Gujarat High Court
Commissioner Of Customs, Ahmedabad vs Baroda Rayons Corporation Ltd on 2 January, 2023
Author: Aravind Kumar
Bench: Aravind Kumar, Ashutosh J. Shastri
C/TAXAP/504/2022 CAV JUDGMENT DATED: 02/01/2023
®
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 504 of 2022
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2022
In
R/TAX APPEAL NO. 504 of 2022
With
R/SPECIAL CIVIL APPLICATION NO. 14527 of 2022
=============================================
COMMISSIONER OF CUSTOMS, AHMEDABAD
Versus
BARODA RAYONS CORPORATION LTD.
=============================================
Appearance:
MR PRIYANK P LODHA(7852) for the Appellant(s) No. 1
MR SAURABH SOPARKAR, SENIOR COUNSEL WITH
MR HAMESH C NAIDU(5335) for the Opponent(s) No. 1
=============================================
CORAM:HONOURABLE THE CHIEF JUSTICE MR. JUSTICE
ARAVIND KUMAR
and
HONOURABLE MR. JUSTICE ASHUTOSH J.
SHASTRI
Date : 02/01/2023
COMMON CAV JUDGMENT
(PER : HONOURABLE THE CHIEF JUSTICE MR. JUSTICE
ARAVIND KUMAR)
1. This appeal is admitted to consider the following
substantial questions of law:
"(i) Whether the Hon'ble Tribunal was justified in
entertaining an appeal against the Chief
Commissioner's letter under Section 129A of
the Act which mandates appeal against the
Order of Commissioner /Commissioner
(Appeals)?
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(ii) Whether in the facts and circumstances of the
case and law, the Tribunal was justified in
holding that even though the duty was
confirmed by adjudication process, the same
is payable only when goods are cleared for
home consumption, considering the
provisions of section 72 of the Customs Act,
1962?
(iii) Whether in the facts and circumstances of the
case and law, the Tribunal was justified in
holding that in terms of the board circular
03/2003-Cus dated 14/1/2003, the
Respondent was entitled to re-export of the
goods without payment of duty and
consequently also entitled for extension of
warehousing period?
(iv) Whether in the facts and circumstances of the
case and law, the Tribunal was justified in
entertaining and allowing the appeal which is
against its own Order dated 25.11.2002 that
had attained finality and thus reviewing their
own order."
BRIEF BACKGROUND OF THE CASE:
2. Respondent is a public limited company engaged in
a commercial production of Viscose Filament yarn i.e.
Rayon Yarn. In the year 1995-96, respondent imported
plant and machineries - equipment under Open General
Licence (OGL) from Japan, Germany and Korea, after
executing 21 bonds amounting to Rs.18,01,31,442/- and
initially it was stored at Bombay and later on shifted to
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the private bonded warehouse at Surat. On expiry of the
warehousing period, respondent sought for extension for
six months on the ground of it being unable to clear the
imported plants and machineries - equipments due to
financial crunch. Later on four extensions were sought for
which came to be granted upto 31.12.1997. When the 6th
extension was sought for from 01.01.1998 upto six
months i.e. 30.06.1998, same was rejected and so also 6th,
7th, 8th, 9th and 10th extensions sought for. It was the stand
of the respondent that there was no reply in respect of
extensions sought for from 6th extension onwards till the
end.
3. On account of the equipments in the bonded
warehouse not having been cleared after the expiry of the
permitted extension warehousing period, the appellant
was issued show cause notices, initially 16 show cause
notices resulting in 16 Orders in Original (For short
'OIO') came to be passed on 30.03.2001 which became
the subject-matter of appeals which came to be
adjudicated by the appellate authority and a common
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order dated 15.01.2001 came to be passed and rejected
the same. Further, challenge to the same before the
Tribunal - CESTAT, Mumbai, also ended in its dismissal
on 25.01.2002. Simultaneously, in respect of remaining
goods, five show cause notices came to be issued on
27.11.2001 which resulted in OIO dated 28.04.2013 being
passed and appeal filed against the same was also
dismissed vide order dated 12.12.2003 and appeal filed
before the CESTAT was allowed in part by order dated
26.05.2004 by reducing the pre-deposit and directed the
Commissioner (Appeals) to decide the appeals on merits
and on account of there being no compliance, the order of
Commissioner became final. Thus, the customs duty of
688.06 Lakhs was outstanding from the appellant as per
the orders of the authorities which had attained finality.
4. The request of the appellant to transfer the
equipments namely bonded plant and machinery lying in
private bonded warehouse to inside factory premises at
Surat was also rejected on the ground of show cause
notice issued having already been adjudicated.
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Subsequently, the request which was renewed by the
respondent was considered and permission granted and
accordingly the plant and machinery/ equipment came to
be shifted inside the factory during 23-26.10.2007, which
was duly acknowledged by the department on
29.10.2007. However, the plant and machinery imported
in the year 1995-96 is said to have not been installed and
was still lying in bonded warehouse.
5. The respondent is said to have become Sick
Industrial Unit under Section 15(1) of the Sick Industrial
Companies (Special Provision) Act, 1985, which resulted
in BIFR proceedings being initiated and factory of the
petitioner was closed from June, 1999 to June, 2000 and
from August, 2002 to December, 2003 and from August,
2008 till date thereafter. Respondent submitted
representations for re-exporting the plant, equipment and
machineries and also sought for consequential extension
of warehouse period. Undisputedly, respondent admits
said representations were not pursued vigorously on
account of BIFR proceedings pending.
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6. After a period of 16 years, respondent sought for
extension of the warehousing period which came to be
rejected on the ground that show cause notice and the
demand issued earlier had stood confirmed upto the level
of Tribunal. Not being satisfied with the same,
respondent again approached the department requesting
for reconsideration of their prayer for extending the
warehousing period which culminated in communication
dated 07.03.2019 being issued and intimating the
respondent that consideration for extension of the
warehousing period is already over and as such show
cause notices were issued and demand raised thereunder
which have been adjudicated and same had attained
finality by obtaining approval of the Chief Commissioner
of Customs. Being aggrieved by the said communication,
an appeal came to be filed under Section 129 of the
Customs Act, 1962 (for short 'the Act') which has been
allowed by the Tribunal by relying upon the circular
dated 14.01.2003 by arriving at a conclusion that when
importer makes a request for re-export of the goods
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under Section 69 of the Act, same should be allowed even
if the bonding period has expired and demand notice has
been issued or even the goods are put under auction. It
has been further held that appellant therein namely
respondent herein stands on a better footing as the goods
warehoused are not put to auction by the department and
concluding that there is no conflict between the Board
circular dated 14.01.2003 and Section 72(1)(d) of the Act,
it has been held by the Tribunal that goods warehoused
by the respondent were neither cleared for home
consumption nor the department had initiated any action
to sell/auction the goods and as such, appellant is entitled
for re-export of the goods without payment of duty and
consequently entitled for extension of the warehousing
period. The Tribunal also held that even though goods are
cleared for home consumption and same is exported,
appellant would be entitled for 98% duty drawback under
Section 74 of the Act and therefore appellant would not
be liable to pay more than 2% of the total duty payable on
the imported goods. Hence, concluding that appellant
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therein had sought to export the goods from the
warehouse itself and as such it would not be required to
pay 2% duty. Hence, appeal came to be allowed and
appellant therein namely the respondent herein was
permitted to re-export the warehoused goods without
payment of duty, fine and penalty, apart from extending
the warehousing period of the imported goods for six
months or further period within which the goods are
re-exported. Hence, this appeal.
