Customs, Excise and Gold Tribunal - Delhi
Jayant Oil Mills vs Collector Of Customs on 10 March, 1987
Equivalent citations: 1987(12)ECC166, 1987(12)ECR1(TRI.-DELHI), 1987(30)ELT476(TRI-DEL)
ORDER D.C. Mandal, Member (T)
1. In this case, the appellants imported a consignment of Coconut Oil described as "Crude Coconut Oil" which was assessed to basic Customs duty at the standard rate of 60% ad-valorem prescribed in the Customs Tariff and was also charged to additional duty of customs under Section 3 of the Customs Tariff Act, 1975. In the Bill of Entry, the appellants claimed benefit of Preferential rate of duty under Notification No. 352/76-Cus., dated 2-8-1976. They filed a refund application claiming re-assessment of the goods at preferential rate of duty and also refund of additional duty. Assistant Collector of Customs (Refund) rejected the refund claim on the ground that Republic of Singapore was not included in the schedule attached to the Notification No. 342/76. Appeal was filed against the said order of the Assistant Collector, but the same was also rejected by the Collector of Customs (Appeals). The present appeal is against the order of the Collector (Appeals).
2. Collector (Appeals) has held that the decision of the Assistant Collector was wrong as Singapore was included in the Notification No. 352-Cus., dated 2-8-1976. He, however, rejected the appeal of the appellants on the ground that coconut oil is not included in the Notification No. 342/76-Cus., dated 2-8-1976.
3. We have heard Shri S.D. Nankani, learned advocate for the appellants and Shri Shishir Kumar, learned S.D.R. for the respondent. Shri Nankani has argued that the Assistant Collector and the Collector (Appeals) have wrongly applied Notification No. 342/76-Cus., dated 2-8-1976. The said notification was not at all relevant in this case. In the Bill of Entry, the appellants claimed preferential rate of duty under Notification No. 352/76-Cus., dated 2-8-1976 as the country of origin of the goods was Singapore. Singapore is included at Sl. No. 19 of the said Notification. They also claimed refund of additional duty. The contention of the learned advocate is that the goods imported by the appellants were Crude Coconut Oil, and Crude Coconut Oil was exempted from the Central Excise Duty under Notification No. 33/63-CE., dated 1-3-1963. He has also stated that sample was drawn from the consignment and a bond was taken from the appellants. The test result of the sample showed that the goods were Crude Coconut Oil. In letter No. S/5-340/80-III-A, dated 20-7-1982 the Assistant Collector intimated to the appellants about the cancellation of the bond. The said letter also shows that the goods were crude coconut oil. The learned advocate has further argued that in the refund application filed before the Collector of Customs (Appeals), the appellants claimed refund on two counts, viz., Preferential rate of duty @ 50% ad valorem and refund of additional duty. The Assistant Collector and the Collector (Appeals) did not give any findings regarding their claim for refund of additional duty. The Assistant Collector on his own invoked the Notification No. 342/76-Cus., dated 2-8-1976 which was not at all relevant in the case of the appellants. The Collector (Appeals) also relied on that Notification to reject their appeal on the ground that coconut oil was not included in the schedule to that Notification. In support of his arguments for refund of countervailing duty learned advocate has relied on Bombay High Courts' judgment in the case of Century Enka Limited and Ors. v. Union of India and Ors. (1982-ELT-64), decision of the Government of India in the case of Bombay Oil Industries Pvt. Ltd., Jai Hind Oil Mill and Kish Hem Trading Corporation, reported in 1982 ELT 707 (GOI) and this Tribunal's decision in the case of Collector of Customs, Bombay v. Godrej Soaps Limited, Bombay and Ors., reported in 1985(21) ELT 805 (Tribunal). He has argued that the Bombay High Court judgment fully covers his case and the same is to be followed. When it was pointed out to the learned advocate that in Karnataka High Court's judgment, reported in 1986(24) ELT 456 (Kama-taka) B.S. Kamath & Company and Ors. v. Union of India and Ors. and this Tribunal's decision in the case of Gupta Trading Company v. Collector of Customs, Bombay reported in 1987(27) ELT 510 (Tribunal), it was held that the exemption granted to the excise duty either in whole or in part is for the purpose of that Act only and it cannot be the basis for claiming exemption under the Customs Act, the learned advocate has stated that Karnataka High Court did not appear to have considered the provision of Section 3 of the Customs Tariff Act, 1975. It was pointed out to the learned advocate that the High Court had considered the provision of Section 3 of the Customs Tariff Act.
4. Section 3 of the Customs Tariff Act, 1975 reads as follows :-
"3. Levy of Additional Duty equal to excise duty - (1) An article which is imported into India shall, in addition, be liable to a duty (hereafter in this section referred to as the additional duty) equal to the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article.
Explanation. - In this section, the expression "the excise duty for the time being leviable on a like article if produced or manufactured in India" means the excise duty for the time being in force which would be leviable on a like article if produced or manufactured in India or, if a like article is not so produced or manufactured, which would be leviable on the class or description of article to which the imported article belongs and where such duty is leviable at different rates, the highest duty.
