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[Cites 40, Cited by 0]

Madras High Court

M/S.Mrf Limited vs Union Of India on 23 December, 2011

Author: Chitra Venkataraman

Bench: Chitra Venkataraman

       

  

  

 
 
 IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED: 23.12.2011

CORAM 

THE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMAN

W.P.Nos.25922 to 25924 of 2011
and M.P.No.1 of 2011

M/s.MRF Limited
124, Greams Road
Chennai-600 006
Represented by Mr.V.Deivasigamani
General Manager
Indirect Taxes								..Petitioner

Vs

1. Union of India
    Ministry of Finance
    Through Secretary
    Department of Revenue
    North Block
    New Delhi-110 001

2. The Additional Commissioner of Customs
    (Group 2)
    Office of the Commissioner of Customs
    Custom House
    60, Rajaji Salai
    Chennai-600 001						..Respondents

Prayer in W.P.No.25922/2011:-
	Writ Petition filed under Article 226 of the Constitution of India praying to issue a writ of Certiorari to call for the records of the Second respondent and quash the impugned show cause cum Demand Notice dated 23.09.2011 issued under Section 28(1)(a) of the Customs Act, 1962 in File No.S.Misc.1714/2011/GR-2 by the respondent No.2.

Prayer in W.P.No.25923/2011:-
	Writ Petition filed under Article 226 of the Constitution of India praying to issue writ of Prohibition prohibiting the respondent No.2 from usurping a jurisdiction not vested in it and levying cess in the nature of Additional Duty of Customs under Section 3(1) of the Customs Tariff Act, 1975 on the future imports which are continuous in nature and are required for the petitioner's manufacturing activities.

Prayer in W.P.No.25924/2011:-
	Writ Petition filed under Article 226 of the Constitution of India praying to issue writ of Mandamus forbearing the respondent No.2 from imposing/levying any duty in the nature of Additional Duties of Customs under Section 3(1) of the Customs Tariff Act, 1975 on the future imports which are continuous in nature and are required for the petitioner's manufacturing activities.

	For petitioner	: Mr.Arvind Datar, Senior Counsel 
			           for Raju K.Lukose

	For respondents  : Mr.K.Ravi Anandapadmanabhan
				  Standing Counsel (Customs)

O R D E R

The petitioner seeks a Writ of Certiorari to quash the show cause notice-cum-demand notice dated 23.09.2011, issued under Section 28(1)(a) of the Customs Act, 1962, by the second respondent. The petitioner also seeks a Writ of Mandamus to forbear the second respondent from levying Additional Duties of Customs under Section 3(1) of the Customs Tariff Act, 1975 on the future imports which are continuous in nature and are required for the petitioner's manufacturing activities. The petitioner further seeks a Writ of Prohibition, prohibiting respondent No.2 from usurping a jurisdiction not vested in it and levying cess in the nature of Additional Duty of Customs under Section 3(1) of the Customs Tariff Act, 1975 on the future imports which are continuous in nature and are required for the petitioner's manufacturing activities.

2. The petitioner herein is the manufacturer of Automotive Tyres, Tubes and other rubber products. For manufacturing these rubber products, they purchase indigenously grown natural rubber, apart from importing natural rubber on a regular basis. Rubber, under the Rubber Act, 1947, attracts a duty of excise on all rubber produced in India at such rate, as fixed by the Central Government. Section 12(1) of the Rubber Act, 1947 is the charging provision under which excise duty as cess is levied on rubber produced in India at such rate fixed by the Central Government as not exceeding two rupees per kilogram of rubber so produced in India. As per the Ministry of Commerce, a duty of excise at Rs.1.50 per Kg is leviable as cess on all rubber produced in India. The excise duty shall be collected by the Rubber Board, levied under Section 12(1). As far as the excise duty leviable under the Central Excise and Salt Act, 1944 is concerned, natural rubber falling under Entry 40.01.00 is exempted from the whole of excise duty leviable. Thus exemption from excise duty under the excise law has nothing to do with the levy under the Rubber Act. Under Section 3(1) of the Customs Tariff Act, 1975, any article which is imported into India attracts additional duty equal to excise duty for the time being, leviable on like articles, produced or manufactured in India.

3. It is seen from the documents placed before this Court that in respect of imports made by the assessee during the period January, 1995 to August, 1995, the petitioner imported 31 consignments of natural rubber covered under three categories of licence, which enabled the petitioner to enjoy exemption from payment of customs duty. In particular, the petitioner states that as regards the imports under DEEC scheme covered by Customs Notification Nos.203/92 and 204/92, apart from customs duty exemption, whole of the additional duty leviable under Section 3 of the Customs Tariff Act is also exempted. It is stated that although the Customs Department did not levy additional duty of customs on the import made prior to 19.6.1995, in respect of Bill of Entry No.2919 dated 19.6.1995, for import of 24.92 MTs of natural rubber, the Customs Department levied rubber cess at the rate of Rs.50 per Kg. Aggrieved by the demand made, the petitioner preferred appeals before the Customs, Excise and Service Tax Appellate Tribunal (hereinafter called as the "CESTAT"). By order dated 11.9.1997, in the decision reported in 1997 (96) ELT 198 (Tribunal) (MRF Limited Vs. C.C.), the Tribunal allowed the appeal, quoting the clarification by the Ministry of Finance dated 22.7.1997 in Letter No.F572/97-C, based on the clarification by the Ministry of Commerce dated 30.6.1997 in Letter No.14(3)/97, that under Section 12 of the Rubber Act, cess is levied on rubber produced in India and not on rubber imported. Thus applying the clarification, the Tribunal allowed the appeal preferred by the petitioner. So too, in the case of TTK-LIG Ltd Vs. CC, Chennai reported in 1999 (111) ELT 52, as well as the decision in the case of Vikrant Tyres Vs Commissioner of Madras in Final Order No.1761/2001 dated 29.11.2001, the CESTAT, Bangalore Bench, held that the cess levied on the imported rubber was bad in law.

