2014 (300) E.L.T. 309 (Tri.

- Mumbai)
IN THE CESTAT, WEST ZONAL BENCH, MUMBAI
[COURT NO. I]
S/Shri P.R. Chandrasekharan, Member (T) and Anil Choudhary, Member (J)

FRESENIUS KABI INDIA P. LTD.

Versus

COMMR. OF CUS. (IMPORTS), NHAVA SHEVA

Final Order Nos. A/262-297/2013-WZB/C-I(CSTB), dated 8-2-2013 in Appeal Nos. C/333-368/2012

Duty liability - Rate of CVD leviable on import of intravenous fluid - Benefit of

Notification No. 1/2011-C.E. - Denial of - Non-compliance of condition of
Notification No. 1/2011-C.E. - Importer opting for more beneficial concessional
rate of CVD of 1% ad valorem, prescribed under Notification No. 1/2011-C.E.
subject to condition that no Cenvat credit taken on duty paid, whereas Department
claiming imports chargeable to CVD @ 5% ad valorem prescribed unconditionally
under Notification No. 2/2011-C.E. - HELD : Imported goods not eligible for benefit
of Notification No. 1/2011-C.E. as question of taking Cenvat credit under Cenvat
Credit Rules, 2004 does not arise in case of goods imported from abroad where
such Rules not applicable and as such, condition of availing benefit of Notification
No. 1/2011-C.E. cannot be satisfied - Settled principles of statutory interpretation
do not permit disregard of said condition - Clarification given in Explanation to
Section 3(1) of Customs Tariff Act, 1975 to be strictly followed stipulating that
when goods manufactured in India leviable to different rates of Excise duty, CVD
on like goods imported to be at highest rate of duty - C.B.E. & C. Instruction No. B1/3/2011-TRU, dated 25-3-2011 also clarifying CVD of 5% applicable to imported
goods - Thus applying contemporaneous exposition and administrative
construction, benefit of Notification No. 1/2011-C.E. not admissible and impugned
goods attract CVD @ 5% under Notification No. 2/2011-C.E. [paras 6.1, 6.2, 6.3,
6.4, 6.5, 6.6, 6.7, 6.8, 6.9]

Appeals dismissed
CASES CITED

Baleshwar Bagarti v. Bhagirathi Dass (1908) ILR 35 Cal 701/703 Relied on.....................................................................................................................
Balwant Singh v. Jagdish Singh 2010 (262) E.L.T. 50 (S.C.) Relied on.............................................................................................................................
Collector v. Andhra Sugar Ltd. 1988 (38) E.L.T. 564 (S.C.) Relied on................................................................................................................................
Commissioner v. Ashima Dyecot Ltd. 2011 (267) E.L.T. 122 (Tribunal) Referred..............................................................................................................
Commissioner v. Malwa Industries Ltd. 2009 (235) E.L.T. 214 (S.C.) Not Applicable......................................................................................................
Hyderabad Industries Ltd. v. Union of India 1999 (108) E.L.T. 321 (S.C.) Referred..........................................................................................................
K.P. Varghese v. Income-Tax Officer (1981) 131 ITR 597 (SC) Relied on.........................................................................................................................
Mapsa Tapes Pvt. Ltd. v. Commissioner 2009 (247) E.L.T. 188 (Tribunal) Referred.........................................................................................................
Priyesh Chemicals and Metals v. Collector 2000 (120) E.L.T. 259 (Tribunal-LB) Relied on..............................................................................................
Thermax Private Ltd. v. Collector 1992 (61) E.L.T. 352 (S.C.) Not Applicable.................................................................................................................
DEPARTMENTAL CLARIFICATION CITED

C.B.E. & C. Instruction No. B-1/3/2011-TRU, dated 25-3-2011...................................................................................................................................................

REPRESENTED BY :

S/Shri Prakash Shah and Vinay Ansurkar, Advocates, for the Appellant.

Shri Rakesh Goyal, Additional Commissioner (AR), for the Respondent.

[Order per : P.R. Chandrasekharan, Member (T)]. - There are 36 appeals directed against Order-in-Appeal
Nos. 22 to 57 (Gr.II B)/2012 (JNCH) IMP 17-52, dated 30-1-2012 passed by the Commissioner of Customs (Appeals),
Mumbai-II, JNCH, Nhava Sheva.
2.As all these appeals deal with a common issue, they are being taken up together for consideration and

disposal.
3.The

appellant, M/s. Fresenius Kabi India Pvt. Ltd., Pune, imported

Intravenous fluid falling under Chapter 30 of the Customs Tariff. They
claimed concessional rate of CVD of 1% adv. under Notification No. 1/11C.E., dated 1-3-2011, which prescribes the said rate, inter alia, in respect of
the said goods subject to certain conditions. The department was of the
view that the goods under import are chargeable to CVD @ 5% adv. in
terms of Notification No. 2/11-C.E., dated 1-3-2011 wherein the said rate
has been prescribed on the said goods unconditionally. Accordingly, the
goods were assessed to CVD @ 5% adv. against which the appellant
preferred an appeal before the lower appellate authority. The lower
appellate authority vide the impugned order rejected the appeals and
hence, the appellants are before us.
4.The learned Counsel for the appellants submits that there are two
rates prescribed for the impugned goods, namely, intravenous fluid - one @
1% ad valorem in terms of Notification No. 1/11 and, the other @ 5% ad
valorem in terms of Notification No. 2/11. They have chosen the 1% ad
valorem rate which is more beneficial to them. The argument of the
department that the rate of 1% ad valorem would not apply to them is
incorrect for the reason that the condition prescribed for availing the said
rate is that the manufacturer should not have availed CENVAT credit of the
duty paid inputs or Service Tax paid on the input services under the
provisions of Cenvat Credit Rules, 2004. The appellant herein is not
availing any CENVAT credit because he is importing the anal product. The
manufacturer abroad obviously cannot be subjected to this condition as the
provision of CENVAT Credit Rules applies to manufacturers in India. There
is no dispute that the goods imported by the appellant satisfies the
description given in the notification and also falls under Chapter 30.
Therefore, the benefit of 1% ad valorem in respect of CVD cannot be
denied to them. He relies on the decision of the Honble Apex Court in the
case of Thermax Pvt. Ltd. v. Collector of Customs - 1992 (61) E.L.T. 352
(S.C.), wherein a question arose with regard to eligibility of CVD under
Notification No. 63/85-C.E., dated 17-3-1985. Under the said Notification
vide Sr. No. 4 specified parts of refrigerating and other air-conditioning
appliances were given a concessional rate of duty @ 80% ad valorem.
Under the same notification under Sr. No. 8 specified part of refrigerating
and air-conditioning appliances required for use in specified institutions
were given a concessional rate of duty of 25% ad valorem subject to the
end-use conditions. The importer in that case claimed benefit under Sr. No.
8 of the Notification which was denied and the department allowed the

