2011(11)LCX0127

IN THE CESTAT, PRINCIPAL BENCH, NEW DELHI

Ms. Archana Wadhwa, Member (J) and Shri Rakesh Kumar, Member (T)

Commissioner of Customs, Jaipur

Versus

V.K. International

Final Order Nos. C/472-477/2011(PB), dated 3-11-2011 in Appeal.Nos. C/701-706/2007 and Cross Objection No. C/CO/69/2008

Cases Quoted -

Commissioner v. P.S. Jain - ITR (179) 1991 - Distinguished [Paras 2.2,4]

Commissioner v. Ratan Melting and Wire Industries - 2008(10)LCX0001 Eq 2008 (231) ELT 0022 (S.C.) = 2008(10)LCX0001 Eq 2008 (012) STR 0416 (S.C.) - Referred [Para 11]

Departmental Clarification Quoted-

C.B.E. & C. Circular No. 40/2004-Cus., dated 4-6-2004 [Paras 1.1,2.1,2.2,10,12]
C.B.E. & C. Circular No. 13/2006-Cus, dated 29-3-2006 [Paras 2.2,10,12]
C.B.E. & C. Circulars, dated 20-10-2010 , [Para 4]
C.B.E. & C. Instruction No. 390/Misc./163/2010-JC, dated 17-8-2011 [Paras 2.2,4]

Advocated By -

Shri Amresh Jain, SDR, for the Appellant.
S/Shri Jitender Singh, R.S. Sharma, Advocates and B.L. Sharma, Consultant, for the Respondent.

[Order per : Rakesh Kumar, Member (T)]. -

The respondents in this group of cases imported mountings and findings of Gold jewellery and claimed the benefit of duty exemption under Notification No. 62/2004-Cus., dated 12-5-04. This exemption notification prescribes concessional rate of duty for -

(a) gold bars other than tola bars bearing manufacturers /refineries en-graved serial number and weight expressed in metric units, gold coins;

(b) gold in any form other than those specified in (a) above including liquid gold and tola bars and;

(c) silver in any form.

Explanation to this notification explains that for the purpose of this noti-fication, the expression "gold in any form" or "silver in any form" shall include medallions and coins but shall not include jewellery made of gold or silver as the case may be and foreign currency coins.

1.1 The point of dispute in this case is as to whether the imported gold mountings and gold findings are "gold in any form" covered under the Notification No. 62/2004-Cus. and, hence, eligible for this exemption notification, or as contended by the department, are items of jewellery or its parts, excluded from the purview of this notification. There is no dispute that for the purpose of assessment of duty, the gold mountings had been classified under sub-heading 7113 19 10 and gold findings has been classified under sub-heading 7113 11 90. In all these cases, the Commissioner by the impugned orders-in-original extended the benefit of Notification No. 62/2004-Cus. to the imported gold mountings and findings holding that the same are covered by the expression "gold in any form" in serial No. 2 of the table annexed to the Notification No. 62/2004-Cus. The Commissioner in this regard relied upon the Board's Circular No. 40/2004-Cus., dated 4-6-04. These orders of the Commissioner were reviewed by the Committee of Chief Commissioners and these review appeals have been filed by the de-partment in pursuance of the directions of the Committee of Chief Commissioners. The Committee of Chief Commissioners was of the view that while findings are part of the jewellery, the mountings are an item of jewellery compete in all respect except for setting of gems/stones and, hence, the same have to be treated as jewellery or part thereof and would be out of the purview of Notification No. 62/2004-Cus.


2. Heard both the sides.

2.1 Shri Amresh Jain, the learned Senior Departmental Representative, assailed the impugned orders-in-original passed by the Commissioner by reiterating the grounds of appeal in the Revenue's appeal and emphasised that scrutiny of the bills of entry and invoices reveals that the goods imported and cleared as gold mountings were in fact semi-finished gold jewellery in the shape of pendants, necklace, rings, ear rings and bracelets and the same were complete in all respect except for setting of gems and such goods would be classifiable under sub-heading 7113 19 10 as unstudded/semi-finished gold jewellery, that findings are nothing, but part of the jewellery which are also classifiable under Heading 7113, and that the gold mountings and findings being semi-finished jewellery and part of the jewellery respectively, are out of the purview of Notification No. 62/2004-Cus., as the Explanation to this notification specifically excludes the gold or silver jewellery from the purview of this notification. He also pleaded that the Circular No. 40/2004-Cus., dated 4-6-2004 is only in the nature of clarification to the Notification No. 62/2004-Cus., dated 12-5-2004 and the same cannot extend the scope of the notification. He, therefore, pleaded that the impugned orders-in- original passed by the Commissioners are not correct.

