Judgment:
1. This appeal is being considered by the Bench consisting of 5 members, under the following circumstances :- 2. The appeal was originally heard by S/Shri G. Sankaran, Sr.
Vice-President and V.T. Raghavachari, Member (J) The entire matter arose out of a notice dated 19.12.1981 issued by the Central Government; under Section 131(3) of the Customs Act, since the Government was of the view that the order of the Appellate Collector, Customs, Madras, dated 1:7.1981 was not proper, legal and correct. The Central Government observed that the Appellate Collector was in error when he held that no C.V. duty was payable by the respondents on the three imports effected by them by post parcel. The Central Government has stated that for the purpose of C.V. duty, the goods which are silk bolting cloth should be assessed as fabric under Entry Nos. 18 to 22 of the C.E.T.3. The Assistant Collector held that the 3 parcels contained silk bolting cloth, though cut to size, were not ready for use on machinery and were assessable under 56.07-C.T.A. and C.V. duty was to be charged under Item Nos. 18 to 22 of the C.E.T.4. On appeal, the Appellate Collector held the view that as the goods had been cut to specific sizes for use on machinery, the proper classification for the levy of Customs duty was under Heading 59.16/ 17-C.T.A. He further held that non-metallic machine clothes, cut to size and shape are to be assessed as component parts of machinery and not as fabrics and no C.V. duty was payable.
5. In the notice for review, the Government accepted the classification under Heading 59.16/17-C.T.A. but, was of the view that the goods were fabrics, though cut to size and were liable for C.V. duty under Item Nos. 18 to 22-C.E.T.6. The Bench which heard the appeal considered the question of classifications in paragraph 5 of their order. They were satisfied that the classification of the goods under the Central Customs Tariff Schedule (CET) should be as fabrics though the fabrics may have been cut to size and shape. In regard to this classification, no arguments were advanced before us by Shri V. Lakshmi Kumaran, Ld. Counsel for the respondents. We are in complete agreement with the reasoning set out in paragraph 5 of the order dated 2.6.1987.
7. In para 6 of their order, the Bench has considered that the goods would be liable for payment of C.V. duty in respect of that part of the consignment under invoice dated 11.7.1980 which consisted of nylon bolting cloth. Under Notification 24/65 exemption would be available in the case of silk fabrics only. No arguments were advanced in regard to the findings in paragraph 6 with which we are in complete agreement.
8. The real controversy is in respect of the accord of benefit of exemption under Notification 24/65. According to the department, the benefit would be available only with reference to Central Excise duty payable under the C.E.T. if the goods had been manufactured in India and that the benefit of the Notification could not be availed with reference to liability for payment of additional duty of customs under Section No. 3(1) of the Customs Tariff Act. The Tribunal in the case of Gupta Trading Co. [1987 (27) E.L.T. 510] followed the decision of the Karnataka High Court in the case of B.S. Kamath and Ors. [1986 (24) E.L.T. 456] who held, that in view of the observations of the Supreme Court in the case of Khandelwal Metal & Engg. Co. [1985 (20) E.L.T.222] the exemption from payment of Central Excise duty under a Notification issued under the Central Excises and Salt Act, 1944, will not apply with reference to liability for payment of additional duty of customs under Section 3(1) of the Customs Tariff Act. The Bench also noted the decision of the Bombay High Court in the case of Century Enka Ltd. (1982 ELT 64) which held that the exemption from payment of Central Excise duty under a Notification issued under the Central Excises and Salt Act would also govern the quantification of the C.V.duty. This decision of the Bombay High Court was followed in a later case of the same High Court reported in 1986 (25) E.L.T. 508 (P.A.V.Asia Commercial). In paragraph 15, it is observed as follows :- "In a case whether the statutory levy has been reduced by a Notification under Central Excise Rules 8(1), "the excise duty for the time being in force which would be leviable on a like article if produced or manufactured in India", would be not the levy at the rate set forth in the First Schedule (that is, the statutory levy), but the reduced rate of levy brought into existence by the notification under Rule 8(1). The additional duty of customs leviable in terms of Section 3(1) of the Customs Tariff Act, would, in the result, be' equal to the reduced rate of levy brought into existence by the Rule .8(1) notification and not the statutory levy at the rate set forth in the First Schedule to the Central Excises and Salt Act." 9. The Special Bench also referred to the decision of the Delhi High Court in Orient Paper Mills (1982 E.L.T. 247). Since the matter required further consideration of all its aspects by a larger Bench, this Forum has been constituted.