benefit under Sr. No. 4. It was contested by the revenue before the Honble
Apex Court that when two rates of duty are specified for the purpose of levy
of CVD, as per the Explanation to Section 3(1) of the Customs Tariff Act,
the highest rate should be taken. This contention was negatived by the
Honble Supreme Court holding that once the goods satisfied the
description given in respect of a particular product, the said rate should be
applied for the purposes of levy of CVD and not the highest rate.
4.1The ld. Counsel also relies on the decision of the Honble Apex
Court in the case of Malwa Industries Ltd. reported in 2009 (235) E.L.T. 214
(S.C.) wherein a question arose as to whether the Nil rate of duty in
respect of certain goods falling under Tariff Headings 3204 or 3809 would
apply to imported goods when the Excise Notification prescribed the said
rate subject to the condition that the product should be used within the
factory for manufacture of textile and textile articles. The CVD claim of the
appellant was rejected on the ground that in respect of imported goods, the
question of using the products in the same factory would not arise and,
therefore, the Notification should be interpreted in a harmonious way, so as
to construe that the imported goods should be used in the same factory for
manufacture of textile and textile articles.
4.2The ld. Advocate also relies on the decision of this Tribunal in the
case of Mapsa Tapes Pvt. Ltd. reported in 2009 (247) E.L.T. 188 (Tri.-Del.)
wherein a dispute arose as to whether the Excise duty rate prescribed for
goods falling under Chapter Heading Nos. 5004 and 5005 subject to the
condition that no credit of duty on inputs and capital goods have been
taken under the provisions of Cenvat Credit Rules, 2002, could be applied
for the levy of CVD in respect of imports of the said goods. It was held by
this Tribunal that words provided that nothing contained in this notification
shall apply to the goods in respect of which credit of duty on inputs or
capital goods has been taken under the provisions of Cenvat Credit Rules,
2002 are in form of exclusion to the exemption notification and not
occurring as a condition for availing the notification and, hence the said rate
could be applied for the purposes of levy of CVD.
4.3The learned Counsel also relies on the decision of this Tribunal
in the case of Ashima Dyecot Ltd. reported in 2011 (267) E.L.T. 122 (Tri.Mum.) wherein also a similar issue arose and the Tribunal upheld the claim
of the appellant therein for levy of CVD under Notification No. 30/2004-C.E.
in the light of decision of this Tribunal in the case of Mapsa Tapes Pvt. Ltd.
(supra). On the basis of above decisions, the learned Advocate contends
that so long as the imported goods satisfy the description given in the

Exemption Notification, the benefit of CVD exemption cannot be denied

and accordingly, he pleads for setting aside the impugned order and
allowing the appeals.
5.The learned Addl. Commissioner (AR) appearing for the Revenue,
on the other hand, strongly refutes the arguments of the learned Counsel
for the appellant. He submits that the purpose and object of levy of
additional duty (CVD) on imported articles is to counter-balance the excise
duty leviable on the like articles made indigenously or the indigenous raw
material used in the manufacture of like indigenous articles. In other words,
Section 3 of the Customs Tariff Act has been enacted to provide the levy of
CVD on imported goods on par with the excise duty leviable on like goods
manufactured in India, as has been held by the Constitution Bench of the
Honble Apex Court in the case of Hyderabad Industries Ltd. v. UOI [1999
(108) E.L.T. 321 (S.C.)].
5.1In the present case, there are two rates prescribed for the
purpose of levy of excise duty. One rate is 1% ad valorem which is subject
to the condition that no CENVAT credit is taken on the duty paid on inputs
or taxes paid on input services vide Notification No. 1/2011-C.E. Another
rate is 5% ad valorem prescribed under Notification No. 2/2011-C.E.
without any condition. In other words, the manufacturer who avails
CENVAT credit is liable to pay tax @ 5% adv. As per Explanation to Section
6(1) of the Customs Tariff Act, when the like goods produced in India are
subjected to different rate of duty. For the purposes of levy of CVD, the
highest rate should be taken.
5.2The learned AR further relies on the decision of the Larger Bench
of this Tribunal in the case of Priyesh Chemicals & Metals v. Commissioner
of Central Excise, Bangalore - 2000 (120) E.L.T. 259 (Tri.-LB), where an
identical issue arose for consideration. In the facts of that case, vide
Notification No. 19/88-C.E. exemption was provided on Zinc Ash subject to
the condition that no credit of duty paid on the inputs used in the
manufacture of goods have been taken under Rule 56A or Rule 57A of the
Central Excise Rules, 1944. The importer appellant, who imported Zinc Ash
from abroad claimed the benefit of the said notification for the purposes of
levy of CVD. The Larger Bench held that Central Excise Act and the Rules
do not apply to manufacturers situated abroad and therefore, the
appellants claim that the imported goods fulfilled the requirement of the
notification has no substance or basis and accordingly, benefit of
Notification No. 19/88-C.E. was denied in respect of imported Zinc Ash.
5.3The learned AR also relies on the clarification issued by the

C.B.E. & C. vide Instruction No. B-1/3/2011-TRU, dated 25-3-2011. In the

said instruction, the C.B.E. & C. has clarified that the benefit of 1% ad
valorem would not be available for the purpose of levy of CVD, since it is
subjected to the condition of non-availment of credit and, therefore, in
respect of imported goods, CVD has to be levied @ 5% ad valorem in
respect of Intravenous fluids. In the light of these submissions, he prays for
upholding the impugned order and rejection of the appeals.
6.We have carefully considered the rival submissions.
6.1It will be useful at this juncture to look at the wordings of
Notification Nos. 1/2011-C.E. & 2/2011-C.E. both dated 1-3-2011. The
relevant extracts of the notifications are given below :Notification No. 1/2011
G.S.R. (E).- In exercise of the powers conferred by subsection (1) of section 5A of the Central Excise Act, 1944 (1 of
1944), the Central Government, on being satisfied that it is
necessary in the public interest so to do, hereby exempts the
excisable goods of the description specified in column (3) of the
Table below and falling under Chapter, heading, sub-heading or
tariff item of the First Schedule to the Central Excise Tariff Act,
1985 (5 of 1986), specified in the corresponding entry in column
(2) of the said Table, from so much of the duty of excise leviable
thereon under the said Central Excise Act, as is in excess of the
amount calculated at the rate of 1% ad valorem :
Provided that nothing contained in this notification shall apply
to the goods in respect of which credit of duty on inputs or tax on
input services has been taken under the provisions of the CENVAT
Credit Rules, 2004.
TABLE
S.
Chapter or heading
Description of
No.
or sub-heading or
the excisable
tariff item of the First
goods
Schedule
(1)
(2)
(3)
38.
30
Intravenous
fluids, which are
used for sugar,
electrolyte
or
fluid
replenishment
Notification No. 2/2011
G.S.R. (E).- In exercise of the powers conferred by subsection (1) of section 5A of the Central Excise Act, 1944 (1 of

