Customs, Excise and Gold Tribunal - Delhi
Jindal Photo Films Ltd. And ... vs Cc on 21 April, 2004
Equivalent citations: 2004(95)ECC316
ORDER P.G. Chacko, Member (J)
1. These appeals are against an order of the Commissioner of Customs (Import), Mumbai, the operative part whereof reads as under: "Accordingly, I order as:
(i) I deny the benefit of Notification Nos. 56/98 dated 1.8.98 and 22/99 dated 28.2.99 and confirm the SAD totally amounting to Rs. 4,88,04,606 (Rs. four crores eighty eight lakhs four thousand six hundred six only) for the period from 18.9.98 to 30.6.98 in respect of the imports of photographic of jumbo rolls collectively valued at Rs. 83,82,30,415 in terms of the undertaking given by them read with Section 28(1). I further order that Rs. 2,50,00,000 deposited by the importer be adjusted against the total duty demanded and confirmed.
(ii) I hold that CPFL are also liable to pay interest @ 24% on the said duty amount in terms of the provisions of Section 28AB.
(iii) I hold that the imported goods are liable for confiscation under Sections 111(m) and 111(o) of the Customs Act, 1962. The goods however are not available for the confiscation having been released on the basis of the undertakings. The importer is therefore, liable for penal action under Section 114(A) of the Customs Act. I therefore, impose a penalty of Rs. 4,88,04,606 (Rupess four crore eighty eight lakh four thousand six hundred six only) on M/s. CPFL under Section 114(A) of the Customs Act.
(iv) I also hold JPFL liable to penalty under Section 112(b) as they have been associated directly have been the ultimate beneficiaries. I, therefore, impose penalty amounting to Rs. 50,00,000 (Rupees fifty lacs only) under Section 112(a) of the Customs Act on JPFL."
Appeal No. 152 filed by M/s. Consolidated Photo & Finvest Ltd. is against Clauses (i), (ii) and (iii) of the above order. Appeal No. 151 filed by M/s. Jindal Photo Films Ltd. is against Clause (iv) of the above order.
2. M/s. Consolidated Photo & Finvest Ltd. (CPFL, for short) are a Public Limited Company engaged in trading activities. M/s. Jindal Photo Films Ltd. (JPFL, for short) are also a Public Limited Company having both trading and manufacturing activities. Both the companies have their corporate offices in the same premises at New Delhi. The manufacturing unit of JPFL is engaged in the conversion into finished products, of Jumbo Rolls (Bulk Rolls) of various kinds of photographic films and papers imported from M/s. FUJI Photo Film Co., Ltd., Japan (hereinafter referred to as 'FUJI'). It is situate at Silvassa within the Union Territory of Dadra & Nagar Haveli. On 6th June, 1998, CPFL opened a Branch Office in the factory premises of JPFL at Silvassa and subsequently obtained Import Export Code Number from the Customs authorities. The Branch Office was also got registered with the Sales Tax Department of Dadra & Nagar Haveli under Section 12 of the Dadra and Nagar Haveli Sales Tax Regulations 1978 (hereinafter referred to as 'DNHST Regulations' or 'the Regulations') w.e.f. 17th June, 1998. CPFL and JPFL are sister concerns. During the period of dispute, one Shri B.R. Gupta was Director (Imports) of JPFL as well as Authorised Signatory of CPFL. He used to pursue the Purchase Orders placed on FUJI by JPFL for import of Jumbo Rolls of photographic films and papers. He used to advise the foreign supplier as to what quantities of Jumbo Rolls, covered by JPFL's Purchase Orders, should be separately consigned to JPFL and CPFL. As per his oral advice, FUJI used to issue separate Proforma Invoices to the two companies. Insofar as the imports made by CPFL were concerned, they used to open Letters of Credit in favour of FUJI and, on the basis thereof, FUJI used to send the goods and negotiate Bills of Lading, Insurance documents, Invoices, etc. through bankers. CPFL used to obtain these documents from the Bank by making payment for the goods on the basis of the shipping documents of FUJI. Thereafter, CPFL used to file Bills of Entry at Nhava Sheva (Mumbai) for customs clearance of the goods. After taking delivery of the goods, against payment of customs duty as assessed by the authorities, the goods were transported to Silvassa where they were sold to JPFL under Sale Invoices. CPFL imported Jumbo Rolls of various kinds of photographic films & paper from FUJI (Japan) in the above modus operandi during the period of dispute (18th Sept., 1998 to 30th June, 1999). The goods were cleared without payment of Special Additional Duty (SAD) by claiming the benefit of exemption Notification Nos. 56/98-Cus dated 1.8.98 and 22/99-Cus dated 28.2.99. The claims was in terms of Sl. No. 12 in the Table annexed to Notification No. 56/98 ibid and Sl. No. 5 in the Table annexed to Notification No. 22/99 ibid for the relevant periods. The entries at Sl. No. 12 under Notification No. 56/98 and Sl. No. 5 under Notification No. 22/99 were identically worded. The entry at Sl. No. 12 ibid reads as under:
"All goods falling within the said First Schedule, which are imported for sale as such, other than by way of high seas sale and the importer at the time of importation or at the time of clearances of warehoused goods for home consumption under the provisions of Section 68 of the Customs Act, 1962 (No. 52 of 1962), as the case may be, makes a specific declaration to that effect in the bill of entry in the manner specified below:
Provided that the rate specified herein shall not apply if the importer sells the said imported goods from a place located in an area where no tax is chargeable on sale or purchase of goods. Declaration I/We hereby declare that the goods of description ____________ imported under Bill of Entry No. _________ dated _________ are of sales purpose only. I/we also declare that sale of said goods will not be effected from a place located in an area where no tax is chargeable on sale or purchase of goods. In case the said goods are disposed of in any manner in contravention of the conditions specified in Notification No. 56/98-Customs, dated the 1st August, 1998, without prejudice to any other action that may be taken under any law for the time being in force. I/we undertake to pay the special additional duty of customs of Rs. __________, which is leviable on these goods, but for exemption contained in the said notification, The aforesaid clearances of Jumbo Rolls without payment of SAD were made by CPFL after declaring, in the prescribed format given above, that any sale of the goods would not be effected from a place located in an area where no tax was chargeable on sale or purchase of goods. It was also undertaken that, if the goods were disposed of in any manner in contravention of the conditions specified in the Notification, the SAD of customs leviable on the goods but for the exemption provided under the Notification would be paid. Later on, the department started investigations into what appeared to them to be evasion of SAD on the goods. Records were scrutinized, statements of officials of the two companies were recorded, documents produced by the company officials during the course of investigations were examined, and the relevant notifications were interpreted in the light of budgetary clarifications issued by Governmental authorities and certain decisions of the Supreme Court. On the basis of the results of all these, the department concluded that the goods imported in the name of CPFL during the aforesaid period of dispute were not eligible for exemption from SAD and that, by wilful mis-statement, mis-declaration and suppression of facts, CPFL had evaded payment of SAD of Rs. 4,88,40,606 on the said goods. It also appeared to the department that a conspiracy was hatched by CPFL and JPFL for the alleged evasion of duty. It was thought that the goods purchased by JPFL from FUJI were routed through CPFL so that the goods could be cleared without payment of SAD in terms of the relevant Notification. Accordingly, the department issued show-cause notice dated 26.5.2000 to CPFL, JPFL and some of their officials. The notice, invoking the extended period of limitation under the proviso to Section 28(1) of the Customs Act, demanded the aforesaid amount of SAD from CPFL and proposed to impose a penalty of equal amount on them under Section 114A of the Act. The notice also proposed penalties on JPFL and company officials under Section 112 of the Act. The demand of duty and the proposal for imposing penalties were contested by the noticees. The Commissioner of Customs, after hearing the noticees, passed the impugned order. CPFL, in their appeal, have challenged the demand of duty on merit as well as on the ground of limitation. They are also aggrieved by the penalty imposed on them under Section 114A of the Act. JPFL, in their appeal, are aggrieved by the penalty imposed on them under Section 112 of the Act.
