Calcutta High Court
Oriental Tiles Ltd. And Anr. vs Union Of India (Uoi) And Ors. on 18 May, 2006
Equivalent citations: 2007(3)CHN799
Author: Pinaki Chandra Ghose
Bench: Pinaki Chandra Ghose, Tapan Kumar Dutt
JUDGMENT Pinaki Chandra Ghose, J.
1. This appeal is arising out of an order passed by the Hon'ble First Court dated August 17, 2004 whereby His Lordship was pleased to dismiss the writ petition and further held that the writ petitioner is liable to pay additional duty under the Central Excise Tariff Act, 1985. His Lordship further held that the writ petitioner could not produce any law before His Lordship wherefrom he can get an exemption of additional duty.
2. The appellant/writ petitioner challenged the said order on the ground that the Hon'ble First Court failed to appreciate that the appellant is exempted from making payment of basic customs duty under Section 12 of the Customs Act, 1962 in view of the free trade agreement entered into by and between India and Sri Lanka executed on December 28, 1998 read together with notification No. 26 dated March 1, 2000 issued under Section 26(1) of the Customs Act, 1962.
3. Customs authorities have imposed additional customs duty under Section 3 of the Customs Tariff Act, 1975 on the polished marble slabs. Section 3 of the said Customs Tariff Act, 1975 is set out hereunder:
3 Levy of additional duty equal to excise duty, sales tax, local taxes and other charges.-- (1) Any article which is imported into India shall, in additional, 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 per centage 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....
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4. It is submitted on behalf of the appellant that an imported article, in addition to customs duty, shall be liable to additional duty equal to the excise duty if such article is manufactured or produced in India. Therefore, it is contended that in the matter of imposition of additional customs duty or countervailing duty under the provisions of Customs Tariff Act, 1975, the taxable event is the event of manufacturer as in the case of imposition of central excise duty. The question is whether cutting of marbles into slabs, and polishing of marble slabs amount to manufacture of goods or not.
5. It is submitted that in Aman Marble Industries Pvt. Ltd. v. Collector of Central Excise, Jaipur SC, the Hon'ble Supreme Court held that cutting of marbles into slabs and polishing thereof do not amount to manufacture of goods. In Rajasthan State Electricity Board v. Associated Stone Industries , the Hon'ble Supreme Court held that cutting and polishing stones into slabs is not a process of manufacture in view of the fact that no new commercial product comes into existence as the end product still remains stone. Therefore, relying on such decisions learned Counsel appearing on behalf of the appellant contended that under Section 3(1) of the Customs Tariff Act, 1975 it has been specifically stated that excise duty is leviable on a like article "if produced or manufactured in India". Therefore, it is submitted that polished marble slabs cannot be subjected to central excise duty and it is submitted that no countervailing duty can be levied on the polished marble slabs imported from Sri Lanka.
6. It is further submitted that no excise duty could have been imposed on such items in India since there is no manufacturing activities involved in preparation of polished marble slabs and if excise duty is not leviable, then ipso facto countervailing duty is not leviable. Accordingly, learned Counsel appearing on behalf of the appellant submitted that the whole basis of demand/claim on account of countervailing duty imposed by the authorities is without jurisdiction. He also relied upon a decision Hyderabad Industries v. Union of India.
7. It is also submitted that since the Hon'ble Supreme Court has already held that cutting and polishing of marbles into slabs do not amount to manufacture, therefore, no excise duty is leviable and hence, the additional customs duty which is levied to counter-balance excise duty, cannot be imposed.
8. On the contrary, learned Counsel appearing on behalf of the respondent contended that there are two types of duties - customs duty and countervailing duty at the time of importation of goods into India. The charging section for customs duty is Section 12 of the Customs Act. According to that section, duties of customs shall be levied at such rate as may be specified under the Customs Tariff Act, 1975 or any other law for time being in force on goods imported into India. Charging section countervailing duty is Section 3 of the Customs Tariff Act, 1975. Under the said section in addition to customs duty there is a levy of additional duty (countervailing duty). The rate of such additional duty is identical to the rates of excise duty on identical or similar goods manufactured in India.
9. He also contended that it is a fact that under a notification No. 26 of 2000 dated March 1, 2000 the Government of India exempted customs duty on marble slabs imported into India underss the said notification.