1944), the Central Government, on being satisfied that it is

necessary in the public interest so to do, hereby exempts the
excisable goods of the description specified in column (3) of the
Table below and falling under Chapter, heading, sub-heading or
tariff item of the First Schedule to the Central Excise Tariff Act,
1985 ( 5 of 1986), specified in the corresponding entry in column
(2) of the said Table, from so much of the duty of excise leviable
thereon under the said Central Excise Act, as is in excess of the
amount calculated at the rate of 5% ad valorem :
TABLE
S. Chapter or heading or Description of
No sub-heading or tariff
the excisable
.
item of the First
goods
Schedule
(1) (2)
(3)
20 30
Intravenous fluids,
which are used for
sugar, electrolyte
or
fluid
replenishment
From the above, it can be seen that the benefit of 1% ad valorem is
available subject to the condition of non-availment of CENVAT credit of the
duty paid on inputs or the tax paid on input services under Cenvat Credit
Rules, 2004. Unless this condition is satisfied, the benefit of 1% of duty
cannot be granted. The question of taking CENVAT credit under the
CENVAT Credit Rule, 2004 does not arise in the case of imported goods
and, therefore, this condition cannot be satisfied in respect of imported
goods. Hence, the imported goods will not be eligible for the benefit of duty
exemption under this Notification.
6.2An identical issue was considered by the Larger Bench (5
Member Bench) of this Tribunal in the case of Priyesh Chemicals & Metals
(supra) in the context of Notification No. 19/88. The said notification
provided Excise duty exemption on Zinc Ash subject to the condition that
no credit of duty paid on the inputs used in the manufacture of said goods
shall be taken under Rule 56A or Rule 57A of the Central Excise Rules,
1944. The question considered by the Larger Bench was whether this
concession can be applied to imported Zinc Ash for the purpose of levy of
CVD and Honble Larger Bench held as follows :-

The exemption notification stipulates that no credit of duty

paid on the inputs used in the manufacture of said goods have
been taken under Rule 56A or Rule 57A of Central Excise Rules,
1944. In order to satisfy this condition it has to be shown that the
Zinc Ash in question had been manufactured from inputs on which
no credit of duty has been taken. The goods were manufactured
abroad. It is common knowledge that the Central Excise Act of
India and Central Excise Rules of Indict do not apply to
manufacture abroad. Therefore, the appellants claim that the
imported consignments fulfil the requirement of the Notification has
no substance or basis in facts. In other words, it is clear from the
exemption notification that it exempts only Zinc Ash which is
produced from duty paid inputs. In order to satisfy this condition, it
is necessary that a manufacturer seeking exemption should show
that the Zinc Ash was produced from duty paid inputs. Imported
goods are incapable of fulfilling this condition and therefore, could
not claim the exemption under notification 19/88.
This Larger Bench decision prevails over other decisions of this Tribunal
relied upon by the appellant and also takes into account the decision of the
Honble Apex Court in the case of Thermax Pvt. Ltd. (supra).
6.3Coming to the reliance placed by the appellant in the case of
Thermax Pvt. Ltd. (supra), in that particular case, the imported goods
satisfied the description given in the entry as well as the condition of use.
Therefore, the Apex Court held that the benefit of excise duty exemption for
the levy of CVD cannot be denied in a case where the imported goods
satisfied not only the description but also the condition of use. It was in that
context, the Apex Court held that explanation to Section 3(1) of the
Customs Tariff Act will not be relevant. Similarly in the case of Malwa
Industries Ltd. (supra) relied upon by the appellant, there also the imported
goods satisfied not only the description but also the condition of use i.e.
imported goods namely, finishing agents, dye carriers to accelerate the
dyeing or fixing of dye-stuffs, printing paste, and other products and
preparations of any kind falling under Heading No. 3204 or 3809 used in
the same factory for the manufacture of textiles and textile articles. The
issue before the Honble Apex Court which is the factory, referred to in the
notification, that is the factory of manufacture of dyestuffs or the factory of
manufacture of textiles and textile articles. The Honble Supreme Court
held that it is the factory of textiles and textile articles which is relevant and
so long as the imported goods are used in the factory of manufacture of

textiles and textile articles, the CVD exemption cannot be denied. In the
facts of the case before us they are distinct and distinguishable. Though
the imported goods satisfy the description given in Notification No. 1/2011,
they do not satisfy the condition for availing the exemption, that is, nonavailment of CENVAT credit of the duty paid on inputs or the tax paid on
input services. This condition can be satisfied only in respect of goods
manufactured in India. When this condition cannot be satisfied with respect
to imported goods, the question of extending this rate for imported goods
for the purpose of CVD does not arise at all and we hold accordingly.
6.4Can we ignore the condition and extend the benefit to imported
goods disregarding the condition. Settled principles of statutory
interpretation do not permit this. In Balwant Singh v. Jagdish Singh [2010
(262) E.L.T. 50 (S.C.)] while interpreting the provisions of Section 15 of the
Haryana Urban Rent (Control of Rent and Eviction) Act, 1973, the Apex
Court laid down the following principle :It must be kept in mind that whenever a law is enacted by the
legislature, it is intended to be enforced in its proper perspective. It
is an equally settled principle of law that the provisions of a statute,
including every word, have to be given full effect, keeping the
legislative intent in mind, in order to ensure that the projected
object is achieved. In other words, no provisions can be treated to
have been enacted purposelessly. Furthermore, it is also a well
settled canon of interpretative jurisprudence that the Court should
not give such an interpretation to provisions which would render
the provision ineffective or odious.
If we fellow this principle, we cannot disregard the condition stipulated in
Notification 1/2011-C.E. for the purposes of levy of CVD on imported
goods.
6.5It will also be relevant to peruse the provisions of Section 3 of the
Customs Tariff Act, 1975, which are reproduced as under :(1) Any article which is imported into India shall, in3.
addition, be liable to a duty (hereafter in this section referred to as
the additional duty) equal to the excise duty for the time being
leviable on a like article if produced or manufactured in India and if
such excise duty on a like article is leviable at any percentage of
its value, the additional duty to which the imported article shall be
so liable shall be calculated at that percentage of the value of the
imported article :
Provided that in case of any alcoholic liquor for human