4. The decision in Vikrant Tyres Vs Commissioner of Madras in Final Order No.1761/2001 dated 29.11.2001 was taken on appeal before the Apex Court by the Revenue. By order dated 17.2.2003, in the decision reported in 2003 (157) ELT A134 (Commissioner of Customs, Chennai Vs. Vikrant Tyres, Mysore), the Apex Court dismissed the Revenue's appeal as "not pressed". Subsequently, in I.A.No.31-45 in Civil Appeal Nos.1460-1474/2003, under order dated 11.10.2003, the Apex Court dismissed the Review petition filed by the Revenue, by observing "We see no reason to modify / clarify our order dated 17th February, 2003. I.A.Nos.31-45 stands dismissed."

5. It is a matter of record that considering the conflicting views of the various Benches of CESTAT as to the levy of additional duty of customs on the imported rubber to the extent equal to the duty of excise levied as cess under Section 12 of the Rubber Act, the Principal Bench, New Delhi, referred the question as to whether the additional duty of customs was leviable on the imported rubber, to a Larger Bench, vide the decision reported in 2005 (190) ELT 47 in the case of TIK-LIG Ltd, Vs Commissioner of Customs, Chennai. In the decision reported in 2006 (193) ELT 169 (TTK-LIG Ltd. Vs. Commissioner of Customs, Chennai & Delhi), by order dated 16.12.2005, the Tribunal, New Delhi, held that additional duty of customs was leviable under Section 3 of the Customs Tariff Act, 1975 on the imported rubber as on the date of importation to the extent equal to the duty of excise levied as cess under Section 12 of the Rubber Act on the rubber produced/manufactured in India as on the said date. In so holding, the Tribunal pointed out that neither the communication of the Finance Ministry dated 22.7.1997 nor the communication of the Commerce Ministry dated 30.6.1997 dealt with the additional duty of customs leviable under Section 3(1) of the Customs Tariff Act. It pointed out to the communication from the Ministry of Finance on 02.09.1997, informing all the Commissioners of Customs that as cess is collected as duty of excise, additional duty of customs is leviable under Section 3 of the Customs Tariff Act equivalent to the cess on the imported goods. Noting the misinterpretation of this communication, Ministry of Finance informed the Commissioners of Customs on 02.09.1997, to ensure collection of additional duty of customs on imported goods equal to cess wherever leviable as duty of excise on goods produced/manufactured in India. On 29.9.1997, it clarified that though Rubber Act, 1947 may not provide collection of cess on imports, additional duty of customs is payable on the import of rubber by virtue of Section 3 of the Customs Tariff Act, 1975. By Circular No.75/98 Customs dated 8.10.1998, Government of India, Ministry of Finance, withdrew the circular dated 22.7.1997, by which, Ministry of Commerce letter dated 30.6.1997 was circulated with immediate effect. Thus, the CESTAT pointed out that when cess is levied on goods as duty of excise, then as per Section 3 of the Customs Tariff Act, 1975, additional duty of customs equivalent to such cess is leviable on similar imported goods.

6. Leaving this development aside, it may be noted that consequent on the orders passed in the appeals preferred by the assessee, resulting in relief to the assessee holding that on the imported rubber, there could be no levy of cess under Section 12 of the Rubber Act, the petitioner herein sought for refund of the cess collected and filed a refund application to that effect before the Assistant Commissioner of customs. By proceedings dated 02.12.1998, the Assistant Commissioner of Customs rejected the claim for refund. The Assistant Commissioner pointed out that in terms of Section 3 of the Customs Tariff Act, additional duty of customs was leviable; that the clarification dated 29.9.1997 had clearly held that cess on imported rubber is leviable under Section 3 of the Customs Tariff Act; hence, the refund claim was liable to be rejected. Although there is some confusion in the order passed by the said authority on 02.12.1998 with reference to the Ministry of Commerce letter dated 29.09.1997, the fact remains that as far as imported rubber is concerned, Ministry of Commerce made it clear that imported rubber did not attract cess levy under the Rubber Act. Aggrieved by the orders passed in 79 claims, the petitioner preferred appeals before the Commissioner of Customs (Appeals). Placing reliance on the CESTAT order in the assessee's case dated 11.9.1997, the petitioner contended that refund of the cess paid was to be ordered.

7. The First Appellate Authority, however, dismissed the appeals and held that the order of the lower authority holding that cess is leviable as additional duty of customs on natural imported rubber could not be held as bad and that the instruction given on 02.09.1997 clearly pointed out that Additional Duty of Customs under Section 3 of the Customs and Tariff Act, 1975 equal to excise duty leviable as per the Rubber Act, 1947 on the locally produced or manufactured goods was leviable. Thus the appeals were dismissed in toto.

8. It may be of relevance to point out that in the orders passed therein dated 19.11.1999, the Commissioner of Customs made a specific reference to Final Order Nos.2242 to 2272 of 1997 dated 11.09.1997 of CEGAT, South Regional Branch, Chennai, passed in the petitioner's case, following the decision in the case of M/s.M.M.Rubber Company Limited Vs. Commissioner of Customs, Chennai dated 08.12.1998, wherein, in paragraph 5 of the order, the Tribunal stated that the claim of the present petitioner therein before the Tribunal was with reference to the levy of cess and not with reference to the Countervailing Duty (CVD). The Tribunal had observed therein that had the question been a countervailing duty, the order of the Commissioner might have been different.

