1992 (2) TMI 198 - AT - Customs

Importers Denied Duty Exemption for Failing Particle Size Test

FOOD CORPORATION OF INDIA Versus COLLECTOR OF CUSTOMS

The appellants imported Ammonium Nitro Phosphate seeking duty exemption under Customs Notification No. 115/73. Despite meeting other specifications, only ... Interpretation of statute Issues Involved:1. Eligibility for duty exemption under Customs Notification No. 115/73.2. Validity of test results and procedural fairness.3. Interpretation of exemption notification.Issue-wise Detailed Analysis:1. Eligibility for Duty Exemption under Customs Notification No. 115/73:The appellants imported 4150 MT of Ammonium Nitro Phosphate (ANP) and sought exemption under Customs Notification No. 115/73. The goods were provisionally assessed, and upon testing, it was found that only 67.6% of the material passed through Tyler sieve No. 16, contrary to the requirement that a minimum of 90% must pass. Consequently, the Bill of Entry was finalized without granting the exemption, and the appellants paid the differential duty of Rs. 81,86,815.16 P. The lower authorities and the Collector (Appeals) upheld this decision, noting that another consignment from the same vessel had passed the test and received the exemption, but the instant consignment did not meet the particle size specification.2. Validity of Test Results and Procedural Fairness:The appellants contended that the test results were flawed and that the notification should not be strictly construed to deny them the benefit. They argued that the size requirement was not significant enough to alter the nature of the goods or their eligibility for exemption. The Tribunal noted that the samples were drawn and sealed in the presence of the appellants' representative, who acknowledged them as representative of the entire consignment. The appellants did not challenge the test results at the appropriate time and paid the duty after learning the test results. The Tribunal found no denial of natural justice and rejected the appellants' contention that the test procedure was not followed correctly.3. Interpretation of Exemption Notification:The appellants argued for a liberal interpretation of the notification, emphasizing that it was designed for their benefit as a government concern. They cited several rulings to support their contention that exemption provisions should be interpreted to reduce the incidence of tax. However, the Tribunal concluded that the notification's language was clear and required strict compliance with the particle size specification. The Tribunal noted that the notification did not stipulate a strict condition for ineligibility if less than 90% of the material passed Sieve 16. A liberal interpretation was deemed necessary to avoid hardship to the government and consumers, especially since the goods met all other specifications.Separate Judgments:Majority Decision:The majority, including the President and Vice President, concluded that the goods did not meet the particle size specification and were therefore ineligible for the exemption. They emphasized that the notification's language was clear and required strict compliance with all specifications, including particle size. The plea to grant exemption for the portion of the consignment that passed the sieve test was also rejected, as the notification required the entire consignment to meet the specification.Dissenting Opinion:The Member (Judicial) disagreed, arguing for a liberal interpretation of the notification. He noted that the goods met all other specifications and that the particle size issue was not significant enough to deny the exemption. He emphasized the purpose of the notification to grant relief and reduce the tax burden on fertilizers imported for the agricultural sector.Conclusion:In view of the majority opinion, the appeal was dismissed, and the appellants were deemed ineligible for the duty exemption under Customs Notification No. 115/73.