1. Import of goods into a Free Trade Zone under exemption notification — removal of surplus goods to domestic tariff area — dispute over duty assessment date. (Para 2 , 3 )
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1999 Supreme(SC) 1168
SUPREME COURT OF INDIA
D.P.Mohapatra : S.P.Bharucha : V.N.Khare
Collector Of Customs, Rajkot
Versus
Sarabhai International Limited
Case No. : 5071 of 1989
Date of Decision : 10/7/99
When goods imported into a Free Trade Zone under a conditional exemption notification are cleared to the domestic tariff area, the duty payable is the amount that would have been leviable at the time of the original import into the zone.
Headnote:(A) Customs Act, 1962 - Sections 15(1)(a), 15(1)(c) and 25(1) - Customs Tariff Act, 1975 - Import of goods into Free Trade Zone - Exemption notification - Condition for payment of duty on surplus goods cleared to domestic tariff area - The obligation to pay an amount equal to the duty leviable on goods not used for production or packaging for export is determined by the terms of the exemption notification - The amount payable is the duty that would have been leviable on the goods had they not been cleared into the Free Trade Zone under the said notification. (Para 5)
Facts of the case:
The respondents imported soda ash for use in the manufacture of detergent powder within a Free Trade Zone. They were exempted from customs duty under a notification issued under Section 25(1) of the Customs Act, 1962, subject to the condition that they would pay, on demand, an amount equal to the duty leviable on goods not proved to have been used in connection with the production or packaging of goods for export. A portion of the imported soda ash remained surplus and was subsequently cleared to the domestic tariff area on payment of duty.
Findings of Court:
The respondents are liable to pay the amount of the duty that would have been leviable on the surplus soda ash had it not been cleared into the Free Trade Zone under the exemption notification.
Issues: The main issue was determining the relevant date for the assessment of customs duty payable on goods cleared from a Free Trade Zone to the domestic tariff area.
Ratio Decidendi: The court held that the obligation of the importer is determined solely by the terms of the exemption notification. Since the notification required payment of an "amount equal to the duty leviable" on unused goods, the importer must pay the duty that would have been applicable at the time the goods were originally cleared into the Free Trade Zone.
Result: Civil appeal allowed, with costs.
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2. Whether the date of payment or the date of import is relevant for assessing customs duty on goods cleared from a Free Trade Zone to domestic area. (Para 1 , 4 )
3. The obligation to pay duty on surplus goods is governed by the specific exemption notification requiring payment of the amount equal to the duty leviable. (Para 5 )
4. Duty on surplus goods cleared from a Free Trade Zone to a domestic area is the amount that would have been leviable had the goods not been exempted. (Para 5 )
5. Civil appeal allowed with costs. (Para 6 )
6. What is the relevant date for assessing customs duty on goods cleared from a Free Trade Zone to a domestic tariff area under a conditional exemption?
The obligation is determined by the terms of the exemption notification; the importer must pay the amount equal to the duty that would have been leviable had the goods not been cleared into the zone under the notification. (Para 5 )
7. How is the amount equal to the duty leviable interpreted for surplus goods not used for export production in a Free Trade Zone?
It is interpreted as the duty which had not been paid when the goods were initially cleared into the Free Trade Zone under the exemption notification. (Para 5 )
8. Which sections of the Customs Act, 1962, were considered regarding the assessment of duty for goods cleared from a Free Trade Zone?
The court considered whether the provisions of Section 15(1)(a) or Section 15(1)(c) of the Customs Act, 1962 were attracted to the facts of the case. (Para 1 )
(1) THE Customs Authorities are in appeal against an order of a Bench of three learned Members of the Customs, Excise and Gold (Control) Appellate Tribunal. Two Members took the view that the provisions of Section 15(l)(c) of the Customs Act, 1962 were attracted to the facts of the case. The dissenting Member took the view that Section 15(1)(a) was attracted.
(2) THE respondents manufactured detergent powder within the Kandia Free Trade Zone. They imported soda ash in August 1984 for use in the manufacture of detergent powder in the Free Trade Zone. They did not pay customs duty on the imported soda ash by reason of the notification dated 17-4-1980 issued in exercise of powers conferred by Section 25(1) of the said Act. Thereunder, the Central Government exempted goods that were specified
"WHEN imported into India for the production of the goods for exports out of India or for being used in connection with the production or packaging of goods for exports out of India or for the promotion of such exports by units within the Kandia Free Trade Zone ...from the whole of the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 (5 of 1975) and the additional duty, if any, leviable thereon ... subject to the following conditions: (7) the importer shall pay, on demand, an amount equal to the duty leviable (a) * * * (b) on goods other than capital goods as are not proved to the satisfaction of the Collector of Customs to have been (i) used in connection with the production or packaging of goods (within the Zone) for export out of India...."
(3) THE respondents did not utilise the entire quantity of the imported soda ash in the manufacture of detergent powder within the Free Trade Zone. They requested the administration of the Free Trade Zone for permission to remove the surplus soda ash to the domestic tariff area on payment of duty. Accordingly, they filed six bills of entry: on 13-1-1985, 14-1-1985, 30-1- 1985 and 31-1-1985.
(4) THE question in this case is what is the date that is relevant for the purposes of assessment of the customs duty payable on the soda ash so cleared to the domestic tariff area? If it is the date upon which the duty was paid, the respondents get the benefit of an exemption notification.
(5) IN our view, the obligation of the respondents must be determined solely upon the basis of the said notification dated 17-4-1980. They were exempted from paying the "duty leviable" on the imported soda ash that they cleared into the Free Trade Zone by reason of that notification. It was a condition of that notification that they would pay on demand on the soda ash that they had not used in connection with the production of detergent powder within the Free Trade Zone an "amount equal to the duty leviable" thereon. In other words, it was clearly a condition of the said notification that the respondents would pay on the surplus soda ash the amount of the duty which had not been paid thereon when the soda ash was cleared into the Free Trade Zone. It must, therefore, be held that the respondents are liable to pay the amount of the duty that would have been leviable on the surplus soda ash had it not been cleared into the Free Trade Zone under the said notification.
(6) THE civil appeal is allowed, with costs.
