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M/s. K.M. Knitwear Versus Customs & Central Excise Settlement Commission, Commissioner of Customs

2016 (9) TMI 778 - MADRAS HIGH COURT

Calculation of differential duty demanded - BCD - CVD - SAD - Section 3A(5) of the Customs Tariff Act, 1975 - Central Excise Notification No.14 of 2002, dated 01.03.2002 - whether SAD will apply to the goods chargeable to additional duties levied under Section 3(1) of the Additional Duties of Excise (Goods of Special Importance) Act, 1957? - Held that: - the additional duty leviable and the power to levy the Additional Duty of Excise is traceable to sub-section (5) of Section 3 of the Customs Ta .....

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iable in terms of sub-section (5) of Section 3 of the Customs Tariff Act. The exemption which is sought to be granted by the Budget Notification pertains to the duty leviable under sub-section (1) of Section 3 of the Customs Tariff Act and there is no reference to the additional duty of excise leviable in terms of sub-section (5). - The petitioner already accepted before the Settlement Commission regarding the leviability of the additional duty of excise at 8% - the petitioner has not made o .....

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these Writ Petitions, has challenged the order passed by the Customs and Central Excise Settlement Commission, Additional Bench, Chennai (Settlement Commission), dated 19.11.2004. Though there are nine Writ Petitions in this batch of cases, all Writ Petitions question the common order passed by the Settlement Commission, dated 19.11.2004. The facts which are necessary for the disposal of the Writ Petitions are as follows:- The petitioners filed individual applications for settlement of the proc .....

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import documents for the import of polyester lining fabrics from the various petitioners/importers at Tiruppur and cleared the imported goods by availing concessional rate of duty under Customs Notification No.21 of 2002, dated 01.03.2002, took delivery on behalf of the importers and diverted the imported material to the local market. 2. The allegation in the show cause is that the goods imported, availing concessional rate of duty under Customs Notification No.21 of 2002, were not used in the .....

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e imported goods cleared to domestic area instead of utilising the same in manufacture of textile garments, should not be treated as liable to confiscation for non-fulfilment of the conditions subject to which the exemption was granted under notification No.21 of 2002, why the duty foregone should not be demanded from them under proviso to Section 28(1) of the Act and amounts already paid should not be adjusted against the said demand, why interest should not be demanded and why penalty should n .....

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the differential duty liability mentioned in each of the show cause notices has been arrived at by taking into account, the basic customs duty as applicable plus CVD at 16% plus Special Additional Duty (SAD) at 4%. By relying on Section 3A(5) of the Customs Tariff Act, 1975, it was contended that SAD will not apply to the goods chargeable to additional duties levied under Section 3(1) of the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Therefore, it was contended that the .....

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proposed in the show cause notice is on the basis of serial No.410 of the table below Customs Notification NO.21 of 2002 and therefore, Special Additional Duty on the subject goods is leviable. 5. The Settlement Commission taking note of the fact that the petitioners admitted the allegations contained in the show cause notice and the resultant inability for total exemption, the Settlement Commission did not go into the merits of the matter. Thus, the only issue was the quantum of duty that could .....

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.e., CVD is in addition to other duty leviable on the said imported goods in terms of Customs Tariff Act or any other Act and Additional Duty of Excise Act is one such other Act. Therefore, the Settlement Commission held that the imported goods ought to have been charged, Additional Duty of Excise also, which the subject show cause notice has omitted to take into account and in view of the leviability of Additional Duty of Excise, the subject goods are not chargeable with SAD in the light of Sec .....

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e Settlement Commission has recorded that the counsel for the petitioner and the Revenue accepted that ADE was leviable at 8%. Though such appears to be the stand taken by the petitioners before the Settlement Commission, they have filed these Writ Petitions challenging the said order. 6. The learned counsel for the Petitioner after referring to the Budget Notification, more particularly, clause (b) therein, submitted that there is an exemption from so much of the additional duty leviable thereo .....

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of the notification of the Government of India in the Ministry of Finance (Department of Revenue), No.17/2001-Customs, dated the 1st March 2001 [G.S.R.116(E), dated the 1st March 2001], the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods of the description specified in column (3) of the Table below or column (3) of the said Table read with the relevant List appended hereto, as the case may be, and falling within the Chapter, head .....

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aid Customs Tariff Act, as is in excess of the rate specified in the corresponding entry in column (5) of the said Table. 7. Reference was also made to Section 3 of the Customs Tariff Act and also Section 3 of the Additional Duties of Excise (Goods of Special Importance), Act, 1957, which reads as follows:- 3. Levy and Collection of Additional Duties:- (1) There shall be levied and collected [in respect of the goods described in column (3) of the First Schedule] produced or manufactured in India .....