7. We have heard the arguments of Mr. Priyank Lodha,
learned counsel appearing for the appellant and Mr.
Saurabh N. Soparkar, learned Senior Counsel appearing
for the respondent.
8. It is the contention of Mr. Lodha, learned counsel
appearing for the department that appeal itself is not
maintainable before the Tribunal as an appeal under
Section 129(a) would lie to the Tribunal only against the
order passed by the Principal Commissioner /
Commissioner as an adjudicating authority and orders
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passed by the Commissioner (Appeals). By drawing the
attention of the Court to the communication dated
19.12.2008 and 07.03.2009, he would contend that it is
not an order of the Commissioner of Customs or
Commissioner (Appeals) and as such, appeal before
CESTAT was not maintainable.
9. He would elaborate his submissions by contending
that Tribunal erred in allowing the appeal as it would
amount to setting aside its own order passed earlier
whereunder appeal filed by the respondent challenging
the order in original had been dismissed whereby the
duty demand had been confirmed and thereby the
original order had attained finality. He would submit that
impugned order would amount to tribunal reviewing its
own order and thereby rendering its earlier order
infructuous.
10. He would contend that Tribunal committed a serious
error in arriving at a conclusion that goods are lying in
the warehouse without being cleared for home
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consumption and therefore no custom duty would be
payable, though Section 72 of the Act mandates full
custom duty with interest and penalty being payable by
the owner of the goods. He would also submit that action
relating to the impugned goods had also attained finality
as the demand raised under the show cause notice had
been adjudicated by the original authority, confirmed by
the appellate authority and affirmed by the Tribunal by
dismissing the appeals on merits and now by virtue of the
impugned order re-export has been permitted and it
would result in nullifying the earlier order and the effect
of payment of custody duty as directed thereunder would
stand negated. Hence, contending that respondent is
attempting to seek the relief indirectly which he could not
get directly.
11. He would further submit that Tribunal erred in
applying Section 69 inasmuch as liability to pay duty by
the owner of the goods under Section 72(1) had already
arisen with interest and penalty and as such, under
Section 69 could not have been pressed into service at all.
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12. He would also contend that circular No.03/2003
dated 14.01.2003 had no application to the facts on hand
and Tribunal erred in relying on paragraph-2 of the said
circular. He would submit that circular cannot be read in
part and said circular itself indicates that it is subject to
provisions of Section 61 and draws the attention of the
Court to Sub-section (2) of Section 61. Hence, he would
contend that Section 61 itself mandates that it is
necessary to make payment of duty with interest without
which the period of warehousing cannot be extended.
13. It is his further contention that circular dated
14.01.2003 does not indicate anything about liability of
the owner to make payment of duty, interest and penalty
and it only indicates about re-export, which has to be
understood as it would be applicable in case of
applications made prior to adjudication of the show cause
notice. Hence, he prays for appeal being allowed by
answering the substantial questions of law in favour of
the appellant - revenue.
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14. Per contra, Mr. S.N. Soparkar, learned Senior
Counsel appearing for the respondent would support the
order of the Tribunal. He would contend that as the
communications which were impugned before the
CESTAT namely communications dated 19.12.2018 and
07.03.2019 would decide the rights of the respondent and
the order passed thereunder is an order passed by the
adjudicating authority namely the authority which is
competent to pass any order or take decision under the
Act as defined under Section 2(1) and under the
impugned communication, the Commissioner having
decided the rights of the respondent by adjudicating the
lis, an appeal filed assailing the correctness of the same
by invoking Section 129(a) of the Act was fully justified.
He would support the impugned order and to fortify his
contention, he would rely upon the circular dated
14.01.2003 to contend that under Section 151A of the
Act, the instructions issued to the Officers by way of
circulars would be binding on them and as such, the
Tribunal has rightly extended the benefit flowing from the
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circular dated 14.01.2003. He would submit that whether
accepting the demand made by not challenging the order
or such adjudicating authority having passed any order
adjudicating the show cause notice even if it had reached
Tribunal will have no effect and still the circular dated
14.01.2003 would be binding and qualitatively it does not
make any difference. He would draw the attention of the
Court to the words and expression "that till the goods are
auctioned" found in the circular to buttress his arguments
that a right is kept open to the respondent to seek for
re-export and the authorities are bound to consider such
request and pass orders and it is this precise exercise
which was not undertaken by the Commissioner though
prayed for has resulted in the impugned order being
passed by the Tribunal and rightly so. He would further
contend that even if steps are taken to auction but goods
are not auctioned, still the applicant would be entitled to
seek protection under the circular dated 14.01.2003. He
would also support the finding of the Tribunal with regard
to payment of differential duty and contends that
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Tribunal has examined the case from all angles to extend
the relief which finding does not suffer from any infirmity
calling for interference at the hands of this Court and as
such, he prays for answering substantial questions of law
in favour of the respondent. In support of his submissions,
he has relied upon the following judgments :
(i) 2018 361 ELT, Page 51;
(ii) 2003 (5) SCC 528;
(iii) 2014 (3) SCC 154;
(iv) 2016 (340) ELT 162.
15. Mr. Soparkar, learned Senior Counsel would also
contend that revenue having not raised any ground with
regard to respondent being entitled for 98% duty
drawback under Section 74 of the Customs Act, 1962, in
its appeal memorandum, said issue cannot be agitated by
the revenue or adjudicated by this Court.
16. In rejoinder, Mr. Priyank Lodha, learned counsel
appearing for the appellant would submit that judgment
of the Bombay High Court was rendered in the
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background of Section 110A of The Customs Act, which
provides for provisional release which is an inherent right
given to a party and as such, the principles laid down
thereunder would be inapplicable. He would submit that
Commissioner had no right to adjudicate any right of the
petitioner, that too on the basis of a representation and as
such, the impugned communication dated 07.03.2009
would not partake the character of either being classified
as an order or decision. He would also submit that
circular dated 14.01.2003 will have no effect after
adjudication as it is silent on this aspect. He would also
submit that Commissioner has not adjudicated any claim
of the petitioner as such by the impugned communication
and respondent has been intimated that prayer for
re-export was an issue which has already been decided,
adjudicated and answered which has attained finality and
thereby, respondent cannot rely upon said circular. He
would also contend that payment of 2% differential duty
was alternatively available to the respondent, as held by
the Tribunal cannot be accepted as it involves two stages
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namely clearance of the goods and such stage having not
occurred namely the goods having not being cleared,
Tribunal could not have taken upon itself this issue which
was never raised by the respondent before the Tribunal
and on this ground also he seeks for the order of
Tribunal being set aside and substantial questions of law
being answered in favour of the revenue.
