2010 (12) TMI 16 - SC - Customs

Exemption notification read as whole: smuggled goods aren't 'imported goods', no exemption; confiscation and penalties affirmed

The SC held the exemption notification must be read as a whole and smuggled goods do not qualify as 'imported goods' for exemption. Because the HC's ... Smuggling of rough diamonds into the country clandestinely without payment of duty - benefit of exemption notification for illegal import - confiscation and penalty - application of baggage rules - Held that: - It is settled law that the notification has to be read as a whole. If any of the conditions laid down in the notification is not fulfilled, the party is not entitled to the benefit of that notification. The rule regarding exemptions is that exemptions should generally be strictly interpreted but beneficial exemptions having their purpose as encouragement or promotion of certain activities should be liberally interpreted. The notification issued by the Central Government in exercise of the powers conferred by Section 25(1) of the Act exempts the articles enumerated in the table annexed when imported into India from payment of duty under the Act. The language used in the notification is plain and unambiguous. T 'Smuggled goods' will not come within the definition of `imported goods' for the purpose of the exemption notification - In the present case, it is the finding of the Bombay High Court that the respondent-firm had imported diamonds of foreign origin without a valid licence and that finding has become final. Therefore, we agree with the learned senior counsel Sri R.P. Bhatt on this aspect. The Tribunal, in our view, erred in holding that the situation was covered by the case of Associated Cements Company [2001 (1) TMI 248 - SUPREME COURT (LB)] decided by this Court Issues Involved:1. Whether the benefit of the exemption notification has been rightly granted to the respondent-firm by the Tribunal.2. Whether the declaration made under the KVS Scheme and the subsequent payment of amount quantified under the said Scheme by the respondent-firm vis-`a-vis the release of the diamonds that were confiscated by the department.3. Whether the Baggage Rules were correctly applied by the Commissioner of Customs, while deciding the duty payable by the respondent-firm.Issue-wise Detailed Analysis:1. Exemption Notification:The primary issue revolves around whether the Tribunal correctly granted the benefit of the exemption notification to the respondent-firm. The Tribunal had allowed the appeal filed by the respondent, setting aside the original order which directed the respondent to pay a duty of Rs. 2,20,50,125/- for the release of the seized goods. The Customs Act, 1962, defines terms such as 'dutiable goods,' 'import,' and 'smuggling,' and provides for the confiscation of goods imported contrary to any prohibition under Section 111(d). The exemption notification (No.247/76-Cus dated 02.08.1976) exempts certain articles, including rough diamonds, from payment of duty. However, the Supreme Court held that smuggled goods do not fall within the definition of 'imported goods' for the purpose of the exemption notification. The goods in question were imported without a valid license, thus not qualifying for the exemption. The Court emphasized that exemptions should be strictly interpreted, especially when conditions of the notification are not fulfilled.2. KVS Scheme Declaration:The second issue concerns the declaration made under the Kar Vivad Samadhan Scheme (KVS Scheme) and the subsequent payment of the quantified amount by the respondent-firm. The respondent had earlier availed the benefit under the KVS Scheme, which directed them to pay Rs. 42,50,000/- towards redemption fine and penalty, with liberty to redeem the goods on payment of duty at the appropriate rate. Despite this, the department insisted on the payment of duty based on the original order dated 03.12.1992. The Supreme Court did not delve deeply into this issue, as the Tribunal had not addressed it due to its decision on the exemption notification. The matter was remanded to the Tribunal for reconsideration.3. Application of Baggage Rules:The third issue pertains to whether the Baggage Rules were correctly applied by the Commissioner of Customs in determining the duty payable by the respondent-firm. The Commissioner had quantified the duty payable at Rs. 2,20,50,125/- before the redemption of the confiscated diamonds. The Tribunal had not addressed this issue either, as it had allowed the appeal based on the exemption notification. The Supreme Court remanded this issue to the Tribunal for consideration, emphasizing the need for a personal hearing for both parties.Conclusion:The Supreme Court set aside the Tribunal's order, which had incorrectly extended the benefit of the exemption notification to the respondent-firm. The Court clarified that smuggled goods do not qualify as 'imported goods' for exemption purposes. The remaining issues regarding the KVS Scheme and the application of Baggage Rules were remanded to the Tribunal for further consideration. The appeal was disposed of with no order as to costs.