by the appellant is coil sheets. The Special Additional Duty is paid on such imported goods namely coil sheets. Thereafter, what is manufactured and sold by the appellant is "Proflex Roof and on such "Proflex Roof VAT is paid. Therefore, it cannot be said the assessee has paid the VAT on the goods imported, on which, Special Additional Duty has been paid. Under the circumstances, one of the condition mentioned in the Notification No. 102/2007-Cus, dated 14.09.2007 has not been complied with. 7. It is the case on behalf of the appellant that in fact what is used subsequently is the coil sheets and only the process of corrugation is done which subsequently installed on the building as per the requirement of the customer and as per the works contract. It is the case on behalf of the appellant-assessee that what they are charging is for the services and therefore, for providing service and/or on the value on the services provided, they are not liable to pay the VAT under the provisions of VAT Act. However, what is required to be considered is the interpretation of Notification No. 102/2007-Cus, dated 14.09.2007 and whether all the conditions mentioned in the Notification No. 102/2007-Cus, dated 14.09.2007 have been satisfied or not and/or whether the appellant is entitled to refund of Special Additional Duty under Notification No. 102/2007-Cus, dated 14.09.2007 or not. However, what is required to be considered is the interpretation of Notification No. 102/2007-Cus, dated 14.09.2007 and whether all the conditions mentioned in the Notification No. 102/2007-Cus, dated 14.09.2007 have been satisfied or not and/or whether the appellant is entitled to refund of Special Additional Duty under Notification No. 102/2007-Cus, dated 14.09.2007 or not. From the material on record, it appears that what is imported is coil sheets and what is sold subsequently by the appellant is "Proflex Roof. That thereafter, "Proflex Roof is installed on the building as per the requirement of their clients and on the "Proflex Roof, the VAT is paid. At this stage, it is required to be noted that even in the invoice the rate of laying of "Proflex Roof is also charged on per square meter including the value of the material. There is no separate invoice/bill issued for coil sheets. Therefore, it cannot be said that what is sold by the appellant to his client is same goods which is imported i.e. coil sheets. Under the circumstances and one of the condition of Notification No. 102/2007-Cus, dated 14.09.2007 has not been complied with i.e. appellant has not paid VAT on the goods imported i.e. coil sheets and what is sold subsequently is "Proflex Roof and what is charged by the appellant is for "Proflex Roof on which the VAT has been paid and as the VAT is not paid on the coil sheets, the appellant is rightly denied the refund of Special Additional Duty claimed under the Notification No. 102/2007-Cus, dated 14.09.2007. 8. Now, so far as reliance placed upon the decision of the Division Bench of this Court in the case of Posco India Delhi Steel Processing Centre P. Ltd. (supra) is concerned, it is required to be noted that on facts it was observed and found that the process undertaken by the importer did not amount to manufacture and imported goods continued to retain their distinct and original character as well as identity, it was held that the importer was entitled to the benefit of Notification No. 102/2007-Cus, dated 14.09.2007. In the case before the Division Bench, the imported goods was the steel round logs and sold in sawn timber form. Therefore, it was found that the steel which imported was sold in the market after cutting and slitting and therefore, original imported goods identity continued. In the case before the Division Bench, the imported goods was the steel round logs and sold in sawn timber form. Therefore, it was found that the steel which imported was sold in the market after cutting and slitting and therefore, original imported goods identity continued. Thus, on facts aforesaid decisions shall not be applicable to the facts of the case on hand. Similarly, the decision of the Tribunal in the case of Agarwalla Timbers Pvt. Ltd. (supra) also shall not be applicable to the facts of the case on hand. 9. In view of the above and for the reasons stated above, more particularly, when one of the condition of Notification No. 102/2007-Cus, dated 14.09.2007 has not been satisfied and as the VAT has been paid by the appellant on the "Proflex Roof and not on the imported goods i.e. coil sheets, the appellant is rightly held to be not entitled to refund of SAD claimed under Notification No. 102/2007-Cus, dated 14.09.2007. We are in complete agreement with the view taken by the learned Tribunal. No substantial question of law arise. Hence, present appeal deserves to be dismissed and is accordingly dismissed. No costs.