17. Having heard the learned advocates appearing for
the parties and proceed to answer the substantial
questions of law, we deem it necessary to sate the factual
background in brief.
BRIEF BACKGROUND OF THE CASE:
18. Petitioner is a public limited company and
commenced its commercial production of Viscose
Filament Yarn i.e. Rayon Yarn in 1962. Petitioner is said
to have diversified its activities by starting Nylon Plant in
1974 and thereafter established its Polyester Plant and
Nylon Tyre Cord Plant in the year 1981.
19. Petitioner had imported plant and machinery /
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equipment in 1995-96 under OGL from Japan, Germany
and Korea after executing 21 bonds amounting to
Rs.18,01,31,442/-. The goods or the imported equipment
were initially stored at Bombay for safety and security of
the goods and same was allowed to be shifted from
Bombay to petitioner's private bonded warehouse at
Surat. After the expiry of initial warehouse period,
petitioner had applied for its first extension of
warehousing period which came to be granted upto
30.6.1996. However, petitioner was not able to clear the
imported plant and machinery / equipment on account of
alleged financial crunch. Hence, petitioner applied for
second extension upto 31.12.1996. Subsequently, the
extension sought for from time to time had been
considered and granted upto 31.12.1997. Though
applications for extension were made, same was not
granted and petitioner was not able to clear the imported
plant and machinery / equipment from their bonded
warehouse after the expiry of permitted extended
warehouse. This resulted in adjudication and the
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department had issued 16 orders-in-original, all dated
30.3.2001 and confirmed the total custom duty of
Rs.05,30,36,179/- and imposed penalty of 10% on each
bond. It was also ordered to recover interest at
appropriate rate. Being aggrieved by the same, petitioner
filed appeals before the Commissioner (Appeals), Surat,
who by common order-in-appeals dated 15.1.2001
rejected all the appeals filed by the petitioner. This was
challenged before CESTAT, Mumbai which also ended in
dismissal vide order dated 25.11.2002.
20. Hence, show cause notices were issued by the
department on 27.11.2001 vide order-in-original dated
28.4.2003 whereby the department confirmed the
customs duty of Rs.01,55,60,368/- and imposed penalty of
Rs.10,000/- on each bond and the interest thereon. The
appeal preferred against the said order came to be
dismissed by the Commissioner (Appeals), Surat by order
dated 12.12.2003 due to non-compliance of pre-deposit of
Rs.1 crore. Petitioner assailed the said order by
preferring an appeal before CESTAT, Mumbai who by
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order dated 26.05.2004 reduced the pre-deposit from
Rs.1 crore to Rs.50 lakh which was to be deposited within
3 months and report was to be submitted to the
Commissioner (Appeals), Surat who was required to
decide the appeal on merits. On account of non-
compliance of the same, the appeal was not taken up for
hearing on merits.
21. Thereafter the petitioner submitted an application
on 26.10.2006 requesting the department for permitting
transfer of the bonded plant and machinery / equipment
lying in the private bonded warehouse outside the factory
premises to inside factory premises at Surat. The
department by reply dated 19.01.2007 informed the
petitioner and since the request for extension of the
warehousing period has been rejected in 1998 and show
cause notices of consignment were already issued,
permission was not granted. Despite there being no
permission accorded, petitioner shifted plant and
machinery / equipment inside the factory during 23-
26.10.2007 and sought to justify its action by relying
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upon the representation submitted on 09.02.2007.
22. On 23.06.2008, petitioner requested the department
to accord permission for re-export of consignment by
relying upon the board's circular dated 3/03-COSs dated
14.01.2003. After having kept quite for 5 years, petitioner
renewed its request vide letter dated 22.07.2008 and
06.10.2008 seeking permission for re-export. Again after
period of 10 years, i.e. on 15.11.2018, petitioner renewed
its request by submitting a representation to the Chief
Commissioner of Customs, Gujarat Zone, Ahmedabad for
extending warehousing period on the ground that it
intends to re-export the imported plant and machinery /
equipment which was followed by communication dated
03.12.2018 which came to be rejected by the Chief
Commissioner of vide letter dated 19.12.2018 on the
ground that show cause notices had been issued and
demand has been confirmed upto the level of Tribunal
and the issue had attained finality. Yet petitioner
submitted one more letter on 15.02.2019 to the Chief
Commissioner of Customs, Gujarat Zone, Ahmedabad and
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requested to re-consider the prayer for re-export of entire
warehoused plant and machinery / equipment with
consequent extension of warehousing period till the
goods are re-exported. However, the said request was
rejected by the Chief Commissioner of Customs, Gujarat
Zone, Ahmedabad vide communication dated 07.03.2019,
against which petitioner company preferred an appeal
before CESTAT which has been allowed by the Tribunal
vide impugned order dated 31.01.2022.
RE: SUBSTANTIAL QUESTION OF LAW No.(i):
23. Right of appeal is a creature of statute and there
cannot be any dispute to this proposition. When the issue
comes up before the Court with regard to the
maintainability, it goes to the root of the matter namely
jurisdictional aspect and at any stage this issue can be
considered, as it would have a direct bearing on the core
issue of maintainability. This view gets support from the
authoritative principles laid down by the Hon'ble Apex
Court in the case of Corona Limited vs. M/s.Parvathy
Swaminathan and sons, reported in (2007) 8 SCC 559
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and Kanwar Singh Saini vs. High Court of Delhi,
reported in (2012) 4 SCC 307, whereunder it came to be
held that issue of jurisdiction can be raised at any time
and there can be no waiver or consent. In other words, it
has been held consent does not confer jurisdiction.
24. In the instant case, the thrust of the arguments of
the learned counsel appearing for the revenue is that
there was no order adjudicating right of the parties which
gave cause of action for the respondent herein to file an
appeal before the CESTAT by invoking Section 129A of
the Act. He has drawn the attention of the Court to the
communication dated 07.03.2019 which was impugned
before the Tribunal whereunder the Additional
Commissioner of Customs with the approval of the Chief
Commissioner has referred to the communications dated
14.02.2019 and 15.02.2019 addressed by the respondent
herein requesting for reconsideration of the request for
extension of the warehousing period and held such
consideration would not arise as the matter had already
attained finality. For the purposes of convenience and
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necessity, we deem it proper to extract the contents of
the said letter and it reads thus:
"Please refer to your letters dated 14.2.2019 and
15.2.2019 in the subject matter requesting for
reconsideration of your request for extension of
warehousing period.
2. In this regard, it is to intimate that as far as
extension of warehousing period is concerned, this
stage is already over once a show cause notice was
issued and demand was dated 14.01.2003
mentioned in your letters, your representation does
not merit any consideration now since the matter
has already attained finality as the issue was
already decided by the Hon'ble Tribunal.
3. This issues with the approval of the chief
Commissioner.