consumption imported into India, the Central Government may, by

notification in the Official Gazette, specify the rate of additional
duty having regard to the Excise duty for the time being leviable on
a like alcoholic liquor produced or manufactured in different States
or, if a like alcoholic liquor is not produced or manufactured in any
State, then, having regard to the Excise duty which would be
leviable for the time being in different States on the class or
description of alcoholic liquor to which such imported alcoholic
liquor belongs.
Explanation. In this sub-section, the expression the excise
duty for the time being leviable on a like article if produced or
manufactured in India means the excise duty for the time being in
force which would be leviable on a like article if produced or
manufactured in India or, if a like article is not so produced or
manufactured, which would be leviable on the class or description
of articles to which the imported article belongs, and where such
duty is leviable at different rates, the highest duty.
The Explanation to the section makes it absolutely clear that when the
goods manufactured in India are leviable to different rates of excise duty,
CVD on like goods imported shall be at the highest rate of duty.
6.6In his book Principles of Statutory Interpretation, 12th Edition,
2010, Justice G.P. Singh explains the purpose of Explanation in page 212
as follows :An Explanation is at times appended to a section to explain
the meaning of words contained in that section. [S. Sundaram
Pillai v. Pattabhiraman, (1985) 1 SCC 591, pp. 611, 613 : AIR 1985
SC 582; Dipak Chandra Ruhidas v. Chandan Kumar Sarkar;
(2003) 7 SCC 66, p. 71 : AIR 2003 SC 370]. It becomes a part and
parcel of the enactment. [Bengal Immunity Co. Ltd. v. State of
Bihar, AIR 1955 SC 661, p 733]. The meaning to be given to an
Explanation must depend upon its terms, and no theory of its
purpose can be entertained unless it is to be inferred from the
language used. [Krishna Ayyangar v. Nattaperumal Pillai, ILR 43,
Mad 550, p. 564 (P.C.).]. But if the language of the
Explanation shows a purpose and a construction consistent with
that purpose can be reasonably placed upon it, that construction
will be preferred as against any other construction which does not
fit in with the description or the avowed purpose.
The Explanation to Section 3(1) of the Customs Tariff Act has a clear

purpose as stated therein. That purpose is to clarify what will be the rate for
levy of Addl. Duty (CVD) when more than one rate is prescribed for levy of
excise duty in respect of domestically manufactured goods and the
Explanation clarifies that it will be the highest rate. Thus the clarification
given in the Explanation cannot be overlooked and has to be strictly
followed. In the present case, the highest rate of duty leviable on
intravenous fluids domestically manufactured is 5% ad valorem under
Notification No. 2/2011, dated 1-3-2011. Therefore, identical or similar
goods imported will attract CVD @ 5% ad valorem.
6.7This issue relating to levy of CVD was also considered by the
C.B.E. & C. at the time of introduction of 1% levy on 130 items including
Intravenous fluids in the Budget 2011-12 and the C.B.E. & C. clarified as
follows vide Circular B-1/3/2011-TRU, dated 25-3-2011 :. Doubts have been raised about the applicable CVD rate
on the 130 items, on which Excise Duty @ 1% has been levied
vide Notification 1/2011-C.E., dated 1-3-2011, when imported. It is
further learnt that manual bills of entry have been permitted at
certain customs locations as 1% CVD rate was not available in the
system. This concessional rate of 1%, however, is available only if
the Cenvat credit on inputs and input services is not availed of;
otherwise all these items attract 5% Excise duty as prescribed vide
notification 2/2011-C.E., dated 1-3-2011 and Tenth Schedule to the
Finance Bill. At the time of updating of ICES, the Directorate of
Systems had been advised not to feed Notification 1/2011-C.E.,
dated 1-3-2011 in the system as 1% rate will not be applicable for
CVD purposes. There should have been no confusion on the
subject. Since the CVD is levied to provide a level playing field for
the domestic manufacturers, CVD is charged at a rate equal to
excise duty rate. However, in respect of these 130 items, there are
two excise duty rates. It needs to be appreciated that if CVD is
levied @ 1%, the protection for the domestic manufacturer would
be lest since in the country of origin, the overseas supplier enjoys
input tax neutralization on goods exported to India (akin to
availment of input tax credit), whereas on the other hand the
domestic manufacturer suffers all the input taxes and 1% excise
duty over and above that. Since 5% excise duty rate is payable
when the cenvat credit of duties and taxes paid on inputs and input
services is availed of, the tax treatment becomes equitable with
the goods being imported into India, the input taxes having been

neutralized in. the country of export. As such, the CVD of 5% will

be applicable in respect of all the goods covered under Notification
1/2011-C.E., dated 1-3-2011 and 1% rate will not apply.
6.8Though the above Circular is not binding on this Tribunal, due
consideration needs to be given as C.B.E. & C. is the authority concerned
with implementation and administration of union indirect taxes in India. In
the case of K.P. Verghese v. Income Tax Officer - [1981] 131 ITR 597 (SC)
the Supreme Court, based on the earlier judgment in the case of
Baleshwar Bagarti v. Bhagirati Dass - [1908] ILR 35 Cal 701/703
expounded
the
principle
of
administrative
construction,
i.e.,
contemporaneous construction placed by administrative or executive
officers charged with executing a statute, as follows :It is a well-settled principle of interpretation that courts in
construing a statue will give much weight to the interpretation put
upon, it, at the time of its enactment and since, by those whose
duty it has been to construe, execute and apply it.
6.9In the case of Collector of Central Excise, Guntur v. Andhra
Sugar Ltd. - 1988 (38) E.L.T. 564 (S.C.), the Honble Apex Court re-iterated
the same as follows :
It is a well settled that the meaning ascribed by the authority
issuing the Notification, is a good guide of a contemporaneous
exposition of the position of law. Reference may be made to the
observations of this Court in K.P. Varghese v. The Income Tax
Officer, Ernakulam, [1982] 1 SCR 629. It is a well settled principle
of interpretation that courts in construing a Statute will give much
weight to the interpretation put upon it at the time of its enactment
and since, by those whose duty has been to construe, execute and
apply the same enactment.
Thus even applying the principles of contemporaneous exposition and
administrative construction, the imported intravenous fluid will attract CVD
@ 5% adv. under Notification No. 2/2011-C.E. and not, repeat not, @ 1%
adv. under Notification No. 1/2011-C.E. and we hold accordingly.
7.In the light of the foregoing, we hold that CVD is leviable on
Intravenous fluid @ 5% ad valorem under Notification No. 2/2011-C.E.,
dated 1-3-2011 and not @ 1% ad valorem under Notification No. 1/2011C.E., dated 1-3-2011 as claimed by the appellant. Accordingly, we dismiss
these appeals as devoid of merits.
(Pronounced in Court on 8-2-2013)

_______

Classification and exemption issues in Customs Clarifications

Circular No. 1/2005-Cus., dated 11-1-2005
F.No. 528/78/2004-Cus(TU)
Government of India
Ministry of Finance (Department of Revenue)
Central Board of Excise & Customs, New Delhi
Subject :

Clarification on various Tariff Issues - Regarding.

