Countervailing duty barred where the like Indian-made article was fully excise-exempt and statutory conditions were met.

Countervailing duty under the Customs Tariff Act could not be imposed on imported polyamide chips where the like article, if manufactured in India, was fully exempt from excise duty and the exemption conditions were satisfied. On that basis, the show cause notice seeking such duty was unsustainable. The Court also treated the writ challenge as maintainable despite its pre-show-cause-notice stage because the levy lacked statutory basis on undisputed facts and further departmental proceedings would serve no useful purpose. The notice was quashed, further proceedings on the levy were restrained, and the refund claim was left open for separate pursuit.

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Issues: (i) Whether countervailing duty could be levied on imported polyamide chips when the like article manufactured in India was exempt from excise duty under the exemption notification; (ii) whether the Court should decline relief on the ground that the petition challenged only a show cause notice at a premature stage.

Issue (i): Whether countervailing duty could be levied on imported polyamide chips when the like article manufactured in India was exempt from excise duty under the exemption notification.

Analysis: Section 3 of the Customs Tariff Act, 1975 permits additional duty only to the extent of the excise duty for the time being leviable on a like article if produced or manufactured in India. The exemption notification issued under Rule 8(1) of the Central Excise Rules, 1944 granted full exemption to polyamide chips when used in the manufacture of nylon yarn in the factory of production. Since the imported article would not attract excise duty if manufactured in India and the stated conditions of the notification were satisfied, the statutory basis for countervailing duty was absent.

Conclusion: The proposed countervailing duty was not leviable and the show cause notice on that basis was unsustainable.

Issue (ii): Whether the Court should decline relief on the ground that the petition challenged only a show cause notice at a premature stage.

Analysis: The Court treated the challenge as fit for writ intervention because the levy itself was plainly unsupportable, the dispute turned on undisputed facts, and relegating the petitioners to the departmental stage would only prolong the matter and multiply proceedings. In those circumstances, insistence on a reply to the notice would serve no useful purpose.

Conclusion: Relief was granted notwithstanding the challenge to a show cause notice.

Final Conclusion: The notice demanding countervailing duty was quashed, the respondents were restrained from proceeding with the levy for the relevant import period, and the connected security was discharged, while the claim for refund of excess customs duty was left open to be pursued separately.

Ratio Decidendi: Countervailing duty under Section 3 of the Customs Tariff Act, 1975 cannot be levied where the like article, if manufactured in India, is exempt from excise duty and the exemption conditions are satisfied.

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