Yours Sincerely
(Sushant Kumar)
Additional Commissioner"
25. A plain reading of the above communication would
indicate that the representations made by the petitioner
on 14.02.2019 and 15.02.2019 requesting for extending
the warehousing period was held not warranting
consideration since the matter had already attained
finality. It would be apt and appropriate to note the
Section 129A of the Act. It reads thus :
"129A. Appeals to the Appellate Tribunal.--
(1) Any person aggrieved by any of the following
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orders may appeal to the Appellate Tribunal
against such order--
(a) a decision or order passed by the 1 [Principal
Commissioner of Customs or Commissioner of
Customs] as an adjudicating authority;
(b) an order passed by the 2 [Commissioner
(Appeals)] under section 128A;
(c) an order passed by the Board or the Appellate 3
[Commissioner of Customs] under Section 128, as
it stood immediately before the appointed day;
(d) an order passed by the Board or the 1
[Principal Commissioner of Customs or
Commissioner of Customs], either before or after
the appointed day, under section 130, as it stood
immediately before that day:
[Provided that no appeal shall lie to the Appellate
Tribunal and the Appellate Tribunal shall not have
have jurisdiction to decide any appeal in respect of
any order referred to in clause (b) if such order
relates to,--
(a) any goods imported or exported as baggage;
(b) any goods loaded in a conveyance for
importation into India, but which are not unloaded
at their place of destination in India, or so much of
the quantity of such goods as has not been
unloaded at any such destination if goods unloaded
at such destination are short of the quantity
required to be unloaded at that destination;
(c) payment of drawback as provided in Chapter X,
and the rules made thereunder:
Provided further that] the Appellate Tribunal may,
in its discretion, refuse to admit an appeal in
respect of an order referred to in clause (b) or
clause (c) or clause (d) where--
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(i) the value of the goods confiscated without
option having been given to the owner of the goods
to pay a fine in lieu of confiscation under section
125; or
(ii) in any disputed case, other than a case where
the determination of any question having a relation
to the rate of duty of customs or to the value of
goods for purposes of assessment is in issue or is
one of the points in issue, the difference in duty
involved or the duty involved; or
(iii) the amount of fine or penalty determined by
such order, does not exceed 5 [two lakh rupees].
[(1A) Every appeal against any order of the nature
referred to in the first proviso to sub-section (1),
which is pending immediately before the
commencement of section 40 of the Finance Act,
1984 (21 of 1984), before the Appellate Tribunal
and any matter arising out of or connected with
such appeal and which is so pending shall stand
transferred on such commencement to the Central
Government and the Central Government shall deal
with such appeal or matter under section 129DD as
if such appeal or matter were an application or a
matter arising out of an application made to it
under that section.]
[(1B) (i) The Board may, 8 [by order], constitute
such Committees as may be necessary for the
purposes of this Act.
(ii) Every Committee constituted under clause (i)
shall consist of two Chief Commissioners of
Customs or two Commissioners of Customs, as the
case may be.]
(2) [The Committee of Commissioners of Customs
may, if it is] of opinion that an order passed by the
Appellate 2 [Principal Commissioner of Customs or
Commissioner of Customs] under section 128, as it
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stood immediately before the appointed day, or by
the 3 [Commissioner (Appeals)] under section
128A, is not legal or proper, direct the proper
officer to appeal 4 [on its behalf] to the Appellate
Tribunal against such order:
[Provided that where the Committee of 2 [Principal
Commissioners of Customs or Commissioners of
Customs] differs in its opinion regarding the appeal
against the order of the Commissioner (Appeals), it
shall state the point or points on which it differs
and make a reference to the jurisdictional 6
[Principal Chief Commissioner of Customs or Chief
Commissioner of Customs] who shall, after
considering the facts of the order, if is of the
opinion that the order passed by the Commissioner
(Appeals) is not legal or proper, direct the proper
officer to appeal to the Appellate Tribunal against
such order.
Explanation.--For the purposes of this sub-section,
―jurisdictional Chief Commissioner‖ means the 6
[Principal Chief Commissioner of Customs or Chief
Commissioner of Customs] having jurisdiction over
the adjudicating authority in the matter.]
(3) Every appeal under this section shall be filed
within three months from the date on which the
order sought to be appealed against is
communicated to the 2 [Principal Commissioner of
Customs or Commissioner of Customs], or as the
case may be, the other party preferring the appeal.
(4) On receipt of notice that an appeal has been
preferred under this section, the party against
whom the appeal has been preferred may,
notwithstanding that he may not have appealed
against such order or any part thereof, file, within
forty-five days of the receipt of the notice, a
memorandum of cross-objections verified in such
manner as may be specified by rules made in this
behalf against any part of the order appealed
against and such memorandum shall be disposed of
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by the Appellate Tribunal as if it were an appeal
presented within the time specified in sub-section
(3).
(5) The Appellate Tribunal may admit an appeal or
permit the filing of a memorandum of cross-
objections after the expiry of the relevant period
referred to in sub-section (3) or sub-section (4), if it
is satisfied that there was sufficient cause for not
presenting it within that period.
[(6) An appeal to the Appellate Tribunal shall be in
such form and shall be verified in such manner as
may be specified by rules made in this behalf and
shall, irrespective of the date of demand of duty
and interest or of levy of penalty in relation to
which the appeal is made, be accompanied by a fee
of,--
(a) where the amount of duty and interest
demanded and penalty levied by any officer of
customs in the case to which the appeal relates is
five lakh rupees or less, one thousand rupees;
(b) where the amount of duty and interest
demanded and penalty levied by any officer of
customs in the case to which the appeal relates is
more than five lakh rupees but not exceeding fifty
lakh rupees, five thousand rupees;
(c) where the amount of duty and interest
demanded and penalty levied by any officer of
customs in the case to which the appeal relates is
more than fifty lakh rupees, ten thousand rupees:
Provided that no such fee shall be payable in the
case of an appeal referred to in sub-section (2) or a
memorandum of cross-objections referred to in
sub-section (4).
(7) Every application made before the Appellate
Tribunal,--
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(a) in an appeal 1 *** for rectification of mistake or
for any other purpose; or
(b) for restoration of an appeal or an application,
shall be accompanied by a fee of five hundred
rupees: Provided that no such fee shall be payable
in the case of an application filed by or on behalf of
the 2 [Principal Commissioner of Customs or
Commissioner of Customs] under this sub-
section.]"
