The Raja Lakshmi Mills Ltd v. The Union Of India — 1983 DIGILAW 260 (KER)

JUDGMENT V. Bhaskaran Nambiar, J. 1. Interpretation of a notification issued under S.25 of the Customs Act resolves the dispute raised in these Original Petitions. The Notification reads thus: - CUSTOMS NOTIFICATION In exercise of the powers conferred by sub-s.(1) of S.25 of the Customs Act, 1962 (52 of 1962) the Central Government being satisfied that it is necessary in the public interest so to do hereby exempts viscose staple fibre and viscose tow falling within Chap.56 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), when imported into India, from so much of the duty of customs leviable thereon under the said First Schedule as in excess of 10 per cent ad valorem. Provided that nothing contained in this Notification shall apply to: - (i) High performance viscose staple fibre and high performance viscose tow; (ii) High tenacity viscose staple fibre and high tenacity viscose tow; (iii) High wet modulus viscose staple fibre and high wet modulus viscose tow and; (iv) Polynosic staple fibre and polynosic tow." 2. The petitioners contend that on the strength of this exemption, they are not liable to pay any customs duty in excess of 10 per cent ad valorem. 3. The brief facts, relevant for the purpose are these: - 4. The petitioners have imported into the territory of India, viscose staple fibre or polynosic staple fibre. The import of this fibre attracts customs duty, at the rates specified in Chap.56 of the Customs Tariff Act, 1975, Act 51 of 1975 and also to the additional duty known as the countervailing duty under S.3 of the same Act. Under Chap.56, the customs duty under S.2 of the Act is said to be 140 per cent for the year 1980-81 and Rs. 150 per cent for the year 1983-84. The additional duty is stated to be Rs. 13 per kilogram for 1983-84. 5. Customs notification dated 1st November -1980 extracted in the first paragraph exempted so much of the duty of customs leviable thereon under the first schedule of Act 51 of 1975 as in excess of 10 per cent ad valorem. Customs Notification 203, dated 26th August 1982 enhanced the exemption up to 20 per cent, while Customs Notification 295 of 14th December, 1982 enhanced it to 30 per cent and Customs Notification 39, dated 1st March, 1983 increased it still further to 40 per cent. Customs Notification 203, dated 26th August 1982 enhanced the exemption up to 20 per cent, while Customs Notification 295 of 14th December, 1982 enhanced it to 30 per cent and Customs Notification 39, dated 1st March, 1983 increased it still further to 40 per cent. Similar notifications were issued for polynosic staple fibre also. 6. If, therefore, these exemption orders, challenged in these writ petitions limited the petitioners' liability to pay customs duty only to the percentage fixed under the notifications they have no further liability to pay any amount towards customs duty, and the demand now made to pay the additional duty (countervailing duty) is illegal, not warranted by any statutory sanction. It is therefore necessary to refer to certain relevant sections of the various statutes. 7. S.12 of the Customs Act authorises the levy of customs duty. This is the charging section and it reads thus: - "12. Dutiable goods. - (1) Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 or any other law for the time being in force, on goods imported into, or exported from, India. (2) The provisions of sub-s.(1) shall apply in respect of all goods belonging to Government as they apply in respect of goods not belonging to Government." 8. Thus the rate of customs duty shall be at the rates specified under the Customs Tariff Act, 1975 or any other law for the time being in force. While therefore, the levy is imposed under the Customs Act, the rate is referable to the Tariff Act and any other law for the time being in force. 9. The Customs Tariff Act 51 of 1975, provides the rates. S.2 states: "2. The rates at which duties of customs shall be levied under the Customs Act, 1962 (52 of 1962), are specified in the first and second schedules." Thus, the levy is at the rate specified in the first and Second Schedules of the Act. It is admitted that it is the first schedule that applies to the petitioners in this case. 10. Over and above this rate, under S.2 of Act 51 of 1975, S.3 allows an additional levy and S.3 reads thus: - "3. It is admitted that it is the first schedule that applies to the petitioners in this case. 10. Over and above this rate, under S.2 of Act 51 of 1975, S.3 allows an additional levy and S.3 reads thus: - "3. (1) Any article which is imported into India shall, in addition, be liable, to a duty (hereafter in this section referred to as the additional duty to equal) the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article. Explanation. - In this section, the expression 'the excise duty for the time being leviable on a like article if produced or manufactured in India' means the excise duty for the time being in force which would be leviable on a like article if produced or manufactured in India, or if a like article is not so produced or manufactured which would be leviable on the class or description of articles to which the imported article belongs, and where such duty is leviable at different rates, the highest duty. (2) For the purpose of calculating under this section the additional duty on any imported article, where such duty is leviable at any percentage of its value, the value of the imported article shall, notwithstanding anything contained in S.14 of the Customs Act, 1962 (52 of 1962), be the aggregate of" (i) the value of the imported article determined under sub-s.