Central Excise - Notification 38/99-C.E., dated 16-9-99-Supreme Court decision in the case of M/s. Hyderabad Industries Ltd., Regarding charging section for levy of additional duty of customs - Regarding. - Central Excise - F. No. 345/12/99-TRU

F. No. 345/12/99-TRU Dated 24-9-1999 Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi Subject : Central Excise - Notification 38/99-C.E., dated 16-9-99-Supreme Court decision in the case of M/s. Hyderabad Industries Ltd., Regarding charging section for levy of additional duty of customs - Regarding. I am directed to refer to Notification No. 38/99-C.E., dated 16-9-99 which amends Notification No. 2/95-C.E., dated 4-1-95, 20/97-C.E., dated 11-4-97 and 13/98-C.E., dated 2-6-98, so as to substitute the references in the said notifications to "the duties of customs leviable under Section 12 of the Customs Act, 1962 or under any other law for the time being in force" with "the duties of customs leviable under the Customs Act, 1962 or under any other law for the time being in force." 2. The goods cleared by Export Oriented Undertakings (EOUs) and Free Trade Zones in the Domestic Tariff Area (DTA), are treated at par with "imported" goods and the excise duty leviable on such clearances, in terms of the proviso to section 3(1) of the Central Excise Act, shall be an amount equal to the aggregate of all the customs duties which would be leviable under Section 12 of the Customs Act, 1962 on like goods produced or manufactured outside India, if imported into India. Under Notification No. 2/95-C.E., dated 4-1-1995, 20/97-C.E., dated 11-4-1997 and 13/98-C.E., dated 2-6-98, concessional excise duties equal to 50%, 50% and 30% of the aggregate of such customs duties respectively have been prescribed in respect of the DTA clearances of the goods specified under the respective notifications. 3. In the case of M/s. Hyderabad Industries Ltd., [1999 (108) E.L.T. 321], the Honourable Supreme Court has held that the charging section for the additional duty of customs, leviable under section 3(1) of the Customs Tariff Act, 1975, is not Section 12 of the Customs Act. In view of the said judgment, duties of customs such as the said additional duty, cannot be considered to be levied under the said Section 12 of the Customs Act. Since the notifications above referred to the duties of customs leviable under Section 12 of the Customs Act, 1962 for computation of the excise duty payable on the DTA clearances, clearances, such other duties of customs other than the basic duty, will not be includible in such computation, consequent to the said Supreme Court Judgment. 4. Notification No. 38/99-C.E., dated 16-9-99, has been issued to suitably amend each of the Notification No. 2/95-C.E., 20/97-C.E. and 13/98-C.E. As a result, duty on DTA clearances by EOUs, etc., will be computed in the same manner as was being done before but with one change. 5. The change is that the excise duty payable under the said notifications is subject to the statutory ceiling prescribed in terms of the proviso to sub-section (1) of section 3 of the Central Excise Act, 1944. This aspect is illustrated below with two examples. Illustration :- Suppose product X is liable for only a tariff rate of basic customs duty of 25% but under an exemption is liable for basic customs duty of 15% (surcharge 1.5%), and additional duty of customs of 16%, then the computation of excise duty payable on the DTA clearances of X under notification No. 2/95-C.E. will be as follows : Maximum excise duty payable in terms of proviso to Section 3(1) = 15% Aggregate of customs duties leviable under the Customs Act or under any other law in force read with relevant notification (i.e. equal to the duty in terms of Notification No. 2/95-C.E. leviable prior to the said judgment) = 0.5*(15+1.5+1.165*16) = 17.57% Excise duty payable under the amended Notification No. 2/95-C.E. = Min [15%, 17.5%] = 15% Illustration 2 : Suppose effective rate of basic customs duty on the product X above is 25% (surcharge 2.5%), then the computations will be as follows : Maximum excise duty payable in terms of proviso to section 3(1) = 25% Aggregate of customs duties leviable under the Customs Act or under any other law in force (equal to the duty in terms of Notification No. 2/95-C.E. leviable prior to the said judgment) = 0.5*[25+2.5+1.275*16] = 23.95% Excise duty payable under the amended Notification No. 2/95-C.E. = Min [25%, 23.95%] = 23.95% 6. The above changes are effective from 16th September, 1999.