10. Mrs. Dolly Saxena, SDR drew our attention to the decision of the Karnataka High Court [1986 (24) E.L.T. 456] cited (supra) and urged that this decision was based on the observations of the Supreme Court in the case of Khandelwal Metal & Engg. Co. She submitted that in Gupta Trading Co. [1987 (27) E.L.T. 51.0], the Tribunal has followed the decision of Karnataka High Court which has referred to the decision .
of the Bombay High Court in Century Enka Ltd. and have given cogent reasons for differing from that view. She stated that the Supreme Court has held in Khandelwal's case that the duty under Section 3(1) of the CTA is an additional duty of customs and not C.V. duty. She contended that once this basis is established, unless a notification under Section 25(1) of the Customs Act, is issued, the benefit of exemption under the Central Excise Act would not be applicable to the imported goods. The duty levied and collected under Section 3 of the Central Excise in regard to indigenous goods could be exempted under notification issued under Rule 8(1) of the Central Excises and Salt Act, 1944. But such an exemption cannot and should not be allowed to influence the levy of the additional duty of customs leviable under Section 3(1) of the C.T.A. She urged that the issue has to be decided in the light of the decision of the Karnataka High Court rather than with reference to the decision of the Bombay High Court in view of the clear observations as to the nature of the duty by the Supreme Court in the Khandelwal's case.
11. Shri V. Lakshmi Kumaran, Ld. Counsel for the respondents raised the following points :- (i) The levy under Section 3(1) of the C.T.A., with reference to additional duty prescribes the measure to the charging section.
(ii) For finding out the measure, the first step is to calculate the Excise duty leviable for like goods produced or manufactured in India, (iii) For determination of the excise duty leviable on like goods, the exemption notification issued under Rule 8(1) has to be taken into account.
(iv) The net excise duty leviable and so calculated is the measure under Section 3(1) of the C.T.A. (v) It is not correct or proper to calculate the measure of the C.V. duty by taking into account the statutory duty leviable under the First Schedule and apply the Central Excise notification to reduce the quantum of the C.V. duty. In this way, the application of Rule 8(1) of Notification to the Customs duty does not arise.
(vi) A comparison of Section 3(1) of the C.T.A. with the proviso to Section 3 of the Central Excises and Salt Act would indicate the position.
(vii) In any view, the Notification 89/82-Custorns, dated 24.3..1982 specifically provides for computing the additional duty in the way claimed by the repondents.
12. Shri V. Lakshmi Kumaran, drew our attention to the words "excise duty for the time being leviable on like articles if produced or manufactured in India." occurring in the explanation. He stated that the statutory rate of duty is normally kept high and by exemption notifications different rates of duty are leviable. It was argued that the explanation referred to "different rates" such different rates would arise solely on account of the exemption notifications. If it is not so interpreted, it would render the explanation nugatory and meaningless.
13. Shri Lakshmi Kumaran cited the decision of the Delhi High Court in the case of Orient Papers (1982 ELT 247) and pointed out the distinction between the words "Payable" and "leviable". He laid emphasis on the words "for the time-being in force" in respect of his contention. He submitted that the notification should also be taken into account. He stated that the Karnataka High Court has relied on the decision of the Supreme Court in the Khandelwal's case. He further stated that the decision of the Supreme Court did not concern with a case of an exemption notification.
14. According to Shri Lakshrni Kumaran, the decision of the Bombay High Court did not depend solely on the fact whether the levy under Section 3(1) of the C.T.A. was an additional duty of customs or C.V. duty. He cited 1986 (2.5) E.L.T. 636 (Bom.) Dhort Compact Pvt. Ltd. v. U.O.I, and also the decision of the same High Court in the case of Pan Asia Commercial [1986 (25) E.L.T. 508] which have approved the decision in Century Enka.
