Customs (Import), Mumbai. Vs. M/S.Konkan Synthetic Fibres
[CIVIL APPEAL NO.951
O R D E R
Civil Appeal is directed against the judgment and order passed by the Customs, Excise
and Service Tax Appellate Tribunal (for short 'CESTAT'), Mumbai in Appeal No.C/43/02-
Mumbai, dated 04.09.2003. By the impugned judgment and order, the CESTAT has granted
relief to the assessee by giving a liberal interpretation to the beneficial Notification
No.17/01-Cus dated 1.3.2001, as amended by Notification No.44/01-Cus, dated
assessee is an importer. It has imported one unit of equipment which was declared
as "Kari Mayer High Speed Draw Warping Machine with 1536 ends along with essential
spares". On such importation, it had presented the Bill of Entry No.207814
dated 25.9.2001 before the Customs authorities, inter alia, seeking clearance
of the same by extending the benefit of the Notification No.17/01-Cus dated 1.3.2001,
as amended by Notification No.44/01- Cus, dated 26.04.2001. The Customs
authorities had refused to accept the request of the assessee and accordingly, had
directed the assessee to pay the duty under the provisions of the Customs Act, 1962
("the Act" for short). Therefore, the assessee was constrained to pay
the duty in order to clear the goods. The said payment was made under protest so
that it could carry the matter further in appeal before the First Appellate Authority.
the appeal filed, the First Appellate Authority has confirmed the view of the Customs
authority. Dissatisfied with the order so passed, the assessee had carried the matter
in appeal before the CESTAT and the CESTAT has granted relief to the assessee.
Revenue, being aggrieved by the same is, before us in this appeal.
have heard Shri. V.Shekhar, learned senior counsel assisted by Smt. B.Sunita Rao
for the Revenue and Shri. S.K.Bagaria, learned senior counsel for the assessee.
Shekhar, learned senior counsel for the Revenue, after bringing to our notice the
Notification under which the assessee had claimed benefit for the imported goods,
would submit, that, what was imported by the assessee was not in consonance with
the exemption notification and, therefore, the authorities under the Act were justified
in denying the benefit available under the notification to the assessee. The learned
senior counsel further submits, what is imported by the assessee is High Speed Draw
Warping Machine with yard tensioning without the pneumatic suction device but with
a drawing machine. The learned counsel would submit, since what was imported is
not in accordance with Entry 8 of the table appended to the Notification, the assessee
is not entitled to the benefit of the exemption notification.
contra, Shri Bagaria, learned senior counsel would submit that the beneficial notification
should be given a liberal construction and if it is done, then, what is imported
by the assessee would fall within Entry 8 of the table appended to the
Central Government, in exercise of its power under Section 25(1) of the Act, has
issued an exemption notification in public interest, exempting certain articles
notified under the table appended to the notification from payment of the duty under
the Act. Several items are enumerated under the table. Entry 130 of the table speaks
of drawing machine. Entry of the notification speaks of the High Speed Warping Machine
with yarn tensioning, pneumatic suction devices and accessories.
A reading of the said
entry would indicate that the said machine is a composite machine. The pneumatic
suction devices are machines used for the purpose of sucking of vapour/gas, while
the High speed warping machine is activated or warped. There is no dispute that
the assessee has imported High speed warping machine but without pneumatic suction
device, but with drawing unit. The textile commissioner, who is well conversant
with these machines, has stated vide his letter dated 27.9.2001 that the goods imported
by the assessee are covered under Entry-8 of the Table appended to the notification.
He further stated vide
his letter dated 24.10.2001 that drawing unit is just an essential accessory to
the machines imported by assessee and, therefore, is covered under said Entry. The
opinion so furnished is taken note of by the Tribunal while granting relief to
is a settled proposition in a fiscal or taxation law that while ascertaining
the scope or expressions used in a particular entry, the opinion of the expert in
the field of trade, who deals in those goods, should not be 6 ignored, rather it
should be given due importance. In Collector of Customs v. Swastic Woollens (P)
Ltd., 1988 Supp SCC 796, this Court has observed thus: "4. We are of the opinion
that when no statutory definition is provided in respect of an item in the Customs
Act or the Central Excises Act, the trade understanding, meaning thereby the understanding
in the opinion of those who deal with the goods in question is the safest guide.
See Union of India v.
Delhi Cloth & General Mills. South Bihar Sugar Mills Ltd. v. Union of
India, Dunlop India Ltd. v. Union of India, In re Colgate Palmolive (India) Pvt.
