TaxTMI 
TaxTMI 
2016 (9) TMI 360
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....e contracting parties shall accord unconditionally to each other treatment no less favourable than that accorded to any third country with respect to (a) customs duties and charges of any kind imposed on or in connection with importation and exportation and (b) import regulations including quantitative restrictions. Article IV The contracting parties agree, on a reciprocal basis, to exempt from basic customs duty as well as from quantitative restrictions the import of such primary products as may be mutually agreed upon, from each other. Article V Notwithstanding the provisions of Article III and subject to such exceptions as may be made after consultation with His Majesty's Government of Nepal, the government of India agree to promote the industrial development of Nepal through the grant on the basis of non-reciprocity of specially favourable treatment to imports into India of industrial products manufactured in Nepal in respect of customs duty and quantitative restrictions normally applicable to them". 3. The protocol to the Treaty with reference to Article V stipulated many clauses. With reference to Article V clauses which are relevant are....
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....on. There is no dispute that the appellant who was importing various dental hygiene products from Nepal was entitled to avail exemption under the notification. As the factual matrix would unveil, it was availing the exemption from the customs duty under the notification. 5. In the year 1998, Section 3A was introduced in the Tariff Act. To appreciate the scheme of the Tariff Act, it is desirable to refer to Section 2 of the Tariff Act, which reads as follows:- "Section 2 : Duties specified in the Schedules to be levied. The "rates at which duties of customs shall be levied under the Customs Act, 1962 (52 of 1962), are specified in the First and Second Schedules." Schedule I to the Tariff Act incorporates the duties on the imports and Schedule II on the exports. 6. Section 3 of the Tariff Act specifies about the levy of additional duty equal to excise duty. It is as follows:- "Section 3: Levy of additional duty equal to excise duty. - (1) Any article which is imported into India shall, in addition, be liable to a duty (hereafter in this section referred to as the Additional duty) equal to the excise duty for the time being leviable on a like article if prod....
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....pecial additional duty as indicated in column (4) of the Table below in respect of goods, when imported into India, specified in corresponding entry in column (3) of the said Table and falling within the Chapter, Heading No. or Sub-Heading No. of the First Schedule to the Customs Tariff Act as are specified in the corresponding entry in column (2) of the said table: Provided that in respect of the goods specified against S. Nos. 24, 25, 26, 31 and 32 of the said Table, "Nil" rate shall be subject to the conditions, if any, subject to which the goods are exempt either partially or wholly from the duty of customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act." 9. After the rates were prescribed, the appellant was asked to pay Special Additional Duty (SAD) and it paid under protest. Thereafter, Notification No. 124/2000-Customs was issued on 29.09.2000 amending the Notification No. 37/96-Customs dated 23rd July, 1996. For proper appreciation of the controversy, it is appropriate to reproduce the contents of the said notification:- "Notification No. 124/2000-Customs In exercise of powers conferred sub-section (4) of Se....
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....viability of SAD Notification No. 124/2000 was issued and hence, it was retrospective in nature. 12. On behalf of the revenue, resisting the stand put forth by the assessee, it was submitted that prior to 29.09.2000 SAD was correctly levied in respect of the imports and there is no justification in treating the notification in question as retrospective, more so, when the notification has clearly stated about scope of its applicability. 13. The Member (Judicial) analysing the terms of the Treaty and the need for issuance of notification opined that:- "... If the terms of the Treaty by themselves were to be treated as law, then there was no need for the Government of India to even issue the notification exempting imports from the Basic Customs Duty. As rightly observed by the original adjudicating authority that undoubtedly, the Treaty provides the framework for the bilateral trade between the two countries; but the actual import and export is governed by the Customs and Central Excise Statutes and the provisions of the Treaty do not, ipso facto, translate into import and export procedures within India until a corresponding notification in Customs is issued to bring th....
