M/S.
Bombay Oil Industries Pvt. Ltd. Vs. Union
of India & Ors [1994] INSC 635 (6 December 1994)
Majmudar
S.B. (J) Majmudar S.B. (J) Sahai, R.M. (J) Majmudar, J.:
CITATION:
1995 SCC Supl. (1) 295 JT 1995 (3) 64 1994 SCALE (5)97
ACT:
HEAD NOTE:
1.
These appeals arise out of a common judgment rendered by the Customs, Excise
& Gold (Control) Appellate Tribunal New Delhi, by which it disposed of ten
appeals in all.
Civil
Appeal Nos. 401313A of 1985 challenge that part of that order of the Tribunal
by which the appeals of the common appellant, namely, M/s 67 Bombay Oil
Industries Pvt. Ltd. were dismissed by the Tribunal; while the remaining four
appellants seek to challenge the other part of the Tribunal's order by which
four appeals moved by the Collector of Customs, Bombay, against the concerned
present appellants came to be allowed by the Tribunal.
2.The
facts leading to these appeals may be noted at the outset to appreciate the
grievance of the appellants. All these appellants had imported tallow being bleachable
fancy tallow from foreign countries between 2.8.1976 and 2.9.1978 by different
consignments. So far as common appellant H/s Bombay Oil Industries Pvt. Ltd. in
C.A. Nos.4013-13A of 1985 is concerned,
it imported bleachable mutton tallow while the rest of the appellants imported
bleachable fancy tallow which according to them was not mutton tallow. These
imports were subject to customs duty under the provisions of the Customs Act,
1962. As per the applicable customs tariff as laid down in the First Schedule
to the Customs Tariff Act, 1975, the imported tallow was liable to customs duty
under sub-heading of Heading No. 15-01/06 at the rate of 35 per cent ad valorem.
A partial exemption was given by the Central Government from the payment of
customs duty so far as imported tallow was concerned by an exemption
Notification dated 2nd
August, 1976 being
Notification No.
141
-CUS/76 issued in exercise of powers conferred on the Central Government by
sub-section (1) of Section 25 of the Customs Act, 1962. The said Notification
provided that the Central Government being satisfied that it is necessary in
the public interest so to do, exempts tallow having the specifications
mentioned hereunder and falling under sub- heading No.2 of Heading No. 15-01/06
of the First Schedule to the Customs Tariff Act, 1975(51 of 1975), when
imported into India, from payment of so much of that portion of duty of
customs-leviable thereon which is specified in the said First Schedule as is in
excess of 15 per cent ad valorem.
The Notification
further laid down the specifications of the exempted tallow. It was provided
that the imported tallow meeting the indicated specifications was entitled to
partial exemption of customs duty to the extent of 30 per cent ad valorem.
These specifications read as under:
"SPECIFICATIONS
i. Moisture and Insoluble impurities percent by weight, max. 1.0 ii. Colour in
a lin cell on the Lovibond scale expressed as Y=5 R not deeper than 20 iii. Saponification
Value 192 to 202 iv. lodine Value (wijs) 32 to 50 v. Acid Value, Max 10 vi. Unsapponifiable
matter, percent by weight, Max 0.5 vii. Titre of fatty acids oC 40 to 49"
The said Notification was amended later on by a Notification dated 2.9.1978
whereby specification No. 2 was deleted from the earlier Notification dated
2.8.1976 being Notification No. 141-CUS-76. The said latter Notification dated 2nd September, 1978 being Notification No. 168/F No.