I am directed to say that divergence of practice regarding various Tariff related issues has been
brought to the notice of the Board. A number of such matters were discussed at the Tariff
Conferences of Chief Commissioners of Customs held at Kolkata on 22nd and 23rd January,
2004 and Shillong from 13th to 15th May, 2004. On the basis of the recommendations of these
Tariff Conferences, draft circulars were prepared and put up on the Deptt.s web-site
(www.cbec.gov.in) and also circulated to various trade bodies for giving it wider publicity.
Various parties were asked to give their comments and feedback on the draft circulars within 3
weeks. Board has taken decisions on these issues after considering the feedback received.
(A)
Briefs of such issues and the decisions taken by the Board on the same are enclosed
herewith.
(B)

Field formations may finalise the pending assessments, if any, accordingly.

(C)

Suitable Public Notices may be issued for the benefit of the Trade.

(D)

Hindi version will follow.

Enclosure
(i)Subject : Classification of Pontoon upgraded as Accommodation Barge.
Issue in Brief : This matter was discussed in the Tariff Conference of Chief Commissioners of
Customs held at Kolkata on 22nd and 23rd January, 2004 [Agenda Point T-3]. Pontoon and
Barges, which are usually used for the transport of goods and sometimes of persons are generally
classified under Tariff Heading 8901. The Pontoon/Barge upgraded to an Accommodation
Barge is sought to be classified under Heading 8901, on the ground that there is a specific entry
89011040 for Barges. However, from the description, as well as usage of such vessels, it appears
that these goods are essentially for the purpose of accommodating work personnel who are
working on the production drilling platforms on the sea. The primary function of the vessel does
not appear to be transportation of goods and persons but providing accommodation to the drilling
platform crew. Accordingly, the appropriate and correct classification appears to be 8905. There
is a difference in the rate of duty under the two referred tariff headings, hence the dispute. The
Conference noted that the intended use of the item in question was as Accommodation Barge
for 150 personnel and to provide support function for project material storing & transfer. Its
secondary utility by virtue of its design and onboard machineries (such as mooring winches,
crane, free deck space, generator, compressor logistic support etc.) was for performing several
diverse functions as required.
Decision : The goods described as Accommodation Barge are generally moored at one place.
Therefore, taking note of the HSN Notes to heading 8905, the item would be more appropriately
classifiable under heading 8905 since navigability was subsidiary to its main function. This
HSN notes also states .. Pontoons clearly designed to serve as a base for machines.
fall under heading 8905. In fact, house boats are specifically covered under this heading. It was
also noted that describing the product as barge should not affect the classification of the product
and what was important was its actual use. Accordingly, it has been decided that pontoons
upgraded to accommodation barge are appropriately classifiable under heading 8905.
(ii) Subject : Classification of parts of Cellular phones.
Issue in Brief : This matter was discussed in the Tariff Conference of Chief Commissioners of
Customs held at Kolkata on 22nd and 23rd January, 2004 [Agenda Point T-4]. The importers or
manufacturers who import parts of cellular phones claim exemption under Sl. No. 320 of
Notification 21/2002-Cus., dated 1-3-2002, which is applicable to parts of handsets and attract
NIL rate of duty (0% BCD + 0% CVD), subject to fulfilment of condition No. 5 of this
notification. Under this condition, the jurisdictional Assistant Commissioner/ Deputy
Commissioner of Central Excise issues the necessary certificate to the effect that the importer

has executed the required undertaking bond with them and that he will be following the required
procedure for manufacture of Excisable goods as provided for in Customs (Import of Goods at
Concessional Rate of Duty for Manufacture of Excisable Goods), Rules, 1996. A doubt has been
expressed in many Commissionerates that when all the parts required for manufacture of the
Cellular phone handset are imported by the manufacturer (either in the same consignment or
spread out over different consignments), whether such imports of parts can be denied the benefit
of serial No. 320 of the notification ibid., by treating them as complete handsets (in disassembled
form) by virtue of Rule 2(a) of the General Interpretative Rules. If by doing this, they get treated
as complete handsets under CTH 852520.17 in disassembled form, there is a possibility of denial
of exemption under Sl. No. 320, which applies only to parts, components and accessories of
cellular phones. If this exemption is denied, they would be otherwise charged to duty as
applicable to handsets (5% BCD + 0% CVD) under Sl. No. 313 of Customs Notification 21/2002
dated 1-3-2002, read with the relevant C. Excise notification. The Conference deliberated over
the following judgments relating to the application of Rule 2(a) of the General Interpretative
Rules, specially CCE, Mumbai v. Maruti Udyog Ltd. [1996 (16) RLT 646 (Trib.)], Wipro GE
Medical Systems v. CCE & Customs, Bangalore [1999 (106) E.L.T. 169 (Trib.)], CCE, Mumbai
v. Crescent Metal Processing Works [1999 (111) E.L.T. 841 (Trib.)], Polar Appliances v.
Commissioner of Customs, New Delhi [2001 (127) E.L.T. 448 (Trib. - Del.)], CCE, Bangalore v.
BPL Sanyo, [1998 (102) E.L.T. 249 (Mad.)], Shivaji Works v. CCE, Aurangabad [1994 (69)
E.L.T. 674 (Trib.)].
Decision : The Board took into account the fact that though the interpretative rules cannot
always be invoked for interpreting notifications but still, this will depend upon the nature of the
notification. In the instant case, it is observed that the relevant serial nos. of the notification,
namely, 313, 319 & 320 granted exemption to certain items on the basis of sub-heading nos.
This, therefore, required that the classification of each imported item had to be first determined
and thereafter exemption decided as per the relevant Sl. no. of the notification. To decide the
classification of an item in disassembled form, rule 2(a) of the Interpretative Rules had to be
invoked. Thus, if by invoking Rule 2(a), the items under import get classified under heading
8525 as cellphones, exemption will be available as per Sl. No. 313 of the notification only and
not as per Sl. No. 319 or 320. It has, therefore, been decided that keeping the language of
Notification No. 21/2002-Cus., dated 1-3-2002 in mind, the imported goods would first have to
be classified by invoking Rule 2(a) of the Interpretative Rules and then exemption given either
under Sl. No. 313, 319 or 320. In case, all the parts/components of the mobile phone handset are
imported in a single consignment, it would be classified as complete mobile handset under
CTH 852520.17 and hence it would be ineligible for benefit under Sl. No. 319 or 320 of
Notification No. 21/2002-Cus., dated 1-3-2002.
(iii) Subject :Eligibility of general purpose Labelling Machine under Notification No.
21/2002-Cus., dated 1-3-2002 for use in Textile Industry.

