TMI Blog2022 (10) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... the Customs Act, 1962 is a taxing provision which creates and fastens the liability on a party. The provision has to be strictly construed and will be governed by the language employed in the section. In the present case, it is not disputed that petitioner has paid a sum of Rs.11.84 Crores much prior to the issuance of show cause notice. There is no determination of duty under Section 28(2) of the Customs Act, 1962 and, therefore, Section 28AB of the Customs Act, 1962 is also not applicable. Petitioner has also paid the difference between the admitted duty liability and the amount settled by respondent no.2 - respondent no.2 contention that CVD, SAD and surcharge are being recovered under Section 28 of the Customs Act, 1962, cannot be agreed upon. Consequently Section 28AB of the Customs Act, 1962 also will also not be applicable. In the absence of specific provision relating to levy of interest in the respective legislation, interest cannot be recovered by taking recourse to machinery relating to recovery of duty. The finding of respondent no.2 that it has the inherent authority or power to determine the terms of settlement covering not only the amount of duty but also int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se notice dated 12th September 2005 in respect of petitioner s requirements sourced through three entities, viz., Miyazu Seisakusho Co. Ltd., Japan, Sumitomo Corporation, Japan and Durr Systems GmbH, Germany; and (d) Show cause notice dated 4th January 2006 in respect of petitioner s requirements sourced through M/s. Renault, France. 2. These show cause notices were issued on the allegation that petitioner did not declare the entire amount payable in connection with the imported model which amounts to misdeclaration with an intent to evade payment of customs duty. Under the first show cause notice, a demand of differential customs duty of Rs.33,16,621/- was raised. Under the second show cause notice, a demand of differential customs duty of Rs.3,91,69,685/- was raised. Under the third show cause notice, a demand of differential customs duty of Rs.1,41,53,468/- was raised. And Under the fourth show cause notice, a demand of differential customs duty of Rs.4,04,567/- was raised. 3. A final order dated 29th/31st January 2008 was passed as regards the first show cause notice by respondent no.2 holding that the customs duty liability as proposed in the show cause notice was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on final order dated 5th January 2009, which is impugned in this petition. Respondent no.2 has confirmed its earlier order and in the impugned order has only recorded the reasons why the orders passed by it earlier, which were impugned in the four petitions that were disposed by this Court, were correct. 8. It is petitioner s case that though the law is well settled that a challenge to an order of Settlement Commission when made in a petition under Article 226 of the Constitution of India, the Court should be concerned only with the legality of procedure followed and not with the validity of the order, it is also well settled that the scope of enquiry by the Court should also consider whether the order of the Commission is in confirmity with the provisions of law or contrary to the provisions and that such contravention has prejudiced petitioner. If the order of the Commission is contrary to the provisions of law, certainly the Court should interfere. This is the entire basis of petitioner s case. In support of this submission, Mr. Sridharan relied upon a judgment of the Apex Court in the matter of Jyotendrasinhji V/s. S.I. Tripathi and Ors. 1993 (3) SCC 389 (SC), where para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Article 226 or by this Court under Article 136 is also the same whether the order of the Commission is contrary to any of the provisions of the Act and if so, has it prejudiced the petitioner/appellant apart from ground of bias, fraud malice which, of course, constitute a separate and independent category. Reference in this behalf may be had to the decision of this Court in Sri Ram Durga Prasad v. Settlement Commission 176 I.T.R. 169, which too was an appeal against the orders of the Settlement Commission. Sabyasachi Mukharji J., speaking for the Bench comprising himself and S.R. Pandian, J. observed that in such a case this Court is concerned with the legality of procedure followed and not with the validity of the order.' The learned Judge added 'judicial review is concerned not with the decision but with the decision-making process. Reliance was placed upon the decision of the House of Lords in Chief Constable of the N.W. Police v. Evans, [1982] 1 W.L.R.1155. Thus, the appellate power under Article 136 was equated to power of judicial review, where the appeal is directed against the orders' of the Settlement Commission. For all the above reasons, we are of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al duty of customs or surcharge though charged under different statutes are duties of customs and, therefor, Section 28AB of the Customs Act, 1962 (as then prevailing) is applicable; (b) these duties are part of total customs duty and calculated by taking into consideration value of the goods as well as the basic customs duty and since petitioner had mis-stated the assessable value by undervaluing the imported goods, respondent no.2 was justified in directing interest and penalty was payable by petitioner; (c) under Section 127C of the Customs Act, 1962, respondent no.2 had the inherent authority or power to determine the terms of settlement covering not only the amount of duty but also interest and penalty; and (d) under Section 127H of the Customs Act, 1962, respondent