The Madras High Court while upholding rejection of refund claim affirmed that the Exemption Notification should be interpreted strictly.
The assessees, M/s.Kurian Abraham (P) Ltd and M/s.Kanam Latex Industries (P) Ltd. imported Latex Gloves in bulk and filed bills of entry for clearance of those goods, which after clearance were packed in pouches, after undergoing a process of sterlization and were sold in the retail markt with the brand name. The assessee filed applications for refund of SAD paid by them by relying on a Notification No.102/2007-Cus, dated September 14, 2007.
The original Authority had sanctioned refund in respect of 77 bills of entry and in respect of the remaining 69 bills of entry, they were not sanctioned. The contention of the Revenue was that in terms of Section 2(f)(iii) of the Central Excise Act, 1944, packing, re-packing, labelling, re-labelling, printing of MRP on packages or any treatment of goods to render them marketable would amount to manufacture.
Therefore, the Department proposed that the assessee had not fulfilled the conditions specified in Paragraph No.2 of the Notification No.102/2007-Cus, wherein there is a specific condition that the imported goods shall be sold as such and without being subjected to any further process amounts to manufacture.
It was submitted that the process of sterilization would not amount to manufacture as the use and character of the imported gloves remain the same even after packing and no new product has been created on account of the said process of sterilization and repacking. Further, in terms of the notification, if the importer can establish that the goods sold were the same as imported, the benefit of exemption would apply and there is no specification in the notification that the goods are required to be sold as such.
It is further submitted that exemption is given only if the importer fulfills the conditions specified in the Notification and one such condition being the imported goods sold as “imported goods” without being subjected to any further process, which amounts to manufacture. Repacking, relabelling etc., shall amount to manufacture and the imported goods no more remain the imported goods as required under the Clauses 2(d), 2(e)(ii) of the Notification No.102/2007 and therefore, the order of the Tribunal is incorrect.
The division bench of Justices T.S.Sivanganam and S.Ananthi said that the fundamental legal principle, which we need to note is that an exemption notification has to be interpreted stricto sensu. No external aids can be brought in to interpret an exemption notification. If the assessees, who claim benefit of exemption notification, fail to fulfil any one of the conditions contained therein, the benefit cannot be extended. Courts have to read the exemption notification as such without substituting the words or phrases.
“Bearing in mind this legal principle, if we examine the order passed by the Tribunal, we find that the Tribunal was of the view that the Notification No. 102/2007 was in supersession of the earlier notification and that the words “as such” has been omitted,” the bench added.
The court held that the writ petitions filed by the assessees challenging the orders of the Assistant Commissioner of Customs rejecting the refund claim was not maintainable. Those orders passed by the Assistant Commissioner of Customs were based upon the order in original No.1/2016, dated April 19, 2016, which is to be set aside and the matter to be remanded back to the file of the Commissioner of Customs for fresh decision. In such circumstances, we are of the considered view that the writ petitioners should not be left without any remedy and since we are remanding the matter back to the file of the Commissioner of Customs for reconsideration, after setting aside the order passed by the Tribunal, we deem it appropriate that the orders passed by the Assistant Commissioner of Customers rejecting the refund applications are required to be set aside and the refund applications should stand restored to the file of the Assistant Commissioner of Customs to be taken up for fresh consideration after the Commissioner of Customs completes de novo adjudication based on the order of remand in this appeal.
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