Customs, Excise and Gold Tribunal - Delhi
Collector Of Customs vs Goodyear India Limited on 16 April, 1986
Equivalent citations: 1987(11)ECC38, 1988ECR455(TRI.-DELHI), 1986(25)ELT188(TRI-DEL)
ORDER
G. Sankaran, Vice-President
1. The present proceedings came to be initiated by the Central Government by the issue on 4-2-81 of a notice under Section 131(3) of the Customs Act, 1962 (hereinafter called the "Customs Act") to M/s. Goodyear India Limited (hereinafter called "Goodyear") calling upon them to show cause why order-in-appeal No. S.49/1049/79-R dated 1-12-79 passed by the Appellate Collector of Customs, Bombay should not be set aside and why the Assistant Collector's order No. S/6-C-3342/78-R dated 17-5-79 should not be restored. The proceedings were pending on the eve of the setting up of this Tribunal and were transferred to it under Section 131 B of the Customs Act, 1962 to be disposed of as if it were an appeal filed before the Tribunal.
2.0 To begin the story at the beginning, Goodyear imported at the Bombay Port a consignment of what was described in the covering invoice 3641 dated 6-2-78 as "Bulked Nylon Fabric - Your code No. E 02 NN". They filed a bill of entry for clearance of the goods describing them therein as "Nylon Woven Dipped Diffusion Resistance Fabric. Goodyear Code EO,. NN". The goods were assessed to duty as shown below :
(a) basic customs duty (leviable under the First Schedule to the Customs Tariff Act, 1975 - hereinafter referred to as the Tariff Act)
- under heading 59.01/15 of the First Schedule to the Tariff Act (hereinafter referred to as the "Import Tariff Schedule")
- at 100% ad valorem + 20%;
plus
(b) additional duty of customs (hereinafter referred to as "additional duty") on the above fabrics (comprised in the goods) corresponding to the excise duty leviable
- under item No. 22(1) of the First Schedule to the Central Excises & Salt Act, 1944 (hereinafter referred to as "CET").
- at 20% ad valorem + Rs. 5 per sq. metre;
plus
(c) additional duty corresponding to the excise duty leviable
- under item No. 22(3), CET as fabrics impregnated, coated or laminated with preparations of cellulose derivatives or other artificial, plastic materials
- at 30% ad valorem + 1.5% ad valorem (5% of 30%) ' plus
(d) additional duty corresponding to the excise duty leviable
- under the Additional Duties of Excise (Goods of Special Importance Act, 1957 (hereinafter called the "1957 Act")
- at 5.5% ad valorem vide Central Excise Notification No. 179/72 as amended from time to time;
plus
(e) additional duty corresponding to the duty of excise leviable
- under the Khadi & other Handloom Industries Development (Additional Excise Duty on Cloth) Act of 1953 (hereafter the "1953 Act")
- at 1.9 paise per sg. metre;
plus
(f) additional duty leviable
- under the Additional Duty Rules 1976 read with Customs Notification No. 356 dt. 2-8-76 on the Nylon Yarn used in the manufacture of fabric.
- at Rs. 58 per kg.
2.1 Goodyear cleared the goods on payment of the duty assessed. Later on, it appears they claimed refund of duty on the ground that additional duty was leviable at 30% ad valorem + 5.5% ad valorem + 1.9 paise per sg. metre + Rs. 6.50 per kg. + 5% of the total duty. It further appears that subsequently, they revised their stand and claimed that additional duty was leviable only at 30% ad valorem + 1.9 paise per sq. metre + Rs. 6.50 per kg. + 5% of the total duty.
2.2 The Assistant Collector of Customs, Bombay, passed an order on 17-5-1979 rejecting the claim. Among the reasons given were :
(i) the goods had not been subjected to laboratory test and hence benefit of lower additional duty could not be given;
(ii) the enhanced amount of claim on a fresh ground in the claim on 6-1-1979 was time-barred.