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1944), or any other law for the time being in force. [(3) The provisions of the [Central Excise Act, 194] (1 of 1944), and the rules made thereunder, including those relating to refunds, exemptions from duty, offences and penalties, shall, so far as may be, apply in relation to the levy and collection of the duties of excise on the goods specified in sub-section (1).] 8. The contention of the learned counsel for the petitioner is that in terms of Notification No.21 of 2002, the additional duty l .....

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ule of the Central Excise Tariff Act are both duties of excise only and as per the notification No.21 of 2002, the additional duty in case of excise duties of 16% is exempt and under law, there is no provision to demand payment of 8% equal to excise duty leviable under the ADE Act, since effective rate of additional duty of customs (equal to excise duties leviable) is only 16% and not 24%. Therefore, it is the contention that the Settlement Commission had gone beyond the notification and imposed .....

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ed the order, so that the correct duty amount is applied and collected. It is further contended that under Section 3(5) of the Customs Tariff Act, the duty chargeable shall be in addition to any other duty under the Act or any other law for time being in force and therefore, the levy of ADE at 8% under the ADE Act 1957, is proper. Further, it is contended that Notification No.21 of 2002, dated 01.03.2002, exempts all goods from additional duty leviable under Section 3(1) of the Customs Tariff, a .....

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upreme Court in the case of State of Kerala vs. Attesee reported in 1989 (72) STC 1. 10. Heard Mr.S.Murugappan, learned counsel for the petitioner and Mr.V.Sundareswaran, learned Standing counsel for the respondent Department and perused the materials placed on record. 11. On a perusal of the impugned order passed by the Settlement Commission, it is evident that the petitioners conceded to the fact that 8% ADE is leviable along with the Basic Customs Duty CVD at 16% and Cess at 0.05%. When the p .....

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the petitioner is pitched upon the Budget Notification referred above. By the said Notification, the Central Government exempted the goods of the description in column 3 of the table of the first Schedule to the Customs Tariff Act, from so much of additional duty leviable thereon under sub-section (1) of Section 3 of the Customs Tariff Act as in excess of the rates specified in the corresponding entry in column 5 of the said table. By referring to the said Budget Notification and relying on Sec .....

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value of the imported article, shall, notwithstanding any thing contained in Section 14 of the Customs Act, be the aggregate of the values as mentioned in clauses (i) & (ii) to the said sub-section. Therefore, it is contended that the levy and collection of additional duties in terms of the ADE Act, 1957, are duties of excise and therefore, by virtue of the Budget Notification, no more than 16% can be collected as duty. However, one important provision, which needs to be considered to examin .....

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iable on a like article on its sale, purchase or transportation in India, it may, by notification in the Official Gazette, direct that such imported article shall, in addition, be liable to an additional duty at a rate not exceeding four percent of the value of the imported article as specified in that notification. Explanation:- In this sub-section, the expression sales tax, value added tax, local tax or any other charges for the time being leviable on a like sale, purchase or transportation in .....

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arge. 13. The above provision has been made with an object of counter balancing, the sales tax value of the article, when the same is removed to the domestic area. Therefore, when the Central Government is satisfied that in public interest to levy on any imported article, such additional duty as would counter balance the sales tax, value added tax, local tax, or any other charges on a like article on its sale, purchase or transportation in India, it may by notification in the official gazette di .....

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ion or reference. In a case arising under the Kerala General Sales Tax Act, 1963, which granted exemption from sales tax of goods specified in third schedule to the said Act, the question was whether in respect of the relevant assessment years, the exemption given to cotton fabrics should be restricted to cotton fabrics as defined in the Central Excise and Salt Act, 1944, or whether it would also cover goods falling under the said definition after its amendment in 1969. 15. The Central Sales Tax .....

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he States. While deciding the question, reference was made to Article 268 of the Constitution of India, which imposed certain restrictions on the legislative powers of the State in the matter of levy of Sales Tax on sales taking place outside the State, sales in the course of import or export, sales in the course of interstate trade or commerce and sales of declared goods. After referring to the relevant provisions, it was pointed out that levy of Sales Tax on declared goods, should not be at a .....

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it was considered expedient and desirable to compensate the States for the proportionate loss of sales tax incurred by them. Thus, even before Section 15 was brought into force, the Central Government decided to pass an Act to provide for the levy and collection of additional duties of excise on certain goods and for the distribution of a part of the net proceeds thereof among the States in pursuance of the principles of distribution recommended by the Second Finance Commission in its report dat .....

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m its objects and reasons set out earlier. Some of the items liable to excise duty were picked out from the Schedule to the 1944 Act. They were listed among the declared goods of section 14 of the C.S.T., Act and also made liable to additional excise duty under the 1957 Act. A perusal of the lists under these three enactments shows that out of the items listed in the Schedule to the 1944 Act, sugar, tobacco, cotton fabrics, rayon or artificial fabrics and woollen fabrics were categorised as decl .....

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