TaxTMI 
TaxTMI 
2015 (12) TMI 1390
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....de the Show Cause Notice dated 3rd October, 2013 issued by Respondent No.3 herein. 3. In a nutshell, it is the case of the Petitioner that vide Notification No.96/2009-Cus. dated 11th September 2009, goods imported into India against Advanced Authorization issued in terms of paragraph 4.1.3 of the Foreign Trade Policy, are exempted from (1) whole of the Customs Duty leviable thereon; (2) whole of the Additional Duty under section 3 of the CTA, 1975; (3) Anti- Dumping Duty under section 9A of the CTA, 1975; and (4) Safeguard Duty under section 8B of the CTA, 1975 subject to the terms and conditions set out in the said Notification. However, no exemption is granted from the Transitional Product Specific Safeguard Duty leviable under section 8C which is imposed on goods imported into India specifically from the People s Republic of China. It is the case of the Petitioner that the nature of the Safeguard Duty imposed under section 8B as well as under section 8C is one and the same and there is no intelligible differentia for granting exemption from one and denying exemption from the other. It is in these circumstances that the reliefs and in the nature set out above, have been....
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....are copies of the bills of entry showing the imports of Carbon Black from the People s Republic of China against Advance Authorisation by availing the benefit of the aforesaid Notification. 7. Despite the fact that the Petitioner was allowed to import Carbon Black from the People s Republic of China without the payment of Transitional Product Specific Safeguard Duty levied under section 8C of the CTA 1975, it appears that the Revenue is now taking a stand that the exemption in terms of Notification No.96/2009-Cus. is not available for Safeguard Duty imposed under section 8C of the said Act. According to the Revenue, exemption in terms of the said Notification is available only to Basic Customs Duty, Additional Duties of Customs, Special Additional Duties of Customs, Anti-dumping Duty levied under section 9A and Safeguard Duty levied under section 8B of the CTA, 1975. In other words, it is the stand of the Revenue that the benefit of the said Notification could not be extended to the Transitional Product Specific Safeguard Duty levied under section 8C of the CTA, 1975 which was a specific provision for imports from the People s Republic of China. In view of the ....
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....he domestic producers to adjust to international competition, particularly when there is an increase in the quantity of imports into India of a particular product. Mr Sridharan submitted that the amount of Safeguard Duty that is imposed on any specified product does not exceed the amount which has been found adequate to prevent a serious injury that is sought to be negated by virtue of such imposition. In support of this, Mr Sridharan placed reliance on the Customs Tariff (Identification and Assessment of Safeguard Duty) Rules 1997. In other words, it was the submission of Mr Sridharan that Safeguard Duty is leviable to the extent of the injury margin. This, according to Mr Sridharan, was the common underlining factor in sections 8B as well as 8C of the CTA, 1975. 11. Mr Sridharan submitted that imposing duties under sections 8B, 8C and/or 9A of the CTA, 1975 ensures that the domestic industry in India is protected. However, such imposition has the effect of prejudicially affecting the user industry. For example, manufacturers of pistons in India would be the domestic industry and manufacturers of engines using those pistons would be the user industry. If Safeguard Duties are im....
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....ndian exporters a level playing field in the international market and the Indian origin goods would be competitive in today's global markets. To give effect to this Policy, the Ministry of Finance issued Notifications from time to time. Notification No.96/2009-Cus. dated 11th September, 2009 was one such Notification that was issued to implement this Policy. Mr Sridharan would submit that despite the Foreign Trade Policy taking within its sweep exemption of Safeguard Duty, the Notification issued to implement the said Policy only exempted Safeguard Duty imposed under section 8B of the CTA, 1975. Looking to the Foreign Trade Policies of the Government and the object sought to be achieved thereby, Mr Sridharan submitted that the omission of section 8C from the said Notification was clearly a mistake or an oversight by the Government. 13. In the alternative, Mr Sridharan submitted that in any event the said Notification has been issued to give effect to the Foreign Trade Policy. The Foreign Trade Policy formulated from time to time by the Government of India exempts payment of all Safeguard Duties irrespective of whether they are imposed under sections 8B or 8C of the CTA, 1975....
