TMI Blog1988 (1) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... at for the purpose of C.V. duty, the goods which are silk bolting cloth should be assessed as fabric under Entry Nos. 18 to 22 of the C.E.T. 3. The Assistant Collector held that the 3 parcels contained silk bolting cloth, though cut to size, were not ready for use on machinery and were assessable under 56.07-C.T.A. and C.V. duty was to be charged under Item Nos. 18 to 22 of the C.E.T. 4. On appeal, the Appellate Collector held the view that as the goods had been cut to specific sizes for use on machinery, the proper classification for the levy of Customs duty was under Heading 59.16/17-C.T.A. He further held that non-metallic machine clothes, cut to size and shape are to be assessed as component parts of machinery and not as fabrics and no C.V. duty was payable. 5. In the notice for review, the Government accepted the classification under Heading 59.16/17-C.T.A. but, was of the view that the goods were fabrics, though cut to size and were liable for C.V. duty under Item Nos. 18 to 22-C.E.T. 6. The Bench which heard the appeal considered the question of classifications in Paragraph 5 of their order. They were satisfied that the classification of the goods under the Central C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty for the time being in force which would be leviable on a like article if produced or manufactured in India, would be not the levy at the rate set forth in the First Schedule (that is, the statutory levy), but the reduced rate of levy brought into existence by the notification under Rule 8(1). The additional duty of customs leviable in terms of Section 3(1) of the Customs Tariff Act, would, in the result, be equal to the reduced rate of levy brought into existence by the Rule 8(1) notification and not the statutory levy at the rate set forth in the First Schedule to the Central Excises and Salt Act." 9. The Special Bench also referred to the decision of the Delhi High Court in Orient Paper Mills [1982 (10) E.L.T. 247]. Since the matter required further consideration of all its aspects by a larger Bench, this Forum has been constituted. 10. Mrs. Dolly Saxena, S.D.R. drew our attention to the decision of the Karnataka High Court [1986 (24) E.L.T. 456] cited (supra) and urged that this decision was based on the observations of the Supreme Court in the case of Khandelwal Metal Engg. Co. She submitted that in Gupta Trading Co. [1987 (27) E.L.T. 510], the Tribunal has followed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondents. 12. Shri V. Lakshmi Kumaran, drew our attention to the words "excise duty for the time being leviable on like articles if produced or manufactured in India." occurring in the explanation. He stated that the statutory rate of duty is normally kept high and by exemption notifications different rates of duty are leviable. It was argued that the explanation referred to "different rates" such different rates would arise solely on account of the exemption notifications. If it is not so interpreted, it would render the explanation nugatory and meaningless. 13. Shri Lakshmi Kumaran cited the decision of the Delhi High Court in the case of Orient Papers (1982 (10) E.L.T. 247) and pointed out the distinction between the words "Payable" and "leviable". He laid emphasis on the words "for the time-being in force" in respect of his contention. He submitted that the notification should also be taken into account. He stated that the Karnataka High Court has relied on the decision of the Supreme Court in the Khandelwal's case. He further stated that the decision of the Supreme Court did not concern with a case of an exemption notification. 14. According to Shri Lakshmi Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e duty for the time being in force which would be leviable on a like article if produced or manufactured in India, or, if a like article is not so produced or manufactured, which would be leviable on the class or description of articles to which the imported article belongs, and where such duty is leviable at different rates, the highest duty." The department endeavours to make out that the additional duty leviable under the C.T.A. is equal to the Excise duty for the time being leviable which means that the relief by way of exemptions granted under the Central Excises and Salt Act, 1944 would not be applicable to the additional duty of Customs. The respondents, on the other hand, urged that the additional duty has to be worked out taking into account the exemptions granted under Rule 8 of the Central Excises and Salt Act, 1944. 17. In order to appreciate the rival contentions, it must be mentioned that the Customs Act, 1962 was preceded by two other Enactment's namely : the Sea Customs Act, 1928 and the Land Customs Act, 1934. The Indian Tariff Act, 1934 contained the bare Schedule prescribing the rate of duty. In 1962, the Customs Act was passed as a measure of general and com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clear that it levies countervailing duty on imported article which, if produced in India, would be leviable to excise duty. The explanation makes it abundantly clear. Sub-section (1) of Section 2A is the charging section and levies the countervailing duty on imported articles. The section says it is leviable on imported articles which, if produced in India, would be leviable to excise duties." 22. Even though the lubricating oils identical to the one imported by the petitioners were not manufactured in India. Lubricating oils of two low qualities were manufactured in India and hence the additional duty of excise was leviable on the class of articles to which the imported articles belonged. 