2.2 Shri Jitender Singh, Advocate, Shri R.S. Sharma, Advocate and Shri B.L. Sharma, Consultant, representing the respondents, in their oral submissions as well as written submissions submitted later, pleaded that the gold mountings and findings are not jewellery, that the same are nothing but structures of unfinished articles, that the Board in its Circular No. 40/2004-Cus., dated 4-6-2004 had clarified that findings and mountings of gold would be covered by the exemption Notification No. 62/2004-Cus., dated 12-5-2004 so long as they are classified under 71 of the Customs Tariff, that the same clarification has been given by the Board in its Circular No. 13/2006-Cus., dated 29-3-2006, wherein it has been clarified by the Board that the findings and mountings of gold and silver are covered within the scope of SL. No. 2 and 3 respectively of the Notification No. 62/2004-Cus., dated 12-5-2004 and the concessional rate of import duty may be extended to these items, that these instructions of the Board are binding on the department, that the duty invdived in each of these cases is less than Rs. 5,00,000/- while as per the instruction No. 390/Misc./163/2010-JC dated 17-8-11 issued by the Board regarding litigation policy, no appeal to the Tribunal is to be filed in the cases where the duty involved'is less than Rs. 5,00,000/-, that in this regard they rely upon the judgment of Hon'ble Delhi High Court in the case of Commissioner of Income Tax, Delhi-Ill v. M/s. P.S. Jain and Co. reported in 1TR 179/1991, wherein the Hon'ble High Court taking note of the fact that the amount involved being Rs. 52,565/-, did not proceed with the reference in view of the Circular of Central Board of Direct Taxes and that in view of this, there is no merit in the review appeals filed by the Revenue.


3. We have carefully considered the submissions from both the sides and perused the records.


4. Coming first to the preliminary objection regarding the appeals by the Revenue being not maintainable in view of the present guidelines of the Board in its Circular dated 17-8-11 regarding filing of appeal to the Tribunal, we find that all these appeals had been filed in the year 2007 when there were no monetary limits regarding filing of appeal before the Tribunal. It is only vide Circular dated 20-10-10, issued by the Board in accordance with the national litigation policy formulated by the Government of India with aim to reduce the Government litigation that monetary limits were prescribed for filing appeals to the Tribunal, High Courts and Supreme Court and as per this Circular monetary limit prescribed for filing appeal to the Tribunal against the orders passed by the Commissioner or Commissioner (Appeals) was only Rs. 1,00,000/-. Subsequently, by the Board's Circular dated 17-8-11, the monetary limit in respect of appeal to the Tribunal was increased to Rs. 5,00,000/-. In our view, the Board's Circulars dated 20-10-10 and 17-8-11 are only administrative guidelines which cannot be applied retrospectively and on the basis of these guidelines, the appeals filed prior to 20th October 20th 2010, where the amount involved was less than Rs. 5,00,000/- cannot be dismissed. Moreover, we find that in this group of appeal, an issue relating to interpretation of an exemption Notification No. 62/2004-Cus. is involved which has recurring effect. We, therefore, do not accept the respondent's plea that these appeals are not maintainable, in view of the Board's Circular dated 17-8-11. The judgment of Hon'ble Delhi High Court in the case of Commissioner of Income Tax Delhi-Ill v. M/s. P.S. Jam and Co. (supra) cited by them is not applicable to this group of cases.


5. Coming to the merits of the case, the goods, in question, are mountings and findings of the 18 Karat gold. The point of dispute is as to whether the duty exemption under Notification No. 62/2004-Cus. is available to these items.


6. Notification No. 62/2004-Cus., dated 12-5-04 is reproduced below :-

"Gold and Silver imported other than through post, courier or baggage - Effective rate of duty - Notification No. 80/97-Cus. Superseded

In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 80/1997-Customs, dated the 21st October, 1997, published in the Gazette of India, Extraordinary vide, G.S.R. No. 610(E), dated the 21st October, 1997, hereby exempts goods of the description specified in column (2) of the Table hereto annexed and falling within Chapter 71 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), when imported into India, other than through post, courier or baggage, from so much of the duty of customs leviable thereon which is specified in the said First Schedule as is in excess of the amount calculated at the rate specified in the corre-sponding entry in column (3) of the said Table and from the whole of the additional duty of customs leviable thereon under Section 3 of the said Customs Tariff Act.

TABLE

Explanation. - For the purposes of this notification, the expression 'Gold in any form' or 'Silver in any form' shall include medallions and coins, but shall not include jewellery made of gold or silver, as the case may be, and foreign currency coins."


7. From perusal of this notification, it is clear that jewellery made of gold or silver is excluded from the purview of this notification. Thus, the point of dispute is as to whether the mountings and findings of gold are gold jewellery or other than the gold jewellery covered by SL. No. 2 of the table annexed to the notification. There is no dispute that so far as findings are concerned, the same are parts of gold and silver jewellery and the same would be covered by sub-heading 71131190 and being part of the jewellery, the same would be out of the purview of Notification No. 62/2004-Cus.