9. Thus, ultimately, the batch of claims of the petitioner got dismissed and all of them went on appeal before the CESTAT. By a common order passed by the Tribunal dated 28.10.2003 in Appeal Nos.C/726 to 730/1996, which included not only the assessee's case but two other assessees case viz., London Rubber Co. India Ltd and Elgi Tyre and Tread Ltd., towards the end of paragraph 7, the Tribunal pointed out to the factual issue therein that cess on imported rubber was not leviable and hence allowed the appeals, holding that the appellants are entitled to the refund of the cess levied and collected by the Customs Department on the imported rubber. In the circumstances, the Tribunal further held that as the question of unjust enrichment for the purpose of Section 11B had to be seen, the authorities were directed to verify the said aspect and grant the refund to the petitioner. Thus, the Tribunal set aside the orders with a consequential direction to the authorities to consider the claim in terms of Section 11B and pass orders.

10. It is seen from the documents placed before this Court that the Revenue preferred a Special Leave Petition before the Apex Court as against this order of the CESTAT, raising the following questions of law:

(a) Whether cess is leviable on imported rubber under Section 12 of the Rubber Act, 1947, read with Section 3 of the Customs Tariff Act, 1975?
(b) Whether the claim of the respondent for refund of duty is barred by the doctrine of unjust enrichment?

11. The appeals filed by the Revenue were however dismissed under orders dated 05.07.2004 and the Apex Court remanded the matter back to the CESTAT to decide on the question of unjust enrichment. The appeals preferred in the case of Vikrant Tyres Ltd. and MM Rubber Company Ltd. were also remanded by the Apex Court under orders dated 14.07.2008 and 08.03.2007 respectively. The CESTAT accordingly set aside the orders in the respective assessee's case and remanded the case to the original authority to decide on the issue of unjust enrichment on the refund claim made by the assessees therein.

12. While matters stood thus, by Show cause-cum-Demand Notice dated 23.09.2011, the second respondent herein initiated proceedings under Section 28(1)(a) of the Customs Act, 1962, demanding levy of Additional Duty under Section 3 of Customs Tariff Act, 1975 and called upon the petitioner-MRF Limited to show cause:

(i) As to why Additional Duty of Customs amounting to Rs.46,47,500/- as detailed in Annexure I for the period 24.09.2010 to 23.10.2010 under Section 3(1) of the Customs Tariff Act, 1975 should not be recovered from them under Section 28(1) of the Customs Act, 1962.
(ii) As to why interest at appropriate rate on the amount mentioned above should not be recovered from them under Section 28 AB of the Customs Act, 1962.
(iii) As to why penalty should not be imposed on them under Section 114 A of the Customs Act, 1962.

13. Aggrieved by this, the petitioner has filed the present writ petition before this Court, challenging the same on the following grounds:

(a) that the respondent has no authority or jurisdiction to reopen the issue, which is already concluded in favour of the assessee.
(b) that once the appeal preferred by the Revenue on the aspect of levy of cess on imported goods is rejected by the CESTAT as confirmed by the Apex Court and again on the refund claim on further appeal before the Tribunal, it is no longer open to the Revenue to reopen that concluded issue to press into service, Section 12(1) of Rubber Act, 1947 and Section 3(1) of the Customs Tariff Act, 1975.
(c) that when the Tribunal's order on the petitioner's refund claim appeal had also attained finality, the demand notice issued by the Revenue on the pretext of show cause notice with premeditation to forestall the refund claim is totally illegal and without jurisdiction. When there are no jurisdictional facts to issue notice under Section 28(1)(a) of the Customs Act, 1962 in the light of the decision of the Supreme Court in Siemens Ltd., Vs. State of Maharashtra reported in 2007 (207) ELT 168 (S.C.), the impugned demand notice merits to be quashed. The petitioner also submits that the demand now made by the Revenue is no different from the amount collected by the Revenue originally. When the issue on levy of cess had already been decided and stands concluded by the decision of the Tribunal and on appeal, the Revenue itself had withdrawn the appeal before the Apex Court in the case of Vikrant Tyres Ltd., thereby accepting the decision of the CESTAT, the question of assuming jurisdiction to levy additional duty does not arise and there could be no longer a levy of additional duty.

14. Learned senior counsel appearing for the petitioner pointed out that the levy of cess under the Rubber Act, 1947 is a levy for a specific purpose. Given the fact that the same is now like the excise duty to go for a MODVAT credit facility and considering the fact that no excise duty is leviable in the case of imported rubber and going by the decisions of the Tribunal accepted by the Revenue too, there could no longer be any demand in the form of levying additional duty. Thus when Section 3 of Customs Tariff Act, 1975 is clear as to the levy as one of additional duty and not as cess and the present notice is no different from what was originally given by the Revenue, the order passed by the CESTAT on the refund claim should have been taken to a logical end. The present proceedings, in short, are aimed at the refund claims and there are no bona fides in the present proceedings. He pointed out that the confusion persisting in the minds of the authorities below as to the additional duty collected as cess is clear from the reading of the order of the Assistant Commissioner and later in the First Appeal order in considering the claim for refund.

15. Thus learned Senior Counsel pointed out that in substance, the demand now made in the notice is no different from what was originally levied. Going by the history of said levy, right from the decision of the CESTAT in the case of MRF Ltd Vs. CC, Madras reported in 1997 (96) ELT 198 (T-Mad) and the subsequent decisions thereon by the Tribunal in the petitioner's case and in similarly placed assessee's case, it is not open to the Revenue to reopen the settled issue once again as though it is purported to be a notice to levy additional duty. He further pointed out that considering the conflicting views that persisted therein and the long history of litigation on the levy of additional duty on the basis of cess levied under the Rubber Cess Act, 1947, the clarification issued by the Board on 22.07.1997 as well as on 30.06.1997 thus having been accepted by the respondents, a concluded issue cannot be reopened in the guise of proposal to levy additional duty. It is further stated by the learned senior counsel appearing for the petitioner that what was levied as per the original order was cess as additional duty on imported items. When the petitioner had made a refund claim based on the circular and the Tribunal had granted it so, the show cause notice issued is only a colourable exercise.

