Collector
of Customs Vs. M/S. Presto Industries [2001] Insc 85 (15 February 2001)
B.N.
Kirpal & Brijesh Kumar. Brijesh Kumar, J.
J U D
G M E N T
L.T.J
The
question that falls for consideration in these appeals is as to whether or not,
the respondent has been rightly given benefit of Notification No. 16/83-CE
dated 11.2.1983, issued by the Central Government under Rule 8(1) of the
Central Excise Rules, 1944, in regard to the payment of additional custom duty
under Section 3(1) of the Customs Tariff Act, 1975, on the waste and scrap of
imported Cellulose Acetate sheets.
We
have heard Shri Mukul Rohtagi, learned Additional Solicitor General for the
appellant and Shri V. Lakshmikumaran, learned counsel for the respondent.
The
respondent, M/s. Presto Industries, is an industrial unit manufacturing combs
and brushes, in Kandla Free Trade Zone, from the imported Cellulose Acetate
sheets.
On
certain given conditions, exemption from payment of excise duty is admissible
to the manufacturer in the Free Trade Zone. So far it relates to the resultant
waste and scrap of the imported raw material, namely, Cellulose Acetate sheets,
Customs Duty as well as additional duty is payable on the scrap being cleared
for home consumption outside the Free Trade Zone. Undisputedly, on two
clearances of the scrap, Custom Duty was assessed and the same was paid by the
respondent. It was, however, later discovered during the audit that while
assessing the liability, the respondent had been wrongly given benefit of
Notification No. 16/83-CE dated 11.2.1983 and additional duty under Section 3
(1) of the Customs Tariff Act, 1975 was not levied. The duty was found to be
short paid. Thus, two Demand Notices under Section 28 of the Customs Act, 1962
were issued in respect of two clearances, namely, Demand Notice
No.FIZ/Cus/Demand/87-/7545/73 dated 26.6.1989 for a sum of Rs.60,480/- and
Demand Notice No.FIZ/Cus/Demand/85-86/1347 dated 16.10.1989 for a sum of
Rs.8870.40.
The
aforesaid two demands for additional duty were confirmed by the Assistant
Collector (Custom), Kandla Free Trade Zone by order dated 22.6.1989 for a sum
of Rs.68076.40 and by order dated 16.10.1989 for a sum of Rs.8870.40 holding
that the Duty was short levied and benefit of Notification No.16/83-CE dated
11.2.1983 was wrongly made admissible to the respondent. It was also held that
the waste and scrap item of Cellulose Acetate sheets was covered under Tariff
Item No.15-A(1), explanation iiiŠ as provided in the foot note to Item No.15-A
of the Central Excise Tariff. The exemption from payment of Central Excise Duty
was held to be admissible only on fulfilment of certain conditions as contained
in the Notification No.16/83-CE itself. Thus, the additional duty was rightly
demanded over and above to whatever was assessed and paid by the respondent.
The respondent preferred an appeal against the order of the Assistant Collector
(Customs) to the Collector Customs (Appeals) who by order dated 12.3.1990
allowed the appeal holding that the benefit of Notification No.16/83-CE was
admissible to the respondent. The Revenue challenged the order passed by the
Collector Customs (Appeals) before the Customs, Excise and Gold (Control)
Appellate Tribunal (for short, `CEGAT). The Tribunal dismissed the appeal by
order dated 12.7.1991. Hence the appeals by the Revenue.
The
Collector (Appeals) took the view that the whole Duty of Excise, leviable under
Section 3 of the Central Excise Act, 1944 is exempted in respect of scrap for
home consumption outside the Free Trade Zone, under Notification No.16/83-CE,
therefore, no additional Duty in the nature of countervailing duty was liable
to be paid. It was also found that the respondent had paid the Customs Duty on
the scrap as required by Clause (b) to the Proviso to the Notification
No.16/83-CE. The CEGAT upheld the order passed by the Collector of Customs
(Appeals) finding that no additional duty of customs would be payable where
Excise Duty is exempt under a Notification issued under Rule 8(1) of the Excise
Rules 1944. It also relied upon the decision in M.R.F. Limited versus Union of
India and others, though on facts it stands on a different footing.
