Dismissal of Writ Petition on Customs Duty Exemption Challenge

The court dismissed the writ petition challenging the levy of additional customs duty on copper scrap, ruling that the exemption notification under the Excise Act does not automatically apply to customs duty. The petitioner failed to demonstrate compliance with the exemption conditions, leading to the dismissal of the petition. The court upheld that additional customs duty is distinct from countervailing duty and must be specifically extended to customs duties by a notification under the Customs Act. The respondents were permitted to encash the bank guarantee and enforce the bond, with the petitioner granted time to appeal to the Supreme Court until 5th February 1992.

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Issues Involved:
1. Levy of basic customs duty.
2. Levy of additional customs duty.
3. Applicability of exemption notification under the Excise Act to customs duty.

Detailed Analysis:

1. Levy of Basic Customs Duty:
The parties agreed that the basic customs duty was correctly assessed at the rate of 45% ad valorem, as contended by the petitioner. Therefore, this issue was resolved and did not survive in the present petition.

2. Levy of Additional Customs Duty:
The petitioner challenged the levy of additional customs duty on the grounds that copper scrap is not excisable as it is not a product of manufacture. However, the Supreme Court in Khandelwal Metal & Engineering Works & Anr. v. Union of India & Ors. (1985) established that copper scrap and waste are excisable under the Central Excises & Salt Act, 1944. Additionally, the amendment to Item No. 26A of the First Schedule to the Excise Act specifically included waste and scrap, reinforcing their excisability. Consequently, the petitioner's argument that copper scrap is not excisable, and thus not subject to additional duty, was invalid.

3. Applicability of Exemption Notification:
The core issue was whether the exemption Notification No. 35/81-C.E., dated 1st March 1981, issued under the Excise Act, applied automatically to the levy of additional duty under the Customs Act. The court clarified that the Customs Act, 1962, and the Customs Tariff Act, 1975, constitute a complete code for the levy of customs duty. Section 3 of the Customs Tariff Act mandates that any imported article is liable to additional duty equal to the excise duty for a like article if produced or manufactured in India. This additional duty is calculated using excise duty as a measure but does not change the nature of the tax.

The court emphasized that the exemption under the Excise Act does not automatically extend to additional customs duty unless there is a specific notification under Section 25 of the Customs Act. The petitioner failed to show compliance with the conditions of the exemption notification, which required proof that the waste or scrap was intended for use in the manufacture of chemicals. The petitioner had sold the goods on High Seas to M/s. Mehta Industrial Corporation, who did not file the writ petition or provide any affidavit indicating the use of the imported material for manufacturing copper oxychloride.

The court relied on the Supreme Court's judgment in Khandelwal's case and the Delhi High Court's judgment in Khandelwal Metal Engg. v. Union of India, which held that exemption notifications under the Excise Act do not apply to additional customs duty. The Bombay High Court's judgment in Ashok Traders v. Union of India further supported this view, stating that additional duty is distinct from countervailing duty and is a duty of customs.

Conclusion:
(a) Exemption notifications under the Excise Act do not automatically extend to additional duty under the Customs Act.
(b) Exemption notifications apply only to excise duties unless specifically extended to customs duties by a notification under the Customs Act.
(c) The Supreme Court's judgment in Khandelwal Metal & Engg. Works v. Union of India and the Bombay High Court's judgment in Ashok Traders v. Union of India have overruled earlier judgments that treated additional duty as countervailing duty.
(d) The petitioner did not comply with the conditions of the exemption notification, and thus, cannot claim its benefits for additional duty under the Customs Act.

Disposition:
The writ petition was dismissed, and the rule was discharged with costs. The respondents were entitled to encash the bank guarantee and enforce the bond executed by the petitioner. The court granted the petitioner time until 5th February 1992 to move the Supreme Court, during which the respondents were directed not to encash the bank guarantee or enforce the bond.

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