15. According to the Ld. Counsel for the respondents, the decision of the Karnataka High Court is not applicable because the Bombay High Court in a later decision [1987 (27) E.L.T. 617]. Raman Kanti Lal Bhandari v. U.O.I, has referred to the Supreme Court's decision in Khandelwal's case and held even assuming that the additional duty of customs can be leviable the question would arise whether such a duty had been prescribed under T.I. 68(a). Once it was found that such a duty is not prescribed under T.I. 68(a) alchohol all sorts is excluded from payment of duty, then the question as to whether such a duty could be levied or not did not survive for consideration. Shri Lakshmi Kumaran urged that certain arguments relating to the issue have not been placed before the Karnataka High Court. The nature and scope of additional duty for quantification in regard to Entry 51 of the State List has been decided in A.I.R. 1966 (S.C.) 1686 (Kalyani Stores v.State of Orissa) and the judgment of the Karnataka High Court is inconsistent with that decision.
16. From the above narration, it is clear that the surviving controversy is in respect of interpretation of the words "excisable duty for the time being leviable on a like article if produced or manufactured in India". Section 3(1) of the C.T.A. 1975 (Act 51 of 1975) reads as follows :- "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 leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so leviable shall be calculated at that percentage of the value of the imported article.
Explanation : In this section, the expression "the excise duty for the time being leviable on a like article if produced or manufactured in India" means the excise duty for the time being in force which would be leviable on a like article if produced or manufactured in India, or, if a like article is not so produced or manufactured, which would be leviable on the class or description of articles to which the imported article belongs, and where such duty is leviable at different rates, the highest duty." The department endeavours to make out that the additional duty leviable under the C.T.A. is equal to the Excise duty for the time being leviable which means that the relief by way of exemptions granted under the Central Excises and Salt Act, 1944 would not be applicable to the additional duty of Customs. The respondents, on the other hand, urged that: the additional duty has to be worked out taking into account the exemptions granted under Rule 8 of the Central Excises and Salt Act, 1944.
17. In order to appreciate the rival contentions, it must be mentioned that the Customs Act, 1962 was preceded by two other Enactments namely : the Sea Customs Act, 1928 and the Land Customs Act, 1934. The Indian Tariff Act, 1934 contained the bare Schedule prescribing the rate of duty. In 1962, the Customs Act was passed as a measure of general and comprehensive revisions of the Sea Customs Act. The Indian Tariff Act, 1934 was replaced by the Customs Tariff Act, 1975. It must be mentioned that Section 2A of the Indian Tariff Act also referred to C.V. Duty- In the Customs Tariff Act, 1975, the duty was referred to as "additional duty".
18. The term "C.V. Duty" has not been defined in the Constitution.
However, Entry 51 of List-II of the Seventh Schedule to the Constitution provides for levy of duty of excise on goods manufactured in the State and also for levy of countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India." While considering the scope of C.V. Duty, the Supreme Court in Kalyani Stores v. State of Orissa in 1966 S.C. 1686 adopted the etymological sense of C.V. Duty namely, Counter Balance, to avail against with equal force or virtue, to compensate for something or serve as an equivalent of or substitute for. This meaning was adopted by the Supreme Court in 1977 S.C. 1459 Mc.Dowell v. Commissioner of Commercial Taxes Officer.
19. The nature and scope of the duty under Section 3(0 of the Customs Tariff Act has been considered in several decisions. In 1981 (&) E.L.T.134 (Neomer Ltd. v. Govt. of India), the Gujarat High Court while interpreting Section 2A of the Indian Tariff Act, l934 held as follows: "...The purpose of Section 2A is to levy ' an additional duty over and above the customs duty envisioned by Section 2 as per the Schedule and the said additional duty has been labelled as "countervailing duty". It is levied on any article which is imported into India, and the rate or measure of the duty has been indicated in Section 2A. The measure is : "at the rate equal to the excise duty for the time being leviable on a like article if produced or manufactured in India." 20. The Gujarat High Court repelled the contention that C.V. Duty could be levied and provided only if the article in question was manufactured or produced in India. The Court observed that it was only for the purpose of finding out the measure of duty or the rates of duty that a reference has to be made to the relevant entry or Item of the Excise Act.