Issue in Brief : This matter was discussed in the Tariff Conference of Chief Commissioners of
Customs held at Kolkata on 22nd and 23rd January, 2004 [Agenda Point N-8]. Concessional rate
of duty of 5% is extended to specified machinery/equipment which are meant for use in textile
industry vide S. No. 250 of Notification No. 21/2002-Cus., dated 1-3-2002. List 30 of the said
Notification specifies labeling machine at Sl. No. 84 therein. The intention of the Notification is
to allow concessional duty for labeling machines which are for use in textile industry. The field
formations have noticed import of Labeling machines of general purpose which can be used not
only in textile industry but also in other industries. Labeling machines, imported by trading firms
are normally used for general purposes and not in textile industry alone. But importers of such
machines are claiming concessional rate of duty under the said notification by declaring them as
machinery/equipment for use in textile industry. Rejection of the claim of the importers may not
be found sustainable as the imported labeling machines can be used also in textile industries.
Labeling machines being an omni-bus term, the Notification gives room for unscrupulous
importers to avail of unintended benefit.
Decision : The Board deliberated upon the language of the notification. The expression used in
the notification is ..goods for use in the textile industry. The notification, therefore,
does not appear to restrict the concession to only those machinery or equipment which was
specifically designed for use in the textile industry. The notification allows the import of
general purpose machinery also as listed in List 30 so long as they are capable of use in textile
industry. It has accordingly been decided that general purpose labelling machine was eligible
for exemption under S.No. 250 of Notification No. 21/2002-Cus., dated 1-3-2002, if it could also
be used in the textile industry.
(iv) Subject : Eligibility of exemption under Notification No. 94/96-Cus. for Fuel
Injection Pump and Injectors exported and re-imported after fitment on
Engines.
Issue in Brief : This matter was discussed in the Tariff Conference of Chief Commissioners of
Customs held at Kolkata on 22nd and 23rd January, 2004 [Agenda Point N-10]. Notification No.
94/96-Cus., dated 16-12-96 exempts re-imported goods from Customs duty subject to specified
conditions. In the case under reference, a company exported Unique Fuel Injection pumps and
Injectors to their engine manufacture facility abroad. These pumps and injectors were fitted on
engines, tested and the engine assembly fitted with these items were imported back into India.
The importer filed a Bill of Entry declaring engine separately & fuel pump and injectors fitted on
the engine separately, claiming benefit of Notification No. 94/96-Cus. for fuel pump and
injectors. Fuel pump and injectors could be identified as those which were originally exported
with reference to export documents and on that basis, the benefit of Notification 94/96-Cus. was
extended by the Customs formation. CRA raised an objection observing that in terms of the
second proviso to Notification No. 94/96-Cus., exemption under the above notification may be
allowed only if the goods exported and imported are the same. In the instant case, the items

exported were multi cylinder fuel injection pump classified under heading 8413 of the Customs
Tariff and the items imported are engine assembly fitted with fuel injection pumps and injectors
classifiable under heading 87089900 of the Customs Tariff. Thus, there has been functional
difference in the goods imported and exported besides changes in classification of the goods
imported and exported. Thus the condition regarding similarity of imported/exported goods did
not appear to be satisfied.
Decision : The Board deliberated upon the wording of Notification No. 94/96-Cus. The
notification requires that the exported item and the re-imported item should be the same and it
should be possible to establish their identity. This notification is meant to cover cases of repair or
reprocessing with the exported article retaining its identity. In the instant case what has been
exported are fuel injection pumps and injectors and the items imported are engines (though fitted
with the injection pumps and injectors). If the Govt. feels that such types of cases should be
covered by the said notification, it should be suitably amended to do so. It has accordingly been
decided by the Board that fuel injection pumps and injectors exported and re-imported after
fitment onto engines are not covered by Notification No. 94/96-Cus., dated 16-12-96.
(v) Subject : Import of ACT test tubes - Benefit as accessories of the ACT machine
(Notification No. 21/2002-Cus., dated 1-3-2002, Sl. No. 363B).
Issue in Brief : This matter was discussed in the Tariff Conference of Chief Commissioners of
Customs held at Kolkata on 22nd and 23rd January, 2004 [Agenda Point N-13]. The issue relates
to assessment of ACT (Activated Clot Time) test tubes and whether ACT test tubes can be
considered as accessories of Activated Clot Time (ACT) machines and hence eligible for benefit
of Notification No. 21/2002-Cus., dated 1-3-2002, Sl. No. 363B (List 37 Sl. No. 59). Under
Notification No. 21/2002-Cus., dated 1-3-2002, Sl. No. 363A covers specified medical
equipments as given in List 37 annexed to the said Notification. These equipments attract
concessional rate of duty @ 5% only. Further, under entry 363B of the said Notification,
concessional rate of duty @ 5% basic is extended to accessories of the said equipments.
Activated Clot Time Machine (ACT machine) appears in List 37 at Sl. No. 59 and therefore,
attracts duty @ 5% only. The item in dispute is ACT test tube, which is claimed as accessory of
ACT machine, for coverage under 363B of the said Notification. Perusal of the product literature
of ACT Test Tube (Model FTCA 510) shows that this test tube is coated inside with an activator
and contains diatomaceous earth (12 mg). Fresh whole blood, 2 ml, is added to it to conduct
Activated Clotting Time (ACT) Test, which is commonly used for Heparin anti-coagulation
monitoring during bypass surgery and other surgeries. The ACT tests are performed using whole
blood at the patients bed side with Hemochron ACT machine models 401 or 801. Heparin is an
anticoagulant which is essentially required during Open Heart Surgery to prevent thrombosis
(blocking of arteries). Over-dosing of heparin can lead to dangerous bleeding whereas underdosing leads to thrombosis. The ACT test is an important test to determine the above state. A