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....0 SCC 242 (vi) State of Bihar v. Suprabhat Steel Ltd.; (1999) 1 SCC 31 : 1999 (112) STC 258 and (vii) State of U.P. v. Renusagar Power Co. (1988) 4 SCC 59 : AIR 1988 SC 1737 15. Mr. Sridharan would therefore submit that this Court may issue a writ of mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India striking out the phrase "under section 8B" appearing in the opening portion of Notification No.96/2009-Cus. dated 11th September, 2009 and for a declaration that the Transitional Product Specific Safeguard Duty imposed under section 8C for imports from the People s Republic of China is also exempted / covered by Notification No.96/2009-Cus. dated 11th September, 2009. 16. On the other hand, Mr Jetly, learned counsel appearing on behalf of the Revenue, submitted that Carbon Black imported by the Petitioner from China are admittedly subjected to a Safeguard Duty under section 8C of the CTA, 1975. In this regard, Mr Jetly brought to our attention Notification No.4/2012-Cus.(S.G.) dated 5th October, 2012 in which it is stated that in the matter of import of Carbon Black (for rubber application) from the Pe....
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....by experts in the field, and unless it is shown that the decision of the Government is wholly arbitrary or capricious, no interference is called for in writ jurisdiction. 17. In addition thereto, Mr Jetly submitted that it is now settled law that whether to grant an exemption or not is entirely at the discretion of the Government and there is no vested right in any citizen to claim an exemption. If the Legislature in its wisdom and after taking into consideration all the relevant factors, chose to exempt a particular product from the imposition of duties whilst deciding not to grant an exemption to some other product, would not make the action of the Government arbitrary or capricious and/or violative of article 14 of the Constitution of India. On this ground also, Mr Jetly would submit that no interference is called for by us in our writ jurisdiction. 18. Mr Jetly also placed reliance on the Foreign Trade Policies referred to above and submitted that these policies never took within its sweep to exempt Safeguard Duty imposed under section 8C of the CTA, 1975. This introduction came for the first time in the Foreign Trade Policy 2015-2020. Mr Jetly was at pains to point out t....
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.... in this Writ Petition and the same ought to be dismissed. 20. With help of learned counsel, we have gone through the papers and proceedings in the Writ Petition alongwith the annexures thereto. We have also perused the relevant provisions of law and the Notifications issued from time to time by the Government of India on the subject. The short controversy that arises for our consideration is whether under Notification No.96/2009-Cus. dated 11th September 2009, there is any intelligible differentia for granting exemption from payment of Safeguard Duty imposed under section 8B whilst denying the exemption from payment of Safeguard Duty imposed under section 8C of the CTA, 1975. It is common ground before us that it has been the policy of the Government of India that as far as goods which are exported out of India are concerned, it is only the goods that are to be exported and not the taxes on the said goods. This is done in order to provide a level playing field to the goods manufactured in India for competing in the international market. This Policy has been framed because other countries across the world also export only the goods and not the taxes on the goods so exported. Thi....
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....in terms of Section 8B of the Customs Tariff Act, 1975; (c) Transitional Product Specific Safeguard Duty leviable on goods imported into India in terms of section 8C of the Customs Tariff Act, 1975. 22. Anti-dumping Duty is leviable on goods imported into India in terms of section 9A upon a conclusion of the investigation that the specified product imported into India from the specified country is being dumped into India. Anti-dumping duty is a measure resorted to for protecting the domestic industry when dumping is practiced by the country of export at a price lower than its normal value. The use of anti-dumping measure as an instrument of fair competition is permitted by the Word Trade Organisation (WTO) and is in accordance with Article VI of the General Agreement on Trade and Tariffs (GATT). Anti-dumping duty is imposed only to neutralise the effect of unfair trade practices being resorted to by the country of export. Safeguard Duty is a form of temporary relief used when imports of a particular product, as a result of tariff concessions or other WTO obligations undertaken by the importing country, increase unexpectedly to a point that they cause or threaten to caus....
