Imposition Of Countervailing Duty On Cut Pieces Of Used Tyres And Used Tubes Is Ultra Vires The Customs Tariff Act: Delhi HC [FB] [Read Judgment]

The process to which old tyres are subject to produce two or more pieces of cut tyre is not “manufacture‟ within the meaning of Section 2 (f) of the Central Excise Act,said the Bench

A full bench of Delhi High Court, in Tinna Rubber & Infrastructure Limited vs Union of India, has held that the process to which old tyres are subject to produce two or more pieces of cut tyre is not “manufacture‟ within the meaning of Section 2 (f) of the Central Excise Act.

A clarification issued by TRU of the Department of Revenue in its clarification that there was no exemption from payment of excise duty in respect of tyre scrap cut into two to three pieces produced from used and old tyres, was challenged before the Delhi High Court.

In Modi Rubber Limited vs Union of India, it was held that waste/scrap obtained not by any process of manufacture, but in the course of manufacturing the end product was not exigible to excise duty.

The division bench had referred the said decision to the full bench for its reconsideration.

The bench headed by Justice S Ravindra Bhat observed that decision in Modi Rubber Limited, Modi Nagar, UP vs Union of India had impliedly been approved by a three-judge bench of the Supreme Court in Union of India vs Ahmedabad Electricity Co Limited.

“Even where an entire unit is set up for the purposes of converting old and used tyres into pieces of cut tyres, the essential character remains the same. Used tyres and tubes remain as such even after they are cut into pieces. They do not undergo any transformation so as to amount to 'manufacture' within the meaning of Section 2 (f) of the CE Act.”

Setting aside the ‘clarification’, the court declared that the imposition of 12 per cent countervailing duty under Section 3 (1) of the Customs Tariff Act on cut pieces of used tyres and used tubes is unlawful and ultra vires the Customs Tariff Act.

Read the Judgment here.