Case Note & Summary
The Commissioner of Customs (Imports), Mumbai filed an appeal under Section 130A of the Customs Act, 1962 against the order dated 6th June, 2006 of the Customs Excise and Service Tax Appellate Tribunal (the Tribunal). The appeal was admitted on 19th November, 2009 on a substantial question of law regarding the interpretation of Notification No.32/97/Cus. dated 1/4/1997. The respondent, M/s. Sujag Fine Chemicals (India) Ltd., was engaged in the manufacture of chemicals and entered into a job work contract with M/s. Agriguard Limited, Ireland to manufacture pesticide formulation on job basis. Under the contract, M/s. Agriguard Limited supplied two principal raw materials free of cost from abroad, which were exempted from customs duty under the notification subject to the condition that the imported goods are used for execution of an export order placed on the importer by the supplier by jobbing, and the value addition in the resultant product exported should not be less than 10% of the CIF value of imported goods. The Deputy Commissioner of Customs denied the exemption benefit by order dated 24/5/2000 on the ground that where substantial inputs/raw materials are procured locally by the importer in execution of the export order, the activity would not amount to jobbing under the notification. The Tribunal, however, held in favor of the respondent, leading to the present appeal by the revenue. The High Court, after hearing both sides, set aside the Tribunal's order and remanded the matter back to the Tribunal for fresh consideration in accordance with law, as the substantial question of law remained unanswered.
Headnote
A) Customs Law - Exemption Notification - Job Work - Notification No.32/97/Cus. dated 1/4/1997 - The issue was whether the activity of manufacturing pesticide formulation using imported raw materials supplied free of cost along with locally procured inputs amounts to job work under the notification. The court held that the Tribunal's interpretation was erroneous and the matter required reconsideration. (Paras 1-2) B) Customs Law - Value Addition - Indigenous Material - Notification No.32/97/Cus. dated 1/4/1997 - The question was whether the value addition clause requires exclusion of value of indigenous material used. The court set aside the Tribunal's order and remanded the matter for fresh consideration. (Paras 1-2)
Issue of Consideration
Whether the Tribunal correctly interpreted Notification No.32/97/Cus. dated 1/4/1997 while holding that the activity undertaken by the respondent 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?
Final Decision
The appeal is allowed. The impugned order of the Tribunal dated 6th June, 2006 is set aside. The matter is remanded back to the Tribunal for fresh consideration in accordance with law. The appeal is disposed of in the above terms with no order as to costs.
Law Points
- Interpretation of exemption notification
- job work definition
- value addition computation
- inclusion of indigenous material value