370/24/78/Cus
1 provided that in exercise of the powers conferred by sub-section (1) of
Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government be- 68
ing satisfied that it is necessary in the public interest so to do hereby makes
the following amendment in the Notification of the Government of India in the
Department of Revenue, and Banking No. 141Customs dated the 2nd August, 1976,
namely, "In the Specifications mentioned under the said Notification, item
(ii) and the entries relating thereto shall be omitted. "
3. It,
therefore, became clear that the importers of tallow after coming into operation
of the latter Notification dated 2nd September, 1978 had not to satisfy the customs authorities that their
imported tallow met the requirement of erstwhile item No.2 in the earlier
Notification of 2.8.1976. We have seen that the second condition of the
Notification dated 2.8.1976 referred to the colour of imported tallow. The
imported tallow under the earlier Notification was required to stand the test
of having colour not deeper than 20 in one inch cell on the lovibond scale as
Y+5R. It is this requirement which the latter Notification gave up. It is not
in dispute between the parties that import oftallow after the Notification
dated 2.9.1978 having given partial exemption upto 30% ad valorem, customs duty
on imported tallow covered even that imported tallow which did not meet any colour
requirement but so far as present proceedings are concerned as the appellants
had imported tallow during the time the earlier Notification dated 2.8.1976
held the field, they had to meet the colour specification No.2. The appellants
contended before the Customs Authorities that they were entitled to get refund
of customs duty paid by them in excess of 15 per cent as their imported tallow
satisfied Notification of Customs dated 2.8.1976. The samples of imported
tallow were examined by Custom House and were found not meeting the colour test
specification as laid down by the Notification dated 2.8.1976, Consequently,
their request was rejected by the Assistant Collector of Customs. They went in
appeal to the Collector of Customs. The Collector of Customs, Bombay, took the
view that so far as common appellant in Civil Appeal Nos.4013-13A of 1985,
namely, M/s Bombay Oil Industries Pvt. Ltd. was concerned, it had imported
tallow on 4.4.1978 when the earlier Notification 14 1 -Cus/76 was operative.
The
Custom House had tested the samples by ap- plying the correct method of I.S.
548 and as it was found that the tallow imported by M/s Bombay Oil Industries
Pvt. Ltd. did not satisfy the colour specification as per condition No. 2 of
Notification of 1976, the appellants cannot be said to have earned any
exemption under the said Notification on the imported tallow and accordingly
the appeals of the appellant, M/s. s Bombay Oil Industries Pvt. Ltd., were
dismissed. However, so far as appeals by the remaining four appellants in the
present case are concerned, the Appellate Collector took the view that these
appellants had imported tallow which were not mutton tallow but bleachable
fancy tallow which was a mixture of beef and other animal tallow and so far as
these imports were concerned, proper tests were not carried out by the Custom
House. The Appellate Collector noticed that the specifications given by Customs
were word for word and figure for figure in IS 887 for Type No. 1 and that referred
to mutton tallow and that the method prescribed for mutton tallow as per IS 548
could not have been applied for testing colour of imported tallow of these
remaining four appellants and that the correct method for testing samples
should have been the method recom- 69 mended by American Oils Chemists' So ciety
wherein samples should have been first bleached and then got tested. In vie of
the Appellate Collector as the goods imported by these four appellants were not
Indian tallow for which the IS 887 and IS 548 were designed but foreign tallow
and most probably beef tallow, it was reasonable to say that the standard of
the tallow should be gauged in accordance with the grades or standards
prescribed by the American Fats and Oil Association and if that was done the colour
specification as found in condition No. 2 of the Notifica- tion was likely to
be satisfied and for that purpose the samples were required to be re-tested by
following the method recommended by American Oils Chemists' Society and accordingly
the remaining four respondents' appeals were allowed and the proceedings were
remanded to the Assistant Collector directing that the test should be done only
after refining aiid bleaching the samples as prescribed in the said American
Oils Chemists' Society Official' method Cc Sd-
55. It
was further observed that if it passes the colour test on such refining and
bleaching, the benefit of No- tification 141 -Cus/76 shall be extended
otherwise not.
4.The
common appellant, M/s Bombay Oils Industries Pvt. Ltd., being aggrieved by the
order of the Appellate Collector dismissing its appeal preferred further
appeals to the Customs, Excise & Gold (Control) Appellate Tribunal. So far
as remaining four appellants arc concerned, the Central Government issued notices
under Section 131(3) of the Customs Act, 1962, whereby all these appellants
were called upon to show cause why the orders passed by the Appellate Collector
should not be recalled and annuled. After the cstiblishment of the Tribunal
these proceedings were trans- ferred to the Tribunal, They were registered as
appeals as taken out by the Collcctor of Customs, Bombay. As noted earlier the two appeals
of M/s Bombay Oil Industries Pvt. Ltd. and the four appeals of the Collector of
Customs against the remaining four present appellants were heard together by
the Tribunal along with other four appeals, In all ten appeals were disposed of
by the common judgment.