2.3 In the appeal, the Appellate Collector, Bombay held that :
(i) there was no time-bar in respect of the second claim which was the one pressed in appeal;
(ii) the fabric itself (as seen from the test report) was not a processed fabric nor coated nor impregnated fabric, but was a fabric woven from Nylon Yarn treated with artificial resins. The fabric was thus an unprocessed fabric; unprocesed fabrics were exempt from excise duty under Notification No. 80/69.
(iii) the yarn was 930 Deniers as seen from the supplier's certificate;
(iv) in the circumstances :
- basic excise duty (meaning additional duty) levied under item No. 22(1) CET at 20% ad valorem + Rs. 5 per sq. metre was not chargeable [item (b) - para 2.0].
- there was no justification for the charge of additional duty under the 1957 Act read with notification No. 179/72-CE and notification No. 109/75 CE, dated 30-4-75 at 5.5% ad valorem [item (d) - para 2.0]
- the additional duty leviable under the Additional Duty Rules, 1976 under item 18 of CET was Rs. 6.50 per kg. vide notification No. 28/75 dated 1-3-75 [item (f) - para 2.0].
2.4 On the above basis, the Appellate Collector allowed the appeal and ordered consequential refund. He added that of all the ingredients of additional duty enumerated, only those indicated at items (e) and (f) - (para 2.0) - were to be levied.
3.0 On scrutiny of the appellate order, the Central Government formed a tentative view that -
(i) the finding of the Appellate Collector that the base fabric being unprocessed, did not attract additional duty corresponding to item 22(1) CET, by virtue of notification No. 80/69 was correct;
(ii) the order was otherwise not correct in law on the question of levy of additional duty for the following reasons :
(a) it appeared to the Central Government that the goods were in the form of woven fabric, composed of nylon yarn, treated with artificial resin. As such the levy of additional duty at 30% ad valorem + 5% of 30% corresponding to item 22(3), CET as fabric coated/impregnated with artificial plastic appeared to be correct and this fact was, at no stage, disputes by Goodyear;
(b) while the base fabric was unprocessed, the imported goods were fabrics impregnated with artificial resin and as such being processed fabrics, they appeared to attract additional duty corresponding to the excise duty leviable under the 1957 Act read with notification No. 179/72-CE at 5.5% ad valorem. The reference to notification No. 109/75 CE by the Appellate Collector seemed misconceived as that applied to goods falling under item 22 (1) CET whereas the imported goods appeared to fall under item 22 (3) CET.
(c) the imported goods appeared to be made from bulked yarn as seen from the invoice and as such, they appeared to attract additional duty corresponding to the excise duty under S.No. 2(a)(v) of notification 55/78 i.e. at Rs. 24.60 per kg + 5% of Rs. 24.60 = Rs. 25:83 per kg.
3.1 In short, additional duty was leviable under item 22(3) of the CET at :
30% ad valorem + 5% of 30% i.e. 1.5% ad valorem [item (c) - para 2.0] Plus additional duty under the 1957 Act at 5.5% Plus 1.9 paise per sq. metre under the 1953 Act [item (e) - para 2.0] Plus Rs. 25.83 per kg. on. the nylon yarn used in the manufacture of the imported fabrics under the Additional Duty Rules 1966, read with notification No. 356~Cus/76 and C.Excise notification No. 55/78 S.No. 2. a (v) [item No. (f) - para 2.0].
3.2 It was on the basis of the aforesaid tentative view that the Central Government proposed to review the impugned order-in-appeal under Section 131 (3) of the Customs Act. The proceedings are now before us as transferred proceedings in terms of Section 131 B of the Customs Act.
4.0 We have heard Shri Vineet Ohri, Sr. D.R. for the Revenue and Shri Harish Salve, Advocate, assisted by Shri P.K. Ram, Advocate for Goodyear.
