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TMI Blog2012 (11) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... etitions were allowed by this Court and against the judgments, the Writ Appeals are filed by the respondents therein. 4. OP No. 23272/2002 was filed by 20 such exporters and the prayers sought are to : "1. Declare the clarification of the 1st respondent in Ext. P10 excluding door mats, foot mats etc, from the purview of D.E.P.B, Entry No. 547 can be enforced only by a suitable public notice amending Entry 547 expressly excluding door mats, foot mats etc. from the purview of rubber sheets. 2. Issue a writ in the nature of Mandamus or any other appropriate writ, direction or order commanding the respondents to register the shipping bills submitted by the petitioner under the D.E.P.B. Scheme till the 1st respondent, makes a suitable amendment to D.E.P.B. Entry No. 547 by the issuance of a public notice. 3. Issue a writ in the nature of mandamus or any other appropriate writ, direction or order commanding the respondents to finalize the adjudication of the provisionally registered D.E.P.B shipping bills and disburse the benefit due to the petitioner in respect of those shipping bills." 5. The factual background of the litigation is that under Section 5 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asic customs duty, special duty of customs as well as additional duty of customs on items except those appearing in the Negative List. Such an import without payment of customs duties is permitted against the credit entered in the Pass Book and such credit is to be calculated by taking into account the import content of the product exported as per the Standard Input Output Norms (SION) and also taking into account the value addition achieved by export of such product. The exporter is eligible to claim credit at a specified percentage of FOB value of the exports made. The various eligible export products and the specified percentage of credit vis-a-vis such products, are required to be specified by the Director General of Foreign Trade (DGFT) by a Public Notice and in exercise of such authority of the DGFT, Appendix 28A of the EXIM Policy Handbook (Vol. 1) is issued. 8. Para 4.11 of the EXIM Policy authorises the DGFT to specify the procedure to be followed by an exporter or an importer or a licencing authority for the purpose of implementing the provisions of the Foreign Trade Act, Rules and Orders made thereunder and also the EXIM Policy. Such procedures are mandated to be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed OP Nos. 36082 and 36146/2001. In the original petitions, Ext. P4 interim order was passed by this Court directing the 2nd respondent to finalise the proceedings pursuant to Ext. P2 show cause notice and that in the meanwhile to provisionally register the shipping bills, giving the petitioners the benefit of DEPB Scheme. 12. Meanwhile, the Rubber Shippers Council, an organization representing the exporters, filed Ext. P5 application before the 1st respondent seeking a clarification on the issue. When the 1st respondent was thus seized of the matter, the 2nd respondent passed Ext. P7 order holding that Rubber Compounded Sheets and Rubber Mats are two different products and hence the subject goods are not eligible for DEPB Scheme under Serial No. 547 of Ext. P1. Appendix 28A of the EXIM Policy. On this basis, it was directed that the shipping bills are to be finalized without extending the benefits under the DEPB Scheme. 13. Subsequently, by Ext. P6 judgment dated 18th February 2002, OP No. 36082 of 2001 was disposed of relegating the petitioners therein to pursue statutory appellate remedies under the Customs Act, 1962 against Ext. P7 order of the 2nd respondent and cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as rubber sheets. Further the product - door mats etc. involve further processing beyond the stage of sheets. The association members confirmed that sizes are cut according to buyers requirement from the sheets. They however pleaded that this does not change the basic character of sheets. The Committee after detailed deliberations decided to clarify that a rubber compounded sheet may or may not be vulcanized and vulcanized rubber compounded sheet was also covered under DEPB entry No. 547 under the Chemical Product Group. It was also decided to clarify that door mats, foot mats etc. which are a stage further to sheets and involve further processing and also known in the commercial parlance as "door mats", "foot mats" etc. are not covered under rubber compounded sheets and hence ineligible for DEPB, benefit under this entry." 