Full Judgment Text
2012:BHC-OS:14815-DB
ASN 1/8 Custom Appeal-67.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
CUSTOMS APPEAL NO.67 OF 2008
The Commissioner of Customs (Imports),
New Custom House, Ballard Estate,
Mumbai. ...Appellant.
v.
M/s. Sujag Fine Chemicals (India) Ltd.,
having address at C-1B/42/627,
GIDC State, Nandesari,
Vadodara 391 340. ...Respondent.
Mr. Pradeep S. Jetly for the Appellant.
Mr. Subodh Joshi i/by Nandlal Kothari & Sabir for the Respondent.
CORAM : J.P. DEVADHAR AND
M.S. SANKLECHA, JJ.
DATE : 31ST OCTOBER, 2012
JUDGMENT ( PER M.S. SANKLECHA, J.):
Issue raised in this appealThis appeal by the revenue
under Section 130A of the Customs Act, 1962 (“the Act”) against
th
the order dated 6 June, 2006 of the Customs Excise and
Service Tax Appellate Tribunal (“the Tribunal”) has been admitted
th
on 19 November, 2009 on the following substantial question of
law.
Whether the Tribunal has correctly
interpreted the said Notification while holding that
the activity undertaken by the respondent
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amounted to job work and the value addition
clause of the said notification does not provide
that the value addition should not include the
value of Indigenous material procured and used in
the manufacture of final product exported?
2) Brief facts leading to the present appeal are as
follows:
a) The respondent is engaged in the manufacture of
chemicals. The respondent entered into a job work contract with
one M/s. Agriguard Limited, Ireland to manufacture pesticide
formulation on job basis. Under the contract M/s. Agriguard
Limited, Ireland were to supply two principal raw materials free of
costs to the respondent from abroad. The imported goods were
exempted from payment of customs duty under Notification
No.32/97/Cus. dated 1/4/1997 subject to the condition that the
imported goods are used for execution of an export order placed
on the importer by the supplier of goods by jobbing. Further, the
value addition in the resultant product exported should not be
less than 10% of the CIF value of goods imported in relation to
manufacturing of exported goods. On import of the raw material
supplied free of charge by M/s. Agriguard Limited, Ireland for the
purposes of jobbing, the Dy. Commissioner of Customs denied the
benefit of exemption under Notification No.32/97/Cus. by an order
dated 24/5/2000 on the ground that where substantial inputs/raw
materials are procured locally by the importer in execution of the
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export order, the activity would not amount to jobbing under
Notification No.32/97/Cus. dated 1/4/1997. In support of the above
conclusion, the Dy. Commissioner placed reliance upon the
decision of the Apex Court in the matter of M/s. Prestige
Engineering (India) Limited V. Collector of Central Excise,
Meerut reported in 1994 (73) E.L.T. 497 (S.C.) and rejected the
claim for the benefit of the notification on the ground that the
requirement of value addition of not less than 10% more than CIF
value of the goods imported is incapable of being established, as
indigenous goods as also used in execution of the export.
3) Being aggrieved by the order dated 24/5/2000, the
respondent filed an appeal to the Commissioner of Customs
(Appeals). By an order dated 18/9/2001, the Commissioner of
Customs (Appeals ) allowed the respondent's appeal. The
Commissioner of Customs (Appeals) held that the decision of the
Apex Court in the matter of Prestige Engineering India Limited
(supra) is not applicable to the present facts as it dealt with job
work as defined under Central Excise Notification and not a
Customs notification. Further the value addition in the case of the
respondent was more than 32.15% of the CIF value of the
imported good, thus achieving more than 10% value addition
required by the Notification No.32/97/Cus. dated 1/4/1997.
Consequently, it was held that the respondent is entitled to benefit
of exemption under Notification No.32/1997/Cus. dated 1/4/1997
in respect of the imported goods.
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4) Being aggrieved by the order of the Commissioner of
Customs (Appeals) dated 7/9/2000 the revenue preferred an
th
appeal to the Tribunal. The Tribunal by its order dated 6 June,
2006 dismissed the revenue's appeal. The Tribunal held that the
Notification No.32/97/Cus. dated 1/41997 required the value
addition of at least 10% more in the value of resultant exported
products than the value of the imported goods while the value
addition was admittedly 32.15% in the present case. The other
plea that the activity under taken by the respondent cannot be
considered as job work in view of the decision of the Apex Court in
the matter of Prestige Engineering (supra) was also negatived by
holding that the above decision was rendered in the context of the
excise notification and not in respect of the customs notification.
Besides the Tribunal further held that indigenous raw
material/inputs used in the export product is less than 30% and
therefore, it cannot be held that the activity under taken by the
respondent would not amount to job work.