(2) For the purpose of calculating under this Section the additional duty on any imported article, where such duty is leviable at any percentage of its value, the value of the imported article shall, notwithstanding anything contained in Section 14 of the Customs Act, 1962 (52 of 1962) be the aggregate of :-
(i) the value of the imported article determined under Sub-section (1) of the said Section 14 or the Tariff value of such article fixed under Sub-section (2) of that Section, as the case may be; and
(ii) any duty of customs chargeable on that article under Section 12 of the Customs Act, 1962 (52 of 1962) and any sum chargeable on that article under any law for the time being in force as an addition to, and in the same manner as, a duty of customs, but not including the duty referred to in Sub-section (1).
(3) If the Central Government is satisfied that it is necessary in the public interest to levy on any imported article [whether on such article duty is leviable under Sub-section (1) or not] such additional duty as would counter-balance the excise duty leviable on any raw materials, components and ingredients of the same nature as, or similar to those, used in the production or manufacture of such article, it may, by notification in the Official Gazette, direct that such imported article shall, in addition, be liable to an additional duty representing such portion of the excise duty leviable on such raw materials, components and ingredients as, in either case, may be determined by Rules made by the Central Government in this behalf.
(4) In making any Rules for the purposes of Sub-section (3) the Central Government shall have regard to the average quantum of the excise duty payable on the raw materials, components or ingredients used in the production or manufacture of such like article.
(5) The duty chargeable under this Section shall be in addition to any other duty imposed under this Act or under any other law for the time being in force.
(6) The provisions of the Customs Act, 1962 (52 of 1962) and the Rules and regulations made thereunder, including those relating to drawbacks refund and exemption from duties, shall so far as may be, apply to duty chargeable under this Section as they apply in relation to the duties leviable under that Act."
5. In the case of B.S. Kamath and Company (supra), Hon'ble Karna-taka High Court considered the provision of Section 3 of the Customs Tariff Act, 1975 and the judgment of Bombay High Court in the case of Century Enka Limited. In paragraph 26 of the judgment cf Karnataka High Court, their Lordships reproduced paragraph 7 of the judgment of Division Bench of Bombay High Court in Century Enka's case. For facility of reference we reproduce below the said paragraph 7 of the judgment :-
"7. Shri Govilkar then argued that Section 3 of the Customs Tariff Act makes reference to the additional duty and it is something different from the countervailing duty. In our judgment, the submissions only deserve to be stated to be rejected. The learned counsel then argued that the exemption notification on which reliance is placed by the petitioners was issued under the provisions of the Central Excise Rules, 1944 and that cannot be used for claiming the advantage under the provisions of the Customs Tariff Act. The submission is totally devoid of merits. Section 3 enables the department to levy countervailing duty provided the excise duty is leviable on article if manufactured in India. The plain reading of Section 3 makes it clear that countervailing duty under Section 3 cannot be levied on an article imported into India if such article manufactured in India is exempted from the payment of excise duty. The provisions of Section 3 has to be read with the provisions of Central Excise Act and the liability to levy the countervailing duty would depend upon the fact as to whether such an article is liable to pay excise duty. In these circumstances, it is futile to urge that the exemption notification issued under the Central Excise Act have no bearing to determine liability to pay countervailing duty under the Customs Tariff Act."
Karnataka High Court, in paragraph 20 of the judgment, extracted the provision of Section 3 of the Customs Tariff Act, 1975 and discussed its applicability to the imported goods. In paragraph 24 of the judgment Hon'ble High Court of Karnataka observed as follows :-
"24. The Customs Act along with the Tariff Act, the Rules made under those acts and the exemption or other Notifications issued thereunder form a complete code in itself. The chargeability, assessments, exemptions, and recoveries of customs and exports are exclusively regulated by the Customs Act and the Tariff Acts. Section 25 of the Customs Act empowers Government to exempt in whole or in part the Customs Duty on imports in the public interest. Section 5 of the Tariff Act empowers Central Government to lower the rates of customs duty to give effect to trade agreement. The exemptions granted under the Excise Act which regulates the levy of excise duty or a tax on manufactured goods in the country is a separate and distinct enactment. The exemptions granted under the Excise duty either in whole or in part are for the purpose of that Act only and they cannot on any principle be the basis for claiming exemptions under the Customs On these basic factors, we find no merit in the claim of the petitioner."
Their Lordships have also held that what has been expressed in paragraph 7 of the judgment in Century Enka's case is opposed to the enunciation made by the Supreme Court in the case of Khandelwal Metal and Engineering Works and Anr. v. Union of India and Ors. [1985 (20) ELT 222], and therefore they could not follow the judgment of Bombay High Court. Their Lordships also observed that in Hegde & Golay Limited v. The Collector of Central Excise and Customs (Writ Petition No. 6706 of 1979 decided on 2-1-1986) the same view was held. In paragraph 27 Their Lordships in Karnataka High Court, therefore, held that "With great respect to the learned Judges that decided Century Enka's case, we are of the considered opinion that the same runs counter to the provisions of the Customs and Tariff Acts and the legal principles underlying the levy of duties or taxes on imports and excise duty on manufactured goods in the country. For these and other reasons stated by us earlier, with great respect to Their Lordship of the Bombay High Court that decided Century Enka's case, we regret our inability to subscribe to their views."