10. He submitted that the charging section for excise duty is Section 3 of the Central Excise Act, 1944. Under the said section polished marble is excisable goods and chargeable to excise duty at the rate specified in Chapter 6802 21 90. Under Section 3 of the Central Excise Act, 1944, excise duty is leviable, the goods are excisable and are manufactured. Under the provisions of the said Act and under the schedule the said goods are excisable. According to the department, the said goods (i.e. polished marble slabs) are also manufactured goods. Hence, central excise duty is payble. Therefore, additional countervailing duties are also payable. It is submitted that the decisions cited on behalf of the appellant, are not the authority for proposition for manufactured marble slabs which has been imported by the writ petitioner/appellant is not excisable goods. It is further submitted that the decision (supra) does not help the petitioner since the excise duty is very much leviable on the subject goods i.e. polished marble slabs.
11. Learned Counsel appearing on behalf of the appellant relied upon Section 3 of the Central Excise Act, 1944 which is set out hereunder:
3 Duties specified in the Schedule to the Central Excise Tariff Act, 1985 to be levied. - (1) There shall be levied and collected in such manner as may be prescribed,--
(a) A duty of excise, to be called the Central Value Added Tax (CENVAT) on all excisable goods (excluding goods produced or manufactured in special economic zones) which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986)....
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12. He further contended that it is absolutely clear that those goods mentioned in the First Schedule to the Central Excise Tariff Act, 1985 "which are manufactured or produced in India" can be subjected to excise duty. Therefore, for the purpose of imposing excise duty, the condition precedent is the event of manufacture. In Aman Marble case the view taken by the learned Tribunal that marble slabs fall under Entry 25.04 under Chapter 25 in the First Schedule to the Central Excise Tariff Act was overruled by the Hon'ble Supreme Court. The issue has been settled by the Hon'ble Supreme Court in Aman Marble case.
13. Accordingly he contended that the appeal should be allowed and the judgment of the Hon'ble First Court should be set aside.
14. After hearing the parties it appears to us that the levy of additional duty of customs under Section 3(1) of the Customs Tariff Act, 1975 on import of polished marble slabs is challenged by the appellant in this appeal. The appellant imported the said goods into India. The department sought to raise a demand of additional duty of customs under Section 3(1) of the said Act. According to the appellant, no duty was payable inasmuch as the polished marble which was imported, had not been manufactured or produced and thus no duty was leviable.
15. It also appears that under the Central Excise Act, 1944 the said item was covered within the tariff item of the Central Excise Act, 1944 and on the same there was a liability to pay the duty of excise. It was also contended by the department that the marble was polished and reached in its character as a polished marble after process of manufacture and the said item correctly falls within the tariff of the schedule to the Excise Act. Therefore, the demand under Section 3(1) of the said Act was raised because the imported item was regarded as an article which are liable to the duty of the excise under the Excise Act.
16. It is submitted on behalf of the respondent Union of India that the polished marble imported by the appellant is an excisable article and it attracts the additional duty regardless of the fact that it was not produced or manufactured and therefore, excisable to excise duty. It is submitted that the polished marble was a result of the process of manufacture and therefore, excise duty was leviable and even if it was not manufactured or produced, excise duty was leviable under the Central Excise Act since it was mentioned in the schedule thereto.
17. It is submitted that the words "if produced or manufactured in India" do not mean that the like article is actually produced or manufactured in India. As per the Explanation if an imported article is one which has been manufactured or produced then it must be presumed, for the purpose of Section 3(1) of Act, that such an article can likewise be manufactured or produced in India. For the purpose of attracting additional duty under Section 3 on the import of a manufactured or produced article the actual manufacture or production of a like article in India is not necessary and reliance was placed in Thermax (P) Ltd. v. Collected of Customs . The Hon'ble Supreme Court in Hyderabad Industries Ltd. and Anr. v. Union of India and Ors. (supra) has observed as follows:
...To our mind of genesis of Section 3(1) of the Customs Tariff Act has been brought out in the aforesaid observations of this Courts, namely, that for the purpose of saying what amount, if any, of additional duty is leviable under Section 3(1) of the Customs Tariff Act, it has to be imagined that the articles imported had been manufactured or produced in India and then to see what amount of excise duty was leviable thereon.