16. Referring to the orders passed on the refund claim, he further pointed out that even assuming that the refund claim of the petitioner was not covered by the earlier order passed, holding it as an additional duty, the stand of the Revenue is evident from the rejection order passed by the Assistant Commissioner, that what was sought to be considered under the refund claim was nothing but a levy collected as additional duty with the cess shown for rate purposes only. Referring to the provisions of the Rubber Act, 1947, learned senior counsel placed reliance on the decision of the Delhi High Court reported in 2004 (165) ELT 35 (Del), in the case of Pasupati Fabrics Ltd., Vs. Union of India, that the levy under the Rubber Cess Act does not partake the character of tax or duty to be considered for the purpose of Section 3 of the Customs Tariff Act, 1975. It must be pointed out herein that learned senior counsel was fair enough to place before this Court, a decision of the Gujarat High Court in the case of Vareli Textile Industries Ltd. Vs. Union of India reported in 1997 (91) ELT 279 (Guj), taking a contra view on this aspect. Thus, the sum and substance of the argument of the learned senior counsel appearing for the petitioner is that, given the round of litigation at the first instance, which ultimately resulted in favour of the petitioner and considering the pith and substance of the levy, the present notice has to be quashed as without jurisdiction.

17. On notice, the respondents have filed the counter affidavit before this Court. The stand of the Revenue is that levy under Section 12 of the Rubber Act, 1947 is not cess as such, but duty of excise levied as cess for the purpose of the Act. Thus, what is levied under the Rubber Act is no different from what is levied as excise duty under the Central Excise Act. Referring to Section 3(1) of the Customs Tariff Act, 1975, the counter states that the question before the Tribunal on the earlier round of litigation was as to whether the Customs Department could levy cess as per the Rubber Act, 1947. It is no doubt true that the Board, in its circular, pointed out that on imported rubber, there is no question of the Customs Department levying cess and the Tribunal also held in favour of the assessee that under Section 3(1) of the Customs Tariff Act, 1975, the Revenue cannot impose cess as leviable under Section 12(1) of the Rubber Act, 1947. Referring to the decision of the Tribunal, particularly to the Larger Bench of the Delhi Tribunal in the case of TTLK-LIG Ltd Vs. Commissioner of Customs, Chennai/New Delhi reported in 2006 (193) ELT 169 (Tri-LB), the respondent submitted that the decisions rendered by the Tribunal earlier were all on the aspect of the Customs Department collecting cess under the Rubber Act, 1947 on the imported rubber and not as an additional duty under Section 3(1) of the Customs Tariff Act, 1975.

18. Thus the issue before the Tribunal and in the appeal before the Supreme Court was as to whether the respondent could levy cess on the imported rubber and the question considered and decided was not in relation to the levy of additional duty of customs under the Customs Tariff Act, 1975.

19. The Supplementary counter filed by the Revenue further pointed out to the circular issued dated 29.09.1997 as clearly giving guidelines to the Field Officers, directing them to collect additional duty of customs only by virtue of Section 3 of the Customs Tariff Act on the imported rubber. The counter further states that all the prior circulars issued were with reference to the jurisdiction of the Customs Department to levy cess under the Rubber Act, 1947 on imported items. Thus the present proceedings is concerned about the levy of additional duty of customs under Section 3 of the Customs Tariff Act and the measure for that levy as per Section 3 (1) is adapted from the Rubber Act,1947.

20. Learned Standing counsel appearing for the Revenue, making his submissions on this aspect, pointed out to Section 3(1) of the Customs Tariff Act, 1975 and submitted that the levy sought to be made under Section 3(1) of the Customs Tariff Act, 1975 is based on the prevalent rate of excise duty payable on the similar goods manufactured within the country. In other words, for the purpose of fixing the rate of additional duty levied under Section 3 of the Customs Tariff Act, 1975, the Act borrows the rate of the dxcise duty levied on the indigenously manufactured goods. Thus what the petitioner paid originally as evident from the Bill of Entry was cess only and the petitioner was fully aware about this nature of levy made right through the proceedings before the various authorities, including the CESTAT at the first round and thereafter in the claim made before the Commissioner for refund. Thus what was collected from the petitioner was cess alone and not additional duty under Section 3 of the Customs Tariff Act, 1975. In the light of the provisions in Section 3 of the Customs Tariff Act and the fact that the Tribunal had, in its order on the refund claim, clearly pointed out to the nature of collection made earlier as one of cess under the Rubber Act, 1947, the petitioner is not justified in contesting the show cause notice as though the levy of additional duty under Section 3 had already been decided in favour of the petitioner and accepted by the Revenue as not chargeable. Considering the stage of the proceedings at which the petitioner has approached this Court, the respondents submit that the writ petitions be dismissed.

21. Heard learned senior counsel appearing for the petitioner and learned standing counsel appearing for the Revenue and perused the materials available on record.

22. In the face of the orders of the Tribunal in the petitioner's own case holding the levy of cess and the collection by the Customs Authorities as bad and without jurisdiction and the decision of the Apex Court dismissing the Revenue's appeal thereon, the issue as regards the levy of cess by the Customs Department on the imported rubber under the Rubber Act thus no longer remains a question for any further consideration before this Court. Hence, the question that arises herein for consideration is as to whether the Revenue could validly assume jurisdiction to justify the notice issued as one for levying additional duty under Section 3 of the Customs Tariff Act and not cess in the guise of an additional duty, as has been contended by the petitioner. Section 3(1) of the Customs Tariff Act, 1975 reads as under:

3.(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:
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.
Explanation. In this sub-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. "

23. The question as to whether Section 3 of the Customs Tariff Act could be held as a charging provision came up for consideration in the Constitution Bench decision of the Apex Court reported in AIR 1999 SC 1847 (Hyderabad Industries Ltd. and another Vs. Union of India). Overruling the decision in the case of Khandelwal Metal and Engineering Works Ltd. Vs. Union of India reported in AIR 1985 SC 1211, the Apex Court pointed out as follows:

