TMI Blog2012 (11) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... , for the Petitioner. S/Shri Mathew John (K) and Baby Thomas, for the Respondent. [Judgment per : Antony Dominic, J.]. Certain common questions of law arise in all these cases and therefore these cases were heard together and are disposed of by this common judgment. 2. For narration of facts, we shall refer to OP No. 23272/2002, against the Judgment of which, WA No. 1140/2006 has been filed and WP (C) No. 37514/2009 and the parties are described as they are arrayed in the original petitions and writ petitions. 3. The petitioners are exporters of door mats, floor mats etc., which are made out of Rubber Compounded Sheets and the subject-matter of the litigations is their claim for the benefit of Duty Entitlement Pass Book. Scheme (hereinafter referred to as the DEPB Scheme for short). Three such Original Petitions 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 enforce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Duty Entitlement Pass Book (DEPB) Scheme, an exporter shall be eligible to claim credit as a specified percentage of FOB value of exports made in freely convertible currency. The credit shall be available against such export products and at such rate as may be specified by the Director General of Foreign Trade by a Public Notice issued in this behalf. Any item except those appearing in the Negative List of Imports shall be allowed for import without payment of basic customs duty, special duty of customs as well as additional duty of customs, against the credit under a Duty Entitlement Pass Book (DEPB). The holder of Duty Entitlement Pass Book (DEPB) shall have the option to pay additional customs duty, if any, in cash as well. 7. The DEPB Scheme essentially allows import without payment of basic 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme and were availing of the benefit of the Scheme. It is stated that while so, from August 2001 onwards the 2nd respondent denied the benefit of DEPB Scheme to the Doormats/ Floor Mats exported by the petitioners on the ground that the product did not satisfy the description of the Entry 547; Rubber Compounded Sheets . They were issued Ext. P2 show cause notice stating that the rubber mats are manufactured through vulcanization and moulding process and hence cannot be termed as Rubber Compounded Sheets and they were directed to show cause why the shipping bills should not be finalized without the DEPB benefit. On receipt of the show cause notice, Ext. P3 reply was submitted contesting the allegations in Ext. P2 show cause notice. 11. At that stage, some of the exporters filed 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 expo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct at the time of export was Rubber compounded sheets/rings and the corresponding SION description covered under Sl. No. A 1704 was Rubber compounded sheets/rings/gaskets . The SION entry provided sulphur as one of the inputs. The representative of DIPP clarified that sulphur is used as a vulcanizing agent and a rubber compounded sheet may or may not be vulcanized. The Committee however observed that the product exported by the exporters is rubber mats/foot mats, floor mats etc, of regular shape and size. The Committee also noted that rubber compounded sheets are generally in running length and of irregular shape and against this the items exported are cut to size which are specifically known in the commercial parlance as door mats/foot mats etc. and cannot be considered 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice. The relevant portion of the judgment reads as under : But the pleadings in the counter-affidavit as well as the submission made by the learned Assistant Solicitor General would show that there is a dispute rather a doubt as to whether the rubber compounded mats would be covered by the DEPB entry - rubber compounded sheets. If that be so, certainly the matter requires either an amendment or a clarification. Be it an amendment or a clarification, in the very nature of its impact on the Export Import Policy, the same can only be duly issued - by means of a public notice, lest, as has happened in the present case there should be different approaches in different Ports. Therefore, these writ petitions are allowed declaring that the export of the rubber mats 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing prayers : (1) Declare Ext. P11 is legally insufficient to exclude door mats, foot mats etc. from the purview of Entry 547 (now 507) of Ext. P1 and the same can be enforced only by issuance of a suitable public notice amending the Entry expressly excluding door mats, foot mats from the purview of rubber compounded sheets. (2) issue a writ in the nature of mandamus or any other appropriate writ, direction or order commanding the 2nd respondent to register the shipping bills submitted by the petitioner under the DEPB Scheme till the 1st respondent makes a suitable amendment to the DEPB Entry No. 547 (now 507) of Ext. P1 by issuance of a suitable public notice, Similar prayers are also sought in WP (C). Nos. 6537/2010 and 6221/2010. 20. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been issued in-accordance with this Policy or if any question or doubt arises touching upon the scope and content of a licence, the same shall be referred to the Director General of Foreign Trade whose decision thereon shall be final and binding. 23. A reading of para 4.11 of the EXIM Policy shows that procedure to be followed by an exporter or importer or by any licensing authority for the purpose of implementing the provisions of the Foreign Trade Act, the Rules and Orders and the EXIM Policy are to be specified by the DGFT. Such procedures shall be included in the Hand Book and ITC (HS) Classifications of Export and Import items and shall be published by means of a Public Notice. The provision further provides that the 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, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther brought to the notice by way of submission in the context that the machine is driven by a 300 HP motor to enable the mixing to take place at a very high pressure and because of the high pressure and temperature, the rubber, carbon black, rubber processing oil and other rubber chemicals, are masticated to form a homogeneous lump. It was submitted that this homogeneous lump is known as rubber compound. This rubber compound is then fed into an open mill by opening the drop door of the intermix. The material is again mixed in the rubber mixing mill for three to five minutes. The rubber mixing mill is driven by a 60 HP motor. The rubber compound is remilled and sheeted out into 3 by 6 length. After cooling 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) S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (EPDM Rubber moulded items carry only 9% DEPB under Sl. No. 923); 7. However, for some customers, after compounded rubber sheets are taken through a mixing mill, instead of allowing the rubber sheets to be processed in running length, it is cut to certain regular geometrical shapes in rectangles and squares depending upon the buyers requirement. These sheets cut to size are further put to a moulding process to carryout certain surface working on these sheets like grooving, embossing etc. In other words, the surface working on the sheets of rubber cut to required 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in which exemption notifications should be understood has been explained by the Apex Court in its judgment dated 6-7-2011 in M/s. Gammon India Ltd. v. Commissioner of Customs, Mumbai (Civil Appeal No. 516/2003) [2011 (269) E.L.T. 289 (S.C.)], where it was held thus : 22. As regards the plea of the appellant that the Exemption Notification should receive a liberal construction to further the object underlying it, it is well settled that a provision providing for an exemption has to be construed strictly. In Novopan India Ltd. (supra), dealing 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /1997-2002, dated 21-5-1997, the Director General of Foreign Trade notified the credit rates under the DEPB Scheme. There were 347 items under Product Group Chemicals . It was followed by Public Notice No. 16 [RE-97] 1997-2002, dated 6-6-1997 adding items 348 to 522 in Appendix 28-A of Handbook of Procedures [Volume 1], in Product Group Chemicals . By Public Notice No. 17/97 (PNJ/1997-2002 dated 13-6-1997, items 523 to 634 were added to the Product Group Chemicals in Appendix 28-A of Handbook of procedures. Rubber Compounded 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 documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Appendix 28-A of HBPV1. The loss to the Exchequer would have been very high in such circumstances. (8) That as per the records available, no request was received for fixation of SION or DEPB for Doormats/Rubber Mats . It was open to the Exporters to prefer Applications for fixation of DEPB Rates for their Export Product in accordance with Paragraph 4.38 of the Handbook of Procedure Volume-1 which is reproduced below : 4.38 ANF 4C prescribes form regarding fixation of DEPB rates. All applications for fixation of DEPB rates shall be routed through the concerned EPCs which shall verify the FOB 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 conc ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