21. In 1981 E.L.T. 182 (H.J. Leach & Co. v. U.O.I. & Other), the Delhi High Court considered the scope of Section 2A. In para 3, it is observed as follows :- "From a plain reading of the provisions of "Section 2A it is clear that it levies countervailing duty on imported article which, if produced in India, would be leviable to excise duty. The explanation makes it abundantly clear. Sub-section (1) of Section 2A is the charging section and levies the countervailing duty on imported articles. The section says it is leviable on imported articles which, if produced in India, would be leviable to excise duties." 22. Even though the lubricating oils identical to the one imported by the petitioners were not manufactured in India. Lubricating oils of two low qualities were manufactured in India and hence the additional duty of excise was leviable on the class of articles to which the imported articles belonged.
23. In 1981 (8) E.L.T. 440 (Prem Cables Pvt. Ltd. v. A.C. Bombay), the Rajasthan High Court examined the distinction between Section 2 of the Customs Act, 1962 and Section 2A of the Indian Tariff Act. It is significant to note that the excise duty was levied on aluminium wire rods initially. By the Finance Act, 1969, sub-item (aa) was added to Item 27. It was held that though Section 2A of the Tariff Act was there, the importers of the goods in question were not leviable to pay any C.V. duty because there was no excise duty leviable on the goods of that kind manufactured or produced in India under the Central Excise Act. In 1982 (10) E.L.T. 292 (Khandelwal Metal and Engg. v. U.O.I. and Ors.), the Delhi High Court considered the leviability of C.V. Duty under Section 3 of the Customs Tariff Act, 1975 in respect of imported Brass Scrap. The Delhi High Court observed in paragraph 18 that the first part of the Section 3 was in a sense the charging Section for levy of additional duty. No separate schedule of rates for additional duty was provided but a different method was adopted namely, "to provide by one sweep that additional duty will be equal to the excise duty for the time being leviable on a like article if produced or manufactured in India". The Court observed as follows :- "...There is definite purpose in so providing because the object and reason of Section 3 of Tariff Act is to provide for the levy of additional duty on the imported article to counterbalance the excise duty leviable on the like article made indigenously or on the indigenous raw materials, components or ingredients which go into the making of like indigenous articles...." 24. Since waste and scrap was certainly excisable item under the First Schedule, it was held that C.V. Duty was also leviable.
25. It must be mentioned that this decision has been confirmed by the Supreme Court in 1985 (20) E.L.T. 222 (cited supra). In paragraph 4, the Supreme Court held as follows :- "...The levy specified in Section 3(1) of the Tariff Act is a supplementary levy, in enhancement of the levy charged by Section 12 of the Customs Act and with a different base constituting the measure of the impost. In other words, the scheme embodied in Section 12 is amplified by what is provided in Section 3(1). The Customs duty charged under Section 12 is extended by an additional duty confined to imported articles in the measure set forth in Section 3(1). Thus the additional duty which is meant in Section 3(1) of the Tariff Act is not in the nature of countervailing duty...." A contention was raised before the Supreme Court that the brass scrap imported by the respondents therein was not produced or manufactured in India. The Supreme Court held that there was no substance in the arguments. We find the following observations :- "...Under Section 3(1) of the Tariff Act, "the excise duty for the time being leviable on a like article if produced or manufactured in India" is only the measure of the duty leviable on the imported article. Section 3(1) does not require that the imported article should be such as to be capable of being produced or manufactured in India. The assumption has to be that an article imported into India can be produced or manufactured in India and upon that basis, the duty has to be determined".
It must be mentioned that this observation of the Supreme Court has been relied on by the Karnataka High Court in support of the view that the exemption wanted under Central Excises Act should not be taken into account while computing the additional duty of customs.