5.0 At the outset, Shri Salve stated that the levy of additional duty under item 22(3)-CET at 31.5% ad valorem [item (c) of para 2.0] was not disputed before the Appellate Collector. Nor was a claim based on this aspect made even before the Assistant Collector. However, after noting that there was no dispute about this component, the Appellate Collector, as Shri Ohri submits, has directed refund of the said component. Shri Ohri further submits that the Appellate Collector could not have done this and this part of the impugned order should be set aside. Shri Salve's reply to this is that, though initially no claim was made in this behalf, since the show cause notice has re-opened the assessment, Goodyear had the right to contest the notice which it had done in the reply to the notice and, in law, had acquired the right to press for refund on this score. Shri Ohri. on the other hand, vehemently contests this stand' and submits that no new case can be set up by the respondent in reply to the show cause notice, the claim not having been made at an any earlier stage.
5.1 We do not agree with the learned Sr. D.R. Though this aspect of the dispute was not raised before the Assistant Collector nor even before the Appellate Collector, the latter came to a finding on the material before him, that the fabric was not a processed, coated or impregnated fabric, but one woven from nylon yarn treated with artificial resin and that, therefore, the fabric was unprocessed. In the show cause notice, it is stated that the imported goods are in the form of woven fabric, composed of nylon yarn treated with artificial resin and as such the levy of additional duty under item 22(3)-CET as a fabric coated/impregnated with artificial plastic appeared to be in order. On this basis, Goodyear is asked to show cause. In this background, it is difficult to see how the fact that Goodyear did not put forth this claim before the lower authorities can be held against them. By seeking to set, aside the relief granted on this score, Government has given Goodyear an opportunity to show cause against the proposed order and that is precisely what the latter have done. As the learned Counsel for Goodyear points out, the Appellate Collector, exercising powers under Section 128(2) of the Customs act, as it stood then, had wide powers - of passing "such order as deemed fit" - on the appeal. He could even order relief not claimed. Reliance was placed for this on 1983 ELT 2465 (CEGAT) Sunrise Electric Corporation v. Collector of Customs, Bombay.
5.2 In this background, Shri Salve is right when he says that Goodyear, called upon to show cause why the relief granted by the Appellate Collector should not be nullified, has the right to press that the relief was due on the facts and circumstances of the case and adduce evidence in support of the stand. It is an entirely different matter whether the evidence produced should be accepted or rejected. He is also right in saying that these are not in the nature of second appeal proceedings truely so-called when it could be argued that new evidence could not be adduced as of right. Goodyear is not in second appeal. It is showing cause.
5.3 It is also observed that the Appellate Collector has relied upon the result of test conducted by the Chemical Examiner on a previous consignment of similar goods. The report, as extracted in para 9 of the memo of appeal before the Appellate Collector reads :
"Sample is in the form of woven fabric. It is composed of Nylon yarn treated with artificial resin" (A photo copy of the report was filed during the hearing by Shri Salve.) It appears that the report has been read differently by the Appellate Collector and the Reviewing authority. The former would appear to have construed it to mean that the Nylon Yarn had been treated with resin and the fabric was woven out of the treated yarn whereas the latter appears to have construed it to mean that the fabric woven out of Nylon Yarn was treated with resin. A plain reading of the test report would seem to support the view taken by the Appellate Collector. Otherwise, one would expect the report to say that the fabric was found to be treated/ coated/impregnated with artificial resin.
5.4 Now, the invoice dated 6-3-78 contains an amplified description of the goods as "Nylon Woven Dipped Diffusion Resistant Fabric" (emphasis supplied). The "certificate of guarantee" (dated 4-5-78 from the suppliers) setting out the specification data also describes the goods as "RFL dipped and diffusion resistant nylon woven chafers ..." (emphasis added). It is this "RFL" dipping that is inter alia explained in the certificate dated 9.3.81 as "Resorcinol - Formaldehyde - Latex" system. This is prima facie evidence of the acceptability of the certificate dated 9-3-81. This read with the Chemical Examiner's report ("It is composed of nylon yarn treated with artificial resin") would point to the inference that the fabric was not coated or impregnated with resin. The fabric would appear to have been dipped in the aforesaid RFL finish. The Revenue has not produced any evidence to the contrary. Even leaving the certificate dated 9-3-81 out of consideration, the chemical examiner's report shows only that the nylon yarn was treated with resin. Fabric woven with such nylon yarn treated with resin cannot, in our view, be appropriately described, (as the show cause notice does) as fabric coated/impregnated with artificial plastic. It is the fabric which has to be coated or impregnated. The chemical examiner's report does not say that the fabric was coated or impregnated. We are, in the circumstances, inclined to hold that the imported goods did not attract additional duty corresponding to the excise duty leviable under item 22(3) of the CET.