26. The judgment of the Bombay High Court which has
been heavily relied upon by Mr. Soparkar though at first
blush looks attractive, on deeper examination it will have
to be necessarily held that it would in no manner assist
the respondent. We say so for reasons more than one. In
the said matter which related to release of vessel namely
the respondent therein that is S.S. Offshore Private
Limited filed a bill of entry - BE for the import of a second
hand vessel by declaring the value of the vessel to be of
Rs.13.82 crores by classifying the same under Chapter
89, heading 8901 of Custom Tariff Act, 1975. The bill of
entry was assessed and vessel was allowed to be cleared
for home consumption. Subsequently, the vessel was
allowed to be converted from a foreign run vessel to
coastal run vessel. The officer of Intelligence and
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Investigation Branch of Custom on a reasonable belief
that vessel is liable for confiscation on account of
incorrect classification / declaration seized it. Hence,
respondent met the Commissioner of Customs and sought
for provisional release of the vessel under Section 110A
of the Act, which provision came to be substituted by Act
2 of 2014 and by virtue of the said section having
undergone a change and interim order or decision could
be taken by the adjudicating authority that is the
Commissioner of Customs was the basis on which the
application was made and it is this representation which
resulted in a decision being rendered by the adjudicating
authority on 25.09.2017 which was the subject-matter of
adjudication before the Bombay High Court. In fact, this
decision of the adjudicating authority which refused
permission was carried in appeal before the Tribunal
whereunder the Deputy Commissioner of Customs
ordered for release conditionally and being aggrieved by
the conditions imposed, the respondent challenged the
same before the Tribunal. The Tribunal entertained the
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appeal under Section 129A(1) of the Act and impugned
order was set aside and matter was restored to the
Commissioner of Customs for deciding the issue afresh.
Challenging the said decision, an appeal under Section
130A of the Customs Act was filed and it is in this
background, High Court of Bombay has held that Section
110A of the Act is required to be viewed and the decision
in the letter dated 25.09.2017 is in terms of Section 110A.
27. High Court of Bombay has also referred to the Full
Bench judgment of the Tribunal in the case of Gaurav
Pharma wherein it has been held that an order of
provisional release is a stand alone order irrespective of
the final outcome of the investigation or adjudication.
Hence, the owner has to have a remedy which is
statutorily provided under Section 129A. Whereas in the
instant case, we have noticed that under the
communication dated 07.03.2019, the authority has
neither adjudicated nor examined the claim of the
respondent or the prayer of the respondent in the
capacity of an adjudicating authority and as such, the
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signatory to the said communication cannot be held to fall
within the definition of 'Adjudicating Authority' as defined
under Section 2(1) of the Act so as to bring such
communication within the sweep of the provisions of
either order or decision as indicated in Section 129A.
28. A taxing statute is to be strictly construed. In a
taxing statute, one has to look merely what is clearly said
in the provision. There is no room for any intendment.
There is no equity about a tax. There is no presumption as
to tax. Nothing has to be read in, nothing is to be implied.
One can look only fairly at the end use. For this
proposition, judgment of the Hon'ble Apex Court in the
case of CIT Madras vs. Kasturi and Sons reported in
AIR 1999 SC 1275 can be looked up and so also
principles enunciated by the Hon'ble Apex Court in
(2014) 11 SCC 672. In that view of the matter, we
are of the considered view that substantial question
of law No.1 will have to be answered in the negative
that is in favour of the appellant revenue and
against the respondent.
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RE : SUBSTANTIAL QUESTION OF LAW NO.(ii):
29. The Tribunal having entertained the appeal against a
communication dated 07.03.2019 whereunder the
Department - Revenue had intimated the respondent
about representation submitted for extension of
warehousing period having already been adjudicated and
reconsideration of the request would not merit
consideration on account of the matter having been
already attained finality, received the attention of the
Tribunal and held that on account of goods lying in the
warehouse without being cleared for home consumption
and therefore, no customs duty would be payable. The
grievance of the Revenue has been throughout that the
issue regarding extension of warehousing period having
been rejected and as such it is deemed under Section 72
of the Customs Act that such goods or improperly
removed from warehouse and thereby the customs duty,
penalty and interest are liable to be paid by the owner
and same having been adjudicated and attained finality,
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question of permitting the respondent to re-export the
goods without payment of customs duty and penalty
would not arise. In this background, we deem it proper
to extract Section 72 of the Customs Act, 1962 and it
reads:
"72. Goods improperly removed from
warehouse, etc.--(1) In any of the following cases,
that is to say,--
(a) where any warehoused goods are removed from
a warehouse in contravention of section 71;
(b) where any warehoused goods have not been
removed from a warehouse at the expiration of the
period during which such goods are permitted
under section 61 to remain in a warehouse;
(c) where any warehoused goods have been
taken under section 64 as samples without
payment of duty;
(d) where any goods in respect of which a bond has
been executed under [section 59 *** ] and which
have not been cleared for home consumption or
exportation are not duly accounted for to the
satisfaction of the proper officer,
the proper officer may demand, and the owner of
such goods shall forthwith pay, the full amount of
duty chargeable on account of such goods together
with all penalties, rent, interest and other charges
payable in respect of such goods.
(2) If any owner fails to pay any amount demanded
under sub-section (1), the proper officer may,
without prejudice to any other remedy, cause to be
detained and sold, after notice to the owner (any
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transfer of the goods notwithstanding) such
sufficient portion of his goods, if any, in the
warehouse, as the said officer may select."
30. A plain reading of the above provision would clearly
indicate that when the goods are cleared from the
warehouse after the expiry of the permitted period or its
permitted extension, the goods are deemed to have been
improperly removed. On a plain reading of the Clause (a)
it would indicate that where any goods are removed from
a warehouse in contravention of Section 71 or where any
warehoused goods have not been removed from a
warehouse at the expiration of the period, during which
such goods are permitted under Section 61 to remain in a
warehouse or where any warehoused goods have been
taken under Section 64 as samples without payment of
duty or where any goods in respect of which a bond has
been executed under Section 59 and which have not been
cleared for home consumption or exportation are not duly
accounted to the satisfaction of the proper officer such
goods are deemed to have been improperly removed and
as a consequence thereof, the duty, interest and penalty
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levied if any would become payable. Sub-section (2) of
Section 72 enables the proper officer to sell such goods
after notice to the owner, if any, in the warehouse in the
event of the owner failing to pay any amount demanded
under Sub-section (1) of Section 72. The issue relating to
improper removal of goods has been laid to rest by the
Apex Court in SBEC Sugar Limited and another vs.
Union of India and others, reported in (2011) 4 SCC
668. It has been held:
"23. The scope and purport of Section 72 was
examined by this Court in Kesoram Rayon (supra).
It was held that:
"13. Goods which are not removed from a
warehouse within the permissible period
are treated as goods improperly removed
from the warehouse. Such improper
removal takes place when the goods remain
in the warehouse beyond the permitted
period or its permitted extension. The
importer of the goods may be called upon
to pay customs duty on them and,
necessarily, it would be payable at the rate
applicable on the date of their deemed
removal from the warehouse, that is, the
date on which the permitted period or its
permitted extension came to an end.
14. Section 15(1)(b) applies to the case of
goods cleared under Section 68 from a
warehouse upon presentation of a bill of
entry for home consumption; payment of
duty, interest, penalty, rent and other
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charges; and an order for home clearance.
The provisions of Section 68 and,
consequently, of Section 15(1)(b) apply only
when goods have been cleared from the
warehouse within the permitted period or
its permitted extension and not when, by
reason of their remaining in the warehouse
beyond the permitted period or its
permitted extension, the goods have been
deemed to have been improperly removed
from the warehouse under Section 72."