The
case of the assessee further is that since no Excise Duty is payable, no
additional duty under Section 3(1) of the Customs Tariff Act, 1975 can be
levied as additional duty could only be equal to the Excise Duty for the time
being leviable on a like article if produced in India or in case it is not so
produced the excise duty which would be leviable on the class or description of
articles to which the imported articles belongs.
The
main stress on behalf of the appellant is that the second condition as
contained in the Notification No.16/83-CE has not been fulfilled hence
exemption from Excise Duty would not be available to the respondent. That being
the position, the additional duty as leviable is liable to be levied and paid
under Section 3 (1) of the Customs Tariff Act, 1975.
Before
entering into the discussion, it would be appropriate to peruse the provisions
as contained under Section 3 of the Customs Tariff Act, 1975 as well as
Notification No.16/83-CE issued under Rule 8 (1) of the Excise Rules, 1944.
Section 3 of the Customs Tariff Act reads as under:
SECTION
3. Levy of additional duty equal to excise uty.- (1) Any article which is
imported into India shall, in 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.
Explanation.-
In this 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.
(2) ..
(3) If
the Central Government is satisfied that is necessary in the public interest to
levy on any imported article [whether on such article duty is leviable under
sub-section (1) or not] such additional duty as would counter-balance the
excise duty leviable on any raw materials, components and ingredients of the
same nature as, or similar to those, used in the production or manufacture of
such article, it may, by notification in the Official Gazette, direct that such
imported article shall, in addition, be liable to an additional duty
representing such portion of the excise duty leviable on such raw materials,
components and ingredients as, in either case, may be determined by rules made
by the Central Government in this behalf.
(4) ..
(5) ..
(6)
The provisions of the Customs Act, 1962 (52 of 1962), and the rules and
regulations made thereunder, including those relating to drawbacks, refunds and
exemption from duties, shall, so far as may be, apply to the duty chargeable
under this section as they apply in relation to the duties leviable under that
Act.
A
perusal of Section 3 (1) of the Customs Tariff Act quoted above shows that on
any article imported into India, a duty in addition may be levied to be called
`additional duty equal to the excise duty for the time being leviable as may be
in force on an item manufactured in India and in case it is not so
manufactured, as may be leviable on the class or description of articles to
which the imported article belong. It is also clear that the `additional duty
is in addition to the Customs Duty levied under Customs Act, 1962 on any
article which is imported into India. The Customs Tariff Act provides for the
rates at which duties of Customs are leviable under Customs Act, 1962 as
specified in the two Schedules. The additional duty is in addition to what is
specified in the first and second schedule of the Customs Tariff Act. It can be
said that first part of Section 3 (1) of the Customs Tariff Act, 1975 is
charging provision for the purposes of imposition of additional duty and the latter
part is in relation to quantification of the additional duty equal to Excise
Duty. In regard to the question as to whether Section 3 (1) is a charging
provision for additional duty or not, it was held by a Three Judge Bench of
this Court in the case of Khandelwal Metal & Engineering Works that Section
3 (1) cannot be said to be an independent charging Section. It was held to be
an extended provision of Section 12 of the Customs Act, 1962 for the purposes
of additional duty. Later on however this question again came to be considered
in the case of Hyderabad Industries Ltd. before a Constitution Bench of this
Court and it was held that Section 3 of Customs Tariff Act is a charging
provision for additional duty. It has also been held that under Section 3 of
the Customs Tariff Act, the additional duty is not called a counter-vailing duty,
it may though result in serving such purpose for manufacturer of such articles
in India. It is to be noticed here that
Sub-section (3) of Section 3 of the Customs Tariff Act makes a provision for
levy of additional duty as would counter-balance the Excise Duty leviable on
any raw material which may be over and above any duty levied under Sub-section
(1). The said provision viz. Section 3(3) of Customs Tariff Act makes it clear
that in the public interest an additional duty under Sub-section (3) can be
levied as would counter-balance the excise duty. It is a provision independent
of Sub-section (1) of Section 3 of the Customs Tariff Act taking care of
counter balancing of Excise Duty.
We may
now advert to the Notification No.16/83-CE to find out whether conditions laid
in Clause (b) of the Proviso of the said Notification has been fulfilled or
not.
