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Issues: (i) Whether, for clearances made by a 100% export oriented unit into the domestic tariff area before 16.09.1999, Notification No. 2/95-CE required payment only to the extent of 50% of the basic customs duty leviable under Section 12 of the Customs Act, 1962, or whether countervailing duty and special additional duty under the Customs Tariff Act, 1975 were also to be included. (ii) Whether the penalty imposed on the assessee could survive when the duty liability itself had to be re-determined on the correct basis.
Issue (i): Whether, for clearances made by a 100% export oriented unit into the domestic tariff area before 16.09.1999, Notification No. 2/95-CE required payment only to the extent of 50% of the basic customs duty leviable under Section 12 of the Customs Act, 1962, or whether countervailing duty and special additional duty under the Customs Tariff Act, 1975 were also to be included.
Analysis: Notification No. 2/95-CE, as it stood prior to its amendment on 16.09.1999, granted exemption from duty of excise in excess of 50% of the customs duty leviable under Section 12 of the Customs Act, 1962. On that wording, the relevant benchmark was only the basic customs duty and not the additional duties levied under Section 3 or Section 3A of the Customs Tariff Act, 1975. The amendment introduced by Notification No. 38/99-CE was held to operate prospectively, and the earlier period could not be governed by the enlarged wording. The Tribunal followed the settled view already taken in the Larger Bench decisions on the same notification.
Conclusion: The assessee was liable, for the pre-16.09.1999 period, only to pay 50% of the basic customs duty under Section 12 of the Customs Act, 1962, and not duty computed by adding countervailing duty or special additional duty.
Issue (ii): Whether the penalty imposed on the assessee could survive when the duty liability itself had to be re-determined on the correct basis.
Analysis: Since the duty demand was required to be re-quantified on the basis of the unamended notification for the earlier period, the penalty imposed on the basis of the original duty confirmation could not be sustained in its existing form.
Conclusion: The penalty was set aside.
Final Conclusion: The impugned order was set aside and the matter was remitted for fresh determination of duty liability in accordance with the correct interpretation of the exemption notification, with consequential relief of refund of excess duty, if any.
Ratio Decidendi: An exemption notification must be applied according to its unamended text for the relevant period, and a later prospective amendment cannot be used to enlarge the duty burden for an earlier period.
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