24. xxx xxx xxx
25. xxx xxx xxx
26. We are, therefore, of the opinion that the
decision in Pratibha Processors on which heavy
reliance is placed by learned counsel for the
appellants, is clearly distinguishable on facts
inasmuch as apart from the fact that in that case
the clearance of goods was under Section 68 of the
Act, the import of Section 72(1)(b) of the Act was
not considered. On the contrary, the dictum laid
down in Kesoram Rayon (supra) is on all fours on
facts at hand, and therefore, the decision of the
High Court cannot be faulted with."
31. In the instant case, undisputedly the goods remained
in the warehouse beyond the period of extension granted
and the prayer for further extension was not acceded to
or in other words not granted and as such they did not
qualify to be construed as goods warehoused in due
compliance of Section 72 and in the facts obtained in the
present case it would also emerge from the records that
on account of such goods having continued in the
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warehouse beyond the period permitted it is deemed to
have been removed improperly attracting the penal
provision which resulted in show cause notice being
issued and same being adjudicated which resulted in
orders being passed and assailed by the respondent
before the appellate authority and also before the
Tribunal which had resulted in its dismissal is a clear
mirror to the fact that duty demand had been confirmed
and as such, Tribunal was not justified in arriving at a
conclusion that though duty demand was confirmed by
adjudicating process, same would become payable only
when it is cleared for home consumption. The Tribunal
erred in applying section 69 of the Act to the present
case. Hence, we deem it proper to extract section 69 of
the Customs Act, 1962 and it reads:
"69. Clearance of warehoused goods for
exportation. -
(1) Any warehoused goods may be exported to a
place outside India without payment of import duty
if -
(a) a shipping bill or a bill of export has been
presented in respect of such goods in the
prescribed form;
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(b) the export duty, penalties, rent, interest and
other charges payable in respect of such goods
have been paid; and
(c) an order for clearance of such goods for
exportation has been made by the proper officer.
(2) Notwithstanding anything contained in sub-
section (1), if the Central Government is of opinion
that warehoused goods of any specified description
are likely to be smuggled back into India, it may,
by notification in the Official Gazette, direct that
such goods shall not be exported to any place
outside India without payment of duty or may be
allowed to be so exported subject to such
restrictions and conditions as may be specified in
the notification."
32. A perusal of the above provision would clearly
indicate that warehoused goods can be re-exported
without payment of duty. The Tribunal has also held that
as goods are lying in the warehouse without being home
consumption and therefore no customs duty shall be
payable. However, it ignored that as per the mandate of
section 72 full customs duty with interest and penalty
would be payable by the owner. Section 72 (1)(b)
indicates that where any warehoused goods have not
been removed from warehouse at the expiry of the period,
then proper officer may demand and the owner of such
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goods would forthwith be required to pay, the full amount
of duty chargeable on account of such goods whether
with interest, fine and penalty payable in respect of such
goods. Undisputedly, in the instant case, the goods
remained in warehouse beyond permitted period. Thus,
the owner of the goods would be liable to pay full amount
of duty with interest and penalty, as if the goods are to be
cleared from home consumption. In the instant case, the
owner of the goods has not complied with this statutory
mandate. Clause (b) of sub-section (1) of Section 72
clearly mandates where warehoused goods have not been
removed from the warehouse at the expiry of the period,
then proper officer would be empowered to demand and
the owner of the goods would be liable to pay full amount
of the duty chargeable on account of such goods together
with interest, fine and penalty. In the instant case, the
action relating to the impugned goods had been initiated
and had reached finality. Thus, when liable to pay duty,
penalty and interest had already arisen on the owner as
per section 72(1)(b), we are of the considered view that
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section 69 would not be applicable. Section 72 provides
for clearance of the goods by the importer within a
stipulated period either for home consumption or for re-
export and in the eventuality of such importer failing,
then it is deemed that such goods are to be cleared for
home consumption and thereby the importer would be
liable to make payment of applicable customs duty with
interest and penalty. In other words, section 69 would be
attracted prior to applicability of section 72 and not
thereafter. In that view of the matter also, we are of the
considered view that the Tribunal was not justified in
holding that even though the duty was conferred by
adjudication process, section 69 would be applicable and
as such finding recorded by the Tribunal requires to be
set aside. Hence, we answer the substantial question
of law No.(ii) in the negative namely in favour of
Revenue and against the respondent.
RE: SUBSTANTIAL QUESTION OF LAW Nos.
(iii) AND (iv):
33. Insofar as question Nos.(iii) and (iv) are concerned,
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from the record, we notice that original order which had
been passed on 30.3.2021 by Assistant Commissioner,
Central Excise Division-I Surat who by virtue of powers
conferred under Section 72 read with Section 47 and
15(1)(b) of the Customs Act, 1962 has ordered to recover
customs duty amounting to Rs.59,43,140/- chargeable
under Section 28 of the Customs Act, 1962 and also
imposed a penalty of Rs.10,000/- under Section 117 of the
Customs Act, 1962 in addition to recovery of interest at
an appropriate rate in view of Section 61(2) of the
Customs Act read with Sections 47 and 72 till date goods
are not actually cleared had attained finality. Similar
orders have been passed with respect to other show
cause notices as can be seen from the record and these
were the orders which came to be challenged in the year
2001 by preferring an appeal before the Appellate
Authority has specifically rejected the request for
extension of warehousing period. Said orders were
passed way back in the year 2001 and carried further
before the Customs, Excise and Gold Control Appellate
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Tribunal also and Appellate Tribunal has also passed a
specific order in November 2002. Said brief order being
relevant, we deem it proper to reproduce hereunder:
"ORDER No.: C-II/236 to 268 WZB/2002 Dt.
25/11/02
Per: Shri Krishma Kumar, Member (Judicial)
Arguing the case of the appellant Shri V.N.
Deshpande, learned advocate submits that the
appellant's financial condition is very bad and as
such they are not in a position to deposit the
amounts towards duty, penalty etc. He submitted
that appellants have imported 16 consignments of
new machinery for making further improvement in
their factory. The total duty amount - against the
said consignments is Rs.6,80.93,056/-.
2. Shri. M. K. Gupta, learned It. CDR stated that
the appellants have been given four extensions and
still they have failed to pay the duty etc. and
remove the goods. Section 72 with Section 47 and
15(1)(b) provide that where warehoused goods
have not been removed from the warehouse on
expiration of period during which such goods are
permitted under Section-61 to remain in the
warehouse, the proper officer may demand and
owner of such goods shall forthwith pay the full
amount of duty chargeable on account of such
goods together with all penalties. rent, interest and
other charges payable in respect of such goods
Thus the legal position is very clear. It is also is
seen from the Commissioner's order that the
appellants have not disputed their duty liability, In
these circumstances we find that there is no merit
in the appeals as well as the stay petitions filed by
the applicant. Accordingly, we dismiss the stay
petitions as well as the appeals at the stay stage
itself.