Ltd., CST v. S.N. Bros., Kanpur, and also the famous observations of Justice Cameron
in His Majesty The King v. Planters Nut and Chocolate Co. Ltd. "
we discuss the issue involved, we intend to notice how this Court has construed
beneficial notifications issued under the Act. In Commissioner of Customs (Preventive),
Mumbai v. M. Ambalal and Company, (2011) 2 SCC 74, (in which one us was the party)
has observed that the beneficial notification providing the levy of duty at a concessional
rate should be given a liberal interpretation: "16. It is settled law that
the notification has to be read as a whole. If any of the conditions laid down in
the notification is not fulfilled, the party is not entitled to the benefit of that
The rule regarding exemptions
is that exemptions should generally be strictly interpreted but beneficial exemptions
having their purpose as encouragement or promotion of certain activities should
be liberally interpreted. This composite rule is not stated in any particular judgment
in so many words. In fact, majority of judgments emphasise that exemptions are to
be strictly interpreted while some of them insist that exemptions in fiscal statutes
are to be liberally interpreted giving an apparent impression that they are contradictory
to each other. But this is only apparent.
A close scrutiny will
reveal that there is no real contradiction amongst the judgments at all. The synthesis
of the views is quite clearly that the general rule is strict interpretation while
special rule in the case of beneficial and promotional exemption is liberal interpretation.
The two go very well with each other because they relate to two different sets of
Commissioner of Sales Tax v. Industrial Coal Enterprises, (1999) 2 SCC 607,
this Court has observed: "11. In CIT v. Straw Board Mfg. Co. Ltd. this Court
held that in taxing statutes, provision for concessional rate of tax should be
liberally construed. So also in Bajaj Tempo Ltd. v. CIT it was held that provision
granting incentive for promoting economic growth and development in taxing statutes
should be liberally construed and restriction placed on it by way of exception
should be construed in a reasonable and purposive manner so as to advance the
objective of the provision."
Commissioner of Central Excise, Shillong v. North-Eastern Tobacco Co. Ltd., (2003)
1 SCC 161, this Court has held: [ "10. The other important principle of interpreting
an exemption notification is that as far as possible liberal interpretation should
be imparted to the language thereof, provided no violence is done to the
Associated Cement Companies Ltd. v. State of Bihar, (2004) 7 SCC 642, this Court
while explaining the nature of the exemption notification and also the manner in
which it should be interpreted has held: "12. Literally "exemption"
is freedom from liability, tax or duty. Fiscally it may assume varying shapes, specially,
in a growing economy. In fact, an exemption provision is like an exception and on
10normal principle of construction or interpretation of statutes it is construed
strictly either because of legislative intention or on economic justification of
inequitable burden of progressive approach of fiscal provisions intended to augment
But once exception or
exemption becomes applicable no rule or principle requires it to be construed strictly.
Truly speaking, liberal and strict construction of an exemption provision is to
be invoked at different stages of interpreting it. When the question is whether
a subject falls in the notification or in the exemption clause then it being in
the nature of exception is to be construed strictly and against the subject but
once ambiguity or doubt about applicability is lifted and the subject falls in the
notification then full play should be given to it and it calls for a wider and liberal
construction. (See Union of India v. Wood Papers Ltd. and Mangalore Chemicals and
Fertilisers Ltd. v. Dy. Commr. of Commercial Taxes to which reference has been
G.P. Ceramics Private Limited v. Commissioner, Trade Tax, Uttar Pradesh, (2009)
2 SCC 90,this Court has observed thus: "29. It is now a well-established principle
of law that whereas eligibility criteria laid down in an exemption notification
are required to be construed strictly, once it is found that the applicant satisfies
the same, the exemption notification should be construed liberally. [See CTT v.
DSM Group of Industries (SCC para 26); TISCO v. State of Jharkhand (SCC paras 42
to 45); State Level Committee v. Morgardshammar India Ltd.; Novopan India Ltd.
v. CCE & Customs; A.P. Steel Re-Rolling Mill Ltd. v. State of Kerala and Reiz
Electrocontrols (P) Ltd. v. CCE.]"
the Tribunal has taken note of the correct principles enunciated by this Court while
granting relief to the assessee, we cannot find fault with the impugned judgment.
Accordingly, the appeal requires to be rejected and it is rejected. No costs.
(ANIL R. DAVE)