3. The Commissioner found that, prior to the issue of Notification No. 34/98-Cus. dated 13.6.98 (which had contained a provision identical to the entry at Sl. No. 12 of Notification No. 56/98-Cus. ibid), the imports of Jumbo Rolls were exclusively in the name of JPFL; that all such imports were meant for conversion into finished products of film and paper in terms of specific agreements entered into between them and FUJI (Japan); that the imports were not for sale as such; that, after 13.6.98, any imports by JPFL (other than imports under DEPB Scheme) had to suffer SAD as the imports were not for sale as such as required under the Notification; that their sister company viz. CPFL got themselves registered with the Sales Tax Department from 17.6.98 as a dealer and, subsequently, made it appear that a part of the jumbo rolls purchased from FUJI by JPFL in terms of the agreements between the two were imported in their (CPFL's) name and sold to JPFL for the purpose of conversion into finished products so as to escape liability to pay SAD on the imported goods; that there was no agreement whatsoever between CPFL and FUJI and no purchase orders were ever placed oh FUJI by CPFL; that CPFL had no infrastructure or technical expertise to convert the Jumbo Rolls into finished products; that a part of the goods for which purchase orders were placed on FUJI by JPFL was supplied to CPFL by FUJI as per instructions of JPFL; that CPFL merely acted as a conduit for supply of jumbo rolls by FUJI to JPFL; that the imports made in the name of CPFL as per instructions of JPFL were strictly governed by the agreements between JPFL and FUJI; that the agreements prohibited the supply of jumbo rolls by FUJI to any party other the JPFL and, therefore, CPFL, in making imports of jumbo rolls from FUJI, were only acting as an agent of JPFL; and that, since JPFL and to pay SAD on jumbo rolls directly imported by them, they imported the same indirectly through CPFL with the sole intention to evade payment of SAD. Ld. Commissioner, thus, examined the nature of transactions between JPFL, FUJI and CPFL, and invoked the principle of "lifting of corporate veil" to come to the conclusion that the real importer of the goods was JPFL. Since, in terms of the agreements between JPFL and FUJI, all imports of jumbo rolls had to be converted into finished products of film and paper, JPFL had no authority to sell the imported goods as such and hence there was no question of claiming exemption from payment of SAD, which was applicable only in respect of sale of imported goods as such. Ld. Commissioner further held that the sale of jumbo rolls by CPFL to JPFL was a pre-determined transaction which could be nothing more than a High Sea Sale, for which reason also the exemption under the Notifications was not admissible to CPFL in respect of the goods so sold by them to JPFL. Ld. Commissioner further noted that Silvassa was a place located in an area where no tax was chargeable on sale or purchase of goods. Accordingly, he found that CPFL's sale of the imported goods from Silvassa attracted the proviso under Sl. No. 12 of Notification No. 56/98 and the corresponding proviso under Sl. No. 5 of Notification No. 22/99. This finding was recorded after examining the provisions of the DNHST Regulations 1978 and considering case law. On the basis of his findings, Ld. Commissioner denied the benefit of exemption to CPFL and confirmed the demand of duty on them. After finding deliberate mis-declaration and suppression of facts, against CPFL, the adjudicating authority held them liable for penalty under Section 114 A of the Customs Act, apart from ordering confiscation of the goods under Section 111 of the Act. It also found both CPFL and JPFL liable for penalty under Section 112(b) of the Act.