23. In 1981 (8) E.L.T. 440 (Prem Cables Pvt. Ltd. v. A.C. Bombay), the Rajasthan High Court examined the distinction between Section 2 of the Customs Act, 1962 and Section 2A of the Indian Tariff Act. It is significant to note that the excise duty was levied on aluminium wire rods initially. By the Finance Act, 1969, sub-item (aa) was added to Item 27. It was held that though Section 2A of the Tariff Act was there, the importers of the goods in question were not leviable to pay any C.V. d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise duty for the time being leviable on a like article if produced or manufactured in India" is only the measure of the duty leviable on the imported article. Section 3(1) does not require that the imported article should be such as to be capable of being produced or manufactured in India. The assumption has to be that an article imported into India can be produced or manufactured in India and upon that basis, the duty has to be determined". It must be mentioned that this observation of the Supreme Court has been relied on by the Karnataka High Court in support of the view that the exemption wanted under Central Excises Act should not be taken into account while computing the additional duty of customs. 26. In 1983 E.L.T. 564 (Dai Ichi Karkaria Pvt. Ltd., Bombay v. C.E., Bombay), the Tribunal considered the scope of the explanation to Section 3(1) of the C.T.A. the Tribunal rejected the argument that C.V. Duty was not leviable if the same or like articles were not manufactured in India. 27. In 1980 (6) E.L.T. 547 M/s. Saigal Glass, the Madras High Court considered the imposition of C.V. Duty under Section 2A of the Indian Tariff Act in respect of Acrylic Sheets manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... customs, leviable on imported articles. It is relatable to the act of importation but is equated to the excise duty for the time being leviable on a like article if produced or manufactured in India. However, it is essentially a duty of customs, and, therefore, caution is necessary in applying with reference to the duty concepts relating to a duty of excise. Thus, the procedure for levy and collection of excise duty are totally inapplicable to this additional duty and it is the procedure relating to levy of customs duty which has to be applied. The value for the purpose of calculating the additional duty (when a corresponding excise duty is also leviable) is not the value as determined under Section 4 of the Central Excises and Salt Act; in terms of Section 3(2) of the Customs Tariff Act, the additional duty is to be calculated on the assessable value of the imported articles as determined for the levy of basic duty plus the basic duty itself (and any other duty leviable in the same manner as the basic duty). It is, therefore, obvious that procedures and concepts relating to excise duty cannot be automatically applied with reference to the levy of additional (countervailing) duty. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be accepted as the expression "levy" used in a particular statute should be construed in the context in which it is used. In National Tobacco case [1978 (2) E.L.T. J 416], the Supreme Court has observed that the term "levy" appear to be wider in its scope than the term "assessment". In 1982 E.L.T. 97 (Shree Synthetic Ltd.), the Madhya Pradesh High Court has considered the scope of the term "levy" and "imposition". In Paragraph 6, it is observed as follows :- "......."Levy" is a word of very wide import. The term "imposition" is narrower and is generally used for the levy of a tax or duty by legislative provisions indicating the subject matter of the tax and the rate at which it has to be taxed. The term "levy" is, however, wide and includes imposition and all stages upto assessment.....". 33. Section 3 of the Central Excises and Salt Act imposes the duty at the rates set forth in the Schedule in respect of excisable goods produced in India. On that account it cannot be urged that the duty leviable under Section 3 of the Customs Tariff Act should not fall short of the rate set out in the First Schedule. Such an interpretation would be ignoring the exemptions envisaged unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds. The scope of Rule 8 has been considered by several decisions which we would advert to. Notifications issued under Rule 8 should be considered as made under the Act and to be given effect as if enacted in the Act itself (See 1978 (2) E.L.T. J 311) M/s. Orient Weaving Mills Pvt. Ltd. v. U.O.I. The Supreme Court has observed that Rule 8 is as much as a part of the statute as Section 37(2) Clause xvii. In 1978 (2) E.L.T. J 355 (M/s. J.K. Steels) Justice Bachawat, J. with Justice Sikri in the majority judgment have stated in Paragraph 8 as follows :- "If it is permissible to look at the notifications issued by the Central Government which have given reliefs of various kinds, they seem to proceed on the interpretation which I have given above. It will be noted that they do not exempt the article from the levy of duty; they give relief which may in a particular case be the excise duty or C.V. duty levied on the article out of which the assessed article has been manufactured." Hegde J. in a dissenting judgment has referred to Hallbury's Laws of England in respect of Subordinate Legislation. At Page 401 of Hallbury's Laws of England, it is observed "where a statute provides that subor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Excise duty, then the provisions of Rule 8 would be applicable to those goods. Section 3 of the Customs Tariff Act provides the basis for levy of additional duty of customs or countervailing duty under certain circumstances. An article shall be liable to customs duty in addition to the excise duty for the time being leviable on like article if produced or manufactured in India. In other words, if there is a notification under Rule 8, then the excise duty for the time being leviable would be circumscribed by the limitations prescribed under the notification. Since the statute provides the basis for the levy of excise duty even for calculating the duty under the Customs Tariff Act, it cannot be stated, that the notifications under Section 25 alone would govern the issue and that notifications under Rule 8 should be ignored. 41. In this context, we have to refer to the words in the explanation "where such duty is leviable at different rates the highest duty." The explanation contemplates the levy at different rates. Pausing here for a moment, if we examine the provisions of the First Schedule, there is no mention of different rates of duty for any particular commodities. Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Hegde Golay Ltd. [1986 (25) E.L.T. 47] was concerned mainly with the observation of the Supreme Court to the effect that the "measure of tax or duty cannot determine its nature or character". He urged that the decision in Khandelwal's case was concerned more with the source of power to charge duty than with the methodology of its quantification. This decision of the Karnataka High Court has been followed in the later decision reported in 1986 (24) E.L.T. 456. We also notice that in the case of B.S. Kamath Co. and Others [1986 (24) E.L.T. 456], the question inter alia raised was about the discriminatory nature of the impost under Article 14 of the Constitution namely, levy of additional duty in regard to imported articles subject to import duty on a percentage basis stipulated in Section 14 of the Customs Act and the duty not being levied with regard to articles subjected to a fixed rate of duty. In the course of the judgment dealing with the issue of benefit of Central Excises and Salt Act, the decision of the Bombay High Court in Century Enka case has also been transferred. The Division Bench of the Karnataka High Court preferred to follow a similar view emphasised by Rajes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of M/s. Khandelwal Metal Engg. Works. The Court has observed that it was not necessary to examine the question because even assuming that the additional duty of customs could be levied, the question which arose in that case was whether such a duty had been prescribed under TI 68(a). As already pointed out Khandelwal's case was not in respect of any exemption notification but was in regard to the liability of duty on imported brass scrap. Hence, there is considerable force in the contentions of Shri Lakshmi Kumaran that the decision of the Supreme Court would not amount to over-ruling the observations of the Bombay High Court in the case of Century Enka. 47. In view of the above analysis, we hold that the benefit of the Central Excise notification could be availed of with reference to the liability for payment of additional duty of Customs under Section 3(1) of the Customs Tariff Act. 48. In the result, we hold that the goods in question should be classified as "fabrics". We also hold that the benefit of Notification 24/65-C.E. would be applicable to the import. In view of the above contentions a consideration of the applicability of Notification 89/82-Cus., dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Customs and Tariff Acts and legal principles underlying the levy of duties or taxes on imports and excise duty on manufactured goods in the country. With these observations and for the reasons stated in the decision, their Lordship of Karnataka High Court expressed their inability to subscribe to the view of the Hon'ble Bombay High Court. The Karnataka High Court decision was followed by the Tribunal when it took decision in Gupta Trading Co.'s case (supra). The decision was also followed by the Tribunal in a number of other decisions. 53. As against the Karnataka High Court decision in B.S. Kamath's case which notices the Bombay High Court decision in Century Enka's case and does not agree with the same, it is seen that the Bombay High Court decisions referred to in Para 47 of brother Santhanam's order - Garware Nylon Ltd. [1986 (26) E.L.T. 688] case merely follows the Century Enka's Ltd.'s case. The same is true of the Pan Asia Commercial Enterprises Another v. Union of India and Another [1986 (25) E.L.T. 508 (Bom.)]. The two decisions do not refer to the Karnataka High Court decision in B.S. Kamath's case. As for reference to the Bombay High Court decision in Raman Kant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . "In the facts and circumstances of the case, the High Court should not have taken on to itself, the responsibility of saying that its earlier Full Bench judgment based upon a decision of this Court in the circumstances indicated above had lost its binding authority in view of two other judgments rendered in different situations and setting. We are really not in a position to appreciate the manner in which a coordinate Bench of the High Court has chosen to overrule an earlier judgment of that Court". The Karnataka High Court decision in B.S. Kamath's case was based on the Supreme Court decision in Khandelwal case. Bearing the above principles in mind and having followed the decision for the reasons and circumstances stated aforesaid, we should leave it to the parties to agitate before the Appellate forum rather than revise our views and veer round to the views of Hon'ble Bombay High Court in Century Enka's case. 57. I would, therefore, hold that no case justifying revision or modification of our views in Gupta Trading Company's case is called for. 58. [Order per : I.J. Rao, Member (T)]. - I have gone through the orders of my brothers S/Shri M. Santhanam and S.D. Jha. I am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs reported in 1984 (17) E.L.T. 331 (Tribunal). 61. In this connection it is relevant to note that in a very recent decision, the Madras High Court in the case of M.R.F. Ltd. v. Union of India and others reported in 1987 (32) E.L.T. 465, after referring to and discussing the Supreme Court's judgment in Khandelwal Metal Engg. Works v. Union of India, 1985 (20) E.L.T. 222 (S.C.), observed as follows: "If no excise duty is in force and could be levied on the goods, then there is no question of the levy of additional duty under Section 3(1) of the Act (CTA). When there is no excise duty in force and leviable on the goods, by virtue of the exemption notifications, it is not possible to bring in a fiction that the goods is amenable and liable for levy of excise duty and the exemption notification have only suspended such levy and on that basis there could be levy of additional duty under Section 3(1) of the Act. When the very measure for the additional duty is not available, it would be doing violence to the express language and implications of Section 3(1) and the explanation thereto, as construed by the Supreme Court, to work out the additional levy on the fictional basis. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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