Recently in Tinna Rubber & Infrastructure Ltd v. UOI & Anr, the Delhi High Court held that Counter Veiling Duty (CVD) not be levied on cut pieces of used tyres and used tubes since it is inconsistent with the provisions of the Customs Tariff Act.
While setting aside a clarification issued by the Government, a full bench of the Court clarified that the process to which old tyres are subject to produce two or more pieces of cut tyre is not “manufacture‟ within the meaning of Section 2 (f) of the Central Excise Act.
In the instant case, the petitioners approached the division bench challenging the validity of a clarification issued by TRU of the Department of Revenue stating that the process of cutting tyre scrap into pieces produced from used and old tyres is subject to payment of excise duty.
The division bench had referred the said decision to the full bench for its reconsideration. The bench headed by Justice S Ravindra Bhat noticed the decision in Modi Rubber Limited vs Union of India, wherein it was held that waste/scrap obtained not by any process of manufacture, but in the course of manufacturing the end product was not exigible to excise duy. Later,the decision was impliedly been approved by a three-judge bench of the Supreme Court in Union of India vs Ahmedabad Electricity Co Limited.
“Even where an entire unit is set up for the purposes of converting old and used tyres into pieces of cut tyres, the essential character remains the same. Used tyres and tubes remain as such even after they are cut into pieces. They do not undergo any transformation so as to amount to ‘manufacture’ within the meaning of Section 2 (f) of the Central Excise Act”, the full bench said.
Setting aside the impugned ‘clarification’, the court held that the imposition of 12 per cent countervailing duty under Section 3 (1) of the Customs Tariff Act on cut pieces of used tyres and used tubes is unlawful and ultra vires to the Customs Tariff Act.
Read the full text of the Judgment below.