6.0 The next issue for consideration is whether additional duty under the 1957 Act was chargeable on the goods, and if so, at what rate. Revenue's contention is that it was chargeable at 5.5% ad valorem under the 1957 Act and read with notification No. 179/72 CET, whereas the respondent contends that it was not chargeable being exempt in terms of notification No. 109-CE, dated 30-4-75.
6.1 The basis for Revenue's contention is that the goods are fabrics impregnated with artificial resin and are, hence, processed fabrics. Processed man-made fabrics falling under item 22(1)-CET, attract additional duty of excise under the 1957 Act as specified in exemption notification No. 179/72 dated 24-7-72. Such fabrics whose value per square metre exceeds Rs. 10 attract duty at 5.5% ad valorem according to the notification, so runs the argument for the revenue. Notification No. 179/72 defines the term "processed" but Goodyear has not claimed exemption from duty on the plea, with evidence, that the process applied to the subject fabric was one of the excepted processes. Notification No. 109/75-CE, dated 30-4-75 which exempts unprocessed man-made fabrics from additional excise duty under the 1957 Act is not applicable to the subject goods.
6.2 The above contentions are sought to be countered by the Counsel for Goodyear by saying that what one has to see is whether the duty under the 1957 Act is leviable on the base fabric. Notification No. 109/75-CE exempts unprocessed fabrics from such duty. The review show cause notice admits that the base fabric was unprocessed fabric.
6.3 Item No. 22(3) in the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act 1957 (Act No. 58 of 1957) read, at the material time, as follows :
"Man-made fabrics - Fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials."
The rate of duty was indicated as "The duty for the time being leviable on the base fabrics, if not already paid".
The show cause notice, as we have seen, proceeds on the basis that the base fabric is unprocessed. Notification 109/75-CE, dated 30-4-75 exempts unprocessed rayons and artificial fabrics falling under item No. 22(1) of the CET from payment of the whole of the additional excise duty leviable under the 1957 Act. We fail to see how this notification is contended by revenue to be not relevant and not applicable to the instant case, particularly in the context of the admitted position that the base fabric is unprocessed. In this view, notification No. 179/72-CE, dated 24.7.72 is not applicable to the subject goods. For the reasons spelt out earlier in para 5.3 and 5.4, the subject goods would also not attract additional excise duty under item No. 22(3) of the First Schedule to the 1957 Act and hence no corresponding additional duty of customs.
7.0 The third issue pertains to the additional duty of customs leviable on the nylon yarn content of the imported goods under the Additional Duty Rules of 1966.
7.1 Section 3(3) of the Customs Tariff Act 1975 provides as follows :
"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."
The Central Government has, by Customs Notification No. 356, dated 2-8-76, framed the Additional Duty Rules 1966. The Notification provides that, for the purpose of Section 3(3) of the Customs Tariff Act, the additional duty leviable on imported fabrics containing more than 10% by weight of synthetic fibre or yarn (there is no dispute that the subject imported fabrics fall in this category), shall be equal to the excise duty for the time being leviable on the synthetic fibre and yarn to the extent that material is used in the manufacture of the imported fabrics.
7.2 There is no dispute that the subject goods attract additional duty in terms of the Additional Duty Rules 1966. The dispute is about the rate. While Revenue's contention is that the nylon yarn contained in the subject goods being bulked yarn, the applicable rate of duty is Rs. 24.60 per kg. under S. No. 2(a) (v) of Notification No. 55/78-CE, dated 1-3-78, Goodyear's contention is that the correct rate is Rs. 6.50 per kg. in terms of S.No. 3(b) (vi) of Notification No. 28/75, dated 1-3-75 - the rate applicable to nylon yarn above 750 deniers.