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....placed reliance on UOI v. Yokasawa Blue Smart 2001 (129) ELT 598 (KAR) and Nestle India Ltd. v. State of Punjab 2 1999 (13) PHT 132 (P&H). 18. After so stating, the learned Member (Technical) opined that the matter should be referred to a larger Bench for a decision whether amendment in such cases could be read retrospectively or not. As there was difference of opinion, the matter was placed before the third Member who was a Member (Technical). He referred to the point of difference which is to the following effect:- "Whether the appeal is required to be rejected as held by Member (Judicial) or the matter needs to be referred to the Larger Bench as held by Member (Technical)." 19. The third Member referred to the views of the Member (Judicial) and Member (Technical) in extenso; noted the submissions advanced by the learned counsel for the parties; scanned the various clauses of the Treaty; analysed the language employed in the notification dated 29.09.2000; distinguished the authorities relied upon by the Member (Technical); declined to accept the submission pertaining to doctrine of promissory estoppel that was canvassed before him and eventually, came to hold that ....
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....a will provide access to the Indian market free of customs duties and the quantitative restrictions for all articles manufactured in Nepal. 2. (i) Import of articles in accordance with the para "I" above shall be allowed by the Indian customs authorities on the basis of a certificate of Origin to be issued by the agency designated by His Majesty's Government of Nepal in the format prescribed at Annexure 'B' for each consignment of articles exported from Nepal to India. However, this facility shall not be available for the articles listed at Annexure 'C'. (ii) In the event of the above facility leading to a surge in the import generally or in the import of any particular article, the two Governments shall enter into consultation with a view to taking appropriate measure. (iii) In the case of other articles made in Nepal which do not fulfill the conditions required by the Certificate of Origin prescribed at Annexure 'B' including those Articles listed at Annexure 'C' for the purpose of Preferential treatment into India, the Government of India will provide normal access to the Indian market consistent with its MFN treatment. 3. On the basis of a Ce....
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.... to be suitable. 7. For the purpose of calculation of import duties customs valuation procedures, as prescribed under the prevailing custom law, will be followed." 24. No doubt paragraph 1 states that the Government of India would provide access to Indian market free from customs duties and quantitative restrictions of all articles manufactured in Nepal, but this would be subject to other paragraphs, for paragraph 2 would indicate that the access to Indian market free from customs duty was subject to conditionalities and also restrictions. Paragraph 2 stipulates, the requirement of certificate of origin which should be as per the proforma prescribed by Annexure B and would not be applicable to Articles listed in Annexure - C for which normal access consistent with most favourable nations' Treaty would be provided. Clause 3 deals with products manufactured by small-scale units in Nepal for which certificate would be issued by the Government of Nepal or agency designated by them. For the said imported products, "reliefs" in the levy of excise duty applicable to products manufactured by similar small-scale industrial units in India, while fulfilled by the Nepalese small sc....
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....nal customs duty, special additional customs duty would be payable on the goods imported into India, having regard to the maximum sales-tax, local tax or other charges for the time being leviable on the like article on the sale and purchase in India. The proviso stipulated that until such rates were specified by the Central Government, special additional duty shall be leviable and collected @ 8% on the imported product. In terms of said proviso, the Notification No.18/2000-Customs was issued on 1st March, 2000 and the same has been quoted above. 28. It is vivid that the protocol to the Treaty of Trade had made a distinction between the "basic customs duty" and "additional customs duty". The basic customs duty was granted exemption. However, in respect of "additional duty" provisions of paragraph 3 or 4 were applicable. But, it is significant that the said protocol did not deal with special additional duty. Thus, per se and ex facie it is not possible to accept the position that "special additional duty" was itself exempted under the protocol. Paragraph 1 would not cover the "special additional duty", which was specific and limited as was clear from the exemption notification dat....
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....uty can be levied without the other. Decision in Associated Cement Companies Limited v. Commissioner 2001 (128) ELT 21 SC, was distinguished. The ratio and finding in Associated Cement Companies Limited (supra) has to be read in the context of the issue involved in the said case as drawing, designs of those goods were not chargeable to duty and were designated as free under the Tariff Act. In Hyderabad Industries Limited v. Union of India 1999 (108) ELT 321 SC, the difference in import under the Customs Act and the Tariff Act was noticed with reference to duty of customs chargeable under Section 12 of the Customs Act, the additional duty chargeable under Section 3(1) of the Tariff Act and additional levied on raw-materials, components and ingredients under Section 3(3) of the Tariff Act. It was elucidated that the two Acts are independent statutes and merely because instance of tax under Section 3 of the Tariff Act arises on import of articles in India, it does not mean that the Tariff Act cannot provide for charging of duty which was/is independent of customs duty leviable under the Customs Act. The Patna High Court has appropriately referred and relied on the view taken by the Bo....