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1997(8) Supreme 161
SUPREME COURT OF INDIA
(From Appellate Tribunal, New Delhi)
S.C. Agrawal, G.T. Nanavati, JJ.
M/s. Oblum Electrical Industries Pvt. Ltd., Hyderabad -Appellant
versus
Collector of Customs, Bombay -Respondent
Civil Appeal No. 789 of 1993
Decided on 2.9.1997
Counsel for the Parties :
For the Appellant, S. Ganesh, K.J. John, Advocates.
For the Respondent, A. Subba Rao, Kishore Kumar Patel, V.K. Verma, Advocates.
Held : A perusal of Notification No. 116/88-Cus. shows that the object and purpose of the said notification is to encourage exports by granting exemption from customs duty on materials that are required to be imported for the purpose of manufacture of the resultant products or for replenishment of the material used in the manufacture of the resultant products, or both or for export as mandatory spares alongwith the resultant products. The manufacture of the resultant products has to be for execution of one or more export orders. In order to ensure that the exemption is availed only by deserving people, conditions have been laid down in clauses (a) to (g), which must be fulfilled for availing the exemption. One such condition, as laid down in clause (a), is that the material imported must be covered by a Duty Exemption Entitlement Certificate issued by the licensing authority. Under Clause (c) it is required that the goods corresponding to the resultant products and the mandatory spares should be exported within the time specified in the DEEC or such extended period as may be granted by the licensing authority. The wordings in the notification have to be construed keeping in view the said object and purpose of the exemption. In the notification two different expressions have been used, namely, materials required to be imported for the purpose of manufacture of products and replenishment of materials used in the manufacture of resultant products which indicates that the two expressions have not been used in the same sense. The expression materials required to be imported for the purpose of manufacture of products cannot be construed as referring only to materials which are used in the manufacture of the products. The said exemption must be given its natural meaning to include materials that are required in order to manufacture the resultant products. On that view, the exemption cannot be confined to materials which are actually used in the manufacture of the resultant product but would also include materials which though not used in the manufacture of the resultant product are required in order to manufacture the resultant product. Crystar Beams imported by the appellant are materials, which though not used in the manufacture of H.T. Porcelain Insulators required for Lightening Arrestors, are materials which are required for producing the insulators in the kilns. (Para 9)
(ii) CUSTOM DUTY-Notification No. 116/88-Cus. dated 30.3.1988 issued u/s 25 of Customs Act, 1962-Expression materials in clause (viii) of Explanation to Notification-Its definition must be confined in its application to the word materials in the expression replenishment of materials used in the manufacture of the resultant products .
Held : It is true that in clause (viii) of the Explanation to the Notification expression materials has been defined to mean goods which are raw materials, components, intermediate products or consumables used in the manufacture of resultant products and their packings or mandatory spares to be exported in the resultant products. But the said definition in the Explanation has to be read in consonance with the main part of the notification. It is a well settled principle of statutory construction that the Explanation must be read so as to harmonise with and clear up any ambiguity in the main provision. (See : Bihta Cooperative Development Cane Marketing Union Ltd. and Anr. v. The Bank of Bihar and Ors., 1967(1) SCR 848 at p. 854). The definition of "materials" in clause (viii) of the Explanation must, therefore, be so construed as not to eliminate the distinction between the words materials required for the purpose of manufacture of products and the words materials used in the manufacture of the resultant products in the main part of the definition. (Para 10)
On a proper construction the definition of "materials" in clause (viii) of the Explanation must be confined in its application to the word "materials" in the expression replenishment of materials used in the manufacture of the resultant products in Notification No. 116/88-Cus. dated March 30, 1988. (Para 11)
(iii) INTERPRETATION OF STATUTES-Explanation must be read so as to harmonise with and clear up any ambiguity in main provision. (Para 10)
JUDGMENT
S.C. Agrawal, J.-The appellant is a manufacturer and exporter of Lightening Arrestors which are supplied to electricity boards, railways and other public sector undertakings. The appellant was awarded a Deemed Export Order (Contract) by the Railway Board for supply of 937 numbers of Metal Oxide Gapless Type Lightening Arrestors (hereinafter referred as Lightening Arrestors ). The said contract was entered into under an International Development Scheme. For the manufacture of Lightening Arrestors, Porcelain housings (H.T. Insulators) are required and these insulators are produced in a ceramic kilns. Crystar (main and Gross) Beams made of Silicon Carbide are used for firing dry and hollow H.T. Porcelain bushings in the kilns and are fitted inside the kilns. The beams are susceptible to breakage and damage and have to be continuously replaced in the course of manufacture.
2. The appellant submitted an application before the Chief Controller of Imports and Exports on March 29, 1990 for issuance of a Special Import Licence to import various items required for the manufacture of Lightening Arrestors. The said items included Crystar Beams as Kiln Furniture. The Deputy Chief Controller of Import and Export issued the Special Import Licence on April 24, 1990 for import of various items including crystar beams. Alongwith the said import licence, the Duty Exemption Entitlement Certificate (hereinafter referred as DEEC ) was also issued in the following terms :
"Material imported against advance Licence No. P/L/3236631/CS.XX/16/H/90 dated 24.4.90 issued by Deputy Chief Controller of Imports and Exports, Hyderabad to the above importer and covered by the list of Materials specified under Part `C of this Certificate would be eligible for exemption from Import duty subject to the conditions specified in the Notification of the Government of India, Ministry of Finance, Department of Revenue and 116/88-Cus. On 30.3.88."
On import of goods into India, the appellant claimed duty free clearance on the basis of exemption granted by Notification No. 210/82-Cus dated September 10, 1982.
By Notification No. 210/82-Cus dated September 10, 1982 issued under Section 25 of the Customs Act, 1962, the Central Government has exempted from whole of the customs duty and additional duty leviable under the Customs Tariff Act, 1975, "raw materials and components required for the manufacture of goods to be supplied to International Development Association or International Bank for Reconstruction and Development or bilateral and Multilateral aided projects or Asian Development Bank or United Nations Organisation or under the Aid Programme of the United Nations or for the replenishment of raw materials and components of used in the manufacture of such goods already supplied". The said exemption was, however, subject to the conditions laid down in clauses (1) to (5) of paragraph 1 of the said Notification. The case of the appellant is that the conditions laid down in the said Notification were fulfilled in the present case and, therefore, the appellant was entitled to exemption from duty on the Crystar Beams imported by it and reliance was placed on the DEEC granted by the Import Control Authorities while granting the import licence for importing the said articles. The Additional Collector of Customs has, however, held that the entry of Kiln Furniture (Crystar Beams) in the special import licence and DEEC book does not preclude the customs authorities from deciding the issue regarding eligibility of the articles for duty exemption in terms of exemption Notification No. 210/82-Cus. The Additional Collector further held that the said exemption is only in respect of raw material and components of the resultant product to be supplied to the project authorities specified in the said exemption Notification No. 210/82-Cus. itself and that the item in question are admittedly utilised as supporting structures for manufacturing Bushing and on account of bearing he
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