7.3 It is common position that the nylon yarn we are concerned with is bulked yarn. The Revenue contends that it is textured yarn, whereas Goodyear contends it is not. Both sides agree that the yarn is above 750 deniers.
7.4 On the question whether bulk yarn was textured yarn, there were considerable arguments sought to be supported by technical literature. However, for our present purpose, it does not seem necessary to go into the technical aspects of the question. For, item No. 18 (ii) which covers textured man-made filament yarn, contains an explanation to the following effect :
"Textured yarn' means yarn that has been processed to introduce crimps, coils, loops, or curls along the length of the filaments and shall include bulked yarn and stretch yarn."
Therefore, it is not open to argument whether bulked yarn is textured yarn or not. In view of the above explanation, bulked yarn is certainly textured yarn for the purpose of item 18(ii). When this was pointed out to the learned counsel for Goodyear, he did not advance any further arguments on the point whether bulked yarn was or was not textured yarn.
7.5 However, it is Shri Salve's contention that the rate of duty applicable to the yarn is Rs. 6.50 per kg. in terms of S. No. 3(b) (vi) of Notification No. 28/75, dated 1-3-75. But as correctly pointed out by the learned Sr. D.R., this notification, as is evident from the preamble, applies to item No. 18 (i) of the CET, which covered rayon and synthetic fibre and yarn other than textured yarn. Evidently, the notification is not attracted in the present case and, therefore, its benefit is not available to the appellant, since the yarn in the present goods is textured yarn falling under item No. 18(ii). The applicable notification is 55/78 CE dated 1-3-78, which in terms, is in respect of textured yarn falling under sub-item II (i) (b) of item 18-CET.
7.6 With respect to the notification No. 55/78 Shri Salve submits that the yarn in question would fall under S.No. 1 ("textured yarn produced out of base yarn" with the rate of duty being "the duty for the time being leviable on the base yarn if not already paid plus Rs. 5 per kg.") and not S.No. 2(a) (v) "other textured yarn - polyamide (nylon) textured yarn - 165 deniers and above"] with the rate of duty being Rs. 24.60 per kg. If Shri Salve's contention is correct, the duty rate would be Rs. 11.50 per kg. comprised of Rs. 6.50 per kg. under S. No. 3 (b) (vi) of Notification No. 28/75 ["other synthetic yarn - polyamide (nylon) yarn - above 750 deniers" the rate of duty shown in the table being Rs. 6.50 per kg.] plus Rs. 5 per kg. The basis for this contention is that the supplier of the imported goods had bought base yarn from its manufacturer, namely M/s. Imperial Chemical Industries and had subjected the base yarn to the process of air-bulking. Shri Salve further contends that though the question of textured yarn was not covered before the lower authorities, the respondent was entitled to adduce evidence and show in. these proceedings, which have arisen out of the Government's show cause notice, that the yarn comprised in the imported goods fell in the description "textured yarn produced out of base yarn" and not in the description "other textured yarn". It was not as though the Assistant Collector had raised the question-of texturising and the respondent had slept over the matter in which case the respondent perhaps would not be entitled to produce any evidence in this behalf at the present stage. We heard the objection of the Sr. D.R. to the admission of the letter dated 9-3-81 from M/s. Milliken to the respondent at the present stage of the proceedings. But we were inclined to agree with the aforesaid contention of the respondent and permit the introduction of the said letter but permitted reference to it only to the extent required in connection with the respondent's contention on the aspect of texturising. With reference to this letter, Shri Salve submitted that it would be clear that the textured yarn comprised in the imported goods answered to the description "textured yarn produced out of base yarn" and fell under S.No. 1 of the Table under notification No. 55/78-CE.
