1983 (3) TMI 52 - HC - Customs

Court rules exemptions under Customs Act do not apply to additional duty under Customs Tariff Act.

The court held that exemption notifications under Section 25 of the Customs Act did not apply to the additional duty imposed under Section 3 of the ... Viscose Staple Fibre Issues Involved:1. Application of exemption notifications to additional duty under Section 3 of the Customs Tariff Act, 1975.2. Competence of the respondents to levy additional duty despite exemption notifications.3. Interpretation of statutory provisions and notifications regarding customs duty and additional duty.Detailed Analysis:1. Application of Exemption Notifications to Additional Duty:The primary issue is whether the exemption notifications issued under Section 25 of the Customs Act, 1962, also apply to the additional duty levied under Section 3 of the Customs Tariff Act, 1975. The petitioners argued that all duties imposed on the act of import, including auxiliary, additional, or countervailing duties, form part of the customs duty. They relied on the Supreme Court's interpretation that customs duty is a tax on the act of importation or exportation and contended that exemptions under Section 25 should also cover additional duties. The respondents, however, maintained that additional duty is distinct and separate from basic customs duty and that the exemption notifications did not explicitly cover additional duties.2. Competence of Respondents to Levy Additional Duty:The petitioners contended that the respondents lacked the competence to levy any duty on the act of importation in excess of what is limited by the exemption notifications issued under Section 25 of the Customs Act. They argued that even if the additional levy under Section 3 of the Customs Tariff Act is considered an independent levy, the exemption under Section 25 should also apply to it. The respondents countered that the additional duty is an independent levy under the Customs Tariff Act and is distinct from the basic customs duty. They emphasized that the notifications did not indicate any exemption from additional duty.3. Interpretation of Statutory Provisions and Notifications:The judgment delved into the interpretation of the relevant statutory provisions and notifications. The court noted that Section 25 of the Customs Act allows the Central Government to exempt goods from customs duty, but this power is selective and can be specific to certain goods, duties, or the quantum of exemption. Section 3 of the Customs Tariff Act imposes an additional duty equal to the excise duty on like articles produced in India. Sub-section (6) of Section 3 states that provisions of the Customs Act, including those related to exemptions, apply to the additional duty. However, the court found that the power of exemption under Section 3(6) is independent and distinct from the power under Section 25 of the Customs Act.The court examined the wording of the notifications, which exempted specific goods from 'so much of the duty of customs leviable thereon under the said First Schedule as is in excess of...' The court concluded that the exemption was limited to the basic customs duty specified in the First Schedule of the Customs Tariff Act and did not extend to the additional duty under Section 3.Separate Judgments:The court referred to various judgments to support its interpretation. The Bombay High Court in *Kirloskar Cummins Limited v. The Union of India* held that countervailing duty is part of customs duty but emphasized that it is an independent levy. The Delhi High Court in *Modi Rubber Ltd. v. The Union of India* interpreted similar exemption notifications and concluded that they did not cover additional duties. The Madras High Court in *Sree Ayyanar Spinning and Weaving Mills Limited v. Union of India* explicitly held that additional duty is distinct from basic customs duty and that exemption notifications did not apply to additional duties.Conclusion:The court held that the exemption notifications under Section 25 of the Customs Act did not extend to the additional duty levied under Section 3 of the Customs Tariff Act. The respondents were within their rights to impose additional duty despite the exemption notifications. The court directed the petitioners to pay the arrears of additional duty in installments, with 50% to be paid within a month and the balance within another month. The original petitions were disposed of without any order as to costs.