18. It has also been held by the Hon'ble Supreme Court which is reproduced hereunder:
Paragraph 12. Section 12 of the Customs Act levies duty on goods imported into India at such rates as may be specified in the Customs Tariff Act, 1975. When we turn to the Customs Tariff Act, 1975, it is Section 2 which states that the rates at which duties of customs are to be levied under the Customs Act, 1962 are those which are specified in the First and second Schedules of the Customs Tariff Act, 1975. In Section 12 of the Customs Act there is no words for the purpose of determining the levy of customs duty on goods imported into India what is relevant is Section 12 of the Customs Act read with Section 2.
Paragraph 13. On the other hand levy of additional duty under Section 3 is equal to the excise duty for the time being leviable on the like article which is imported into India if produced or manufactured in India. The rate of additional duty under Section 3(1) on an article imported into India is not relatable to the First and the Second Schedules of the Customs Act but the additional duty if leviable has to be equal to the excise duty which is leviable under the Excise Act. This itself shows that the charging section for the levy of additional duty is not Section 12 of the Customs Act but is Section 3 of the Customs Tariff Act, 1975, This apart Sub-sections (3), (5) and (6) of Section 3 refer to additional duty as being leviable under Sub-section (1). In Sub-section (5), for instance, it is clearly stated that the duty chargeable under Section 3 shall be in addition to any other duty imposed under this Act or under any other law for the time being in force.
Paragraph 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 9A of the Customs Tariff Act, 1975. 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.
19. The Hon'ble Supreme Court in Khandelwal Metal and Engineering Works v. Union of India, observed as follows:
The levy specified in Section 3(1) of the Tariff Act is a supplementary levy, in enhancement of the levy charged by Section 12 of the Customs Act and with a different base constituting the measure of the impost. In other words, the scheme embodied in Section 12 is amplified by what is provided in Section 3(1). The customs duty charged under Section 12 is extended by an additional duty confined to imported articles in the measure set forth in Section 3(1). Thus, the additional duty which is mentioned in Section 3(1) of the Tariff Act is not in the nature of countervailing duty.
20. It further held that:
We are unable to accept the argument of the appellants that Section 3(1) of the Tariff Act is an independent, charging section or that, the 'additional duty' which it speaks of is not a duty of customs but is a countervailing duty.
21. After referring to the Explanation to Section 3(1) the Bench held that:
These provisions leave no doubt that the duty referred to in Section 3(1) of the Tariff Act does not bear any nexus with the nature and quality of the goods imported into India.
22. The Hon'ble Supreme Court also came to the conclusion that Section 3(1) of the Tariff Act is not attracted because, the damaged articles, which are in the nature of brass scrap, are outside the scope of that Act since, such articles are not and cannot be produced or manufactured.
23. On the basis of such observations the Hon'ble Supreme Court in Hyderabad Industries Ltd. and Anr. v. Union of India and Ors. (supra) held that the additional duty was a customs duty, Section 12 of the Customs Act being the charging section, which was leviable on the import of goods into India and it had no nexus with the nature and quality of goods so imported. Another reason which was given by the Bench while upholding the levy was that the brass scrap which was imported was a by-product and was, therefore, in any case a manufactured product. Hence, the Hon'ble supreme Court held that the decision in Khandelwal Metal and Engineering Works v. Union of India (supra) to the effect that additional duty of customs is leviable merely on the import of the article even if it is not manufactured or produced in India does not appear to be correct inasmuch as the said conclusion is based on the premise that Section 12 of the Customs Act, and not Section 3(1) of the Tariff Act, is the charging section. The Hon'ble Supreme Court further held as follows:
...As we have already observed on a correct interpretation of the relevant provisions of the two Acts there can be no manner of doubt that additional duty which is levied under Section 3(1) of the Tariff Act is independent of the customs duty which is levied under Section 12 of the Customs Act. Secondly, it has been held by the three-Judge Bench in this case that excise duty is leviable if the article has undergone production or manufacture. The observation in Khandelwal Metal and Engineering Works case which seems to suggest that even if no process of manufacture or production has taken place the imported articles can still be subjected to the levy of additional duty does not appear to be correct inasmuch as the measure for levy of additional duty is the quantum of excise duty leviable on a similar article under the Excise Act. Duty under the Excise Act can be levied, as has been held earlier, if the article has come into existence as a result of production or manufacture. In other words when articles which are not produced or manufactured cannot be subjected to levy of excise duty then on the import of like articles no additional duty can be levied under the Customs Tariff Act. The levy of additional duty being with a view to provide for counterbalancing the excise duty leviable, we are of the opinion that additional duty can be levied only if on a like article excise duty could be levied. The decision in Khandelwal Engineering Works case to the extent it takes a contrary view, does not appear to lay down the correct law. Shri Vaidyanathan contended that this Court should be reluctant to reconsider a judgment which has held the filed for a long time, but in our opinion public interest requires that law be correctly interpreted more so in a taxing statute where the ultimate burden may fall on the common man. We hasten to add that we are not overruling the Khandelwal Metal and Engineering works case in its entirety because the Court also held in that case that brass scrap was in any case an item which was manufactured and therefore, excise duty was leviable. We have not examined, in the present cases, whether brass scrap can or cannot be regarded as a manufactured item for that question does not arise in the present case.
