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SUPREME COURT OF INDIA
A.K. SIKRI, N.V. RAMANA, JJ.
UNION OF INDIA & ORS. – APPELLANTS
VERSUS
M/S N.S. RATHNAM & SONS – RESPONDENTS
CIVIL APPEAL NO. 1795 OF 2005
Decided On : 29-07-2015
(2007) 6 SCC 624 – Relied upon
(1995) 1 SCC 274 – Referred
(b) Interpretation of statute – Taxing statute – Amenable to judicial review on the touchstone of Article 14. (Para 16)
(2001) 7 SCC 545 – Relied upon
(c) Customs Tariff Act, 1975 – Second Schedule, Heading 72.15 and 73.09 – Two Notifications both dated 27.03.1987 – Both pertaining to same goods falling under Heading 72.15 and 73.09 – Custoim duty payable u/s 3 – Two methods available for paying custom duty – Option would be that of the assessee – Merely because with adoption of one particular method payable duty becomes lesser than with the other method would not create two different categories – All important factors like the goods being same, falling under same Heading and the custom duty leviable as per the Act hav ung been paid make them at par – Impugned Notification giving exemption only to those persons who paid a particular amount of duty – No reasons given for withdrawing exemption from persons paying the other amount of duty – For classification, difference between persons should be real and substantial – Classification having regard to microscopic differences is not good – To overdo classification is to undo equality. (Para 18, 19, 20)
(1989) 1 Supp. SCC 116 – Relied upon
(d) Interpretation of statute – Taxing statute – Legislature has wide power in matter of taxation and exemption – But it should pass the test of Article 14 – Instantly, parties belonging to same class – Only option to bring parity was to demand duty on differential amount instead of denying exemption – Held, respondent shall also be entitled to the benefit of the exemption Notification subject to the condition that the duty already paid by the respondent on LDT would be taken into account and only the balance out of it would be subject to excise duty. (Para 23)
(1996) 1 SCC 345; (2007) 10 SCC 342 – Relied upon
A.I.R. 1989 S.C. 665; A.I.R. 1993 S.C. 1339; (1997) 3 SCC 398; (1997) 7 SCC 300 – Referred
Facts of the case:
The respondent had challenged the validity of Notifications Nos.102/87-CE and 103/87-CE, both dated 27.03.1987, whereby whole of the duty of excise was exempted in respect of iron and steel scrap obtained by breaking the ship subject to the condition that customs duty should have been levied at the rate of Rs.1400/-per Light Displacement Tonnage (LDT). With the stipulation of such a condition, giving the exemption of payment of excise duty only to those who had paid customs duty at Rs.1400/-per LDT, another class of persons who also paid custom duty under Section 3 of the Customs Tariff Act, 1975, albeit at a lesser rate, was excluded.
The respondent who belonged to excluded category, had challenged the said Notification as arbitrary and violative of Article 14 of the Constitution.
The Single Judge dismissed the writ petition.
The Division Bench in appeal has accepted the aforesaid plea of the respondent and held that the second category of persons shall also be entitled to the benefit of this Notification.
Finding of the Court:
Only option to bring parity was to demand duty on differential amount instead of denying exemption.
Result: Appeals disposed of.
JUDGMENT
A.K. SIKRI, J.
The respondent herein impugned the validity of Notifications Nos.102/87-CE and 103/87-CE, both dated 27.03.1987, whereby whole of the duty of excise was exempted in respect of iron and steel scrap obtained by breaking the ship subject to the condition that customs duty should have been levied at the rate of Rs.1400/-per Light Displacement Tonnage (LDT). With the stipulation of such a condition, giving the exemption of payment of excise duty only to those who had paid customs duty at Rs.1400/-per LDT, another class of persons who also paid custom duty under Section 3 of the Customs Tariff Act, 1975, albeit at a lesser rate, was excluded. The respondent who belonged to excluded category, had challenged the said Notification as arbitrary and violative of Article 14 of the Constitution. Though the learned Single Judge dismissed the writ petition, the Division Bench in appeal has accepted the aforesaid plea of the respondent and vide judgment dated 18.08.2003 held that the second category of persons shall also be entitled to the benefit of this Notification. It is this judgment which is impugned by the Union of India and is the subject matter of the instant appeal.
2. The facts which are relevant to the aforesaid controversy need to be traversed at this stage. These are as follows:
The respondent herein is engaged in the business of ship breaking activities. It had imported a foreign vessel “M.V. Gonong Mass” for the purpose of breaking it and selling it as scrap. This ship was purchased by the respondent as a successful tenderer for a sum of Rs.61 lakhs and at the time of import, the Collector of Customs, Cochin, assessed the custom duty and additional duty payable under Section 3 of the Customs Tariff Act, 1975 on this ship on ad-valorem basis and customs duty in the sum of Rs.62,16,796.55 was levied on the movable articles in the ship; body of the ship was assessed at 30% and 50% ad-valorem and additional custom duty i.e. countervailing duty at 12% ad-valorem. The respondent also paid a sum of Rs.5,68,660/-as sales tax.
3. After import of the ship, the same was dismantled and broken from which iron and steel scrap was taken out. This iron and steel scrap is exigible to excise duty. The respondent has registered itself under the Central Excise Act. The aforesaid iron and steel scrap which was obtained by breaking the ship was cleared by the respondent on payment of central excise duty at the rate of Rs.365/-per tonne as per Notification No.146/86-CE dated 01.03.1986. Upto this point, there is no dispute. The relevant period with which we are concerned is from 08.08.1986 to 27.07.1987. During this period, the following materials were cleared:
4. There are certain exemption Notifications issued by the Government of India under sub-rule (1) of Rule 8 of the Central Excise Rules, 1944. The details of these Notifications are as under:
Notification No.146/86-CE dated 01.03.1986 which pertains to “iron and steel from breaking the ship”. It provides for exemption of goods falling under Heading No.72.15 and 73.09 of the Schedule to the Central Excise Tariff Act, 1985, from so much of the duty or excise leviable thereon, which is specified in the said Schedule, as in excess of the amount calculated at the rate of Rs.305 per tonne. Proviso to the said Notification lays down the conditions which need to be fulfilled to avail the benefit of this Notification. This proviso reads as under:
“Provided that the said goods have been obtained from breaking of ships, boats and other floating structures-
(i) On which duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) has been paid at the rate of Rs.1,400/- per Light Displacement tonnage; or
(ii) Imported on or before the 28th day of February, 1986 and on which appropriate additional duty leviable thereon under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), has been paid.”
5. The aforesaid Notification was superseded by
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