2020 Supreme(SC) 517

SUPREME COURT OF INDIA
A.M. Khanwilkar, Dinesh Maheshwari, JJ.
M/s. L. R. Brothers Indo Flora Ltd. – Appellant
Versus
Commissioner of Central Excise – Respondent
Civil Appeal No. 7157 of 2008
Decided on : 01-09-2020

IMPORTANT POINTS
(1) An exemption clause ought to be strictly construed according to language employed therein and in case of any ambiguity benefit must go to State.
(2) All laws are deemed to apply prospectively unless either expressly specified to apply retrospectively or intended to have been done so by the legislature.
(3) DTA sales pertaining to excisable goods made in conformity with conditions of EXIM policy are exigible to excise duty but once there is contravention of condition(s) of EXIM policy, irrespective of goods produced being excisable or non-excisable, benefit under exemption notification is unavailable.

Headnote:

(A) Customs Act, 1962 – Sections 28, 28AB and 114A – Levy of customs duty upon on sale of cut flowers – In terms of Notification No. 126/94CUS dated 3.6.1994, apart from providing for duty free imports of inputs for an 100% EOU in order to export all goods produced or manufactured by it, in addition, it also gives liberty to the 100% EOUs to clear their goods in DTA to the extent permissible by and in accordance with EXIM policy – Fulfilment of such conditions is a condition precedent to become eligible to make DTA sales – Resultantly, if goods are cleared in DTA sales in breach of such conditions, customs duty would be leviable as if such goods were imported goods – DTA sales pertaining to excisable goods made in conformity with conditions of EXIM policy are exigible to excise duty but once there is contravention of condition(s) of EXIM policy, irrespective of goods produced being excisable or non-excisable, benefit under exemption notification is unavailable – In such a situation, the very goods would become liable to imposition of customs duty as if being imported goods – In present case, notification, having been issued in exercise of delegated legislation under Section 25 of 1962 Act, has to be understood as “any other law” – Appellant, having availed exemption under notification, cannot evade customs duty on imported inputs at rate prescribed by notification – A priori, demand in present case, pertaining to non-excisable goods has rightly been made under 1962 Act upon imported inputs used in production of goods sold in DTA in violation of condition(s) in EXIM Policy – Appellant was obliged to comply with conditions prescribed by EXIM Policy, to avail exemption under stated notification and failure to do so, must denude them of exemption so granted – Since charging rate prescribed under exemption notification is under question, any ambiguity in regard to date of application of amendment thereto would necessarily have to be construed in favour of State, unless shown otherwise by judicially acceptable parameters – CESTAT has rightly upheld levy of customs duty – Appeal dismissed. (Paras 12, 13, 15, 17, 32, 35 and 36 )

(B) Excise and Customs – Anomaly – Import – Unless shown otherwise, it has to be seen as a conscious change in dispensation, particularly concerning fiscal subject matters – In context of subject circular, since it takes note of previous arrangement and distinguishes it from excise notifications, meaning has to be taken as deviation from regular arrangement, which cannot be treated as a mere mistake – To call amendment notification clarificatory or curative in nature, it would require that there had been an error/mistake/omission in the previous notification which is merely sought to be explained. (Paras 26 and 27)

(C) Statute Law – Rule of Prospectivity – All laws are deemed to apply prospectively unless either expressly specified to apply retrospectively or intended to have been done so by legislature – An essential requirement for application of a legislation retrospectively is to show that previous legislation had any omission or ambiguity or it was intended to explain an earlier act – In absence of such ingredients, legislation cannot be regarded as having retrospective effect. (Paras 24 and 30)

Facts of the case:

Instant appeal takes exception to the Final Order No. C/203/08 dated 17.7.2008 passed by the Customs, Excise & Service Tax Appellate Tribunal1 in Customs Appeal No. 9 of 2008, whereby customs duty levied upon the appellant on the sale of cut flowers within the Domestic Tariff Area had been confirmed by the Tribunal. issues that arise for consideration in this appeal are: (i) Whether customs duty can be charged on the non-excisable goods produced in India and sold in DTA by an EOU?; and (ii) Whether the amendment in terms of Notification No. 56/01Cus dated 18.05.2001, purporting to amend the criteria for determination of duty on inputs, is prospective or retrospective in its application?

Findings of Court:

Appellant was obliged to comply with the conditions prescribed by the EXIM Policy, to avail the exemption under the stated notification; and failure to do so, must denude them of the exemption so granted. Further, since the charging rate prescribed under the exemption notification is under question, any ambiguity in regard to the date of application of the amendment thereto would necessarily have to be construed in favour of the State, unless shown otherwise by judicially acceptable parameters.

Result : Appeal dismissed