(1) of the said S.14 or the tariff value of such article fixed under sub-s.(2) of that section, as the case may be; and (ii) any duty of customs chargeable on that article under S.12 of the Customs Act, 1962, and any sum chargeable on that article under any law for the time being in force as an addition to, and in the same manner as, a duty of customs, but not including the duty referred to in sub-s.(1). (3) If the Central Government is satisfied that it is necessary in the public interest to levy on any imported article whether on such article duty is leviable under sub-s.(1) or not such additional duty as would counter balance the excise duty leviable on any raw materials, components and ingredients of the same nature as, or similar to those, used in the production or manufacture of such article, it may, by notification in the Official Gazette, direct that such imported article shall, in addition, be liable to an additional duty representing such portion of the excise duty leviable on such raw materials, components and ingredients as, in either case, may be determined by rules made by the Central Government in this behalf. (4) In making any rules for the purposes of sub-s.(3), the Central Government shall have regard to the average quantum of the excise duty payable on the raw materials, components or ingredients used in the production or manufacture of such like article. (5) The duty chargeable under this section shall be in addition to any other duty imposed under this Act or under any other law for the time being in force. (6) The provisions of the Customs Act, 1962 (52 of 1962) and the rules and regulations made thereunder, including those relating to drawbacks, refunds and exemption from duties, shall, so far as may be, apply to the duty chargeable under this section as they apply in relation to the duties leviable under that Act." 11. Thus the position that emerges is that customs duty is leviable under the Customs Act. The rates are fixed either under Customs Tariff Act, Act 51 of 1975 or any other law for the time being in force. The Tariff Act provides a rate in the first schedule. Over and above this rate, S.3 imposes an additional levy, commonly known as countervailing duty. It is stated there is another levy under the Finance Act also, the auxiliary duty. 12. We need not pause to consider whether the levy under the Tariff Act or the Finance Act for, the import of the goods is customs duty or not, for, the answer seems to be simple on the wording of the notification. 13. It is stated there is another levy under the Finance Act also, the auxiliary duty. 12. We need not pause to consider whether the levy under the Tariff Act or the Finance Act for, the import of the goods is customs duty or not, for, the answer seems to be simple on the wording of the notification. 13. When customs duty can be levied at the rates fixed under the first schedule of the Tariff Act, can be enhanced under S.3 of the Act, or can still further be increased under the Finance Act, there are three statutory methods of augmenting the customs revenue. The exception affects only one of those statutory levies and not to all of them. The levy under the first schedule of the Tariff Act under S.2 of the Act alone comes under the beneficial provision of the notification, for, it says " so much of the duty of customs leviable thereon under the said fast schedule ". The demands now made and challenged in the writ petitions are under S.3 of the Tariff Act and not with reference to the rate under the first schedule. The petitioners admit that they have paid 40 per cent of the ad valorem duty fixed under the first schedule on the basis of the exemption. They are liable to pay the additional levy under S.3 or the further levy under the Finance Act for which there is no exemption. 14. If the Revenue intended to give exemption to the entirety of the customs duty, the notification need not have added the words "under the said first schedule". S.25 of the Customs Act provides for grant of exemption from customs duty. Exemption can relate to goods of any specified description. It can be from the whole or any part of the duty of customs. It can be a general exemption either absolutely or subject to certain conditions. The only safeguard is that exemption can be granted only if the Government is satisfied that it is necessary in the public interest to do so. When the present notification, in challenge in these writ petitions referred to the specified goods in Chap.56 - "staple fibre and viscose tow" and also states in effect that part of the duty leviable under the first schedule is exempted, the exemption can relate only to that part and nothing else. When the present notification, in challenge in these writ petitions referred to the specified goods in Chap.56 - "staple fibre and viscose tow" and also states in effect that part of the duty leviable under the first schedule is exempted, the exemption can relate only to that part and nothing else. This is a notification relating only to a "part of the duty of customs" as provided in S.25 of the Customs Act. 15. Whenever the revenue granted exemption from the additional levy under S.3 of the Tariff Act, they did so in clear words as would be seen from another notification, 243 - Customs - dated 13th November, 1981 Ext. R-3(B) which reads thus: - "In exercise of the powers conferred by sub-s.