26. In 1983 E.L.T. 564 (Dai Ichi Karkaria Pvt. Ltd., Bombay v. C.E., Bombay), the Tribunal considered the scope of the explanation to Section 3(1) of the C.T.A. the Tribunal rejected the argument that C.V.Duty was not leviable if the same or like articles were not manufactured in India.
27- In 1980 (6) E.L.T. 547 M/s. Saigal Glass, the Madras High Court considered the imposition of C.V. Duty under Section 2A of the Indian Tariff Act in respect of Acrylic Sheets manufactured from Methyl Metha-crylate Monamer. Under Notification 38/73, dated 1.3.1973, the Acrylic Sheets were exempt from Central Excise duty only when they were produced out of three different sources mentioned in the notification.
In paragraph 2, after adverting to the relevant provision under the Indian Tariff Act, the High Court has observed as follows :- "It is not necessary to extract the other clauses in the section, as the levy was not in pursuance of any other Central Government notification. It may be seen from this provision that in order to attract the liability for payment of countervailing duty, an excise duty shall be leviable on a like article, if produced or manufactured in India. If no excise duty was payable on a like article if produced or manufactured in India, no countervailing duty also would be payable. The Notification, which I have already referred to, has exempted acrylic sheets if manufactured in India from the whole of the duty of excise leviable thereon, subject only to the condition that they are manufactured out of the material referred to in the condition. It was the case of the petitioner that acrylic sheets imported by it were made from Methyl Methacrylate Monomer. Therefore, if the goods of the description which the petitioner had imported were produced or manufactured in India, it could not have been subjected to any levy of excise duty by reason of the notification and therefore no countervailing duty was also leviable...." This decision considered the scope of the exemption granted under the Central Excise Act vis-a-vis, the computing of the C.V. Duty.
28. In 1984 ELT 368 (Tribunal) (Fair Deal Corporation v. C.C. Bombay), the Tribunal extended the benefit of Central Excise Notification 55/75, dated 1.3.1975 as a Drug intermediate to an imported chemical.(Chokshi Tube Ltd. Bombay v. C.C.E., Bombay), the Tribunal observed that additional duty (C.V. Duty) and excise duty-are not synonymous. It was, therefore, held that the appellants were not eligible for exemption under exemption notification 69/73-CE, dated 1.3.1973.
30. In 1983 E.L.T. 993 (Indian Airlines, New Delhi v. C.C. Delhi), the Tribunal had to decide on the levy of additional duty on retreaded tyres. In paragraph 7, we find the following observations :- "It will be seen that the additional duty is a duty of customs, leviable on imported articles. It is relatable to the act of importation but is equated to the excise duty for the time being leviable on a like article if produced or manufactured in India.
However, it is essentially a duty of customs, and, therefore, caution is necessary in applying with reference to the duty concepts relating to a duty of excise. Thus, the procedure for levy and collection of excise duty are totally inapplicable to this additional duty and it is the procedure relating to levy of customs duty which has to be applied. The value for the purpose of calculating the additional duty (when a corresponding excise duty is also leviable) is not the value as determined under Section 4 of the Central Excises and Salt Act; in terms of Section 3(2) of the Customs Tariff Act, the additional duty is to be calculated on the assessable value of the imported articles as determined for the levy of basic duty plus the basic duty itself (and any, other duty leviable in the same manner as the basic duty). It is, therefore, obvious that procedures and concepts relating to excise duty cannot be automatically applied with reference to the levy of additional (countervailing) duty." 31. The above decisions indicate the nature and scope of the levy under Section 3(1). After the decision of the Supreme Court in the Khan-delwal's case such duty is not countervailing duty but is additional duty of customs. However, the measure for calculating the levy, is the excise duty for the time being leviable on like articles if produced or manufactured in India. Having regard to the nature and scope of the duty involved and in view of the ratio of the decisions set out above, the measure of a duty cannot be restricted to the mere rate set out in the First Schedule but should include within its ambit, even the exemption notifications issued under the Central Excise law.