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....ious injury to a domestic industry; Provided that where, on final determination, the Central Government is of the opinion that increased imports have not caused or threatened to cause serious injury to a domestic industry, it shall refund the duty so collected; Provided further that the provisional safeguard duty shall not remain in force for more than two hundred days from the date on which it was imposed. (2A) Notwithstanding anything contained in sub-section (1) and sub-section (2), a notification issued under sub-section (1) or any safeguard duty imposed under sub-section (2), unless specifically made applicable in such notification or such imposition, as the case may be, shall not apply to articles imported by a hundred per cent export-oriented undertaking or a unit in a free trade zone or in a special economic zone. Explanation - For the purposes of this section, the expressions "hundred per cent export-oriented undertaking", "free trade zone" and "special economic zone" shall have the meanings assigned to them in Explanation 2 to sub-section (1) of section 3 of Central Excise Act 1944 (1 of 1944); (3) The duty chargeable under thi....
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....s section shall, as soon as may be after it is issued, be laid before each House of Parliament." 23. On a plain reading of section 8B, it is clear that if the Central Government, after conducting such inquiry as it deems fit is satisfied that any article imported into India in such increased quantities so as to cause or threaten to cause serious injury to the domestic industry, then, it may, by Notification in the Official Gazette, impose a Safeguard Duty on that article. This Safeguard Duty is imposed by the Central Government subject to the other sub-sections of section 8B. On a plain reading of section 8B, it is clear that Safeguard Duty can be imposed on any article imported from any country. In other words, the Safeguard Duty imposed under section 8B is article specific and not country specific. 24. When China decided to become a member of the WTO, an Accession Protocol was approved by the members of the WTO marking its entry into the Organisation. Section 16 of the Chinese Accession Protocol provided for the imposition of Transitional Product Specific Safeguard Duty on specified goods of Chinese origin imported from the People s Republic of China. It was pursuant ....
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....Explanation 2 to sub-section (1) of section 3 of the Central Excise Act, 1944 (1 of 1944); (4) The duty chargeable under this section shall be in addition to any other duty imposed under this Act or under any other law for the time being in force. (5) The duty imposed under this section shall, unless revoked earlier, cease to have effect on the expiry of four years from the date of such imposition; Provided that if the Central Government is of the opinion that such article continues to be imported into India from the People's Republic of China so as to cause or threatening to cause market disruption to domestic industry, the Central Government may, notwithstanding the measures taken by the domestic industry towards adjustment to such market disruption or any threat arising thereof, if considers necessary that such duty should continue, extend the period of imposition of such safeguard duty for a period not beyond the period of ten years from the date on which the safeguard duty was first imposed; (5A) The provisions of the Customs Act, 1962 (52 of 1962) and the rules and regulations made thereunder, including those relating to the date for de....
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....der section 8C is a Transitional Product Specific Safeguard Duty on imports from the People s Republic of China. In other words, the Safeguard Duty imposed under section 8C is only with reference to articles that are imported into India from the People s Republic of China. For imposing Safeguard Duty on any article imported from any other country, the same would have to be levied under section 8B of the CTA, 1975. The other distinctive feature between section 8B and 8C is that Safeguard Duty under section 8B is imposed when any article is imported into India in such increased quantities and under such conditions so as to cause or threatening to cause serious injury to domestic industry, whereas Safeguard Duty under section 8C is imposed when any article is imported from China in such increased quantities and under such conditions so as to cause or threatening to cause a market disruption to domestic industry. This would clearly show that different parameters are applied whilst imposing Safeguard Duty under the two sections. 26. Having noted these distinctions, we shall now deal with the arguments advanced by Mr Sridharan, learned Senior Counsel appearing on behalf of....
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....ion 8B. 28. A similar provision can be found in the Export Import Policy 2002-2007 (2002 Edition) at paragraph 4.1.2 and which reads as under:- "4.1.2. Advance Licence is issued for duty free import of inputs, as defined in paragraph 4.1.1 subject to actual user condition. Such licences (other than Advance Licence for deemed exports) are exempted from payment of basic customs duty, additional customs duty, anti dumping duty and safeguard duty, if any. However, Advance Licence for deemed export shall be exempted from basic customs duty and additional customs duty only." 29. The Foreign Trade Policy 2004-2009 also exempts payment of Basic Customs Duty, Additional Customs Duty, Antidumping Duty and Safeguard Duty, if any, for import of inputs against Advance Licence as defined in paragraph 4.1.1 of the said Policy. Paragraph 4.1.4 of the Foreign Trade Policy 2004-2009 (September 2004 Edition) reads as under :- "4.1.4. Advance Licence is issued for duty free import of inputs, as defined in paragraph 4.1.1 subject to actual user condition. Such licences (other than Advance Licence for deemed exports) are exempted from payment of basic customs duty, additional cus....