The
Tribunal came to the conclusion that the colour specification as laid down by
the Notification dated 2.8.1976 being No. 141 Cus/76 was not fulfilled by the
concerned imports of the tallow of appellants herein and that, therefore, these
imports failed to earn the partial exemption to the extent of 30 per cent as
claimed by them on these imports under the said Notification. It was. further
found by the Tribunal that a common colour specification was laid down as
condition No.2 under the said Notification and it referred to all types of
tallow whether mutton tallow, beef tallow or other animal tallow and a common
test had to be resorted to for testing the samples of these imported tallow and
all these imported tallow did not satisfy the colour specification of condition
No. 2 of the exemption Notification. The Tribunal further observed that it was
not open to the Assistant Collector to lay down a separate condition for the
said Notification that the sample should be tested by American method and that
the Indian Standard method as adopted by the Custom House for testing these
samples cannot be found fault with, consequently, the appeals filed by M/s. '
Bombay Oil Industries Pvt. Ltd., were dismissed and appeals filed by the
Collector of Customs against the remaining four appellants were allowed. Being
aggrieved by the aforesaid common order 70 of the Tribunal in the respective
appeals, the appellants have preferred appeals under Section 131(3) of the
Customs Act, 1962.
5.These
appeals were set down for final hearing before us.
We
have heard learned counsel for the contesting parties in support of their respective
cases.
6.Learned
counsel for the appellant, M/s Bombay Oil Industries Pvt. Ltd., submitted that
the Tribunal had committed a patent error in taking the view that the imported
mutton tallow of the appellant did not meet the colour specification of the
exemption Notification that the Custom House had wrongly followed the IS 549
for testing the appellant's samples and it should have followed the official
method Cc 8d- 55. In any case the matters were required to be remanded as the
appellant had been denied the principle of natural justice and fair play.
Learned counsel appearing for the remaining appellants submitted that the
tallow which they imported was bleachable fancy tallow and was not mutton
tallow and, therefore, as rightly held by the Appellate Collector the IS 548
meant for mutton tallow testing could not have been adopted by the Custom House
for testing their samples of imported tallow and that the correct method which
should have been adopted was method prescribed by the American oil Chemists'
Society and if that was done in all probabilities their samples would have
satisfied the colour test of being not deeper than 20. It was next contended
that exemption Notification of 1976 nowhere lays down any particular method for
testing colour of samples of imported tallow and especially when imported
tallow came from foreign countries specially America and Australia, the American method of testing, colour
specification should have been adopted as Appellate Collector had done. It was
further submitted that even if Indian testing method was adopted by following
IS 548, the testing method should have been done on one inch cell and not on
half inch cell as was done by Custom House so far as their samples were
concerned. In these circumstances the Tribunal was not justified in allowing
the appeals. These appeals should have been dismissed.
7.Having
given our anxious consideration to the rival contentions, we have reached the
conclusion that there is no substance in any of the appeals.
8.It
has to be kept in view that as per Section 12 of the Customs Act. duties of
customs shall be levied as specified in the Customs Tariff Act for goods
imported in or exported out 'of India. It is not in dispute between the parties that the imported tallow
attracted the customs duty as per the Customs Tariff Act, 1975 at the rate of
45 per cent ad valorem but the applicants staked their claim on the basis of
the Notification issued by the Central Government under Section 25 of the Act
granting partial exemption from duty on such imported tallow. It is obvious
that whatever ex- emption is granted under Notification may be either absolute
or subject to such conditions which have got to be fulfilled by the importers
before earning such exemption, The Notification 141-cum/76 which we have
earlier referred does not grant such 30 per cent exemption in absolute terms
but such exemption is based on fulfilment of conditions mentioned therein about
the specification of imported tallow and if the imported tallow does not meet
the specification required it cannot earn the exemp- 71 tion. It is trite to
say that in order to earn the exemption the person claiming the exemption must
satisfy that his imported item has fulfilled all the conditions of the
exemption Notification as such exemptions are granted in public interest. In
connection with such exemption Notification issued under Section 25 of the
Customs Act a Bench of this Court in case Union of India & Ors. vs. M/s Jalyan
Udyog & Anr. (A.I.R. 1994 SC 88), speaking through B.P. Jeevan Reddy, J.,
has made the following observations "An exemption granted may be an
absolute and or subject to such conditions, as may be specified in the
notification and further that the conditions specified may relate to a stage
before the clearance of goods or to a stage subsequent to the clearance of
goods. S.25(1) is a part of the enactment and must be construed harmoniously
Kith the other provisions of the Act. The power of exemption is variously
described as conditional legislation and also as a species of delegated
legislation. Whether it is one or the other, it is a power given to the Central Governmen t to be exercised in public
interest. Such a provision has become a standard feature in several enactments
and in particular, taxing enactments. It is equally well settled by now that
the power of taxation can be used not merely for raising revenue but also to
regulate the economy, to encourage or discourage as the situation may call for
the import and export of certain goods as also for serving the social objectives
of the State.