The decision of the Supreme Court in the case of Kalyani Stores reinforces the view taken by us. We must also say that explanation to Section 3(1) makes, the position clear and the words "Excise duty for the time being in force" lends support to the contentions of the respondents. If the expression, "the Excise Duty for the time being leviable", set out only the measure and is merely the yard-stick, one would expect the words "at the rate" after the words "Excise Duty" and before the words "for the time being". In the absence of those words, by necessary implication, we can conclude that the expression refers to the particular levy in the first Schedule of the Central Excises and Salt Act circumscribed by the notifications issued by the Executive Government from time to time providing for the exemption. Such a construction alone would fit in with the overall scheme.
32. Emphasis was laid on the words "leviable" occurring in the section and it was urged by the department that the term would not connote the expression "payable". The scope of the term "levy" has to be adverted to in order to find out whether the contention could be approved.
Stroud in his Judicial Dictionary (P. 1528) described "levy" as follows :- "Levy" signifies to collect or exact as to levy money; sometimes to set by anything has to levy a mill".
In the Law. Dictionary by John Burke, "levy" is stated as "to raise money compulsorily" for example by means of a distress or by taxes. The expression levy is a common expression in taxing and fiscal statutes and has various shades of meaning. It depends upon the different contexts in which the terms is used. Hence the distinction sought to be made by the Revenue cannot be accepted as the expression "levy" used in a particular statute should be construed in the context in which it is used. In National Tobacco case [1978 (2) E.L.T. .J 16], the Supreme Court has observed that the term "levy" appear to be wider in its scope than the term "assessment". In 1982 E.L.T. 97 (Shree Synthetic Ltd.), the Madhya Pradesh High Court has considered the scope of the term "levy" and "imposition". In paragraph 6, it is observed as follows :- "..."Levy" is a word of very wide import. The term "imposition" is narrower and is generally used for the levy of a tax or duty by legislative provisions indicating the subject matter of the tax and the rate at which it has to be taxed. The term "levy" is, however, wide and includes imposition and all stages upto assessment...".
33. Section 3 of the Central Excises and Salt Act imposes the duty at the rates set forth in the Schedule in respect of excisable goods produced in India. On that account it cannot be urged that the duty leviable under Section 3 of the Customs Tariff Act should not fall short of the rate set out in the First Schedule. Such an interpretation would be ignoring the exemptions envisaged under the same Act.
34. Lord Dunedin in Whiting v. Commissioner of Inland Revenue (1926 A.C.37) stated as follows :- "Now there are three stages in the imposition of tax; there is the declaration of liability i.e. part of statute which determines what persons, in respect of what property are liable. Next there is the assessment. Liability does not depend on assessment. That ex-hypothesis has already been fixed. But assessment particularises the exact sum which a person liable has to pay. Lastly, come the methods of recovery if the person taxed does not voluntarily pay".
The term "levy is frequently used to conclude both the first two stages involved in the process of taxation namely, the levy properly so called and the determination of amount of tax." 35. The above passage denotes that the meaning of expression "levy" cannot be restricted to the imposition of the tax provided under the statute, but includes the processes of taxation namely, the determination of the amount of tax, which in turn depended on the exemptions applicable to a particular levy.
36. Article 265 of the Constitution refers to the/ words "levy" and "collection" in a comprehensive manner and are intended to include and envelope the entire process of taxation commencing from the Taxing Statute to the taking away of the money from the pockets of the citizen. See 1959 (10) S.T.C. 345 (Rayala Seema Construction). We are aware that the Tribunal in order No. 619/86 (Radhika India Pvt. Ltd.) has made a distinction between the "leviable" and "payable". But in the light of the above discussion, we are of the view that the term "leviable" should be construed in a comprehensive manner. We do not accept the contention of the Revenue that the duty leviable would connote only the rate mentioned in the First Schedule, dehors, the exemption arising out of the provisions in the statute.