no.2 has the power to grant immunity from prosecution and penalty subject to such conditions as it may think fit to impose. Such a power has been exercised by the Commission in imposing penalty and interest upon petitioner and, therefore, respondent no.2 cannot be faulted. Mr. Mishra submitted that there is nothing in the order to be concerned that the legality of procedure was not followed. Since th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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. (emphasis supplied) Section 3A. Special additional duty - (SAD) (1) Any article which is imported into India shall in addition be liable to a duty (hereinafter referred to in this section as the special additional duty), which shall be levied at a rate to be specified by the Central Government, by notification in the Official Gazette, having regard to the maximum sales tax, local tax or any other charges for the time being leviable on a like article on its sale or purchase in India : Provided that until such rate is specified by the Central Government, the special additional duty shall be levied and collected at the rate of eight per cent of the value of the article imported into India. Explanation . - In this sub-section, the expression maximum sales tax, local tax or any other charges for the time being leviable on a like article on it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elating to non-levy, short levy, refunds and appeals shall, as far as may be, apply to the duty chargeable under this section as they apply in relation to duties leviable under that Act. (emphasis supplied) 16. Section 90 of the Finance Act, 2000 reads as under : Section 90. Surcharge of customs : (1) In the case of goods mentioned in the First Schedule to the Customs Tariff Act, or in that Schedule, as amended from time to time, there shall be levied and collected as surcharge of customs, an amount, equal to ten per cent of the duty chargeable on such goods calculated at the rate specified in the said First Schedule, read with any notification for the time being in force, issued by the Central Government in relation to the duty so chargeable. (2) Sub-section (1) shall cease to have effect after the 31st day of March, 2001, and upon such cesser, section 6 of the General Clauses Act, 1897 (10 of 1897) shall apply as if the said sub-section had been repealed by a Central Act. (3) The surcharge of customs referred to in sub-section (1) shall be in addition to any duties of customs chargeable on such goods under the Customs Act or any other law for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the words five years were substituted: Provided further that where the amount of duty which has not been levied or has been short-levied or erroneously refunded or the interest payable has not been paid, part paid or erroneously refunded is one crore rupees or less, a notice under this sub-section shall be served by the Commissioner of Customs or with his prior approval by any officer subordinate to him : Provided also that where the amount of duty which has not been levied or has been short-levied or erroneously refunded or the interest payable thereon has not been paid, part paid or erroneously refunded is more than one crore rupees, no notice under this sub-section shall be served except with the prior approval of the Chief Commissioner of Customs. Explanation .-Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of one year or six months or five years, as the case may be. (2) The proper officer, after considering the representation, if any, made by the person on whom notice is served under sub- section (1), shall determine the amount of duty or interest due from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded by the Finance (No.2) Act, 2004, reads as under : xxxxxxxxxxxxxxx (8) The provisions of the Customs Act, 1962 (52 of 1962) and the rules and regulations made thereunder (relating to, the date for determination of rate of duty, non levy, short levy, refunds, interest, appeals, offences and penalties) shall, as far as may be, apply to the duty chargeable under this section as they apply in relation to duties leviable under that Act. (emphasis supplied) 19. When a statute levies a tax it does so by inserting a charging section by which a liability is created or fixed and then proceeds to provide the machinery to make the liability effective. It, therefore, provides the machinery for the assessment of the liability already fixed by the charging section, and then provides the mode for the recovery and collection of tax, including penal provisions meant to deal with defaulters. Provision is also made for charging interest on delayed payments, etc. Ordinarily the charging section which fixes the liability is strictly construed but that rule of strict construction is not extended to the machinery provisions which are construed like any other statute. As held by the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to special additional duty of customs do not borrow the provisions of Customs Act, 1962 relating to interest. 22. In M /s. Khemka and Co. (Agencies) Pvt. Ltd. V/s. State of Maharashtra (1975) 2 SCC 22, that Mr. Sridharan relied upon, the question that the Court had to answer was whether the assessees under the Central Sales Tax Act, 1956 could be made liable for penalty under the provisions of the State Sales Tax Act. There petitioner contended that there is no provision in the Central Act for imposition of penalty for delay or default in payment of tax and, therefore, imposition of penalty under the provisions of the State Sales Tax Act for delay or default in payment of tax is illegal. The rival contention on behalf of the Revenue was that the provision for penalty for default in payment of tax as enacted in the State Sales Tax Act was applicable to the payment and collection of the tax under the Central Sales Tax Act and is incidental to and part of the process of such payment and collection. The Apex Court held that a penalty is a statutory liability and is in addition to tax and a liability under the Act. There must be a charging section to create liability. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Act in respect of tax and penalty payable under the Central Act. There is no lack of sanction for payment of tax. Any dealer who would not comply with the provisions for payment of tax, would be subjected to recovery proceedings under the public Demands Recovery Act. A penalty is a statutory liability. The Central Act contains specific provisions for penalty. Those are the only provisions for penalty available against the dealers under the Central Act. Each State Sales Tax Act contains provisions for penalties. These provisions in some cases are also for failure to submit return or failure to register. It is rightly said that those provisions cannot apply to dealers under the Central Act because the Central Act makes similar provisions. The Central Act is a self contained code which by charging section creates liablity for tax and which by other sections creates a liability for penalty and impose penalty. Section 9(2) of the Central Act creates the State authorities as agencies to carry out the assessment, reassessment, collection and enforcement of tax and penalty by a dealer under the Act. (emphasis supplied) Therefore, penalty is not a continuation of assessment proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ........ (3) The provisions of the Central Excises and Salt Act, 1944 and the rules made thereunder including those relating to refunds and exemptions from duty shall, so far as may be, apply in relation to the levy and collection of the additional duties as they apply in relation to the levy and collection of the duties of excise on the goods specified in sub-section (1). 6. A perusal of the said provision shows that the breach of provision of the Act has not been made penal or an offence and no power has been given to confiscate the goods. It only provides for application of the procedural provisions of the Central Excises and Salt Act, 1944 and the Rules made thereunder. It is no longer res integra that when the breach of the provision of the Act is penal in nature or a penalty is imposed by way of additional tax, the constitutional mandate requires a clear authority of law for imposition for the same. Article 265 of the Constitution provides that no tax shall be levied or collected except by authority of law. The authority has to be specific and explicit and expressly provided. The Act created liability for additional duty for excise, but created no liability for an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bate provided in section 13 (8) of the Orissa Sales Tax Act was available to dealers if they paid the tax under the CST Act before due date of payment. The court said that rebate for payment of tax within the prescribed time under the State Act was available to dealers for payment of tax under the CST Act on the reasoning that the power to collect the tax assessed in the same manner as the tax on the sale and purchase of goods under the general sales tax law of the State would include within itself all concessions given under the State Act for payment within the prescribed period. The Supreme Court in Khemka's case observed respecting this case that the reason why rebate was allowed and penalty was disallowed was that rebate was a concession whereas penalty was an imposition. The concession did not impose liability but penalty did. It, therefore, stood to reason that rebate was included within the procedural part of collection and enforcement of payment, and penalty like imposition of tax could not be included within the procedural part. xxxxxxxxxxxxxx 36. We are, thus, of the opinion that the argument that various sections falling in Chapter II of the Central Excises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on thereof. Where the Act has to be explained by referential legislation or legislation by incorporation levies penalty or not, it is better for the Court to lean in favour of the tax payer. There is no room for presumption in such cases. 25. The Gujarat High Court in C.C.E. C., Surat-I V/s. Ukai Pradesh Sahakari Khand Udyog Mandli Ltd. 2011 (271) E.L.T. 32 (Guj.), (relied upon by Mr. Sridharan), while dealing with the provisions of the Central Excise Act read with the Sugar Export Promotion Act, 1958, also held that interest can be levied and charged on delayed payment of tax only if the statute that levies and charges the tax makes a substantive provision in this behalf. In Ukai Pradesh Sahakari Khand Udyog Mandli Ltd. (Supra), sub-section (4) of Section 7 of Sugar Export Promotion Act, 1958 reads as under : (4) The provisions of the Central Excise Act, 1944 (1 of 1944) and the rules made thereunder, including those relating to refunds and exemptions from duty, shall, so far as may be, apply in relation to the levy and collection of the duty of excise or any other sum referred to in this section as they apply in relation to the levy and collection of the duty on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de interest and penalty was inserted in sub-section (6) of Section 3 or sub- section (4) of Section 3A of the Customs Tariff Act, 1975. Therefore, the intention of the legislature was very clear that it wanted to include interest and penalties only with regard to anti-dumping duty on dumped articles and not for CVD, i.e., levy of additional duty equal to excise duty and SAD, i.e.,, special additional duty. No such insertion or amendment was made in Section 90 of the Finance Act, 2000 relating to surcharge. Therefore, interest and penalty cannot be levied on the portion of demand pertaining to surcharge under Section 90 of the Finance Act, 2000 or additional duty of customs under Section 3 or special additional duty of customs under the Customs Tariff Act, 1975. 