"16. There are different types of customs duty 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. "

Thus merely because the incidence of tax under Section 3 arises on the import of the articles, it does not necessarily mean that the Customs Tariff Act cannot provide for the charging of duty which is independent of the customs duty leviable under the Act. It observed:

"12. Section 3(1) of the Customs Tariff Act, 1975 provides for levy of an additional duty. The duty is, in other words, in addition to the customs duty leviable under Section 12 of the Customs Act read with Section 2 of the Customs Tariff Act. Secondly this duty is leviable at a rate equal to the excise duty for the time being leviable on a like article to the one which is imported if produced or manufactured in India. The explanation to this sub-section expands the meaning of the expression "the excise duty for the time being leviable on a like article if produced or manufactured in India". The explanation to Section 3 has two limbs. The first limb clarifies that the duty chargeable under Sub-section (1) would be the excise duty for the time being leviable on a like article if produced or manufactured in India. The condition precedent for levy of additional duty thus contemplated by the explanation is that the article is produced or manufactured in India. The second limb to the explanation deals with a situation where "a like article is not so produced or manufactured". The use of the word "so" implies that the production or manufacture referred to in the second limb is relatable to the use of that expression in the first limb which is of a like article being produced or manufactured in India. "

24. Going by the object of the Customs Tariff Act, the Apex Court pointed out that Section 3 has been enacted to provide for a level playing field to the present or the future manufacturers of the like article in India. Overruling the view taken in the case of Khandelwal Metal and Engineering Works Ltd. Vs. Union of India reported in AIR 1985 SC 1211, the Apex Court pointed out that the levy of additional duty, being with a view to provide for counter-balancing the excise duty leviable, additional duty could be levied only if on a like article, excise duty could be levied. The Apex Court further held as follows:

" 19. ... 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 counter balancing the excise duty leviable, we are clearly 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. Sh. Vaidyanathan contended that this Court should be reluctant to reconsider a judgment which has held the field 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 over-ruling the Khandelwal Metal & 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 cases. "

25. The said view was reiterated in the decision reported in (2009) 12 SCC 735 (CC (Preventive) Amritsar Vs. Malwa Industries Ltd.), that the object of the levy under Section 3 is that an importer should not be placed at some more advantageous position vis-a-vis the purchaser/manufacturers of similar goods in India.

26. It is an admitted fact that in respect of imported rubber, there is no levy of cess under the Rubber Act, 1947. It is made clear in the circular issued by the Ministry of Commerce dated 22.07.1997 as well as by the Ministry of Finance dated 30.06.1997 that under Section 3(1) of the Customs Tariff Act, 1975, additional duty is levied on article imported in India, the rate of duty being equal to the excise duty leviable on a like article, if manufactured in India. Explanation to the said Section says that whenever there is no equivalent of the imported article manufactured for the purpose of attracting particular rate of duty, the imported article would nevertheless attract the duty leviable on the class or description of articles, to which the imported article belongs.

27. Thus Section 3(1) makes it clear that unless and otherwise exempt from levy of excise duty, imported goods attract additional duty at the rate equal to the duty leviable on a like article, if produced or manufactured in India.

28. Thus with the enunciation of law on the levy of additional duty of customs under Section 3 of the Customs Tariff Act, 1975 on the imported goods, before considering the question as to whether the cess paid under Section 12 of the Rubber Act could be treated as excise duty, we need to look at what Section 12 of the Rubber Act,1947 says. Section 12(1) of the Rubber Act, 1947, which levies excise duty as a cess on the indigenously produced rubber, reads as under:-

Section 12. "With effect from such date as the Central Government may, by Notification in the Official Gazette, appoint, there shall be levied as a Cess for the purpose of this Act, a duty of excise on all Rubber produced in India at such rate, not exceeding two rupees per kilogram of Rubber so produced, as the Central Government may fix. "

29. As for the question as to whether the cess paid under the Rubber Act could be treated as excise duty for the purpose of Section 3 of the Customs Tariff Act, the petitioner relied on the decision of the Delhi High Court reported in 2004 (165) ELT 35 (Del), in the case of Pasupati Fabrics Ltd., Vs. Union of India, as well as referred to the decision of the Gujarat High Court reported in 1997 (91) ELT 279 (Guj) in the case of Vareli Textile Industries Ltd., Vs. Union of India.

30. The question as to whether the cess paid under Section 12 of the Rubber Act could be treated as excise duty to be included in the sales turnover for the purpose of levy of purchase tax under the Kerala General Sales Tax Act, came for consideration in the petitioner's own case in the decision reported in (1998) 1 SCC 616 (State of Kerala Vs. Madras Rubber Factory Ltd.). In considering the said issue, the Apex Court pointed out as follows:

"12. That the cess which is collected is a duty of excise on all the rubber produced in India is evident from the provisions of Section 12(1) of the Rubber Act. The rate of cess is prescribed in Section 12(1) itself, The excise duty referred to in Section 12(1) is not determined with reference to any price but the duty is determined by applying a fixed rate to the weight of the rubber produced. After the amendment of Sub-section (2) of Section 12 the duty is to be collected by the Board in accordance with the rules made in this behalf either from the owner of the estate on which the rubber is produced or from the manufacturer by whom such rubber is used. It is the duty which is statutorily levied under Sub-section (1) on the rubber produced which is to be collected, Under Sub-section (2), in the manner provided by the rules.