digital timer on the ACT machine determines the coagulation time in seconds, known as the
clotting time.
Decision : This issue was examined by the Board in consultation with the Directorate General of
Health Services (DGHS) and it has been clarified by the DGHS that
ACT test tubes are specific to ACT machines and cannot be used for any other purpose; hence
the ACT test tubes are to be considered as accessories to the main equipment, namely ACT
machine, listed at entry No. 59 under list 29 of the Notification 17/2001 dated 1-3-2001.
The current entry under Sl. No. 363 of Notification No. 21/2002-Cus., dated 1-3-2002 is
identical to the earlier entry. Therefore, the clarification by the DGHS is relevant in the present
context also. Board has deliberated over the opinion received from the Directorate General of
Health Services (DGHS) that ACT test tubes are specific to ACT machines and can not be used
for any other purpose. The Board is of the view that since the ACT test tubes have single use
only and have to be disposed of thereafter, it can not be considered to be components/parts of the
ACT machine but would be in the nature of a consumable or accessory. It has therefore been
decided by the Board that ACT test tubes are eligible for exemption under Notification No.
21/2002-Cus., dated 1-3-2002 - Sl. 363 B (List 37, Sr. 59).
(vi) Subject : Admissibility of benefit of Notification No. 6/2002-C.E., dated 1-3-2002
(Sl. No. 63) on Dant Mukta used in the manufacture of Lal Dant
Manjan.
Issue in Brief : This matter was discussed at the Tariff Conference of Chief Commissioners of
Customs held at Shillong from 13th - 15th May, 2004 [Agenda Point N-1]. Central Excise
Notification No. 6/2002-C.E., dated 1-3-2002, Sl. No. 63, covers Tooth Powder falling under
CETH 33.06. Although the subject notification doesnt specify any sub-heading, the Central
Excise Tariff specifies heading 3306.10 for Tooth Powder and Tooth Paste. It, thus implies that
for coverage under the said Notification, the goods should be classifiable under CTH 3306.10.
Therefore, the issue under reference relates to classification of Dant Mukta under CETH
3306.10 as against 3306.90. This entry of the Notification 6/2002-C.E. is worded exactly similar
to the earlier exemption vide Notification No. 6/2000-C.E., dated 1-3-2000 (Sl. No. 51). Tariff
Unit, CBEC had earlier issued a clarification dated 4th March, 2003 regarding classification of
Dant Mukta. This clarification did not deal with the matter of admissibility of notification
benefit on Dant Mukta and it was limited to its classification as a dental hygienic agent of Ch.
33 as against medicament of Ch. 30. Classification of Dant Mukta under heading 3306.10 or
3306.90 would depend upon whether in the form as presented, Dant Mukta can be treated as
dental powder. If found so, it would be eligible for the notification benefit.

Decision : The Board took note of the fact that the CEGAT had decided in case of Dant Shakti
that it would be appropriately classifiable under CTH 33.06. Since Dant Shakti and Dant Mukta
are similar products, classification of Dant Mukta would also fall under CTH 33.06. However,
since the referred notification specifically requires that the goods should be tooth powder, Dant
Mukta being a raw material for the manufacture of Lal Dant Manjan, would not qualify for the
benefit. It has accordingly been decided by the Board that Dant Mukta is not eligible for benefit
under Notification No. 6/2002-C.E., dated 1-3-2002, Sl. No. 63.
(vii) Subject : Admissibility of Exemption under Notification No. 21/2002-Cus. (Sr.
No. 356) for items namely Inflatable Life Raft & Life Jackets supplied
along with Vessel.
Issue in Brief : This matter was discussed at the Tariff Conference of Chief Commissioners of
Customs held at Shillong from 13th - 15th May, 2004 [Agenda Point N-5]. As per Notification
No. 21/2002-Cus., dated 1-3-2002 (Sr. No. 356), which corresponds to the earlier Notification
No. 16/2000-Cus., Sl. No. 299, Raw materials and parts, for use in the manufacture of goods
falling under heading Nos. 89.01, 89.02, 89.04, 89.05 (except 8905.20) or 89.06, in accordance
with the provisions of section 65 of the Customs Act, 1962 are fully exempt from Customs duty.
An objection was raised by the Audit on the admissibility of exemption to the said goods
imported by the shipbuilder, on the ground that the goods in question having separate identity
and use as life saving equipment would not qualify to be raw materials or parts for manufacture
of vessels/ ships. Although strictly speaking, the said rafts and jackets are not directly raw
material and parts used in the manufacture of ships, nevertheless these items are statutorily
required onboard and therefore supplied by the shipbuilder.
Decision : The Board took into account that the inflatable life jackets and life rafts were supplied
as statutory supply for the ship. The certificate of ship worthiness issued by the authorities
requires that the ship should be fitted with life jackets and life rafts. Additionally, the subject
notification does not mention any specific chapter for the parts. Therefore, the Board has decided
that the benefit of the referred notification (s) would be available on the import of inflatable life
jackets and life rafts considering these as essential parts for the manufacture of ships.
(viii) Subject : Scope of the exemption vide Notification No. 80/70-Cus., dated 29-81970, as amended.
Issue in Brief : This matter was discussed at the Tariff Conference of Chief Commissioners of
Customs held at Shillong from 13th - 15th May, 2004 [Agenda Point N-7]. The aforesaid
exemption exempts articles supplied free under warranty as replacement for defective ones. The
language of the condition in the said notification suggests that the intention behind the
notification was to exempt warranty spares imported by individuals only since it uses the words
private personal property of the importer. However, in the case of M/s. Echjay Industries (P)
Ltd. v. Union of India reported in 1994 (52) ECR 366 (Bombay) in which the Bombay High
Court quashed the denial of the said exemption by Customs on the ground that it was applicable