The
Notification No.16/83-CE provides as under:- Kandla Free Trade Zone In exercise
of the powers conferred by sub- rule (1) of rule 8 of the Central Excise Rules,
1944 the Central Government hereby exempts scrap or waste material arising in
the course of production or manufacture of any goods in the Kandla Free Trade
Zone, from the whole of the duty of excise leviable thereon under section 3 of
the Central Excise and Salt Act, 1944 (1 of 1944):
Provided
that:- (a) such scrap or waste material is out of any goods brought into the
said zone from a place outside India, and (b) such scrap or waste material is
cleared for home consumption outside the said zone on payment of duties of
customs leviable thereon under any law for the time being in force." The
whole of the excise duty leviable under the Central Excise & Salt Act, 1944
is liable to be exempted, on scrap or waste arising in the course of
manufacture of any goods in the Kandla Free Trade Zone, which is imported from
outside India and it is cleared for home consumption outside the zone on
payment of duties of customs leviable thereon under any law for the time being
in force.. So far condition provided under clause (a) of the proviso there is
no dispute. But as it relates to fulfilment of Clause (b) to proviso, it is in
dispute. Admittedly additional duty leviable under Section 3(1) of the Customs
Tariff Act has not been paid. Their case is that basic customs duty has been
paid which fulfils the requirement. The Notification however requires payment
of duties of customs under any law for the time being in force. The additional
duty leviable under Sub-section (1) of Section 3 of the Customs Tariff Act is
not described or called as counter-vailing duty as observed in the case of
Hyderabad Industries (supra) as well as in the case of Khandelwal Metal &
Engineering Works (supra) despite the purpose whichever it may serve.
There
is a specific provision under Sub-section (3) of Section 3 of the Customs
Tariff Act, 1975, quoted earlier, providing for levy of additional duty,
whether on such item additional duty under Sub- section (1) of Section 3 is leviable
or not, to counter-balance the Excise Duty. The clause (b) to the proviso to
the Notification 16/83-CE provides for clearance of all duties of customs leviable
under any law for the time being in force. It does not confine to payment of customs
duty leviable under the Customs Act, 1962 alone. Therefore, additional duty
levied under Section 3(1) of Customs Tariff Act shall also have to be cleared
before claiming benefit under Notification No.16/83-CE.
In the
case of Hyderabad Industries Ltd. (supra), in paragraph 14 of the Judgment, it
is held that there are different types of Customs Duty levied under different
Acts or Rules. It includes Duty under Section 3(1) of the Customs Tariff Act.
The para 14 is quoted below:-
14.
There are different types of customs duties levied under different Acts or
Rules. Some of them are:
(a) a
duty of customs chargeable under Section 12 of the Customs Act, 1962;
(b) the
duty in question, namely, under Section 3(1) of the Customs Tariff Act;
(c) additional
duty levied on raw materials, components and ingredients under Section 3(3) of
the Customs Tariff Act; and
(d) duty
chargeable under Section 9-A of the Customs Tariff Act, 1975.
The
Customs Act, 1962 and the Customs Tariff Act, 1975 are two separate independent
statutes. Merely because the incidence of tax under Section 3 of the Customs
Tariff Act, 1975 arises on the import of the articles into India it does not necessarily mean that
the Customs Tariff Act cannot provide for the charging of a duty which is independent
of the customs duty leviable under the Customs Act.
Since
it is found that the respondent did not pay the additional duty as leviable
under Sub-section (1) of Section 3 of the Customs Tariff Act, 1975, it failed
to comply with the condition as contained in Clause (b) to the proviso to the
Notification No.16/83-CE dated 11.2.1983. The onus of proof of fulfilment of
condition subject to which an exemption may be admissible lies on the assessee
or upon a party claiming benefit under the Notification as also held in the
case of Motiram Tolaram and another . So far the question of construing an
exemption Notification is concerned, such Notifications are to be strictly
construed.
Where
a condition precedent is not fulfilled before claiming any exemption, such
benefit would not be admissible.
In the
result it is found that due to non-payment of additional duty as prescribed
under Section 3(1) of Customs Tariff Act, the respondent would not be entitled
for the benefit of exemption from Excise Duty under Notification No.16/83-CE.
It was wrongly made admissible to the respondent.
In
view of what has been discussed above, the appeals are allowed and the orders
passed by the Collector of Customs (Appeals) and CEGAT are set aside and the
order passed by the Assistant Collector of Customs are restored.
There
would, however, be no order as to costs.
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