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.... CTA, 1975. 33. It is pertinent to note that section 8C was brought on the statute-book with effect from 11th May 2002, and yet all the Notifications issued by the Government thereafter only exempted Safeguard Duty under section 8B and not the Transitional Product Specific Safeguard Duty under section 8C. This is clear from Notification No.93/2004-Cus. dated 10.09.2004 and Notification No.96/2009-Cus. dated 11.09.2009. This clearly goes to show the intention of the Government not to exempt Transitional Product Specific Safeguard Duty imposed under section 8C of the CTA, 1975 and we do not think that there was any mistake or omission on the part of the Government in not granting exemption from payment of Safeguard Duty imposed under section 8C. We have come to this conclusion because we are clear that even the Foreign Trade Policies upto and including the Foreign Trade Policy 2009-2014 did not contemplate exemption from payment of Transitional Product Specific Safeguard Duty under section 8C of the CTA, 1975. That exemption came for the first time in the Foreign Trade Policy 2015- 2020. In fact, keeping in line with this new Policy, the Government issued Notification No.21/2015-C....
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....tember, 2009. This representation sought for exemption of Safeguard Duty imposed under section 8C on Carbon Black imported from the People s Republic of China. Despite the aforesaid representation, the Government in its wisdom chose not to issue any corrigendum or amend the aforesaid Notification. This clearly spells out the intention of the Government in not exempting the Transitional Product Specific Safeguard Duty imposed under section 8C on import of goods from the People s Republic of China. We must mention here that it is well settled that though Legislative measures dealing with economic regulations are not outside Article 14 of the Constitution of India, it is well recognised that the State enjoys the widest latitude where measures of economic regulations are concerned. These measures for fiscal and economic regulations involve an evaluation of diverse and quite often conflicting economic criteria and it is for the State to decide what economic and social policy it should pursue and what discriminations advance those social and economic policies. It is in this context that a larger discretion is given to the Legislature in the matter of its preferences of econom....
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.... "...The court must be aware of its own remoteness and lack of familiarity with the local problems. Classification is dependent on the particular needs and specific difficulties of the community ... which are beyond the easy ken of the court, ... and which the legislature alone was competent to make. Consequently, lacking the capacity to inform itself fully about the peculiarities of a particular local situation, a court should hesitate to dub the legislative classification as irrational.... ...The question whether, under Article 14, a classification is reasonable or unreasonable must, in the ultimate analysis depend upon the judicial approach to the problem.... The more complicated society becomes, the greater the diversity of its problems and the more does legislation direct itself to the diversities.... In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not official deference to legislative judgment. The courts have only the power to destroy but not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts....
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....as gone in dreaming up rational bases for State regulation in that area may in many instances be ascribed to a healthy revulsion from the court's earlier excesses in using the Constitution to protect interests that have more than enough power to protect themselves in the legislative halls [Darbridge v. Williams, 397 US 471, 520 : 25 Law Ed 2d 491] ." 83. The observations of this Court in ITO v. K.N. Takim Roy Rymbai [(1976) 1 SCC 916 : 1976 SCC (Tax) 143 : (1976) 3 SCR 413] made in the context of taxation laws are worth recalling: (SCC p. 923) "(T)he mere fact that a tax falls more heavily on some in the same category is not by itself a ground to render the law invalid. It is only when within the range of its selection, the law operates unequally and cannot be justified on the basis of a valid classification, that there would be a violation of Article 14." " (emphasis supplied) 35. There is yet another reason why no relief and in the nature sought in this Writ Petition can be granted in favour of the Petitioner. In the present case, it is common ground before us that up until 2015 no exemption was ever granted from payment of Safeguard Duty levied ....