7.7 In response to a query from the Bench whether in view of the provisions of Section 3 of the Customs Tariff Act 1975, the higher of the two rates would not apply, Shri Salve submitted that since the texturised yarn in question squarely fell under the description given against S.No. 1 of notification No. 55/78, there could be no question of different rates for the same goods and, therefore, the highest rate being attracted. In this connection, Shri Salve contended that the Rule that the highest rate would be attracted applied only to goods which are not manufactured in India. If like goods are manufactured in India, the additional duty of customs cannot exceed the excise duty applicable to like goods; it cannot be levied at a higher rate. Since, in India, textured yarn manufactured out of base yarn attracted duty only as shown against S. No. 1 of the Table in notification 55/78, that was the rate of additional duty of customs applicable to imported goods and not any higher rate.
7.8 On the question whether bulking was texturising or not, as earlier noted, Shri Salve, when the explanation to item No. 18(ii) was pointed out in terms of which bulking was included in the term 'texturising', did not make any further submissions.
8.0 In meeting the aforesaid contentions of Shri Salve, Shri Vineet Ohri submitted that the process of manufacture of goods was relevant and important only with respect to goods produced or manufactured in India. In the case of imported goods, one should not go into the process of manufacture." In support of this contention, he relied upon the observations of the Supreme Court in para 7 of Khandelwal Metal & Engineering Works and Anr. v. Union of India and Ors. 1985 (20) ELT 222 (SC). In the present case, the yarn comprised in the imported goods was admittedly textured yarn. It would not be necessary to go into the manufacture of the textured yarn in the foreign country. Viewed in this light, Shri Ohri submitted, S. No. 2 (a) (v) of the table in notification 55/78 was the appropriate entry and the duty indicated against that S. No. was attracted.
9.0 For the purpose of Section 3 of the Tariff Act, the expression "the excise duty for the time being leviable on a like article if produced or manufactured in India" has been assigned the following meaning :
"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."
[emphasis supplied].
Having regard to the words and punctuation employed, we cannot agree to Shri Salve's reading of the above provision to mean that the highest duty provision will apply only if like goods are not manufactured in India and not if like goods are so manufactured. In our opinion, the words "such duty" in the closing part of the provision refers to the expression "the excise duty for the time being leviable on a like article if produced or manufactured in India" which has been defined in the provision and qualify both the preceding clauses.
9.1 Shri Salve contends that the description of the article relevant to the present case is "Textured yarn produced out of base yarn" and not "other textured yarn" in notification 55/78. This contention has, in our opinion no substance. The description of the article in the First Schedule to the Central Excises and Salt Act is "Textured yarn". "Textured yarn produced out of base yarn "is merely descriptive of the process of manufacture. For duty purposes, notification No. 55/78 describes (and fixes a different concessional rate of duty for) textured yarn produced out of base yarn separately from other textured yarn. This itself shows that textured yarn is liable to excise duty at different rates, depending on the process of manufacture. The excise duty leviable on textured polyamide yarn of above 750 deniers would depend on the process of manufacture. It is Rs. 6.50 [SI. No. 3(b) (vi) of notification No. 28/75-CE] plus Rs. 5/-per Kg. (Col. 3 against Sl. No. 1 of notification 55/78-CE), if such textured yarn is produced out of base yarn. If it is produced otherwise, the rate of duty is Rs. 24.60 per kg. [SI. No. 2(a) (v) of notification 55/78]. In such a situation, the yarn content of the imported fabrics would attract duty at the higher rate viz. Rs. 24.60 per kg. (plus special excise duty as may be applicable).
10.0 Summing up, our conclusion are :
(i) the imported goods did not attract additional duty of customs corresponding to the excise duty leviable under item No. 22(3) of the CET.
(ii) they did not attract additional duty of customs corresponding to the excise duty leviable under the 1957 Act.
(iii) the yarn content of the goods attracted additional duty of customs at Rs. 24.60 per kg.
(iv) In addition, special excise duty as applicable was leviable.
11.0 In the result, we modify the impugned order to the extent indicated above. The appeal before us is disposed of in the light of the above findings.