only to an individual and not to Company. The Court held that a company was a legal person
and, therefore, the exemption would be available to companies as well. Following this, the
CEGAT in the case of Kesoram Industries Ltd. v. Collector of Customs, Calcutta, reported in
1999 (108) E.L.T. 694 (Tribunal) held that the free replacement spares imported by a company
were entitled for the benefit of this exemption. However, in another order, the Bombay High
Court in the case of M/s. Birla Erickson and others v. Union of India dismissed the petition
holding that the exemption was not meant for import for commercial purpose. In the order,
however the Court has not referred to the earlier orders of the Bombay High Court and other
orders of the Tribunal.
Decision : The Board took into account that the intention of the notification was to restrict the
exemption to imports by individuals which was reflected by the use of words private personal
property. The Board also took note of the earlier judicial pronouncements treating the company
as an individual and ordering extension of benefit of the said notification. However, the latest
order of the Mumbai High Court ruled that this benefit should not be extended to such imports
for commercial purpose. It has accordingly been decided by the Board that benefit of
Notification No. 80/70-Cus., dated 29-8-1970 would not be extended to import of warranty
replacements by companies or commercial organisations.
(ix) Subject :Extension of benefit under Customs Notification 21/2002-Cus., Sl. No.
344 for a new Car registered for Transport to Airport from showroom and
not for use in the country of manufacture.
Issue in Brief : This matter was discussed at the Tariff Conference of Chief Commissioners of
Customs held at Shillong from 13th - 15th May, 2004 [Agenda Point N-8]. The exemption under
Notification No. 21/2002-Cus., Sl. No. 344 is allowed to motor cars and other motor vehicles
principally designed for the transport of persons (other than those of heading 8702) including
station wagons, racing cars, new, which have not been registered anywhere prior to
importation. The question to be decided is whether the importer is eligible for the benefit of
the said exemption under Notification 21/2002-Cus. when the car had been registered before its
shipment. The supplier in certain cases certify that the Registration Nos. have been temporarily
allocated for transportation of the motor vehicles from the showroom to the airport to facilitate
its export. Some other instances have also come to notice when the cars though new, are
registered abroad before being exported to India for exhibition, field trials, etc.
Decision : The Board observed that condition (c) of category 2 (I) of Licensing Note to Chapter
87, states that a new imported vehicle for the purpose of this Chapter shall mean a vehicle that
has not been registered for use in any country according to the laws of that country, whereas as
per the referred Customs Notification, it should not be registered anywhere prior to
importation. It was also noted that in many countries, registration of the vehicle is an essential
requirement for moving the vehicle from the showroom or the factory to the airport. To verify

whether the registration is a technical formality or not, the field formations may compare the date
of dispatch of the car with the date of registration. It was, accordingly, decided by the Board that
temporary registration of the kind discussed above, shall not interfere with the notification
benefit.
(x) Subject : Classification of used steel rails for re-rolling Under CTH 7204 or 7302
and whether freely importable.
Issue in Brief : This matter was discussed in the Tariff Conference of Chief Commissioners of
Customs held at Shillong on 13th - 15th May, 2004 [Agenda Point T-2]. The issue involved is
whether the goods described as used steel rails for re-rolling are classifiable as scrap of steel
under heading 7204 of the Customs Tariff Act, 1975 or as old and used rails of railway under
heading 730210.10. This would also determine the importability of the said item i.e. whether the
goods are freely importable under para 2.1 of the Foreign Trade Policy, 2004-2009 read with
para 2.30 of the Hand book of Procedure, Vol. I, or whether it would be restricted for import and
require specific license in terms of para 2.17 of the policy ibid. The waste and scrap of iron
and steel is classified under heading 7204 of the Customs Tariff Act, 1975. Section Note 8(a) to
Section XV of the Customs Tariff Act defines the term waste and scrap as metal scrap and waste
from the manufacture or mechanical working of the metals and metal goods definitely not usable
as such because of breakage, cutting up, wear or other reasons. Explanatory Notes to HSN
under heading 7204 mention that the heading covers waste/scrap of iron and steel as defined in
Note 8(a) to Section XV. The note mentions details of the articles, which are covered under said
heading. It also mentions that the waste and scrap is generally used for recovery of metals by
remelting or for the manufacture of chemicals. However, the heading excludes articles, which
with or without repair or renovation can be reused for former purpose or can be adopted for other
uses; it also excludes structural steel works useable after renewal of worn out parts.
Decision : The Board considered the alternative headings of 72.04 and 73.02 for the item. The
main point for discussion related to the policy restrictions on the import of used rails. Chapter 73
of the CTA75 specifically covers articles such as rails. In the case under reference, even though
the items in question were in the form of rails, these bore markings of use and therefore these
could not be used again as rails. Hence, suitable classification would be as scrap of CTH 7204
and not as articles under heading 7302. It has accordingly been decided by the Board that used
steel rails for re-rolling were appropriately classifiable under CTH 7204 and these were freely
importable.
Rails Used steel rails Classification of [Heading 7302]
Circular No. 8/2006-Cus., dated 17-1-2006
F.No. 528/94/2004-Cus(TU)

Government of India
Ministry of Finance (Department of Revenue)
Central Board of Excise & Customs, New Delhi
Subject : Classification of used rails - Reg.
I am directed to invite your attention to the Boards Circular No. 1/2005-Cus., dated 11-1-2005 [2005 (179) E.LT.
T22] and the doubts expressed on the issue of appropriate classification of used steel rails - whether under CTH
7204 as ferrous waste and scrap or under CTH 7302 as used rails.
2.The issue of classification has been re-examined by the Board with respect to the clarification issued under
Central Excise Tariff vide Circular No. 27/89, dated 21-9-89. The Board decided that heading No. 7204 read with
Section Note 8(a) to section XV of the First Schedule to the Customs Tariff Act and explanatory notes of
Harmonized Commodity Description and Coding System (HSN) cover only such waste and scrap as would
generally be used for recovery of metal by re-melting or for the manufacture of chemicals. Such waste and scrap
which is not for re-melting will have to be classified in the other appropriate headings of the tariff. Further, HSN
notes to CTH 72.04, by example excludes structural steel work usable after renewal of worn-out parts; worn
railway lines which are usable as pitprops or may be converted into other articles by re-rolling; steel files
capable of re-use after cleaning and sharpening. Accordingly, used rails would not be covered by chapter heading
7204.
3.Further Board also noted that CTH 7302 specifically covers rails. HSN note on this heading provides that it
covers all lengths of rails, all rails of the type normally used for railway or tramway track, irrespective of their
intended use. There is no exclusion for used rails from this CTH.
4.In view of the above and for the purpose of uniformity in classification, it is hereby clarified by the Board that
the appropriate classification of used steel rails shall be under CTH 7302, and not under CTH 72.04 as ferrous
waste and scrap. The instructions contained in para 8 of Boards Circular No. 1/2005 may be considered as modified
accordingly.
5.The above instructions may be brought to the notice of all concerned for effective implementation. Please
acknowledge receipt of this circular.
6.Hindi version will follow.