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....India [(1997) 3 SCC 398]." (emphasis supplied) 36. The aforesaid principle of law laid down by the Supreme Court clearly stipulates that no party has a vested right in claiming an exemption. An exemption by its very nature is a defeasible right and may be taken away in exercise of the very power under which the exemption was granted. In the present case, under Notification No.96/2009-Cus. dated 11th September 2009, admittedly no exemption was ever granted from payment of Safeguard Duty imposed under section 8C of the CTA, 1975. It is for this very reason that the Automotive Tyre Manufacturers Association made a representation for issuing a corrigendum and/or amendment to the aforesaid Notification seeking exemption from payment of Safeguard Duty imposed under section 8C. This corrigendum obviously was never issued. This being the case and applying the principles laid down by the Supreme Court in J.K. Udaipur Udyog Ltd.'s case, (2004) 7 SCC 673 we are afraid we cannot, exercising our equitable jurisdiction under Article 226 of the Constitution of India, direct the Government to grant an exemption which was even otherwise never granted under the aforesaid Notification. ....
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....hat in these circumstances, this is a fit case where we ought to exercise our equitable, extraordinary and discretionary jurisdiction under Article 226 of the Constitution of India in favour of the Petitioner. 39. Having said this, now we shall deal with the judgments relied upon by Mr Sridharan. The first judgment relied upon by Mr Sridharan was the decision of the Supreme Court in the case of Union of India v/s N.S. Rathnam and Sons.2015 (322) E.L.T. 353 (S.C.) The facts in this case would reveal that the Respondent therein was engaged in the business of ship breaking activities. It had imported a foreign vessel for the purpose of breaking it and selling it as scrap. This ship was purchased by the Respondent as a successful tenderer for a sum of Rs. 61 lakhs and at the time of import, the Collector of Customs, Cochin, assessed the customs duty and additional duty payable under section 3 of the CTA, 1975 on this ship on an ad valorem basis and customs duty in the sum of Rs. 62,16,796.55 was levied on the movable articles in the ship. The body of the ship was assessed at 30% and 50% ad valorem and additional customs duty i.e. countervailing duty at 12% ad valorem. The Respondent....
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....g of such ship was exempted from the entire excise duty. It is in these facts that the Supreme Court came to the conclusion that when an exemption is granted to a particular class of persons, then the benefit thereof is to be extended to all similarly situated persons. The Notification has to apply to the entire class and the Government cannot create sub-classification thereby excluding one sub-category, even when both the sub-categories are of the same genus. If that is done, it would be considered as violating the equality clause enshrined in Article 14 of the Constitution of India. It is in this light that the Supreme Court at paragraph 15 held thus:- "15. The judgment of this Court in Kasinka Trading's case [1994 (74) E.L.T. 782 (S.C.)], no doubt, lays down the principle that there is wide discretion available to the Government in the matter of granting, curtailing, withholding, modifying or repealing the exemptions granted by earlier notifications. It is also correct that the Government is not bound to grant exemption to anyone to which it so desires. When the duty is payable under the provisions of the act, grant of exemption from payment of the said duty to part....
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....anting, curtailing, withholding, modifying or repealing the exemption granted by earlier notifications. The Government is not bound to grant exemption to anyone who desires it. When the duty is payable under the provisions of the Act, grant of an exemption from payment of the said duty to a particular class of persons or products etc. is entirely within the discretion of the Government. This discretion rests on various factors that are to be considered by the Government as these are policy decisions. As noted by the Supreme Court itself, in the facts before it, the issue was not of granting or not granting exemption. The facts before us clearly show that despite the fact that section 8C was brought on the statute-book with effect from 11-05-2002, the Government in its wisdom and as a policy decision chose not to exempt the payment of Transitional Product Specific Safeguard Duty under section 8C. This, to our mind, was also keeping in tune with the foreign trade policies of India upto and including the Foreign Trade Policy 2009- 2014. It is only in the Foreign Trade Policy 2015-2020 that the Government decided to even exempt the Transitional Product Specific Safeguard Duty imposed u....