4. We have heard both sides.
5. The first issue is whether Silvassa -- from where the imported goods were sold by CPFL to JPFL -- is a "place located in an area where no tax is chargeable on sale or purchase of goods." Both sides have argued to length on this issue with reference to the provisions of DNHST Regulations, 1978. Counsel has argued that the charging provisions are Regulations 4 & 6 only and that the only goods which are not chargeable to sales tax at Silvassa are the goods specified in the Second Schedule to the DNHST Regulations. The imported goods in question were not specified in that Schedule. They were goods not specified in any of the Schedules to the Regulations. Referring to Regulation No. 10, counsel has argued that only goods of the Second Schedule are tax-free goods and all other goods are chargeable to tax under the Regulations. The goods in question were chargeable to tax according to Ld. Counsel. In this connection, he refers to Regulation 7 (3), which defines "taxable turnover" and provides for certain deductions from gross sales turnover to determine the taxable turnover. As per Regulation No. 7(3) (II) (a)(iv), deduction is admissible in respect of goods sold to a registered dealer and used by him within Dadra & Nagar Haveli as raw material for the manufacture of taxable goods for sale within Dadra & Nagar Haveli. Such goods are also 'taxable goods', as non-inclusion of any taxable goods in "taxable turnover" does not take away the taxable character of the goods, counsel has argued. In this connection, Ld. Counsel has referred to the assessment order issued to CPFL by the Asstt. Commissioner of Sales Tax, Silvassa. This assessment is for the period 17.6.98 to 31.3.99. This shows a gross turnover of Rs. 71,66,90,470 and a deduction therefrom, of Rs. 71,51,00,100. Accordingly, the taxable turnover shown in the assessment order is Rs. 15,90,370 and the tax payable thereon is Rs. 1,11,326. The assessment order proceeds to say thus: "The dealer's claim that he is not liable to pay any sales tax on the sale of his goods duly supported with the forms ST-XI, amounting to Rs. 71,29,06,663 is also allowed. The dealer's further claim that he is also not liable to pay any sales tax on the sale of his goods (i.e. High Sea Sale) amounting to Rs. 21,93,437 is also allowed on production of the Bill of Entry." Relying on the assessment order, Ld. Counsel has argued that the mere fact that the turnover of jumbo rolls sold by CPFL to JPFL, in respect of which ST-XI forms issued by the latter were produced before the assessing authority, was not included in the "taxable turnover" for the relevant period did not render the goods non-taxable. Counsel has also relied on two, letters issued by the Asst. Commissioner of Sales Tax, Silvassa. These letters are to the effect that, if proper ST-XI forms were not submitted by the selling dealer, he shall be liable for payment of applicable sales tax on such sales. As a matter of fact, in respect of a part of the sales made to JPFL during the period of dispute, ST-XI forms could not be submitted to the assessing authority and, consequently, tax had to be paid on such sales. It was accordingly argued that the goods in question were chargeable to tax under DNHST Regulations during the period of dispute. It was also argued that the proviso under Sl. No. 12 of the Notification No. 56/98 as well as the corresponding proviso under Sl. No. 5 of Notification No. 22/99 had to be strictly construed. In this connection, reliance has been placed on the decision of the Supreme in the case of Innmmuri Gopalan and Ors. v. State of Andhra Pradesh, 1963 (14) STC 742. On the issue of chargeability to tax, Ld. DR has submitted that chargeability of any goods to sales tax is not to be isolated from computation of the taxable turnover. In this connection, he has relied on the decision of the Kerala High Court (Single Bench) in Aluminium Industries Ltd. v. Union of India, 1984 (2) ECC 164 (Ker) : 1984 (16) ELT 183 (Ker) as affirmed by a Division Bench of that court in Aluminium Industries Ltd. v. Union India, 1999 (110) ELT 474 (Ker). It has been argued that as chargeability of the goods in question to sales tax depended on its value, chargeability and valuation were interdependent. Reliance has also been placed on the Supreme Court's decision in Bata Shoe Co. (P) Ltd. and Anr. v. CCE and Ors., 1985 (8) ECC 1 (SC) : 1985 (21) ELT 9 (SC). With reference to the facts of the case, DR has submitted that FUJI had no right to sell jumbo rolls to CPFL but to JPFL only. Therefore, according to DR, there was no valid sale of jumbo rolls by FUJI to CPFL and consequently no valid sale of the goods by CPFL to JPFL and the transaction was not within the meaning of "sale as such" under the Notifications.