27. Sub-section (6) of Section 3 and sub-section (4) of Section 3A of the Customs Tariff Act, 1975 makes applicable to the duty chargeable under Section 3 and Section 3A the provisions of the Customs Act, 1962 and the rules and regulations made thereunder including those relating to drawbacks, refunds, exemptions from duties so far as it applies to Section 3 and so far as Section 3A is concerned, it is relating to non lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n delayed payment of duty or penalty because as time and again Courts have held that taxing statute have to be incorporated strictly and tax can be imposed only when the language of the statute expressly provided for it. The authority has to be provided specifically, explicitly and expressly. Moreover, CVD, SAD and surcharge are in addition to the basic customs duty. Sub-section (5) of Section 3 and sub-section (3) of Section 3A of Customs Tariff Act, 1975 provide that the duty chargeable under the said sections will be in addition to any other duty imposed under the Customs Tariff Act, 1975 or any other law for the time being in force. Sub-section (3) of Section 90 of the Finance Act, 2000 say the surcharge shall be in addition to any duties of customs under the Customs Act or under any other law for the time being in force. 30. As stated earlier, sub-section (6) of Section 3 and sub-section (8) of Section 3A of the Customs Tariff Act, 1975 referred to the procedural aspect and machinery provisions under the Customs Act, 1975 and not the charging provisions. So also Section 90 of the Finance Act, 2000. As held by the Apex Court in Jain Brothers V/s. Union of India AIR 1970 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neering (Supra) is purportedly based on the ratio of India Carbon (Supra) and J.K. Synthetics (Supra). In the decisions of the Apex Court in India Carbon (Supra) and J.K. Synthetics (Supra) interest and penalty were held to be substantive in nature. In J.K. Synthetics (Supra) it was held as follows: Therefore, any provision made in a statute for charging or levying interest on delayed payment of tax must be construed as substantive law and not adjectival law. In India Carbon (supra) it was held as follows: 7. This proposition may be derived from the above: interest can be levied and charged on delayed payment of tax only if the statute that levies and charges the tax makes a substantive provision in this behalf. In Khemka Co. (supra) it was held as follows: 25. Penalty is not merely sanction. It is not merely adjunct to assessment. It is not merely consequential to assessment. It is not merely machinery. Penalty is in addition to tax and is a liability under the Act. It is, therefore, clear from these judgments of the Supreme Court that the liability to interest and penalty is substantive and that provisions imposing interest and pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter on, Finance (No.2) Act, 2004 amended sub-section (8) of Section 9A suitably to include interest and penalty. However, similar amendments have not been made to Section 3(6) of the Customs Tariff Act, 1975 relating to CVD, i.e., additional duty equal to excise duty or Section 3A(4) of Customs Tariff Act, 1975 relating to SAD, i.e., special additional duty or surcharge under Section 9(3) of the Finance Act, 2000. 35. Further, Section 12 of the Customs Act, 1962 levies duty on goods imported into India at such rates as may be specified in the Customs Tariff Act, 1975. In Customs Tariff Act, 1975, Section 2 provides the rates at which duties of customs are to be levied under the Customs Act, 1962 are as specified in the first and second schedules of the Customs Tariff Act, 1975. In Section 12 of the Customs Act, 1962 there is no reference to any specific provision of Customs Tariff Act, 1975. On the other hand levy of CVD or SAD under Section 3 or Section 3A of the Customs Tariff Act, 1975 or surcharge under Section 90 of the Finance Act, 2000 is not relatable to the first or second schedule but the rate is prescribed in those three sections itself. This itself shows the charging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs Act, 1962; (b) the duty in question, namely, under Section 3 (1) of the Customs Tariff Act; (c) additional duty levied on raw- materials, components and ingredients under Section 3 (3) of the Customs Tariff Act; and (d) duty chargeable under Section 9A of the Customs Tariff Act, 1975. Customs Act 1962 and the Customs Tariff Act, 1975 are two separate independent statutes. Merely because the incidence of tax under Section 3 of the Customs Tariff Act, 1975 arises on the import of the articles into India it does not necessarily mean that the Customs Tariff Act cannot provide for the charging of a duty which is independent of the customs duty leviable under the Customs Act. (emphasis supplied) 37. In view of the above, imposing interest and penalty on the portion of demand pertaining to surcharge or additional duty of customs or special additional duty of customs is incorrect and without jurisdiction. 38. We have to note that in the present case, it is not disputed that petitioner has paid a sum of Rs.11.84 Crores much prior to the issuance of show cause notice. There is no determination of duty under Section 28(2) of the Customs Act, 1962 and, therefore, Section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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