15. This decision of the Committee was communicated to the petitioners under cover of Ext. P10 communication. It was thereupon OP No. 23272/2002 was filed and the main contention urged in Ground No. 2 reads as under : "This further finding of the DGFT. can be legally enforced only by an amendment to entry No. 547 which in turn can be done only by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be liable to be covered under entry 547 - rubber compounded sheets unless and until it is duly amended by the Central Government or clarified by the Director General of Foreign Trade by a public notice, if such clarification would meet the purpose. The accounts of the petitioners shall be settled accordingly within a period of three months from the date of production of a copy of the judgment." 18. It is aggrieved by the common judgment, the Writ Appeals are filed by the respondents in the original petitions and the issues raised in OP Nos. 31262/2002 and 2834/2003 are also similar. 19. According to the appellants, in pursuance to directions in the judgment under Appeal, during the pendency of these writ appeals, the issue raised by the petitioners in the original petition was considered by an Inter Ministerial Committee constituted by the 1st appellant and a decision was taken to issue a policy circular clarifying that door mats and floor mats etc., are not included in item No. 547 (which is now item No. 507 in the EXIM Policy of 2009-2014 and reads as rubber compounded sheets/rings/gaskets). It is stated that accordingly Annexure D Policy Circular No. 18/2009-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. The main contention raised in WP (C) Nos. 37514/2009 and its connected cases is that the scheme introduced by a public notice, can be lawfully amended only by the issuance of another public notice issued complying with all the requirements for the issuance of the same. In the counter-affidavit filed in WP (C) No. 37514/2009, the contention raised by respondents is that Ext. P11 policy circular is not an amendment of the scheme, but only clarified the existing position that the products exported by the petitioners are not covered by the DEPB Scheme. 21. We heard the detailed arguments of the learned counsel for the respective parties who have reiterated the contentions noticed above. The issue which mainly arises for consideration is the legality of Ext. P10 in OP No. 23272 of 2002, against the judgment of which WA No. 1140 of 2006 is filed and Ext. P11 Policy Circular No. 18/2009-2014, dated 8-12-2009 challenged in WP (C) No. 37514/2009 and connected cases. Incidentally the question whether the Door Mats/Floor Mats exported by the petitioners are eligible for the benefit of DEPB Scheme also will have to be considered. 22. To appreciate the correctness of the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e procedures so laid down, can also be amended in like manner. The expression 'Public Notice' has been defined in paragraph 3.40 of the EXIM Policy as the notice published under the provisions of para 4.11 of the Policy. Thus a public notice is required to be issued by the DGFT when he prescribes the procedure as respects the matters specified in para 4.11 of the Policy and when such procedures are sought to be amended. 24. On the other hand, by paras 4, 13, the DGFT has been conferred with the power to interpret the provisions of the policy or to resolve any question regarding the classification of any item in the book titled 'ITC (HS) Classification of Export and Import Items' and this paragraph also provides that the decision of the DGFT on such question or doubt shall be final and binding. What is important to be noticed is that while para 4.11 of the Policy requires a public notice for specifying the procedure or amending the same, when the power to interpret the policy is exercised in terms of para 4.13, there is no prescription that the decision taken shall be published in any specified manner. Therefore, if as held by the Learned Single Judge, an amendment to the poli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oling and drying this rubber compound is taken from the cooling system and the compound is the final product produced by the assessee." 27. The process was again explained in the Division Bench judgment of this Court in Commissioner of Income Tax v. Forbes Ewart and Figgis P. Ltd - 1999 (238) ITR 762, which is as follows : "The raw materials used in the mixing of rubber in the assessee's rubber mill are the following : (i) Sheet rubber from natural rubber, (ii) Synthetic rubber; (iii) Carbon black; (iv) Process oil; (v) Chemicals - zinc oxide, stearic acid renacit, wax, etc. The process of mastication is done in two stages. Stage I : The rubber supplied by the customers is masticated in the open mill along with renacit-chemical provided by the customer and crushed into pulp form or roller form. After cooling, this is carried for processing at second stage. Stage II : The rubber rolls obtained after first stage operations are loaded into the intermix mill along with synthetic rubber. With the rubber, carbon, process oil and chem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... size is carried out through a moulding process where the required mould release agent is used. The sheets are also vulcanized to retain its finished form. In this process sulpher is used. These products are used for as floor coverings, door mats etc. Based on buyers' requirement these are invoiced accordingly." 