Since
the parliament cannot constantly monitor the needs of and the emerging trends
in the economy and is in no position to engage itself in day-to-day regulation
and adjustment of import-export trade accordingly, power is conferred upon the
Central Government to provide for exemption from duty of goods0.
either
wholly or partly, and with or without conditions, as may be called for in
public interest. Reading any limitation into this power is not warranted.
If the
public interest demands s that the exemption should be absolute, the Central
Government can do so. Similarly, if the public interest demands that exemption
should be granted only subject to certain conditions it can provide such
conditions. Then again if the public interest demands that conditions specified
should relate to a stage subsequent to the date of clearance it can do so. The
guiding factor is the public interest." 9.Once the appellants admittedly
imported tallow into this country, on account of the charge by the Customs Act
under Section 12, their imported tallow attracted customs duty.
It is
for them to show how instead of paying full duty they get exemption to the tune
of 30 per cent pursuant to the Notification 141-cus/76. For that purpose they
have to show that the imported tallow have met colour specification as it was a
notification granting exemption on conditions and did not grant exemption in
absolute terms. It is not in dispute that out of seven specifications mentioned
in the Notification, six were met by them but only on colour specification No.
2 they met their waterloo. He Custom House which tested the samples on imported
tallow, submitted by the appellants, found that the colour specification laid
down in condition No. 2 was not satisfied by these imported tallow and,
therefore, on these imported tallow exemption could not be granted as claimed.
If the appellants felt that the findings of the Custom House were not correct
it was open to them to get the samples cross tested through their experts and to
Jay evidence in that connection before the authorities as burden was entirely
on them to show that they had satisfied all the conditions of Notification with
a view 72 to earnings, the exemption to the extent of 30 per cent of' import
duty on their imported tallow. They did nothing of the kind. The Custom House
followed the method of Indian Standards Institution for testing these samples.
Our attention was invited to booklet "Indian Standard, Methods of Sampling
and Test for Oils and Fats" as well as booklet of "Indian Standard,
Specification for Animal Tallow" is sued by the Indian Standards
Institution So far as animal tallow is concerned, the booklet dealing with test
IS 887- 1977 in paragraph 8.1 lays down that the test shall be carried out according
to IS 548 part-1 1964. IS 548 Part 1 1964 deals with method of sampling and
test for oils and fats. Thus, there appears to be a common test prescribed by
the Indian Standards Institution being IS 548 Part 1 for all types of animal tallows.
That was the test adopted by Custom House and it was found that none of the
samples of imported tallow as submitted by the appellants fulfilled the
requirement of condition No. 2 of the exemption Notification. 'In other words,
their colour in one inch cell on lovibond scale, expressed as Y + 5R was deeper
than
20.
Consequently, the imported tallow whether mutton tallow or beef tallow or any
other tallow as covered by these consignments of the appellants did not satisfy
condition No.
2 of colour
as laid down by Notification 14 1 -Cus/76 dated 2.8.1976. On these findings
reached by the Custom House and when no effort to rebut the same was made by
the appellants, the conclusion was inevitable that these imported consignments
of tallow during the time exemption Notification dated 2.8.1976 was holding the
field did not earn the exemption under the said Notification from the customs
duty to the extent of 30 per cent and they were liable to pay full customs of
duty. This finding is rightly reached by the Tribunal on facts and calls for no
in- terference. So far as submission of learned counsel for appellant M/s
Bombay Oil Industries Pvt. Ltd., is concerned to the effect that only because
the appellant imported mutton tallow, IS 548 could not have been resorted to
cannot be accepted in view of the Indian Standards Institution's method for
testing animal tallow which has to follows IS 548 as seen earlier. It may also
be noted that the Tribunal has observed in paragraph 25 of its judgment that
M/s Bombay Oil Industries Pvt. Ltd. did not question the test result.