37. We must also mention that the Central Excises and Salt Act provides under Section 37 the power to the Central Government to make rules to carry into effect the purpose of the Act. Clause (xvii) envisages the power of exemption on goods from the whole or part of the duty imposed by the Act. Rule 8 of the Central Excises and Salt Act authorises the Central Government to exempt from time to time by notifications in the Official Gazette any excisable goods from the whole or any part of the duty leviable on such goods. The scope of Rule 8 has been considered by several decisions which we would advert to. Notifications issued under Rule 8 should be considered as made under the Act and to be given effect as if enacted in the Act itself (See 1878 E.L.T. J 311). Orient Weaving Mills Pvt. Ltd. v. U.O.I. The Supreme Court has observed that Rule 8 is asmuch as a part of the statute as Section 37(2) Clause xvii.
In 1978 E.L.T. J 355 (M/s. J.K. Steels) Justice Bachawat, J. with Justice Sikri in the majority judgment have stated in paragraph 8 as follows :- "If it is permissible to look at the notifications issued by the Central Government which have given reliefs of various kinds, they seem to proceed on the interpretation which I have given above. It will be noted that they do not exempt the article from the levy of duty; they give relief which may in a particular case be the excise duty or C.V. duty levied on the article out of which the assessed article has been manufactured." Hegde J. in a dissenting judgment has referred to Hallbury's Laws of England in respect of Subordinate Legislation. At page 401 of Hallbury's Laws of England, it is observed "where a statute provides that subordinate Legislation made under it is to have effect as if enacted in the Statute such Legislation may be referred to for the purpose of construing the provision in the statute itself." Hegde. J. has stated in paragraph 37 "But for the present purpose it is sufficient to hold that for finding out the scope of a particular levy, Notification issued by the executive Government providing for exemption from that levy can be looked into as they disclosed the overall scheme." 38. In 1979 (4) E.L.T. 533, the Andhra Pradesh High Court in the Etinopakka Cooperative Society's case has observed in paragraph 8 as follows :- "The Notification issued by the Government of India under Rule 8 of the Central Excises Rules is "law". Owing to its source of power to the statute." 39. In 1980 (6) E.L.T. 210, the Andhra Pradesh Paper Mills v. A.C.Rajeshwari the Hon'ble Judges did not agree with the contention that the words "amount of duty of excise" in Section 4(4)(a)(ii) could mean only the "actual amount paid" and not what "leviable in law". Mr.
Justice Jeevan Reddy has observed, "I find it difficult to agree with this contention." "Duty is levied by Section 3 of the Act read with the Tariff Schedule. The exemption notification issued under Rule 8 does not take away the levy. It only grants exemption from levy in specified circumstances and the specified extent. In other words because of the exemption, the levy of duty is not erased." These decisions indicate the scope of the notifications issued under Rule 8. Hence it is futile to contend that notifications issued under Rule 8 should be ignored for arriving at the 'measure of duty' for purposes of determining the C.V.duty.
40. An argument was advanced that notifications have been issued under Section 25 of the Customs Act in respect of imported goods and in the absence of' such notification, there can never be a reduction of the additional duty of customs. Section 25 of the Customs Act empowers the Central Government to exempt either absolutely or subject to such conditions goods of any specified description from the whole of duty or any part of customs leviable thereon. Rule 8 of the Central Excise Rules contains a similar provisions for exemption in regard to excise duty for excisable goods either in whole or in part. Reading these two provisions in juxta position, it is manifest that if the goods are leviable to Central Excise duty, then the provisions of Rule 8 would be applicable to those goods. Section 3 of the Customs Tariff Act provides the basis for levy of additional duty of customs or countervailing duty under certain circumstances. An article shall be liable to customs duty in addition to the excise duty for the time being leviable on like article if produced or manufactured in India. In other words, if there is a notification under Rule 8, then the excise duty for the time being leviable would be circumscribed by the limitations prescribed under the notification. Since the statute provides the basis for the levy of excise duty even for calculating the duty under the Customs Tariff Act, it cannot be stated, that the notifications under Section 25 alone would govern the issue and that notifications under Rule 8 should be ignored.