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....Transitional Product Specific Safeguard Duty under section 8C. As noted earlier, the two sections clearly operate in two different fields. Whilst section 8B is article specific, section 8C is article specific and country specific inasmuch as imposition of Transitional Product Specific Safeguard Duty under section 8C comes into play only with reference to a specific article that is imported from the People s Republic of China. Furthermore, as noted earlier, different parameters are applied whilst imposing Safeguard Duty under the two sections. Therefore, there is a clear distinction between the two sections and if the Government, as a policy, decides to exempt one and not the other, the same cannot be termed as an unreasonable classification requiring our interference. This being purely a policy matter decided by experts in the field, cannot be subjected to a judicial review in this fashion. 42. The next judgment relied upon by Mr Sridharan was in the case of Ram Krishna Dalmia AIR 1958 SC 538 : 1959 SCR 279 and more particularly paragraph 11 thereof. After relying upon its earlier judgment in Budhan Choudhry's case, AIR 1955 SC 191 : (1955) 1 SCR 1045 at paragraph 11 t....
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....sistently adopted and applied in subsequent cases. The decisions of this Court further establish - (a) that a law may be constitutional even though it relates to a single individual if, on account of some special circumstances or reasons applicable to him and not applicable to others, that single individual may be treated as a class by himself; (b) that there is always a presumption in favour of the constitutionality of an enactment and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles; (c) that it must be presumed that the legislature understands and correctly appreciates the need of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds; (d) that the legislature is free to recognise degrees of harm and may confine its restrictions to those cases where the need is deemed to be the clearest; (e) that in order to sustain the presumption of constitutionality the court may take into consideration matters of common knowledge, matters of common report, the history of the times and may as....
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....In fact, the aforesaid judgment clearly lays down that there is always a presumption in favour of the constitutionality of an enactment and the burden is upon the person who attacks it to show that there has been a clear transgression of the constitutional principles. In fact, the said judgment clearly lays down that in order to sustain the presumption of constitutionality the Court can take into consideration matters of common knowledge, matters of common report, the history of the times and may assume every state of facts which can be conceived as existing at the time of the legislation. Far from supporting the case of the Petitioner, we find that the principles laid down in the aforesaid decision, would support the view that we have taken earlier in this judgment. In this view of the matter, we find that the reliance placed on the aforesaid decision by Mr Sridharan is wholly misplaced. 44. The next judgment relied upon by Mr Sridharan is a decision of the Supreme Court in the case of Indian Express Newspaper (1985) 1 SCC 641 and more particularly paragraphs 77 to 83 thereof. The facts of this case would reveal that the Petitioners being publishers of daily newspapers and peri....
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....re it and having regard to Article 32 of the Constitution of India which casts an obligation on the Supreme Court to enforce the fundamental rights read with Article 142 which enables the Supreme Court to make such orders as is necessary for doing complete justice, that the Supreme Court gave the directions contained in paragraph 111. To our mind, the aforesaid decision is clearly distinguishable on facts and has no application to the factual matrix before us. In the present case, it is not as if the payment of Transitional Product Specific Safeguard Duty imposed under Section 8C was exempted under the Notification No.96/2009-Cus. dated 11st September, 2009 and the same was thereafter retracted without any justification. As stated earlier, this exemption was never granted by the Government. In fact, it is the case of the Petitioner that by not granting this exemption the Government has committed an error or mistake. A party can never have a vested right in claiming an exemption that was never granted in the first place as held by the Supreme Court in the case of J. K. Udyog. (2004) 7 SCC 763 In this view of the matter, we find that the reliance placed by Mr. Sridharan on the decisi....
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....said Policies. As mentioned earlier, it was only in the Foreign Trade Policy 2015-2020 that Transitional Product Specific Safeguard Duty imposed under section 8C of CTA, 1975 was sought to be exempted so long as the goods imported were used in the manufacture of final products that were exported out of India. Keeping in tune with this Foreign Trade Policy, a Notification was issued on 1st April, 2015 whereby apart from the Safeguard Duty imposed under section 8B, Transitional Product Specific Safeguard Duty imposed under section 8C was also exempted. It is in this light that we have come to the conclusion that there was no conflict between the Foreign Trade Policies framed by the Government of India from time to time and the corresponding Notifications issued to implement the said Policies. Therefore, we find that the decision of the Supreme Court in the case of Suprabhat Steel Ltd. (1999) 1 SCC 31 : 1999 (112) STC 258 would not carry the case of the Petitioner any further. 47. The last judgment relied upon by Mr Sridharan was in the case of Renusagar Power Co.(1988) 4 SCC 59 : AIR 1988 SC 1737 and more particularly paragraph 84 which reads as under:- "84. In this conne....