31. The Apex Court referred to the decision reported in AIR 1997 SC 3497 (Mohan Breweries and Distilleries Ltd. Vs. Commercial Tax Officer, Madras and others) and held as follows:

"21. In our opinion the aforesaid decision is clearly applicable to the present case. Like the Mohan Breweries case the excise duty under Section 12(1) is levied on the production or manufacture of rubber at the rate specified thereunder. It is only by Rule 33(1), similar to Rule 22 of TNIMFL that the cess had to be paid at a stage subsequent to the production. Merely because for the sake of convenience the excise duty, which would essentially be payable at the time of production of rubber is realised at a latter point of time it cannot mean that the excise duty, in the form of cess, was not part of the sales turnover of the producer and, correspondingly, be the purchase turnover of the purchaser of rubber. "

32. Thus although the issue was with reference to the purchase tax liability and the sales turnover, the decision clearly held that what is paid under the Rubber Act under Section 12 as cess is nothing but excise duty. In the context of this, the decisions of the Gujarat and Delhi High Courts need to be seen.

33. In the decision reported in 2004 (165) ELT 35 (Del), in the case of Pasupati Fabrics Ltd., Vs. Union of India, a decision relied on by the petitioner, while considering the textile cess levied under Section 5A of the Textiles Committee Act, 1963 on 100% Export Oriented Unit, the Delhi High Court held that merely because the words "duty of excise" are used in Section 5A of the Textiles Committee Act, the same would not mean that what is charged is the excise duty. Holding that one has to see the real nature of the levy under Section 5A of the Act, the Delhi High Court pointed out that what is prescribed therein is the imposition of cess and it is not the same excise duty which is sought to be charged all over again. Thus it held that the nature of levy is fee and not excise duty. Moreover, excise duty is leviable specifically under Central Excise and Salt Act, 1944. However, the Delhi High Court held that for the purpose of grant of exemption, when the duty levied under the Textiles Committee Act, 1963 does not have the character of excise duty and what is charged is only a fee, the question of exemption from payment of cess for Export Oriented Units does not arise. Thus the exemption given under the Central Excise Act would not entitle the petitioner therein to an exemption under Section 5A of the Textiles Committee Act, 1963 on its 100% Export Oriented Units.

34. In contrast to this is the decision reported in 1997 (91) ELT 279 (Guj) in the case of Vareli Textile Industries Ltd., Vs. Union of India. Referring to the Textiles Committee Act, 1963, the Gujarat High Court considered the levy of cess under Section 5A(1) of the Textiles Committee Act, 1963, which is in pari materia with the Rubber Act, 1947, with reference to the additional duty of customs leviable under Section 3 of the Customs Tariff Act. The Gujarat High Court viewed that once the provisions of the Customs Tariff Act, 1975 stood attracted to the import of any article, it would become exigible to levy of customs duty, the measure of which would be commensurate with the excise duty leviable on such articles, if manufactured in India. The Gujarat High Court held that for the purpose of Section 3(1) of the Customs Tariff Act, 1975, the excise duty paid by way of cess under the Textiles Committee Act would be the measure of additional duty payable under Section 3 of the Customs Tariff Act.

35. The Gujarat High Court pointed out, "Once the provisions of the Customs Tariff Act, 1975 are attracted to the import of any article, it would become exigible to levy of customs duty, the measure of which would be commensurate with the excise duty leviable on such articles, if manufactured in India. It is not disputed that if polyester filament yarn is manufactured in India it would be subject to excise duty. The basic duty and excise duty is provided under the provisions of the Textiles Committee Act, 1963, i.e., cess on textiles. In view of this position, when polyester filament yarn is imported, the same measure of duty is levied from the importer as provided under the provisions of Section 3 of the Customs Tariff Act, 1975 read with Section 12 of the Customs Act, 1962. "

36. I am in agreement with the reasoning given in the decision of the Gujarat High Court. More so, after the decision of the Apex Court referred to above on the nature of levy under the Rubber Act, the question as to the character of the levy under the Rubber Act as to whether it is cess or excise duty, does not any longer survive for any debate before this Court and the levy cannot assume a different character, one for considering it under the sales tax enactment and the other for the purpose of levy under the Customs Tariff Act.

37. Thus going by the provisions under Section 12(1) of the Rubber Act, 1947 and the decision of the Apex Court, the levy therein is in the nature of excise duty and not cess. In the circumstances, I reject the argument of the petitioner and the reliance placed on the Delhi High Court decision.

38. The question that now stands for consideration is as to whether the notice issued by the respondent herein is again on the self same concluded issue that the proposal is nothing but one for levying cess only in the guise of additional levy which the Customs Department cannot levy or additional duty simpliciter, as provided for under Section 3(1) of the Customs Tariff Act. The petitioner states that going by the question of law raised before the Apex Court and the order passed by the Apex Court rejecting the appeal petition, it is too late for the respondents now to contend that the levy now sought to be made is only as an additional duty and not as what was done earlier.

39. In considering the question as to whether the levy originally collected was as cess or as an additional duty, we may have to look at the order of the CESTAT originally passed on the assessment made on the petitioner.

40. Both sides agree that a perusal of the Bill of entry for home consumption, clearly pointed out that what was collected from the petitioner was nothing but cess, levied under the Rubber Act, 1947. The copies of the Bill of Entry produced before this Court show that as against the column on the levy of additional duty, the endorsement therein reads as "Nil" and collection of cess alone was levied under the Customs and Tariff Act, 1975. In respect of such payment of cess collected from the assessee, in the appeal preferred before the Tribunal, the petitioner took a definite stand that levy of cess under Section 12 of the Rubber Act on rubber imports was not leviable by the Customs Department. In respect of the same, after the CESTAT order allowing the petitioner's case, it had also filed the refund claim on the cess payment. In the substantive part of the grounds of appeal filed against the levy and collection of cess under Section 12 of the Rubber Act, the petitioner herein specifically questioned the authority of the respondents to collect rubber cess as additional customs duty under Section 3(1) of the Customs Tariff Act, 1975. The order passed in this regard by the Tribunal dated 11.09.1997 clearly points out to the circular dated 22.07.1997, issued by the Ministry of Commerce, wherein, it was pointed out that under Section 12 of the Rubber Act, 1947, cess was levied on rubber produced in India and not on the rubber imported. Based on the clarification thus given on 30.06.1997 by the Ministry of Commerce, the CESTAT held that the provisions of Section 12 of the Rubber Act, 1947, could only be invoked in respect of rubber produced in India; thus, the cess as demanded by the Customs Department, could not be levied on the imported rubber, the Tribunal set aside the order of the authorities below. A similar order was also passed in the appeal in the case of M.M.Rubber Vs. C.C, Chennai on 08.12.1998 in Final Order No.2547. Referring to the order in the petitioner's case, the Tribunal pointed out as follows:

" The Tribunal judgment referred to above in MRF Ltd. case, the department of Revenue by its communication contained in F.No.572/6/97-L.C. dated 22.7.97, has specifically mentioned that on imported rubber in view of the provisions of Section 12 of the Rubber Act no cess is leviable. Here we are concerned with the cess and not with CVD. The observation of the Commissioner to our mind is inappropriate. Had the question been a CVD, the observation might have been relevant. "

41. It is a matter of record that similar orders allowing the claim of similarly placed importers' cases, who were visited with levy of rubber cess, were also passed by the Tribunal. One of the earliest orders that went before the Apex Court at the instance of the Revenue was in the case of Commissioner of Customs Chennai Vs. Vikrant Tyres Ltd. By order dated 17.02.2003, reported in 2003 (157) ELT A134 (Commissioner of Customs Chennai Vs. Vikrant Tyres Ltd.), the Apex Court dismissed the Revenue's appeal as "not pressed". Subsequently, under order dated 13.10.2003, the Apex Court dismissed the Review petition filed, in I.A.Nos.31-45 in Civil Appeal Nos.1460-1474/2003 observing, "We see no reason to modify / clarify our order dated 17th February, 2003. I.A.Nos.31-45 stands dismissed."

42. As already noted in the preceding paragraphs, considering the conflicting decisions among the various Benches of the Tribunal as to the decision as to the jurisdiction of the Customs Department to levy cess under the Rubber Act, particularly with reference to the circulars issued by the Ministry of Finance and Commerce, the issue was referred to a Larger Bench of the CESTAT. In the decision reported in 2006 (193) ELT 169 (TTK-LIG Ltd. Vs. Commissioner of Customs), by order dated 16.12.2005, the Tribunal, New Delhi, held that additional duty of customs was leviable under Section 3 of the Customs Tariff Act, 1975 on the imported rubber as on the date of importation to the extent equal to the duty of excise levied as cess under Section 12 of the Rubber Act on the rubber produced/ manufactured in India as on the said date. In the appeal preferred before the Supreme Court, as against the orders of the Full Bench dated 28.10.2003, the following were the questions of law raised by the Revenue:

"(a) Whether cess is leviable on imported rubber under Section 12 of the Rubber Act, 1947 read with Section 3 of the Customs Tariff Act, 1975?
(b) Whether the claim of the respondent for refund of duty is barred by the doctrine of unjust enrichment?"

This fact is not disputed by the Revenue too. Ultimately, the appeals were all dismissed, following the order in Vikrant tyres case. In the light of the orders of the CESTAT thus in favour of the importer and the Department cannot recover any cess leviable under Section 12(1) of the Act on the imported goods, the assessee filed petitions for refund of the cess paid on the imported rubber.

43. I do not think that the wrong framing of the questions, by itself, would give a different colour to the facts found and decision rendered thereon by the Tribunal, or for that matter, to the specific case pleaded by the petitioner before the Tribunal and other authorities, namely, that the Customs Department cannot levy cess under the Rubber Act.

44. In this regard, the order passed by the Appellate Authority in the appeal filed by the assessee, assumes significance. A reading of the order of the CESTAT in the petitioner's case, at the first instance, shows that the only issue before the Tribunal at the first round of litigation was as regards the jurisdiction of the Customs Department to levy cess under the Rubber Act, 1947 on imported rubber. In the light of the said decision of the Tribunal dated 11.09.1997 reported in 1997 (96) ELT 198 (Tribunal, Madras) (MRF Limited Vs. C.C.), as of today, the only issue that went in for consideration was as regards the jurisdiction of the Customs Department to levy cess under Section 12 of the Rubber Act read with Section 3 of the Customs Tariff Act. This is further pointed out by the CESTAT in the case of M.M.Rubber Company Ltd. Vs. C.C, Chennai by order dated 08.12.1998 in Final Order No.2547, wherein the order passed in the petitioner's case was referred to; the extract of the decision has already been extracted by me in paragraph 40 of the judgment. Even in the order passed in the appeal relating to the refund claim, in Appeal Nos.C/726 to 730/1996 dated 28.10.2003, the Tribunal pointed out to the circular dated 08.10.1998 and the decision in the petitioner's case and Vikrant Tyres case, that the issue on the levy of cess on imported rubber stood concluded in favour of the importers and the petitioners were entitled to the relief. Thus holding, it pointed out that the question of unjust enrichment was left open and that after verification, the authorities shall grant the refund after due consideration of the claim.

45. Thus, as rightly pointed out by the learned standing counsel appearing for the respondents, right from the claim made by the petitioner for the first time when the Bill of Entry was filed, to the appeals filed on the levy of cess thereon ultimately leading to the petitioner's filing of the refund application, show that there never existed any confusion in the mind of the petitioner as regards the stand taken by them that the dispute raised related to the levy of cess on the imported rubber by the Customs Authorities and that the issue on the levy of additional duty under Section 3 of the Customs Tariff Act was never an issue for consideration before any of the authorities for rendering a decision thereon.

46. The application on refund also makes no secret of what was paid by the assessee - that it was nothing but Cess under Section 12 of the Rubber Act, 1947, collected by the Revenue as so.