(1) of S.25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts tillmill blackplate when imported into India for the manufacture of tin plates, from the whole of the duty of customs leviable thereon which is specified in the first schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable thereon under S.3 of the second mentioned Act. This notification shall be in force up to and inclusive of the 30th September, 1982." 16. The acceptance of the contention of the petitioner that the exemption will ensure to the entire duty of customs subject to the limits mentioned in the notification, will make the words "under the said first schedule" redundant. An interpretation resulting in redundancy defeats the object sought to be achieved and has to be avoided. We are therefore of the view that the petitioners are entitled to exemption only to the limited extent covered by the impugned notification with respect to the rates mentioned in the first schedule of the Customs Tariff Act, Act 51 of 1975. They are liable to pay the additional levy under S.3 of the Act or the auxiliary duty under the provision of the Finance Act. 17. A Division Bench decision of the Madras High Court in Sree Ayyanar Spinning and Weaving Mills Limited v. Union of India (1983 ECR 199 D) has been cited by the counsel for the Revenue. The very same notification has been upheld by the Madras High Court. 17. A Division Bench decision of the Madras High Court in Sree Ayyanar Spinning and Weaving Mills Limited v. Union of India (1983 ECR 199 D) has been cited by the counsel for the Revenue. The very same notification has been upheld by the Madras High Court. It was held by the Division Bench as follows: - "Mr.K.N. Balasubramoniam, learned counsel for the Customs Department, said that in drawing up the notifications for exemption it has always been the practice of the Central Government to take care of particularize what precisely is the kind of duty with reference to which exemption is being granted. The Department's counter affidavit carries some illustrative examples showing this practice. We are not surprised that this precaution is taken in the wording of the notification, what with the variety of customs duties in the field. It is true that the notification in this case does not say or indicate that 'basic duty' alone is the subject of exemption. Nor does it expressly exclude the additional duty from the purview of the exemption. But the pertinent reference in the notification to the "first schedule to the Tariff Act'' only means and implies a coverage of exemption restricted to the basic ad valorem duty, and does not include the countervailing duty. This is a case where we must apply the principle "expressio unius est exclusio alterius." 18. The Delhi High Court in Civil Writ No. 2117 of 1982 held thus: - "...... There is no provision of law which can debar the Government from confining the relief under S.25(1) of the Customs Act, 1962 to only one type of duty. The Central Government in its wisdom has thought it fit to grant exemption from the levy of customs duty in excess of 70 per cent ad valorem only with regard to the duty of customs leviable under the Customs Tariff Act, 1975. It could well have extended that exemption to all types of customs duty levied under different Acts. The Government chose not to do so. It could well have extended that exemption to all types of customs duty levied under different Acts. The Government chose not to do so. Merely because the auxiliary duty may be connected or related with customs duty, which fact is not admitted by the respondents and which we are assuming for the present, it would not follow that when exemption is granted in respect of payment of any amount of customs duty chargeable under the Customs Tariff Act, 1975, there would automatically be an exemption from the payment of auxiliary duty." 19. In the result, we confirm the decision of the learned Single Judge and dismiss the writ petition, but without costs in the circumstances of the case. 20. The learned Single Judge had however directed that the petitioners will pay 50 per cent the balance amount within one month from 23rd March, 1983 and the balance within one month thereafter. Interim stay was granted to the petitioners by this court in these appeals on their furnishing bank guarantee for the 50 per cent balance. It is stated that bank guarantees have been furnished. The counsel for the petitioners submits that the total liability of all the petitioners will come to a few crores of rupees and it will be difficult for them to find the funds to pay the amount in a lump and prays that they be given further time to discharge their liability. In the circumstances of the case and in the interest of justice, it is directed that the bank guarantees furnished pursuant to the interim orders passed in all the writ appeals will continue to be kept alive for another three months from today and the petitioners will pay 50 per cent of the balance amount within six weeks from today and the remaining balance amount within six weeks thereafter; and in default of any of these conditions, the Department will be at liberty to take steps to recover the entire balance including enforcement of the bank guarantees by making the necessary demands to the banks.