6. A similar question came up for consideration before this Tribunal in the case of Gupta Trading Company v. Collector of Customs, Bombay [1987(27) ELT 510]. In that case, this Tribunal, followed the judgment of Karnataka High Court (supra) and also considered the observations of the Hon'ble Supreme Court in the case of Khandelwal Metal & Engineering Works and Anr. v. Union of India and Ors. [1985 (20) ELT 222], the Supreme Court held that additional duty under Section 3 of the Customs Tariff Act, 1975 partakes character of Customs Duty and is not countervailing duty. In Union of India and Ors. v. Modi Rubber Limited and Ors. [1986 (25) ELT 849(SC)], the Supreme Court held :-
"It is obvious that when a Notification granting exemption from duty of excise is issued by the Central Government in exercise of the power under Rule 8(1) simpliciter, without anything more, it must, by reason of the definition of 'duty' contained in Rule 2 Clause (v) which according to the well-recognised canons of construction would be projected in Rule 8(1) be read as granting exemption only in respect of duty of excise payable under the Central Excises and Salt Act, 1944."
Following those judgments, this Tribunal held in Gupta Trading Company's case that appellants could not claim refund of the additional duty, which was customs duty, based on Notification issued under Rule 8(1) of the Central Excise Rules, 1944, when the Notification had no reference to Customs Duty.
7. Hon'ble Bombay High Court did not have the occasion to consider the judgment of the Hon'ble Supreme Court in Khandelwal's case. The Hon'ble Supreme Court in that case has clearly observed that additional duty under Section 3 of the Customs Tariff Act, 1975 is not a countervailing duty, but it partakes the nature of customs duty. In view of this observation of the Supreme Court, it is necessary to issue specific exemption Notification under Section 25 of the Customs Act if it is intended that additional duty should not be levied on the imported goods. Hon'ble Karnataka High Court in their judgment have followed the same principle. In the earlier decision of this Tribunal in Gupta Trading Company's case this Tribunal has followed those judgments. Similarly, in Collector of Customs, Bombay v. Parekh Dye-Chem. Industries (P) Ltd., Bombay, reported in 1986 (24) ELT 119, and in Moti Ram Tola Ram v. Collector of Customs, Bombay reported in 1987 (Vol. II-Part I) E.C.C-T-8, this Tribunal held that exemption from additional duty of Customs leviable under Section 3 of the Customs Tariff Act, 1975 cannot be claimed on the basis of exemption Notification issued under Rule 8(1) of the Central Excise Rules,
8. In view of the above, we do not find any justification to take a view different from that taken by this Tribunal in the cases cited (supra). Accordingly, we hold that Central Excise Notification No. 33/63-CE, dated 1-3-1963 could not exempt the imported goods from the levy of additional duty under Section 3 of the Customs Tariff Act, 1975.
9. Even otherwise, imported crude coconut oil in question is not covered by the Notification No. 33/63-CE. This notification exempted vegetable Non-essential Oils other than processed vegetable non-essential oils. Explanation to the Notification says that the processes referred to in this Notification are (i) Treatment with alkali or acid, (ii) Bleaching, and (iii) Deodorization. Learned Advocate has argued that the imported goods were crude and were not refined coconut oil. In paragraph 2.1.1 of the Indian Standard Specification for Coconut Oils IS 542-1968, Refined Coconut Oil has been defined as Coconut Oil obtained by the process of expression or solvent extraction which has been refined by neutralization with alkali, bleached with bleaching earth or activated carbon or both and deodorized with steam, no other chemical agents being used. This definition shows that refined coconut oil goes through three processes. If the oil has been subjected to one of these three processes, it will not be refined oil. The Notification, on the other hand, disentitles vegetable non-essential oil if it has been subjected to any ox the three processes. The appellants have not produced any evidence to show that the imported oil has not been subjected to any of these three processes. On this ground also the imported oil will not be eligible to the exemption under this Notification. Drawing our attention to the invoice, Shri Nankani has stated that the imported oil as per specification had free fatty acid to the extent of 3.27% and this shows that the said oil was in crude form and unprocessed. In the absence of any test report to show that the oil was not subjected to any of the three processes mentioned in the exemption Notification, mere description of the specification in the invoice is not sufficient to entitle the oil to the exemption.
10. So far as the appellants' claim for preferential rate of duty is concerned it is clearly admissible in view of the Notification No. 352/76-Cus., dated 2-8-1976. Learned J.D.R. has also very fairly conceded to this position during the hearing before us. We, therefore, hold that the appellants were entitled to assessment of the goods at the preferential rate of duty.
11. Having regard to the foregoing discussions, we order as follows :-
(i) The goods should be re-assessed to basic Customs Duty at the preferential rate of duty subject to satisfaction of the Assistant Collector of Customs that the goods were of Singapore origin and consequential refund be allowed, if otherwise admissible.
(ii) Claim for refund of additional duty was not admissible and as such, the same has been correctly rejected by the authorities below.
12. The appeal is thus partly allowed in the above terms.