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(Dictated in Court)
(C. SATAPATHY) (KRISHNA KUMAR)
Member (Technical) Member (Judicial)"
34. As can be seen from the aforesaid order of the
Appellate Tribunal passed in 2002, respondent herein,
had projected financial crunch and contended it is not in
a position to deposit the amount towards duty and
penalty, etc. in respect of 16 consignments, as indicated,
and total duty was amounting to Rs.6,80,93,056/-. In the
said order dated 1.11.2022 it has been specifically
noticed that four extensions were already attempted to be
secured, but still the opponent failed to pay duty and
remove the goods as required under the Act. Thus,
keeping the overall legal position in view and
circumstances prevailing, appeal along with stay
application came to be dismissed. Thus, it is clearly
evident that appellant therein namely respondent herein
had not disputed their duty liability at any point of time.
35. When aforesaid being the factual scenario and the
issue regarding duty and penalty having attained finality,
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an attempt came to be made by the respondent herein
after several years, i.e. 16 years to revive the same issue
by seeking permission to re-export the goods that too
without payment of duty and penalty, by submitting
representations commencing from 23.06.2018 and
attempting to revive the dead cause of action
representations were submitted during 2018-19 and
rightly so said request has been rejected by the Chief
Commissioner of Customs on 07.03.2019 on the ground
said issue had been laid to rest by the CESTAT.
36. However, Tribunal entertained an appeal against
such rejection and has held that in terms of the Board's
Circular No.03/2003-CUS dated 14.01.2003, respondent
was entitled to re-export the goods without payment of
duty, penalty and consequently entitled for extension of
the warehousing period. Tribunal has relied upon
paragraph 2 of the aforesaid circular. Hence, it would be
necessary to understand the circular relied upon by the
Tribunal and same is extracted herein below for ready
reference :
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"Subject: Warehousing - Grant of extension of
warehousing period of by Chief Commissioners
under Section 61 of the Customs Act, 1962 -
regarding -
I am directed to refer to the instructions contained
in Board's Circular no. 47/2002-Cus., dated
29.07.2002, on the above subject and to say that
some references have been received in the recent
past seeking Board's clarification whether the
goods imported and bounded in a warehouse can
be permitted to be cleared for the purpose of
export under Section 69 of the Customs Act, 1962
have been issued by the Customs authority
demanding duty, interest and other charges upon
expiry of the initial or extended period of
warehousing.
2. The matter has been examined in the Board.
It has been decided that in case an importer makes
a request to permit re-export of the goods under
Section 69 of the Customs Act, 1962, such a
request may be allowed even if the permitted
period for bonding has expired and demand notice
has been issued, or it has been decided to put the
goods under auction. Before permitting re-export
in each such case, however, it will be necessary to
extend the period of warehousing under Section 61
of the Customs Act to enable the importer to
export the goods within the permitted period of
warehousing.
3. Chief Commissioners are, therefore,
requested to consider/decide such requests from
the importers keeping in view the aforesaid
guidelines of the Board and also taking into
consideration all the relevant rules/regulations for
export.
4. The contents of this Circular may be suitably
brought to the notice of the field formations and
the Trade under your jurisdiction.
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5. This issues in partial modification of Board's
earlier circular under reference."
37. It is a settled proposition of law that circular cannot
have an overriding effect on a statutory provision. This
well settled proposition of law is propounded by the
Hon'ble Apex Court in the case of Glaxo SmithKline
Pharmaceuticals Limited Vs. Union of India and
others reported in AIR 2014 SC 410 and since same is
quite vogue, we may deem it proper to reproduce the
relevant observations contained in paragraph 60 of the
said judgment:
"60. In our view, it is well settled that if the
departmental circular provides an interpretation
which runs contrary to the provisions of law, such
interpretation cannot bind the Court. 1979 circular
falls in such category. Moreover, the 1979 circular
is with reference to the DPCO,1979 whereas we
are concerned with DPCO, 1987 and DPCO, 1995.
We are not impressed by the argument of Mr. S.
Ganesh that in view of the saving clause in DPCO,
1987, the circular is saved which is further saved
by the saving clause in DPCO, 1995."
38. The exemption circular has to be read in its entirety
and not in part. It would be necessary to consider the
language of the circular in its entirety and it cannot be
read in isolation. In fact, paragraph 2 of the said circular
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which has been relied upon by the Tribunal would
indicate the following expression being conspicuously
present viz.
"2. The matter has been examined ... ... ... in
each such case, however, it will be necessary to
extend the period of warehousing under
Section 61 of the Customs Act to enable the
importer to export the goods within the
permitted period of warehousing."
(emphasis supplied)
39. A plain reading of the aforesaid words found in the
circular, it would make it clear that warehoused goods,
even after expiry of warehousing permitted period, can
be allowed to be re-exported, subject to provision of
Section 61 and not otherwise. Hence, we deem it proper
to extract Section 61(2) which would be relevant and it
reads:
"61(2) Where any warehoused goods --
(i) specified in [sub-clause (a) or sub-clause (aa)]
of sub-section (1), remain in a warehouse
beyond the period specified in that sub-
section by reason of extension of the
aforesaid period or otherwise, interest at
such rate as is specified in section 47 shall be
payable, on the amount of duty payable at the
time of clearance of the goods in accordance
with the provisions of section 15 on the
warehoused goods, for the period from the
expiry of the said warehousing period till the
date of payment of duty on the warehoused
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goods;
(ii) specified in sub-clause (b) of sub-section (1),
remain in warehouse beyond a period of
ninety days, interest shall be payable at such
rate or rates not exceeding the rate specified
in section 47, as may be fixed by the Board,
on the amount of duty payable at the time of
clearance of the goods in accordance with the
provisions of section 15 on the warehoused
goods, for the period from the expiry of the
said ninety days, till the date of payment of
duty on the warehoused goods:
Provided that the Board may, if it considers it
necessary so to do in the public interest, by order
and under circumstances of an exceptional nature,
to be specified in such order, waive the whole or
part of any interest payable under this section in
respect of any warehoused goods:
Provided further that the Board may, if it is
satisfied that it is necessary so to do in the public
interest, by notification in the Official Gazette,
specify the class of goods in respect of which no
interest shall be charged under this section.
Explanation.-- For the purposes of this section,
"hundred per cent. export- oriented undertaking"
has the same meaning as in Explanation 2 to sub-
section (1) of section 3 of the Central Excises and
Salt Act, 1944 (1 of 1944)."
40. Thus, it would be mandatory on the part of owner of
goods to make payment of duty with interest as
contemplated under Section 61, without which period for
warehousing cannot be extended. Thus, in effect, the
circular would only indicate about re-export being
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permitted of warehoused goods and it does not specify or
mention about the liability of the owner to make payment
of duty, interest and penalty. However, it indicates before
permitting re-export in each case, it will be necessary to
extend the period of warehousing under Section 61 of the
Customs Act. In other words, Sections 61 would come
into play. Thereby, Section 61(2) would be attracted.