6. Both sides have also argued on limitation and other subsidiary issues.
7. We have carefully considered the records, submissions and case law. The goods in question are the jumbo rolls of photographic film and paper imported from FUJI (Japan) by CPFL and sold by the latter to JPFL during the period 18.9.1998 to 30.6.99. CPFL had not paid Special Additional Duty of Customs leviable under Section 3A of the Customs Tariff Act at the time of clearance of the imported goods. They had claimed benefit of 'Nil' rate of SAD under Notification 56/98-Cus. dt. 1.8.98 and 22/98-Cus. dated 28.2.99 vide entries at Serial Nos. 12 and 5 in the Tables annexed to the respective Notifications. This claim has been rejected by the learned Commissioner of Customs, who has accordingly confirmed the demand of SAD against CPFL. He has held that the subject goods did not attract the above entries under the Notifications. This view of his is based on two findings viz. (i) the sale of imported jumbo rolls by CPFL to JPFL was in the nature of a High Sea Sale and not a "sale as such, other than by way of High Sea Sale"; (ii) the sale was from a place located in an area where no tax was chargeable on sale or purchase of goods. We shall examine the two findings one by one.
8. Certain facts are not in dispute. After a purchase order was placed on FUJI by JPFL as per the agreement between them, the latter through their Director (Importer) instructed the former i.e., FUJI, to consign a part of the ordered quantity to CPFL and, accordingly, FUJI issued separate Proforma Invoices to JPFL and CPFL. Acting upon the invoice issued to them, CPFL opened Letter of Credit in favour of FUJI who, thereupon, sent the goods to CPFL. The Bill of Lading, Invoice and other shipping documents of FUJI were collected by CPFL through Bank against payment for the goods. Thereafter, CPFL filed Bill of Entry for Customs clearance of the goods. After paying customs duty as assessed and taking delivery of the goods, CPFL sent the goods to Silvassa where the goods were sold to JPFL under Sale Invoices. It is also not in dispute that, in all the documents covering the goods shipped to CPFL, the latter was shown as the importer. We have seen the specimens of Proforma Invoice, Letter of.Credit, Invoice, Bill of Lading and Banker's Debit Advice filed by the appellants. Though, admittedly, there was no formal agreement in writing between CPFL and FUJI for purchase of jumbo rolls by the former from the latter, the parties had, by their conduct, contracted for it as evidenced by these documents. Hence, it has to be held that CPFL had imported the jumbo rolls from FUJI as agreed between them. There was no legal requirement of any written agreement. The Commissioner has found that the agreement entered into between FUJI and JPFL had prohibited sale of Bulk Rolls by the former to any third party in India and therefore it was not permissible for FUJI to sell Bulk Rolls to CPFL. Ld. Commissioner has accordingly dismissed CPFL's plea that they had directly purchased and imported Bulk Rolls from FUJI. But his finding does not appear to be well-founded inasmuch as the agreements between JPFL and FUJI do not expressly provide that JPFL in India shall have the exclusive right to purchase Bulk Rolls from FUJI. The appellants have filed copies of three agreements, of which two were apparently in force during the period of dispute. We have perused these two agreements, one titled as AGREEMENT and the other as MEMORANDUM, both dated 1.7.98. Article 2 of the AGREEMENT PROVIDED that "FUJI shall sell the Bulk Rolls to JINDAL and JINDAL shall purchase the same......." Article 8 provided that "JINDAL shall convert all Bulk Rolls supplied to it hereunder into the products........" Under Article 9, FUJI granted to JPFL the exclusive right to sell the products in India. That the products had to be sold under FUJI'S trademarks only was stipulated under Article 1. The MEMORANDUM provided for sale, by FUJI to JPFL, of semi-processed jumbo rolls on a non-exclusive basis and for processing of the goods into finished products and sale of the finished products in India by JPFL under their own brand-name. It appears from the two agreements that, though the exclusive right to sell the finished products in India was given to JPFL, no monopoly was given to them in the matter of purchasing Bulk Rolls from FUJI. This would only mean that a third party like CPFL could also purchase Bulk Rolls from FUJI. Therefore, nothing contained in the agreements between JPFL and FUJI can be held out to be prohibitory for purchase/import of jumbo rolls by CPFL from FUJI. On the undisputed facts we have already noted, it can be found that CPFL had lawfully imported the goods in question.