Consequently,
it is too late for it to make a grievance about it in these proceedings. So far
as the remaining four appellants are concerned, the Tribunal rightly held that
it was not open to the Appellate Collector to presume that for imported tallow
which was not mutton tallow and which would be a mixture of beef and other tallows,
the American method of testing should have been adopted by the Custom House. It
is true that the Notification did not specify as to which method should be
followed. But it has to be appreciated that the imported tallow was to be utilised
in India by Indian manufacturers and had
ultimately to join the main- stream of consumer goods either as such or after
being utilised in production of consumer goods. When they are to be imported in
India and when they claim exemption for the condition of Notification issued by
the Central Government under Section 25 of the Customs Act, the test for
checking their colour as laid down by the exemption Notification has necessarily
to be as per the Indian standard method and test laid down by the Indian
Standards Institution. In this con- nection, we may refer to the decision in
the case Union of India v. Delhi cloth
& 73 General Mills, (1963 Suppl.) (1) SCR 586) which has taken the view
that if method of testing any item of central excise tariff is not mentioned,
then Indian Standards Institution's method should be applied. Learned counsel
for the appellants submitted that strictly speaking this judgment may not apply
to the facts of the present case as we are not concerned with any central
excise tariff. Be that as it may, the fact remains that the imported goods on
which the appellants claim exemption from customs duty have to be ultimately
disposed of in India and when the Indian Government grants exemption on
condition, the method to test whether the exemption is earned or not by these
imported goods would obviously be the Indian method. Learned counsel for the
respondents submitted that if a converse case is taken into consideration and
if Indian goods are exported to foreign countries and if they have to earn any
exemption from duty imposed by foreign countries on such imports in their
countries and if colour specification of such imported material is to be found
out, the country of import, namely, the foreign country would insist that the
method to be adopted for testing the imported goods should be the method of
testing adopted by the country and it would be no ground to say that the Indian
goods imported in foreign countries meet the requirement of the Indian
specification though they may not meet the requirement of specification laid
down by the importing counties, for the simple reason that they have to meet
the requirements of the importing country and not of India which is the
exporting country. In the present case also, therefore, when the importers are
Indian they have to meet the requirement of exemption Notification issued by
the Central Government. These imports must satisfy the test as laid down by the
exemption Notification issued in India and when the Notification is silent about the method for testing the colour
of imported items then the testing method adopted by the Indian Standards
Institution would of necessity be applicable. It was then contended by the
learned counsel for the appellants in these remaining four appeals that IS 548
Part 1 was to be applied for testing the colour of tallows. The colour
specification by the Notification was required to be tested on one inch cell on
the lovibond scale expressed as Y + 5R. While in the present case the samples
were tested on one half inch cell and, therefore, the Custom House results
should not be relied upon. It is not possible to agree with this contention. As
we have discussed earlier as the appellants wanted refund of duty on their
imported goods, they should have made efforts to rebut the result of Custom
House. That they did not do but even that apart as noted in paragraph 38 of the
impugned judgment the Tribunal found that even when lovibond one inch cell was
adopted, if the imported tallow was tested in unbleached form in which it was
imported then its colour deepening would be 34 to 36 which would be more than
20 as required by the second condition of the colour specification. The main
argument of the appellants was that American method should have been followed
as observed by the Appellate Collector when the exemption Notification is
silent about the said method. We, therefore, concur with the view of the
Tribunal that there, was no occasion to test the appellant's samples of tallow
after bleaching as that was not the method of IS 548 Part 1 which was holding
the' field and as such prebleaching and refining could not be done pursuant to
the American method which 74 was not applicable to the facts of the present
case and even by taking one inch cell testing on lovibond IS 548 method would
have resulted in the samples showing colour deepening to the extent of 34 to 36
on the basis of Y + 5R which would not satisfy condition No. 2. The appellants
cannot have any real grievance in this connection.
10.
Before parting we may note one submission of the learned counsel. They
submitted that laying down of condition No. 2 in Notification dated 2.8.1976
was a clear error on the part of the Central Government which was corrected by
them by the latter Notification dated 2.9.1978 and, therefore, the latter
Notification be treated as clarificatory Notification read with above
Notification of 2.8.1976. It is not possible to agree as the disputed imports
with which we ate concerned are prior to 2.9.1978.
They
are, therefore, covered by the earlier Notification of 1976. It is true that
the Tribunal by noting these submissions has observed in paragraph 3 5 of the
judgment that the colour specification was an error and that the error be
removed but for that reason it could not ignore the colour specification when
it was the part of the law. We entirely agree with the view of the Tribunal
that even if the Central Government corrected its error about condition No. 2
from 2.9.1978 by issuing a fresh Notification, the earlier colour specification
requirement remained operative for imports made by the concerned importers
prior to 2.9.1978 when the earlier Notification dated 2.8.1976 was holding the
field. The latter Notification cannot be said to be merely clarificatory
Notification nor can it have any retrospective, effect. It is a fresh
Notification lying down fresh condition deleting the earlier condition No. 2
about the colour specification. Hence this submission is of no avail to the
learned counsel for the appellants.
11.
For all these reasons, there is no substance in these appeals and they are
accordingly dismissed. In the facts and circumstances of the case, there will
be no order as to costs.
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