47. Considering the above facts and applying the decision of the Apex Court in the case of Hyderabad Industries Ltd. and another Vs. Union of India reported in AIR 1999 SC 1847, Section 3 of the Customs and Tariff Act, 1975 being a charging Section, the respondents have the necessary jurisdiction to issue the show cause notice. As already pointed out, a reading of the said Section shows that it seeks to adopt the rate equal to the excise duty for the time being leviable on a like article if produced in India and if the excise duty on like article is leviable at a particular 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. It is no doubt true that as far as natural rubber is concerned, there is no levy of excise duty under the Central Excise Act. It is not in dispute that the imported rubber does not attract cess. The fact that it does not attract the provisions of excise levy under the Central Excise Act does not mean that the levy under Section 3 of the Customs Tariff Act has to fail, for, going by the decision of the Apex Court in the decision reported in (1998) 1 SCC 616 (State of Kerala Vs. Madras Rubber Factory Ltd.), the levy under Section 12 of the Rubber Act is an excise duty only and the decision in the case of Hyderabad Industries Ltd. and another Vs. Union of India reported in AIR 1999 SC 1847 on Section 3 of the Customs tariff Act, the relevancy of the Rubber Act arises only for adopting the rate for the purposes of quantifying the charge under Section 3(1) under the Customs Tariff Act, 1975, to attract additional levy. Given the fact that locally produced rubber attracts the levy of excise duty in the form of cess under the Rubber Act and that such levy is held to be an excise duty levy, the levy of additional duty, being one levied with a view to counter-balance the excise duty leviable on the like article indigenously made, no exception could be taken as to the jurisdiction of the respondents to initiate proceedings under Section 3 of the Customs Tariff Act. Thus the present proceedings cannot be looked at as a colourable exercise to reimpose what was originally levied as cess, which was set aside by the Tribunal.

48. In the light of the fact that the jurisdiction to levy additional duty is very much available to the respondents herein and what is sought to be levied is not cess under the Rubber Act, but additional duty under Section 3 of the Customs Tariff Act, I have no hesitation in rejecting the contention of the petitioner.

49. Learned senior counsel appearing for the petitioner submits that what was collected originally under Section 3 of the Customs Tariff Act, 1975 was additional duty only and not cess. If that argument has to be accepted, then the Bills of Entry, the claim of the assessee as evident from the orders of the Tribunal, the refund claim and the grounds taken before the Tribunal in the refund claim appeal and finally, the findings of the Tribunal at paragraph 7 in the order on refund, would carry no meaning at all.

50. Given the factual finding that what was originally levied was cess only under the Rubber Act, 1947 and that the petitioner had not raised any grievance even to have the order rectified on this factual aspect at any point of time to contend that what was levied was additional duty only, I have no hesitation in rejecting the line of reasoning projected by the learned Senior counsel appearing for the petitioner. It is not denied by the learned senior counsel appearing for the petitioner that Section 3(1) of the Customs and Tariff Act, 1975 is a valid piece of legislation and the State has the authority to levy additional duty.

51. Thus even going by the argument of the petitioner herein, if what was collected from the petitioner was additional duty only, given the fact that what was not chargeable by the Customs Authority on the imported rubber was only cess under the Rubber Act, given the fact that Section 3 authorises the levy of additional duty, it stands to reason that there could be no claim for refund of the duty paid and the claim for refund itself has to fail.

52. A reading of the Circular of the Ministry of Finance dated 22.07.1997 shows that it was concerned about the levy of cess on the imported rubber. The circular stated that the imported rubber did not attract cess under the Rubber Act, 1947. This circular thus shows that it was not concerned about the levy of additional duty under Section 3(1) of the Customs and Tariff Act, 1975. Thus neither the circular dated 22.07.1997 of the Ministry of Finance nor the circular dated 30.6.1997 of the Ministry of Commerce dealt with the levy under Section 3 of the Customs Tariff Act. The Ministry of Finance, in its circulars dated 02.09.1997 and 29.07.1997, informed all the Commissioners of Customs that though the Rubber Act did not apply to the imported rubber, additional duty of customs was leviable on the imported rubber by virtue of Section 3 of the Customs Tariff Act, 1975 at the rate equivalent to the amount of cess leviable as excise duty on goods produced/manufactured in India under the Rubber Act. By Circular No.75/98 Cus dated 08.10.1998, the Ministry of Finance withdrew the circular dated 22.07.1997, by which the Ministry of Commerce circular dated 30.6.1997 was circulated with immediate effect, to levy additional duty under Section 3 of the Customs Tariff Act, 1975 on the imported goods. Thus a reading of these circulars would show that levy of additional duty under Section 3 of the Customs Tariff Act was never an issue in these circulars.

53. Thus given the fact that the assessee was never in doubt as to the subject of dispute in the earlier proceedings starting from the time of paying the duty as per the Bill of Entry and right through before the Tribunal, I do not find any justifiable ground to accept the plea of the petitioner herein that what is sought to be levied in the present proceedings is nothing but cess under the Rubber Act, 1947. In the light of what had been admitted in the grounds before the Tribunal and what was claimed by the assessee right through in the filing of the refund claim appeal, the present proceedings now taken to impose additional levy under Section 3(1), merits to be upheld by this Court.

54. In the circumstances I have no hesitation in rejecting the plea of the petitioner. Accordingly, I dismiss the writ petitions. No costs. Consequently, connected M.P. stands closed.

55. Considering the fact that the petitioner has approached this Court at the stage of show cause notice, the respondents are directed to give an opportunity of hearing to the petitioner before the passing of orders at the adjudication therein. 


Index:Yes			
Internet:Yes								23.12.2011

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To

1. The Secretary
    Ministry of Finance
    Union of India
    Department of Revenue
    North Block
    New Delhi-110 001.

2. The Additional Commissioner of Customs
    (Group 2)
    Office of the Commissioner of Customs
    Custom House
    60, Rajaji Salai, Chennai-600 001.

CHITRA VENKATARAMAN, J.

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W.P.Nos.25922 to 25924 of 2011
and M.P.No.1 of 2011      












Dated: 23.12.2011