29. The aforesaid process has been explained only to indicate that for a Rubber Compounded Sheet to become the final end product of door mats/floor mats, the sheet is subjected to various further processes and that these two products are having distinct and separate commercial existence, identity and utility. 30. Various products are made out of Rubber Compounded Sheets. If by reason of the fact that door mats and floor mats are made out of rubber compounded sheets, and therefore are entitled to DEPB benefit, applying the same reasoning, tyre and such other products, which are also manufactured utilizing Rubber Compounded Sheets, should also be held eligible for the said benefit. If that were so, the authorities would not have included such items separately in Appendix 28A to the EXIM Policy A perusal of Appendix 28A to the EXIM Policy shows that automobile tyres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the same issue in relation to an exemption notification, a three-Judge Bench of this Court, stated the principle as follows : "16. We are, however, of the opinion that, on principle, the decision of this Court in Mangalore Chemicals - and in Union of India v. Wood Papers referred to therein - represents the correct view of law. The principle that in case of ambiguity, a taxing statute should be construed in favour of the Assessee - assuming that the said principle is good and sound - does not apply to the construction of an exception or an exempting provision; they have to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision In case of doubt or ambiguity, benefit of it must go to the State. This is for the reason explained in Mangalore Chemicals and other decisions, viz., each such exception/exemption increases the tax burden on other members of the community correspondingly. Once, of course, the provision is found applicable to him, full effect, must be given to it. As observed by a Constitution Bench of this Court in Hansraj Gordhandas v. H.H. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounded Sheets/Rings' was introduced by this notification as item 547. (4) The fixation of the Rate of Duty Credit under the Duty Entitlement Pass Book Scheme involves the following procedure, viz., (i) There has to be a Standard Input Output Norms (SION) on a product on which DEPB rate fixation is applied for. (ii) The Deemed import content of the Export Product as per the Standard Input Output Norms [SION], as specified in the Handbook of Procedures-Volume II is taken into consideration; (iii) The Basic Customs Duty payable on the CIF Value of such deemed imports and the likely FOB value of export product is determined on the basis of documentary evidence given by the applicant; (iv) Taking into account the Value Addition achieved in the process, the DEPB rate is recommended. (5) That DEPB rates are recommended by the Inter Ministerial DEPB Committee by taking into account the factors stated in the Para (4) above. DEPB rate is specified by the Director General of Foreign Trade under para 4.3.1 of the Foreign Trade Policy 2009-14 (earlier under para 7.25 of the Export and Impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of exports as well as international price of inputs covered under SION" True copy of ANF-4C [AAYAAT-NIRYAAT Form] is annexed herewith as Ext. R. 1(a). (9) It was also open to the Exporters to prefer Applications to include their product with the corresponding import content in SION [Standard Inputs Output Norms] in ANF 4B. True copy of ANF 4B is annexed as Ext. R.1(b) Paragraph- 4.4.2 of Handbook of Procedure Volume-1 is reproduced below : "4.4.2. in case where Norms have not been published, an Application in ANF 4B, along with prescribed documents, shall be furnished to concerned Norms Committee [NC] at DGFT Headquarters for fixation of Norms. In such cases the original Application along with prescribed fee shall be filed with the RA Concerned and a self-attested copy of the same be filed with the NC. Authorisation in such cases shall be issued by RA as per NC recommendation. NC shall also function as a recommendatory authority for SION. DGFT may notify such norms" (9) That as per the DEPB Scheme, in case where SION is fixed but DEPB rates are not notified, 1.5% DEPB is available under residual entry Sl. No. 22-D on export of such products. The fact that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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