Hence, we are of the considered view that the circular
cannot be read in isolation or it cannot be read against
Section 72 which empowers the Revenue to demand
payment of duty in case warehoused goods are not
cleared within the permitted time.
41. The circular in question which has been dealt with is
also ex facie not possible to be taken for assistance to
order for re-export of goods, especially when liability to
pay duty, interest and penalty had already been
crystallised and said findings has attained finality. Hence,
the circular which is sought to be pressed into service
cannot be read contrary to the statutory provisions.
Under the garb of the circular, the adjudicating process
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cannot be given a go-by completely by permitting re-
export of warehoused goods (when the warehousing
period has expired and not extended and such extension
sought for having been expressly refused) without
payment of duty, fine, penalty. Hence, we are of the
considered view that circular has been erroneously
interpreted by the Tribunal and finding of the tribunal in
this regard is misplaced and contrary to the statutory
provisions.
42. A taxing statute is to be strictly construed. The
Courts have stated greater latitude to the legislature is to
be extended in formulating its tax policy either directly or
by delegated legislation. For this proposition, judgments
the Hon'ble Apex Court in case of R.K. Garg vs. Union
of India and others, reported in AIR 1981 SC 2138
and in case of M/s. Satnam Overseas (Export) vs.
State of Haryana and another, reported in AIR 2003
SC 66 can be looked up.
43. Viscount Simon quoted with approval a passage from
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Rowlatt J.1 expressing said principle in the following
words:
"In a taxing Act one has to look merely at what is
clearly said. There is no room for any intendment.
There is no equity about a tax. There is no
presumption as to tax. Nothing is to be read in,
nothing is to be implied. One can only look fairly at
the language used."
44. In fiscal legislation a transaction cannot be taxed on
any doctrine of 'the substance of the matter' as
distinguished from its legal signification, for a subject is
not liable to tax on supposed 'spirit of the law' or 'by
inference or by analogy'. In IRC vs. Duke of Westminster,
(1936) AC 1, Lord Tomlin while refuting the doctrine of
'the substance of the matter' observed thus:
"It is said that in revenue cases there is a doctrine
that the court may ignore the legal position and
regard what is called 'the substance of the matter'.
This supposed doctrine seems to rest for its
support upon a misunderstanding of language used
in some earlier cases. The sooner this
misunderstanding is dispelled, and the supposed
doctrine given its quietus, the better it will be for
all concerned, for the doctrine seems to involve
substituting 'the uncertain and crooked cord of
discretion' for 'the golden and straight metwand of
the law'."
1
Cape Brandy Syndicate v. IRC, (1921) 1 KB 64, also referred to in Canadian Eagle Oil
Co. Ltd. v. R, (1945) 2 ALL ER 499
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45. It was also pointed out in the same case by Lord
Wright that 'the true nature of the legal obligation'
arising out of a genuine transaction 'and nothing else is
the substance'. This principle which is known as Duke of
Westminster principle is subject to new approach of the
courts towards tax evasion schemes consisting of a series
of transactions or a composite transaction.
46. In interpreting a section in a taxing statutes,
according to Lord Simonds, 'the question is not at what
transaction the section is according to some alleged
general purpose aimed, but what transaction its language
according to its natural meaning fairly and squarely hits'.
Lord Simonds calls this 'the one and only proper test'. It
is, therefore, not the function of a court of law to give to
words a strained and unnatural meaning to cover
loopholes through which the evasive taxpayer may find
escape or to tax transactions which, had the Legislature
thought of them, would have been covered by appropriate
words. As stated by Lord Simon:
It may seem hard that a cunningly advised
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taxpayer should be able to avoid what appears
to be his equitable share of the general fiscal
burden and cast it on the shoulders of his fellow
citizens. But for the courts to try to stretch the
law to meet hard cases (whether the hardship
appears to bear on the individual taxpayer or
on the general body of taxpayers as
represented by the Inland Revenue) is not
merely to make bad law but to run the risk of
subverting the rule of law itself.
The same rule applies even if the object of the enactment
is to frustrate legitimate tax avoidance devices for moral
precepts are not applicable to the interpretation of
revenue statutes.
47. In the teeth of aforesaid propositions of law, we
notice in the instant case that entire adjudicating process
with regard to liability of respondent to pay duty - penalty
had got crystallised and had attained finality and as such
by taking aid of the circular dated 14.01.2003 and
reading the same disjunctively, no undue benefit could
have been extended to the respondent by impugned
order. Hence, we are of the considered view that Tribunal
committed a gross error in entertaining the prayer of the
respondent in the background of our aforesaid discussion.
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We are also of the view that reliance placed by the
Tribunal on the aforesaid circular was impermissible in
the background of facts obtained in the present case. If
taking recourse to the said circular, that too by reading it
in isolation, it would have the effect of nullifying the
adjudicating process under law which had attained
finality, then such interpretation has to be necessarily
held bad in law. Hence, we are of the clear opinion that
order passed by the Tribunal is erroneous and
unsustainable in law.
48. In view of this background of facts, judgments which
have been cited and relied upon by the learned senior
counsel for respondent herein are of no assistance and it
is a settled law that if there is no similarity of facts and
even one additional fact would make a world of difference
in applying the ratio precedent would not arise. Hence, in
view of the discussion made herein-before, we hold that
decisions relied upon by the learned senior counsel for
the respondent herein are of no assistance and we are of
the opinion that appellant has made out a strong case to
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accept the appeal. Hence, substantial questions of
law (iii) and (iv) are answered in the negative viz. in
favour of the Revenue and against the respondent.
49. Special Civil Application No.14527 of 2022 has been
filed by the respondent in Tax Appeal No.504 of 2022
seeking for a direction to the respondent to grant
permission to the petitioner for re-export of the goods,
equipment / machinery which are lying at Surat and as
permitted by CESTAT vide order dated 31.01.2022
passed in Customs Appeal No.14527 of 2022.
50. In the background of Tax Appeal No.504 of 2022
filed by the Revenue having been allowed by answering
the substantial questions of law in favour of the Revenue
and consequently setting aside the order dated
31.01.2022 passed by CESTAT in Customs Appeal
No.10752 of 2019, we are of the considered view that
prayer sought for in Special Civil Application No.14527 of
2022 cannot be entertained and said petition is liable to
be rejected.
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51. For reasons aforestated, we proceed to pass the
following
ORDER
(i) Tax Appeal No.504 of 2022 is allowed by answering the substantial questions of law in favour of the appellant - Revenue and against the respondent, by setting aside the order passed by CESTAT in Customs Appeal No.10752 of 2019 dated 31.01.2022. Consequently, Customs Appeal No.10752 of 2019 is dismissed;
(ii) Special Civil Application No.14527 of 2022 is dismissed;
(iii) No order as to costs;
(iv) All pending civil applications stand consigned to records.
(ARAVIND KUMAR,CJ) (ASHUTOSH J. SHASTRI, J) Bharat Page 56 of 56 Downloaded on : Mon Jan 02 20:53:05 IST 2023