TaxTMI 
TaxTMI 
TaxTMI 
1985 (9) TMI 189
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....on No. 431-Cus., dated 1-11-1976 as amended 2.  The Assistant Collector's order is neither a proper speaking order nor an intelligible one, but apparently rejects the contention of the respondents. The Collector (Appeals) has, however, passed a very detailed order in which he has upheld the contention of the respondents. This order has now been challenged before us. 3.  In order to appreciate the issue involved, some reference to the background would be helpful. Cloves fell under Item 9(3)(a) of the First Schedule to the Indian Tariff Act, 1934, which was in force prior to the enactment of the Customs Tariff Act, 1975. In the Indian Tariff Act, the nature of duty on cloves was described as "Preferential Revenue". The standard rate of duty was specified as "Rs. 18 per kilogram", and the Preferential rate of duty if the article was the produce or manufacture of a British Colony was specified as "Rs. 18 per kilogram less 7 ½ per cent ad valorem". This was obviously due to the fact that a preferential margin of 7 ½ per cent ad valorem had been granted on cloves imported into India from a British Colony, as part of the old scheme of Imperial Preferences. 4.&em....
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....ty(%) Tariff rate offered 1. Ex. 03.02 Dried Fish 60% 50% 2. 08.01 Dessicated coconut 100% 75% 3. Ex.15.07 Coconut oil (refined) 60% 40% 4. 17.03 Molasses 60% Nil 5. Ex. 18.01 Cocoa beans 60% 25% 6. 25.04 Natural graphite 60% 40% 7. 25.31 Fluorspar and fluorite 60% 48% 8. 33.01 Cinnamon leaf oil 100% 70% 9. Ex. 40.11 Tyres and tubes 100%/60% 80%/40% 10. Ex. 68.10 Gypsum board, plaster 100% 85% 11. 73.02 Ferro-silicon 30% 20% 12. Ex. 73.18 GI/MS Pipes (Seamless tubes) 60% 50% 13. 09.04/10 Cloves Rupees 60/- kg. less 7½ Rupees 20/- kg.less 7½ 14. 09.04/10 Nutmegs and mace 92 ½% 83% 15. 15.08/13 Glycerine 60% 55% 16. 40.01/04 Natural rubber 40% 30% 6.  In order to implement their commitment to grant tariff preferences to Bangkok Agreement countries in terms of the Bangkok Agreement, the Government of India issued Notification No. 431-Cus., dated 1-11-1976, which was amended from time to time. The notification provided that the goods specified in the Table annexed to the notification, when imported into India from Bangladesh or Republic of Korea or Sri Lanka or Laos, which h....
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....r (Appeals), after referring to the basis for the conclusion of the Assistant Collector (which however has not been explicitly stated in the Assistant Collector's order) and the arguments put forth by the respondents in their appeal before him, had held in their favour on the following grounds:- (a)  In view of the General Explanatory Note to the Schedules to the Customs Tariff Act, the abbreviation "%" can only mean so much per cent ad valorem. Thus, when the preferential rate of duty for cloves in the First Schedule is given as "Rs. 60/- per kilogram less 7 ½%" it can only mean "Rs. 60/- per kilogram less 7% of the assessable value" , (b)  The figures and sign "7 ½%" in notification No. 431-Cus., dated 1-11-1976 issued to implement the Bangkok Agreement should also be interpreted in a similar manner, in the interests of consistency ; (c)  If the intention was to make the effective rate as Rs. 20/- per kg. less 7 ½% thereof, then this would have been directly indicated by the Government as Rs. 18.50 per kg., instead of relying on an indirect method to express a determinable rate. A number of judicial pronouncements relating to the interpretat....
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.... the preferential rate of duty could have been straight way expressed as "Rs. 18.50 per kg.". There appeared to be no reason why an arithmetical calculation should be performed in order to arrive at a pre-determined figure. Shri Ohri replied that the formula might have been adopted in order to show clearly that a preferential element was involved. 14 .  It was also put to Shri Ohri that the General Explanatory Note made it very clear that the "%" sign in the Schedule to the Customs Tariff Act referred to an ad valorem percentage. The notification being subordinate and cognate legislation, the same rule in regard to the use of the "%" sign should be applicable to the notification. In this connection, his attention was drawn to the General Clauses Act, Section 20 of which provides that expressions used in a notification issued under a Central Act shall, unless there is anything repugnant in the subject or context, have the same meaning as in the main Act. 15.  Shri Ohri then argued that if the view adopted by the Collector (Appeals) was correct, then in an extreme case 7½% ad valorem could exceed Rs. 20/- per kg., in which case the preferential rate of duty would b....
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.... in the Customs Tariff Act. The General-Explanatory Note to the Act makes it clear beyond any possibility of doubt that a reference to "71/2% in the Schedule means71/2% ad valorem. The interpretation of "71/2%" in the notification as 71/2%, ad valorem would be consistent with the position under the Customs Tariff Act, the Indian Tariff Act and the scheme of Imperial Preferences. On the other hand, the interpretation of "71/2%", as 71/2%, of Rs. 20/- per kg. would have no apparent historical or economic basis. 22. Further, the National List of Concessions of India annexed to the Bangkok Agreement (vide para 5 above), lists 16 items and against each of them it shows the "present rate of duty" and "tariff rate offered". Against every entry percentages are shown. As regards all items other than cloves, it is nobody's case that they do not refer to ad valorem percentages. To interpert only the figure of "71/2%" in the entry relating to cloves as meaning not 71/2% ad valorem but 71/2% of the specific duty, would lead to an inconsistency in interpretation of the National List. 23. The clinching argument is in the entry relating to cloves in the National List. It will be seen t....
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....hich Shri Ohri had referred, we have noted Shri Kunhikrishnan's submission that the preferential duty would become zero only if the value of cloves increased to Rs. 267/- per kg., and that at the material time it was far below this, being about Rs. 120/- per kg. We agree with Shri Kunhikrishnan's submission that a mere hypothetical and unlikely situation should not lead to the rejection of what on all grounds appears to be the correct interpretation. Apart from this, we would point out that the situation of a negative duty can never arise as a result of an exemption notification, because the notification only exempts the goods "from that portion of the duty of customs............ as is in excess of the rate specified in the corresponding entry.........". 27. It is true that if there is a substantial increase in the assessable value of cloves, it could happen that the preferential duty in terms of the notification falls to a very low level or even to zero. This, however, does not necessarily mean that the situation is anomalous. As we pointed out to Shri Ohri during the hearing, trading conditions and factors, including prices of commodities, are subject to variations from tim....