Setback for MRF Ltd: CESTAT Rules Imported Rubber Attracts Additional Customs Duty Equal to Rubber Cess, Refund Denied [Read Order]

The Bangalore Bench of the Customs, Excise andService Tax Appellate Tribunal (CESTAT) ruled that imported natural rubber attracts additional customs duty equal to the rubber cess under the Rubber Act, 1947, and rejected the refund claims filed by MRF Ltd.

MRF Ltd., the appellant, imported natural rubber and classified it under Customs Tariff Heading 40012100. The customs authorities assessed the goods to additional duty of customs under Section 3(1)of the Customs Tariff Act, 1975, equivalent to the rubber cess payable under Section 12 of the Rubber Act, 1947.

The appellant paid the duty under protest and later filed refund claims, arguing that the cess applied only to rubber produced in India. The refund claims were rejected by the adjudicating authority and the Commissioner (Appeals), Cochin. Aggrieved by this decision, MRF approached the CESTAT.

The appellant’s counsel argued that rubber cess could be levied only on rubber produced in India and not on imported rubber. They referred to Section 12 of the Rubber Act, 1947, and submitted that the cess was intended to be collected from producers or landowners within India.

The counsel relied on earlier tribunal decisions such as MRF Ltd. v. Commissioner of Customs, Madras (1997 (96) ELT 198), where it was held that no rubber cess was payable on imports. The counsel also argued that the payment was made under pressure, without which the goods would not have been cleared, and hence the appellant was entitled to a refund with interest.

The revenue counsel argued that the issue was already settled against the appellant by the tribunal in MRF Ltd. v. Commissioner of Customs, Madras [2017 (358) ELT 566 (Tri.-Chennai)], which had relied on the Larger Bench judgment in TTK-LIG Ltd. v. Commissioner of Customs, Chennai [2006 (193) ELT 169 (Tri.-LB)]. The revenue counsel further argued that dismissal of certain appeals by the Supreme Court on grounds of delay or monetary limits did not change the legal position.

The two-member bench comprising Dr. D.M. Misra (Judicial Member) and Mr. Pullela Nageswara Rao (Technical Member) observed that the issue was no longer open to dispute, as it had been conclusively decided by the Larger Bench in TTK-LIG Ltd.

The Larger Bench had held that additional customs duty under Section 3(1) of the Customs Tariff Act was leviable on imported rubber equal to the cess under the Rubber Act. The tribunal pointed out that Section 3(1) of the Customs Tariff Act allows imposition of additional duty on imported goods equivalent to the excise duty or cess on like goods produced in India.

It explained that the levy ensures parity between imported and domestically manufactured rubber. Concluding that the levy was valid and that the refund claims were rightly rejected, the tribunal dismissed the appeals filed by MRF Ltd.

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