2015 (12) TMI 247 - SC - Customs

Supreme Court questions duty exemption for Vitamin E-50 under Notification No. 20/99, emphasizes strict interpretation

Commnr. of Customs (Import), Mumbai Versus M/s. Dilip Kumar And Ors.

The Supreme Court referred a case involving the classification of Vitamin E-50 as 'Prawn Feed' for duty exemption under Notification No. 20/99 to a larger ... Classification of Vitamin E-50 powder (Feed Grade) - whether Vitamin E-50 is classifiable under Chapter 2309.00 as “Prawn Feed” and therefore eligible for the benefit of partial exemption from duty under Notification No. 20/99 dated 28.02.1999. - Held that:- Shri Yashank Adhyaru, learned senior counsel appearing on behalf of the Revenue, relied upon a later two Judges Bench judgment of this Court in 'Collector of Central Excise, Guntur v. Surendra Cotton Oil Mills & Fert.Co. [2000 (12) TMI 103 - SUPREME COURT OF INDIA] in which the earlier three Judge Bench judgment in Sun Export Corporation's case [1997 (7) TMI 117 - SUPREME COURT OF INDIA] was referred to and distinguished. - it was held that it dealt with 'animal feed' which was large enough to include 'animal feed supplements' whereas the facts of Surendra Cotton Oil Mills's case showed that ingredients of animal feed could not be held to be included in 'animal feed'. Further, in a judgment of three Judges' Bench in Collector of Central Excise, Bangalore v. Tetragon Chemie (P) Ltd. [2001 (7) TMI 127 - SUPREME COURT OF INDIA]. In this judgment, the question that arose for consideration again relates to vitamins that were mixed with animal feed as animal feed supplements. Faced with an entry which spoke of preparation of a kind used in animal feeding including dog and cat food, this Court came to the conclusion that animal feed supplements were rightly includable in such entry as they were obviously preparations of a kind used in animal feed. We may only add that we have referred to this judgment for the sake of completeness. We feel that this judgment does not have direct relevance to the facts of this case as the entry that this Court was concerned with in that case was large enough to take within its ken animal feed supplements. This being the unsatisfactory state of the law as it stands today, we feel that this matter should be placed before Hon'ble the Chief Justice of India to constitute an appropriate Bench to resolve the doubts pointed out by us in the body of this Order. Issues Involved: Classification of Vitamin E-50 as 'Prawn Feed' under Chapter 2309.00 and eligibility for partial exemption from duty under Notification No. 20/99 dated 28.02.1999.Issue-wise Detailed Analysis:1. Classification of Vitamin E-50 as 'Prawn Feed':The primary issue in this appeal was whether Vitamin E-50 powder (Feed Grade) could be classified under Chapter 2309.00 as 'Prawn Feed,' thereby qualifying for a concessional duty rate of 5% under Notification No. 20/99. The respondent imported Vitamin E-50 and claimed this concessional rate.2. Interpretation of 'Prawn Feed' vs. 'Animal Feed':The Order-in-Original concluded that Vitamin E-50 could not be considered 'Prawn Feed' to claim the benefit under Notification No. 20/99. The judgment referenced the Supreme Court's decision in the Sun Export Case, which held that animal food supplements such as Premix of AD3 (Feed Grade) are covered by the generic term 'Animal Feed.' However, the Order-in-Original emphasized that Notification No. 20/99 specifically provided benefits to 'Prawn Feed,' a more restrictive term than 'Animal Feed.' The judgment cited the need for strict interpretation of the notification, referencing the Supreme Court's judgment in M/s. Rajasthan Spinning and Weaving Mills Limited vs. Collector, which stated, 'Liberal construction which enlarges the term and scope of notification is not permissible.'3. Appeal to Commissioner of Customs:The respondent's appeal to the Commissioner of Customs was successful, with the Commissioner relying on the Sun Export Corporation judgment to rule in favor of the assessee. The Commissioner determined that Vitamin E-50, as an animal feed supplement, should be classified under CTH 23 and eligible for exemption.4. Department's Appeal to CESTAT:The Department's appeal to the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) was dismissed. CESTAT also relied on the Sun Export Corporation judgment, upholding the respondent's claim for the concessional rate.5. Reliance on Surendra Cotton Oil Mills Judgment:The Revenue's counsel argued that the Sun Export Corporation case had been distinguished in the Surendra Cotton Oil Mills case, where the Court held that ingredients of animal feed could not be included in 'Animal Feed.' The counsel asserted that a prawn feed supplement like Vitamin E-50 would not fall within the term 'Prawn Feed,' and exemption notifications must be strictly construed.6. Assessee's Argument:The assessee's counsel contended that the Sun Export Corporation judgment, which included animal feed supplements within 'Animal Feed,' should apply. The counsel argued that prawn feed supplements should similarly be included within 'Prawn Feed,' and the CESTAT's judgment was correct.7. Supreme Court's Decision:The Supreme Court acknowledged the reliance on the Sun Export Corporation judgment, which held that animal feed supplements were included in 'Animal Feed.' However, the Court expressed doubts about the correctness of this judgment, noting that the subsequent exemption notification expanded the original notification and should not be considered retrospective. The Court emphasized that exemption notifications must be strictly construed and that the distinction between 'ingredients' and 'supplements' was not adequately addressed.8. Reference to Larger Bench:Given the unsatisfactory state of the law, the Supreme Court ordered that the matter be placed before the Chief Justice of India to constitute an appropriate Bench to resolve the doubts raised in the judgment.Conclusion:The Supreme Court highlighted the need for strict interpretation of exemption notifications and questioned the broader application of the Sun Export Corporation judgment. The matter was referred to a larger Bench to resolve the inconsistencies and provide clarity on the classification of animal feed supplements and their eligibility for duty exemptions.