8. As regards, the gold mountings, the contention of the Revenue is that the mountings are in the nature of semi-finished jewellery in which only the gems/stones are to be set and hence, the same have to be treated as jewellery and, therefore, the same are out of the scope of Notification No. 62/2004-Cus. In this regard, we find that in the written submissions made on behalf of the M/s. Gem Palace and M/s. Om Shree Exports, the following submissions have been made - "for manufacture of gold mountings, the gold of 18 Karat is melted and poured in machine made moulds to obtain the desired shape of "mountings" of article like neck-laces, pendants, bangles, ear rings etc. In the said mountings, holes are therefor studding of the precious/semi-precious stones. The output obtained by this process is called gold mounting. The respondents, however, imported machine made mountings. After import, the said mounting undergo the process of scratching so that the desired design and shape of the ornaments is obtained. Thereafter corners are scratched for fixing the stones. After making a proper space for fitting the stone the precious/semi-precious stones and naginas are fixed/studied".

8.1 In our view, the above submissions of the respondent confirms the Revenue's plea that the mountings are nothing, but semi-finished jewellery as the mounting described above have acquired the shape and character of jewellery. Some mountings may be such that fully finished jewellery can be made by just setting the gem stones, while in some mountings some scratching etc. may be required. But the fact which emerges is that the mountings have character and shape of the jewellery in which the stones either as such or after some scratching are to be fixed so as to obtain fully finished jewellery. In terms of Rule 2(a) of the General Rules of Interpretation of Schedule to the Customs Tariff Act any reference in a heading to an article shall be taken to include a reference to that article in complete or finished form, provided that as presented the incomplete or unfinished article has the essential character of the complete or finished article. Applying this rule of interpretation of tariff, the gold mountings, which are nothing but unfinished jewellery, in which either as such or after some scratching, the gems can be set to obtain the fully finished jewellery, have to be classified as gold jewellery under sub-heading 7113 19 10 of the Tariff.

8.2 ' In course of hearing, we have specifically asked as to under which heading the imported 18 Karat gold mountings had been classified for the purpose of assessment of duty and we were informed by the respondents that the same had been classified as articles of jewellery under Heading 7113. When for the purpose of classification the goods are classified as gold jewellery, for the purpose of availing exemption under Notification No. 62/2004-Cus., the same cannot be treated as something other than gold jewellery.


9. We, therefore, hold that the gold mountings, in question, have to be treated as jewellery and, hence, the same would not be eligible for Notification No. 62/2004-Cus. and the Commissioner's order extending the benefit of this notification by treating the gold mountings as jewellery is not sustainable.


10. The Commissioner in the impugned order and also the respondent have emphasized on the Board's Circulars No. 40/2004-Cus., dated 4-6-04 and Circular No. 13/06-Cus., dated 29-3-06 in which it has been clarified by the Board that the findings and mountings of gold and silver are covered by the SL. No. 2 and 3 respectively of the table annexed to the Notification No. 62/2004-Cus. and, hence, these items are eligible for the concessional rate of duty.


11. Under Section 151(a) of Customs Act, 1962, the Board may, if it con-siders necessary or expedient so to do for the purpose of uniformity in classification of goods or with respect to levy the duty thereon, issue such orders, instructions and directions to officers of Customs as it may deem and such officers of Customs and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and direction of the Board. In our view, while the Board under Section 151(a) of the Customs Act, can issue clarifications with regard to classification of a product or scope of an exemption notification, by such clarifications, the Board cannot expand the scope of an exemption notification issued by the Central Government under Section 25(1) of the Customs Act, 1962 as the Board is after all an office, subordinate to the Government of India. Constitutional Bench of the Hon'ble Supreme Court in the case of C.C.E., Bolpur v. Rntan Melting & Wire Industries reported in 2008(10)LCX0001 Eq 2008 (231) ELT 0022 (S.C.) = 2008(10)LCX0001 Eq 2008 (012) STR 0416 (S.C.) has held that Circulars of the Board are binding only when the same are in accordance with the law. In this regard in para 6 of the above-mentioned judgment, the Apex Court has observed as under :-

"Circulars and Instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares a law on the questions arisen for instruction, it would not be appropriate for the Court to direct that the Circulars should be given effect to not the view expressed in a decision of the Court or the High Court. So far as the clarifications and instructions issued by the Central Government and the State Government are concerned, they represent merely their understanding of the statutory provisions. They are not binding upon the Courts. It is for the Court to declare what the particular provisions of the statute says and it is not for the executive. Looked on from another angle a Circular which is contrary to the statutory provisions has no existence in law."


12. In this group of appeals, as discussed above, the gold mountings and findings being items as jewellery are outside the purview of Notification No. 62/2004-C.E. and, hence, the Board's Circulars No. 40/2004-Cus., dated 4-6-04 and 13/2006-Cus., dated 29-3-06 clarifying that the gold and silver mountings and findings are covered by the Notification No. 62/2004-Cus. are contrary to the provisions of law and, hence, have no validity.


13. In view of the above discussion, the impugned orders-in-original passed by the Commissioner are set aside and the duty demands raised against the respondents are confirmed along with interest under Section 28AB of Customs Act, 1962. The Revenue's appeals are allowed.

(Order pronounced in the open Court on 3-11-2011)

Equivalent 2012 (279) ELT 0441 (Tri. - Del.)