9. Being a registered dealer, CPFL were entitled to sell the goods in Dadra & Nagar Haveli availing any benefit or incurring any liability under the DNHST Regulations 1978. According to the appellants, the goods imported by CPFL were sold to JPFL under Sale Invoices issued from their Branch Office at Silvassa. The Revenue has not recognised the transaction as 'sale' for the purpose of Notifications. We have seen a specimen invoice of CPFL, filed by the appellant -- Invoice No. 67 dated 20.1.99 issued by CPFL from their Sales Office/Godown at Dadra to JPFL at Dadra covering 331 imported jumbo rolls measuring 10096 sq.m. priced at Rs. 8,58,160. We have also seen specimens of National Insurance Company Limited's Policy of insurance for the goods as well as their policy of insurance for the containers, both covering transportation by road from Nhava Sheva (Mumbai) port. The policy relating to the goods covers transit from Mumbai port to Dadra factory and the one relating to containers is for Mumbai port to Dadra factory and return. It appears from these documents that the goods were removed from the dockyard directly to JPFL's factory at Dadra as alleged in the SCN. But CPFL's Branch Office/Sales Office/Godown was also located in JPFL's factory premises. It could be said that there was no physical movement of the goods from seller's premises to the buyer's and that the goods were directly supplied by the seller from the port of importation to the buyer's factory. But the transaction between CPFL and JPFL would not lose the character of sale owing to this fact. Ld. DR has not shown to us that sale of imported goods should necessarily involve physical movement of the goods from the seller's registered premises to the buyer's. In our view, the direct supply of the goods by CPFL from the port of importation to JPFL's factory did not make the transaction anything other than sale when the transaction was recognised as sale by the assessing authority under the DNH Sales Tax Regulations. We have not been able to see any camouflage of High Sea Sale in the transactions between CPFL and JPFL even after "lifting the corporate veil" of the two companies. It is true that JPFL's manufacturing unit and CPFL's sales office (Branch Office) were working in the same premises at Dadra (Silvassa). Shri B.R. Gupta was the Director (Imports) of JPFL and Authorised signatory for CPFL. Shri Sanjeev Kumar Agarwal was Director of CPFL and Sr. Manager in JPFL. Shri S.K. Mittal was General Manager (Accounts) in JPFL. He was looking after Sales Tax matters of CPFL also. Ld. Commissioner has considered these factors in determining the nature of transaction between CPFL and JPFL. In our view, neither the fact that CPFL's sales office and JPFL's factory were situate in the same premises nor that the same person was in charge of some administrative functions in the two companies has any impact on the essential character of 'sale' reflected in the transaction between CPFL and JPFL and conclusively established by the assessment orders passed by the assessing authority under Regulation 20 of the DNH Sales Tax Regulations. We have perused one such assessment order dated 1.11.99 passed by the Asst. Commissioner of Sales Tax, Silvassa for the period 17.6.98 to 31.3.99. The assessee, of course, is CPFL qua dealer. We note that a major part of this period is comprised in the period of dispute in the instant case. Our attention is picked by a certain part of the assessment order, which reads:
"The assessee's gross G.T.O. of the dealer Rs. 71,66,90,470 and T.T.O. at Rs. 15,90,370 are accepted as per books of accounts. The dealer's claim that he is not liable to any sales tax on the sale of his goods duly supported with the forms ST-XI, amounting of Rs. 71,29,06,663 is also allowed. The dealer's further claim that he is also not liable to pay any sales tax on the sale of his goods (i.e. High Seas Sale) amounting to Rs. 21,93,437 is also allowed on production of the bill of entry."
The admitted facts that all the jumbo rolls imported by CPFL from FUJI were sold only to JPFL and that ST-XI Forms issued by JPFL to enable CPFL to claim deduction of the sales turnover from the gross turnover of sales were produced by CPFL before the assessing authority have got to be read with the above order of the assessing authority. The result would be that "sale as such" of the imported jumbo rolls by CPFL to JPFL in the normal course of trade during the relevant period stands established. We therefore hold that the goods in question had been imported for sale as such, other than by way of High Sea Sale. The necessary declaration to this effect was made in the Bills of Entry filed of CPFL for clearing the goods. The requirements in terms of the main part of the entry at Serial No. 12/Serial No. 5 of Notification No. 56/98-Cus./No. 22/99-Cus stood fulfilled.