5) Mr. Pradeep Jetly, Advocate for the appellant in
support of the appeal submits as under :
a) The activity undertaken by the respondent cannot be
considered to be an activity of job work as substantial amount of
work/activity was contributed by indigenous material which was
not less than 30% of the exported product;
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b) Reliance was placed upon the decision of the Apex
Court in the matter of Prestige Engineering (supra) to contend that
where the job worker contributes his own raw material to the
article supplied by the customer and such raw material is
substantial then the activity could not be classified as an activity of
job work; and
c) The value addition as provided in the notification is
incapable of fulfillment as the export product also contained
indigenous raw material.
6) As against the above Mr. Subodh Joshi, Advocate
appearing for the respondent while opposing the appeal submits
as under:
a) The decision of the Apex Court in the matter of
Prestige Engineering (supra) is inapplicable to the present facts
as is dealt with an Central Excise Notification No. 119/95/CE
dated 30/4/1997 which specifically defined job work for the
purposes of central excise notification.
b) The Customs Notification No.32/1997/Cus. dated
1/4/1997 does not define the word jobbing and consequently
general meaning of the word job work/jobbing is to be applied
and its meaning is not to be restricted in any manner; and -
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c) The respondent-assessee has satisfied /fulfilled the
requirement of value addition in the export product being at least
10% more then CIF value of the imported goods. In this case, the
value addition is admittedly 32.15%. In view of the above, Mr.
Joshi submits that the order of the Tribunal calls for no
interference.
7) We have considered the above submissions. The
Customs Notification No.32/97/Cus. dated 1/4/1997 exempted
imported goods from payment of customs duty provided they are
used for execution of export order on jobbing basis. The benefit of
Notification No.32/97/Cus. dated 1/4/1997 is essentially being
denied firstly on the ground that the activity undertaken by the
respondent is not an activity of jobbing as substantial raw
material i. e. 30% are locally procured and therefore, the activity
carried out by the respondent would not be an activity of jobbing.
The word jobbing has not been defined under the Customs
Notification No.32/97/Cus. dated 1/4/1997 and therefore, one
would have to apply general meaning of the word jobbing which
would mean carrying out work i. e. predetermined job as directed
by the supplier of raw material and returning the resultant
product to the supplier. The aforesaid activity is admittedly being
carried out by the respondent. However, the revenue's contention
that the activity carried out by the respondent is not job work in
view of the decision of the Apex Court in the matter of Prestige
Engineering India Limited (supra) is misplaced. In the above
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decision the Apex Court was dealing with Notification issued
under the Central Excise Act namely Notification No.119/75 dated
30/4/1975. For the purpose of the aforesaid notification the word
job work has been defined in the explanation to the notification.
Explanation to the notification No.119/75 dated 30/4/1975 is a
restricted definition and it requires job worker to work on the
goods supplied by the supplier and return the same after the raw
material has under gone manufacturing process. There is no such
definition of jobbing provided in Notification No.32/97/Cus. dated
1/4/1997. In any event as held by the Supreme Court in the matter
of Commissioner of Central Excise, Trichy v. Rukmani
Pakkwell Traders reported in 2004(165) ELT 481 it is
impermissible to interpret one notification with the aid of another
notification. It would therefore, be inappropriate to import definition
of the job work given in excise notification No.119/75 dated
30/4/1975 while construing Customs Notification No.32/97/Cus.
dated 1/4/1997. In view of the above, the decision of the Apex
Court in the matter of Prestige Engineering (supra) would have
no application while interpreting Notification No.32/97/Cus. dated
1/4/1997 and has rightly been disregarded by the Tribunal. The
second ground taken by the revenue for not extending the benefit
of Notification No.32/97 dated 1/4/1997 is that the value addition
of at least 10% more in the exported product then the value of the
goods imported is incapable of being fulfilled in view of the fact
that indigenous material to the extent of almost 30% has been
used in the process of jobbing to obtain the exported product. The
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contention of the revenue requires one to add words to the
Notification No.32/97/Cus. dated 1/4/19097 which is clearly not
permissible. All that Customs Notification No.32/97/Cus. dated
1/4/1997 requires is that there should be value addition of 10% or
more in the exported product than the value of the goods
imported. In this case the admitted position is that there is value
addition of 32.15 % more in the exported product than the value of
the goods imported. Further, the Notification nowhere provides
that the benefit of Notification No.32/97/Cus. dated 1/4/1997
would not be available where any indigenous material is used in
the manufacture of export product. It is well settled principle of
interpretation of fiscal status that exemption notification has to be
strictly read and it is not permissible to either add or subtract
words as found therein as held by the Apex Court in M/s. Hemraj
Gordhandas v. H.H. Dave, Asstt. Commissioner of Central Excise
and Customs, Surat and others reported in 1978 E.L.T. (J.350).
8) In view of the above, we answer the substantial
question of law as framed for our consideration in the affirmative
i.e. in favour of the respondent-assessee and against the
appellant-revenue.
9) The appeal is disposed of in the above terms. No
order as to costs.
(M.S.SANKELCHA, J.) (J.P. DEVADHAR, J.)
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