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2019 Supreme(Guj) 1134
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
ANANT S. DAVE, BIREN VAISHNAV, JJ.
Andagro Services Pvt. Ltd. and Ors. – Appellants
Versus
The Union of India and Ors. – Respondents
R/Special Civil Application No. 8596 of 2007
Decided On : 05-08-2019
Advocate Appeared:
For the Appellant : Hardik P. Modh
For the Respondents: Devang Vyas, Nirzar S. Desai and Maithili D. Mehta
Point of Law: Amended definition enlarges the scope of manufacture by roping in processes which may or may not strictly amount to manufacture provided those processes are specified in the Section or Chapter notes of the Tariff Schedule as amounting to manufacture. It is clear that the Legislature realised that it was not possible to put in an exhaustive list of various processes but that some methodology was required for declaring that a particular process amounted to manufacture. The language of the amended Section 2(f) indicates that what is required is not just specification of the goods but a specification of the process and a declaration that the same amounts to manufacture. Of course, the specification must be in relation to any goods
Headnote:
Constitution of India - Article 226 – Custom – Show cause notice - Order passed by Assistant Commissioner Customs whereby demand of duty raised - petitioner has been denied the benefit of Duty Free Credit Entitlement - Term "agriculture and dairy products"
Facts of the Case:
Petitioner is a government recognized Two Star Export House and a trading company engaged in the export of rice, sesame seeds, soyabean meal extract etc. Under the Exim Policy of 2002-2007 which provides for exempting goods, when imported into India under a Duty Free Credit Entitlement Certificate, the petitioner has been granted the "DFCE Certificate" for import of goods which have a nexus with Product Group exported under the category "67 Food Products". Under this certificate of Duty Free Entitlement, the petitioner imported Crude Degummed Soyabean Oil - Having imported Crude Degummed Soyabean Oil vide the two Bills of Entry, the petitioner claimed duty exemption based on such certificate. The exemption claimed was, in accordance with para 3.7.2.1 (vi) of the Exim Policy as the petitioner had such a certificate as a status holder as specified in para 3.7.2 of the said policy
Finding of the Court:
DGFT sought a clarification from the Department of Revenue. On a conjoint reading of the Notification/Public Notice/Handbooks of Procedure and SION, it becomes evident that the nexus of the imported commodity vis-à-vis the export product is not established - Exemption notification is to be given strict interpretation and that unless assessee makes out clear case in its favour, it is not entitled to claim its benefit and if there is doubt or two interpretations are possible, one which favours Department is to be resorted. The clarification in light of these facts can therefore not be declared to be invalid and violative of Articles 14 and 19(1)(g) of the Constitution of India
Result: Petition dismissed
JUDGMENT :
Biren Vaishnav, J.
1. This petition under Article 226 of the Constitution of India challenges the order dated 09.01.2007 passed by Assistant Commissioner (Gr-VII) Customs House, Kandla whereby a demand of duty of Rs. 1,00,38,321/- (One Crore Thirty Thousand Three Hundred and Twenty One Only) made under the show-cause notice dated 30.08.2006 is confirmed. The petitioner has been denied the benefit of Duty Free Credit Entitlement ('DFCE' for short) in respect of the two Bills of Entry, under notification No. 53/2003 : dated 01.04.2003. Also under challenge is the Circular No. 10/2004-Cus : dated 30th January 2004, by virtue of which the Department of Revenue issued a clarification regarding restrictions on import of agriculture and dairy products, occurring in Clause (ii)(c) of Notification of 01.04.2003. The clarification issued suggested that the term "agriculture and dairy products" shall mean that import of all types of products derived from agriculture/dairy origin including crude edible oil shall not be permitted. According to the petitioner the scope of the term "agriculture and dairy products" cannot be widened or enlarged by a circular, so as to add something in the Notification providing for exemption.
2. The challenge to the order and the clarificatory circular arises in the background of the following facts:
2.1 The petitioner is a government recognized Two Star Export House and a trading company engaged in the export of rice, sesame seeds, soyabean meal extract etc. Under the Exim Policy of 2002-2007 which provides for exempting goods, when imported into India under a Duty Free Credit Entitlement Certificate, the petitioner has been granted the "DFCE Certificate" for import of goods which have a nexus with Product Group exported under the category "67 Food Products". Under this certificate of Duty Free Entitlement, the petitioner imported Crude Degummed Soyabean Oil ("CDSO"). Having imported Crude Degummed Soyabean Oil vide the two Bills of Entry, the petitioner claimed duty exemption based on such certificate. The exemption claimed was, in accordance with para 3.7.2.1 (vi) of the Exim Policy as the petitioner had such a certificate as a status holder as specified in para 3.7.2 of the said policy.
2.2 A show cause dated 30.08.2006 was issued by the Office of the Commissioner of Customs, Kachchh Commissionerate that under DFCE Scheme, under Notification No. 53/2003 : dated 01.04.2003, the petitioner was not eligible for benefits under the Scheme for debits thereof on the import of Crude Degummed Soyabean Oil, as the same was an agricultural product. According to the authorities, since, "goods" in the nature of "agricultural and dairy products" was excluded from the scope of goods under the Notification, the petitioner was liable to discharge the duties as applicable on merits. The department further suggested that in accordance with the condition sheet attached to the license issued by the DGFT, the import will have a nexus with the product group exported. The sheet indicated the product group 67 Food Products, which was deleted and also as one of the goods exported by the importer was "Soyabean Meal extract", while the product imported is Crude Soyabean Oil, there was no nexus with the product group exported. The notice therefore called upon the petitioner to pay all duties chargeable with interest.
2.3 The petitioner responded by filing a reply dated 14.09.2006. It was his case that the product imported by the assessee was not "agricultural and dairy products" so as to be excluded from the Notification No. 53/2003 : dated 01.04.2003. The petitioner further contended that the product imported by them namely Crude Soyabean Oil is classified as "Food Products" under the Standard Input Output Norm (SION) and so is the exported product namely Soyabean Meal Extract and therefore the product imported clearly has a nexus with the product exported by the Noticee. The case of the petitioner also as even as per the amend