10. Regarding the second finding recorded by the Commissioner with reference to the proviso to the entry at S.No. 12/S.No. 5 of Notification No. 56/98-Cus./No. 22/99-Cus, we note, Ld. Commissioner has upheld the Revenue's contention that Silvassa is an area where no tax is chargeable on sale or purchase of goods.
11. The Notifications were issued under Sub-section (1) of Section 3A of the Customs Tariff Act and their provisions should be understood in the light of provisions of the parent statutory provision viz. Sub-section (1) of Section 3A ibid, which reads as below:
"SECTION 3A. Special additional duty -- (1) Any article which is imported into India shall in addition be liable to a duty (hereinafter referred to in this Section as the special additional duty), which shall be levied at a rate to be specified by the Central Government by notification in the Official Gazette, having regard to the maximum sales tax, local tax or any other charges for the time being leviable on a like article on its sale or purchase in India:
Provided that until such rate is specified by the Central Government, the special additional duty shall be levied and collected at the rate of eight per cent of the value of the article imported into India.
Explanation -- In the sub-section, the expression "maximum sale tax, local tax or any other charges for the time being leviable on a like article on its sale or purchase in India" means the maximum sales-tax, local tax, other charges for the time being in force, which shall be leviable on a like article, if sold or purchased in India or if a like article is not so sold or purchased which shall be leviable on the class of description of articles to which the imported article belongs. (Emphasis supplied) Either of the two Notifications reads as below:
"In exercise of the powers conferred by Sub-section (1) of Section 3A of the Customs Tariff Act, 1975 (51 of 1975), the Central Government having regard to the maximum sales tax, local tax or any other charges for the time being leviable on the like goods in their sale or purchase in India, hereby specifies the rates of special additional duty as indicated in column (3) in the Table below in respect of goods, when imported into India, describe in corresponding entry in column (2) of the said Table and falling within the First Schedule to the said Customs Tariff Act:"
(Emphasis supplied) It is clear from Section 3A(1) ibid and the Notification that (i) the special additional duty of customs is a levy on imported goods to offset the burden of sales tax and other local taxes and charges borne by manufacturers who procure like goods indigenously on payment of such taxes and charges and that (ii) the rate of SAD is prescribed having regard to the maximum sales tax, local tax or other charges for the time being leviable on a like article on its sale or purchase in India. The proviso to the entry at S.No. 12/S.No. 5 in the Table to Notification No. 56/98-Cus./No. 22/99-Cus., which reads:
"Provided that the rate specified herein shall not apply if the importer sells the said imported goods from a place located in an area where no tax is chargeable on sale or purchase of goods"(Emphasis supplied).