24. And further the Hon'ble Supreme Court held that any duty under Section 3 of the Customs Tariff Act is not payable on the asbestos fibre imported into India by the appellant in the said decision.
25. We have also considered the notification issued by the authorities and it appears from the said notification issued by the Central Government being notification No. 26/2000 Cus. dated March 1,2000 which was subsequently amended from time to time and the latest amendment bearing No. 57/2000-Cus. dated June 28, 2005 whereby it has been specifically stated that whereby an exemption was granted to the specified goods imported under free trade agreement with Sri Lanka, the Central Government in the public interest exempted the goods of the description specified in column (3) of the table annexed to the said notification and granted an exemption when the goods were/are imported under the free trade agreement with Sri Lanka.
26. Learned Counsel appearing on behalf of the Union of India drew our attention to chapter 68 of Section 13 of the Excise Tariff of India and contended that the articles mentioned therein includes polished marble slabs in tariff item No. 6802 21 90, but it appears to us that it has been specifically stated under the said item, the description of goods "Other" and he tried to convince that the said word "Other" would include polished marble slabs.
27. In Rajasthan State Electricity Board v. Associated Stone Industries and Anr. (supra), the Hon'ble Supreme Court has held as follows:
...This apart excavation of stones from a mine and thereafter cutting them and polishing them into slabs did not amount to manufacture of goods. The word 'manufacture' generally and in the ordinary parlance in the absence of its definition in the Act should be understood to mean bringing to existence a new and different article having distinctive name, character or use after undergoing some transformation. When no new product as such comes into existence, there is no process of manufacture. The cutting and polishing stones into slabs is not a process of manufacture for obvious simple reason that the new and distinct commercial product came into existence as the end product still remained stone and there its original identity continued....
and this position was further reiterated as follows:
...It is not possible to accept that excavation of stones and thereafter cutting and polishing them into slabs resulted in any manufacture of goods.
28. After scrutinizing the decision and the observation made in Hyderabad Industries Ltd. and Anr. v. Union of the India and Ors. (supra), in our opinion the imposition of additional duty under Section 3(1) of the Customs Tariff Act on the given facts in the instant case cannot attract the additional duty as contemplated under Section 3(1) of the Customs Tariff Act.
29. It further appears to us that even the said polished marble which has been imported by the appellant into India cannot be termed as the manufacture of goods in India. Hence, in our opinion, we have to accept the contention of the appellant and we do hold that since the excise duty is not leviable, then automatically the countervailing duty also cannot be attracted and we have to hold that such action on the part of the respondent authorities on the basis of which demand and/or claim of countervailing duty imposed by the authorities, is not tenable under the provision of law in the light of the decision of the Hon'ble Supreme Court in Hyderabad Industries Ltd. and Anr. v. Union of India and Ors. (supra) and hence we set aside the order passed by the Hon'ble First Court and allow the writ petition filed by the petitioner by directing the authorities to consider the case of the writ petitioner in the light of this decision and to pass a reasoned order in the matter after giving a chance of being heard to the petitioner and without insisting the payment or the additional duty at the moment from the appellant and to take necessary steps accordingly.
Tapan Kumar Dutt, J.
30. I agree.