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2001 Supreme(SC) 287
2001(2) Supreme 47
SUPREME COURT OF INDIA
(From Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi)
B.N. Kirpal & Brijesh Kumar, JJ.
Collector of Customs -Appellant
versus
M/s. Presto Industries -Respondent
Civil Appeal Nos. 863-864 of 1992
Decided on 15-2-2001
Counsel for the Parties :
For the Appellant : Mukul Rohtagi, Additional Solicitor General, K. Swami and P. Parmeswaran, Advocates.
For the Respondent : V. Lakshmikumaran, Ms. Meenakshi Arora, Advocates.
Headnote:Customs Act, 1962-Section 28 -Customs Tariff Act, 1975-Section 3(1)-Notification No. 16/83 CE dated 11-2-1983 issued under Rule 8(1) of Central Excise Rules, 1944-Short levy on account of giving exemption wrongly-Demand notice for additional duty-Notification No. 6 providing for exemption from excise duty on fulfilment of two conditions-One of the conditions is payment of customs duty-Respondent not paying additional duty payable under Section 3(1) of customs Tariff Act-Not entitled to benefit of notification but benefit wrongly given-Additional duty rightly demanded.
The whole of the excise duty leviable under the Central Excise & Salt Act, 1944 is liable to be exempted, on scrap or waste arising in the course of manufacture of any goods in the Kandla Free Trade Zone, which is imported from outside India and it is cleared for home consumption outside the zone on payment of duties of customs leviable thereon under any law for the time being in force. So far condition provided under clause (a) of the proviso there is no dispute. But as it relates to fulfilment of Clause (b) to proviso, it is in dispute. Admittedly additional duty leviable under Section 3(1) of the Customs Tariff Act has not been paid. Their case is that basic customs duty has been paid which fulfils the requirement. The Notification however requires payment of "duties" of customs under any law for the time being in force. The additional duty leviable under sub-section (1) of Section 3 of the Customs Tariff Act is not described or called as counter-vailing duty as observed in the case of Hyderabad Industries, AIR 1985 SC 1211 as well as in the case of Khandelwal Metal & Engineering Works, (1999) 5 SCC 15 despite the purpose whichever it may serve. There is a specific provision under sub-section (3) of Section 3 of the Customs Tariff Act, 1975, quoted earlier, providing for levy of additional duty, whether on such item additional duty under sub-section (1) of Section 3 is leviable or not, to counter-balance the Excise Duty. The clause (b) to the proviso to the Notification No.16/83-CE provides for clearance of all duties of customs leviable under any law for the time being in force. It does not confine to payment of customs duty leviable under the Customs Act, 1962 alone. Therefore, additional duty levied under Section 3(1) of Customs Tariff Act shall also have to be cleared before claiming benefit under Notification No.16/83-CE. Since it is found that the respondent did not pay the additional duty as leviable under sub-section (1) of Section 3 of the Customs Tariff Act, 1975, it failed to comply with the condition as contained in Clause (b) to the proviso to the Notification No.16/83-CE dated 11.2.1983. The onus of proof of fulfilment of condition subject to which an exemption may be admissible lies on the assessee or upon a party claiming benefit under the Notification as also held in the case of Motiram Tolaram and another, (1999) 6 SCC 375. So far the question of construing an exemption Notification is concerned, such Notifications are to be strictly construed. Where a condition precedent is not fulfilled before claiming any exemption, such benefit would not be admissible. In the result it is found that due to non-payment of additional duty as prescribed under Section 3(1) of Customs Tariff Act, the respondent would not be entitled for the benefit of exemption from Excise Duty under Notification No.16/83-CE. It was wrongly made admissible to the respondent. (Paras 9 to 11)
JUDGMENT
Brijesh Kumar, J.-The question that falls for consideration in these appeals is as to whether or not, the respondent has been rightly given benefit of Notification No. 16/83-CE dated 11.2.1983, issued by the Central Government under Rule 8(1) of the Central Excise Rules, 1944, in regard to the payment of additional custom duty under Section 3(1) of the Customs Tariff Act, 1975, on the waste and scrap of imported Cellulose Acetate sheets.
2. We have heard Shri Mukul Rohtagi, learned Additional Solicitor General for the appellant and Shri V. Lakshmikumaran, learned counsel for the respondent.
3. The respondent, M/s. Presto Industries, is an industrial unit manufacturing combs and brushes, in Kandla Free Trade Zone, from the imported Cellulose Acetate sheets. On certain given conditions, exemption from payment of excise duty is admissible to the manufacturer in the Free Trade Zone. So far it relates to the resultant waste and scrap of the imported raw material, namely, Cellulose Acetate sheets, Customs Duty as well as additional duty is payable on the scrap being cleared for home consumption outside the Free Trade Zone. Undisputedly, on two clearances of the scrap, Custom Duty was assessed and the same was paid by the respondent. It was, however, later discovered during the audit that while assessing the liability, the respondent had been wrongly given benefit of Notification No. 16/83-CE dated 11.2.1983 and additional duty under Section 3(1) of the Customs Tariff Act, 1975 was not levied. The duty was found to be short paid. Thus, two Demand Notices under Section 28 of the Customs Act, 1962 were issued in respect of two clearances, namely, Demand Notice No.FIZ/Cus/Demand/87-/7545/73 dated 26.6.1989 for a sum of Rs. 60,480/- and Demand Notice No. FIZ/Cus/Demand/85-86/1347 dated 16.10.1989 for a sum of Rs. 8870.40.
4. The aforesaid two demands for additional duty were confirmed by the Assistant Collector (Custom), Kandla Free Trade Zone by order dated 22.6.1989 for a sum of Rs. 68076.40 and by order dated 16.10.1989 for a sum of Rs. 8870.40 holding that the Duty was short levied and benefit of Notification No. 16/83-CE dated 11.2.1983 was wrongly made admissible to the respondent. It was also held that the waste and scrap item of Cellulose Acetate sheets was covered under Tariff Item No.15-A(1), explanation iii(C) as provided in the foot note to Item No.15-A of the Central Excise Tariff. The exemption from payment of Central Excise Duty was held to be admissible only on fulfilment of certain conditions as contained in the Notification No.16/83-CE itself. Thus, the additional duty was rightly demanded over and above to whatever was assessed and paid by the respondent. The respondent preferred an appeal against the order of the Assistant Collector (Customs) to the Collector Customs (Appeals) who by order dated 12.3.1990 allowed the appeal holding that the benefit of Notification No.16/83-CE was admissible to the respondent. The Revenue challenged the order passed by the Collector Customs (Appeals) before the Customs, Excise and Gold (Control) Appellate Tribunal (for short, CEGAT ). The Tribunal dismissed the appeal by order dated 12.7.1991. Hence the appeals by the Revenue.
5. The Collector (Appeals) took the view that the whole Duty of Excise, leviable under Section 3 of the Central Excise Act, 1944 is exempted in respect of scrap for home consumption outside the Free Trade Zone, under Notification No.16/83-CE, therefore, no additional Duty in the nature of countervailing duty was liable to be paid. It was also found that the respondent had paid the Customs Duty on the scrap as required by Clause (b) to the Proviso to the Notification No.16/83-CE. The CEGAT upheld the order passed by the Collector of Customs (Appeals) finding that no additional duty of customs would be payable where Excise Duty is exempt under a Notification issued under Rule 8(1) of the Excise Rules 1944. It also relied upon the decision in M.R.F. Limited v.