bars "Nil" rate of SAD in respect of goods imported for sale from a place where no tax is chargeable on sale or purchase of like goods. It is quite obvious from the provisions which we have examined that the expression "chargeable" has been used in the proviso as a synonym for "leviable". If tax is "leviable" on any goods, the goods are said to be "taxable" also. In the instant case, admittedly, non-taxable goods are only those goods specified in the Second Schedule to the DNH Sales Tax Regulations 1978. This is obvious from Sub-section (1) of Regulation 10 of DNH Sales Tax Regulations 1978, which says that no tax shall be payable under this Regulation on the sale of goods specified in the Second Schedule subject to the conditions and exceptions, if any, set out therein. For a registered dealer like CPFL, the charging provisions under the DNHST Regulations are Regulations 4 & 6 thereof. Regulation 4 provides that every dealer whose gross turnover exceeds the taxable quantum in the previous year shall be liable to pay tax on all sales, provided that a dealer who deals exclusively in one or more classes of goods specified in the Second Schedule shall not be lieviable to pay any tax under the said Regulation. Regulation 6 is another charging provision which imposes liability of tax on dealer registered under the Central Sales Tax Act, 1956. Regulation 7(1) prescribes the rates of sales tax in respect of (a) goods specified in the First Schedule, (b) goods specified in the Third Schedule, and (c) any other goods, not being goods specified in the Second Schedule, Regulation 7 (3) defines the expression "taxable turnover". According to this definition, taxable turnover during any period shall not include the turnover, during that period, of sales (not being the sales of goods which are specified by the Administrator under Regulation 8 as goods taxable at a particular point of sale), to a registered dealer, of taxable goods of the class or classes specified in the certificate of registration of such dealer, as being intended for use by him within Dadra & Nagar Haveli as raw material for manufacture of taxable goods for sale within Dadra & Nagar Haveli. The first proviso to Regulation 7(3) stipulates that the above deduction shall not be allowed unless the dealer, who sells the goods, furnishes in the prescribed manner a declaration duly filed up and signed by the registered dealer, to whom the goods are sold, in such form and containing such particulars as may be prescribed. The prescribed form for this declaration in ST-XI. In the instant case, it is not in dispute that the JPFL who purchased the goods in question from CPFL used the goods as raw material for manufacture of taxable goods viz. finished products of photographic films & papers. Further, it appears from the assessment order that, it respect of those quantities of Jumbo Rolls sold by CPFL to JPFL, for which the latter issued declaration in ST-XI Form, the assessing authority has allowed deduction from gross turnover in terms of Regulation 7 (3) (II) (a) (iv). In respect of a minor quantity of Jumbo Rolls sold to JPFL to CPFL, for which no such declaration was made by the former, no deduction was allowed by the assessing authority. Accordingly, it appears, CPFL paid sales tax on this latter quantity of Jumbo Rolls sold to JPFL. It is on this basis that the appellants have argued that the goods in question were chargeable to local sales tax. The Revenue has argued that, where the declaration, in ST-XI Form, of the buyer is produced before the assessing authority by the seller, the turnover of sales for the subject goods is deductible from the gross turnover of sales for the purpose of determining the taxable turnover under Section 7(3) and, therefore, the goods cannot be held to be chargeable to tax. We are unable to accept this argument. The deduction of the sales turnover of the goods in question from gross turnover for the purpose of determination of taxable turnover is in the nature of an exemption. Any exemption from payment of tax on any goods which are otherwise taxable cannot be held to have the effect of rendering the goods non-taxable. We are supported on this point by the judgment of the Kerala High Court in Aluminium Industries (supra). A Ld. Single Judge of the High Court considered the question whether exemption from payment of Customs duty on certain goods made the goods non-dutiable. His Lordship held: "An exemption granted under Section 25(1) of the Customs Act does not have the effect of taking the goods out of the class of dutiable goods or placing them beyond the reach of Section 12. An exemption only suspends or eclipses chargeability which can be revived the moment the exemption is withdrawn." This ruling of the Ld. Single Judge was affirmed by a Division Bench of the Court vide [1999 (110) ELT 474 (Ker.)]. The decision of this Tribunal in the case of G.H. Shaikh v. CCE, Pune. 2003 (154) ELT 540, cited by Ld. Counsel, is also relevant to this context. Dealing with the entry at Sr. No. 5 of Notification 22/99-Cus., the Tribunal held thus: "It is common that exemptions have been given under the Sales Tax Act in respect of certain transactions and such exemptions for specified cases would not make the place, "an area where no duty is chargeable on sale and purchase of goods."
12. Following the above judicial authorities, we hold that the goods in question, sold by CPFL to JPFL during the period of dispute are to be treated as chargeable to tax for the purpose of the entries at Sr. Nos. 12 and 5 under Notification Nos. 56/98-Cus and 22/99-Cus. respectively. Consequently, the provisos to the said entries are not applicable to the subject goods and the goods are eligible for the benefit of 'Nil' rate of duty in terms of the said entries. The demand of SAD raised in the impugned order is, therefore, unsustainable. Consequently, the confiscation of the goods and imposition of penalties on CPFL and JPFL are also liable to be set aside.
13 In the result, we set aside the impugned order and allow these appeals.