41. In this context, we have to refer to the words in the explanation "where such duty is leviable at different rates the highest duty." The explanation contemplates the levy at different rates. Pausing here for a moment, if we examine the provisions of the First Schedule, there is no mention of different rates of duty for any particular commodities.
Under the scheme of the First Schedule, the item number has been mentioned and they have been further sub-divided. The description has been set out and the rate of duty specific or special excise has been prescribed. A careful scrutiny of the several items would indicate that in none of the items or any sub-division thereof as the case may be, there is a mention of different rates of duty, If so, we have to consider under what circumstances different rates of duty would occur.
In our view the question of different rates of duty would arise only by virtue of the application of the notifications issued under Rule 8. The notifications give relief in different spheres. Exemptions have been granted to small scale industries, exemptions per manufacturer and not per factor'y, in or in relation to the manufacture of which any process is ordinarily carried on without the aid of power, enlargement of production capacity, notifications to protect petty producers, condition regarding the number of workers employed, on the basis of production capacity and similar circumstances. It is true that different standard for determination of C.E. duty is contemplated in the explanation to Section 3 of the Central Excises and Salt Act. That proviso is in regard to duties which could be levied and collected for goods manufactured in a free trade zone, which' concept is totally different from the exemptions granted under Rule 8. Further the words "different rates" were in the Statute even before proviso to Section 3(1) of the Central Excises Act was introduced. Hence it. is reasonable to conclude that the explanation to the Customs Tariff Act itself contains intrinsic proof that Central Excise notifications should be applicable even to the imported goods while calculating the additional duty of customs. Otherwise the explanations will be rendered meaningless and nugatory.
42. We are not concerned on the facts of the present case about the notifications issued under Rule 8 which contain certain conditions.
43. We have now to consider the two contary views' i.e. on the Karnataka High Court in the case of Kamath & Co. and the other in the case of Century Enka by the Bombay High Court.
44. Shri V. Lakshmi Kumaran contended that the Karnataka High Court's decision would not apply in view of the arguments now advanced by him.
Further, the judgment of the Karnataka High Court in the case of M/s.
Hegde & Golay Ltd. [1986 (25) E.L.T. 47] was concerned mainly with the observation of the Supreme Court to the effect that the "measure of tax or duty cannot determine its nature or character". He urged that, the decision in Khandelwal's case was concerned more with the source of power to charge duty than with the methodology of its quantification.
This decision of the Karnataka High Court has been followed in the later decision reported in 1986 (24) E.L.T. 456. We also notice that in the case of B.S. Kamath & Co. and Ors. [1986 (24) E.L.T. 456], the question inter alia raised was about the discriminatory nature of the impost under Article 14 of the Constitution namely, levy of additional duty in regard to imported articles subject to import duty on a percentage basis stipulated in Section 14 of the Customs Act and the duty not being levied with regard to articles subjected to a fixed rate of duty. In the course of the judgment dealing with the issue of benefit of Central Excises and Salt Act, the decision of the Bombay High Court in Century Enka case has also been transferred. The Division Bench of the Karnataka High Court preferred to follow a similar view emphasised by Rajesekharamurty, 3 [1986 (25) E.L.T. 47]. But we must point out that in the earlier decision, the Karnataka High Court has also adverted to the fact that in respect of the watch components imported by the petitioner Central Excise Notification 118/75 had no relevance as the terms of the notification were meant only for extending the exemption in respect of goods manufactured in a factory and intended for use in the same factory in which the finished products were manufactured. Hence with great respect to their Lordships of the Karnataka High Court, we are of opinion that the decision of Bombay High Court has to be preferred, 45. In 1982 (10) E.L.T. 64 (Bom.) M/s. Century Enka, the Bench of the Bombay High Court has observed as follows :- "The explanation clarifies the ambit of the expression" the Excise duty for the time being leviable on a like article if produced or manufactured in India". It is clear from the explanation that the excise duty means the duty for the time being in force. In other words, the levy of countervailing duty is permissible provided the article which is imported is liable to excise duty of manufactured in India. Shri Taraporewala is right in relying upon the exemption notification which specifically provided that the polyamide chips, if used in manufacture of nylon yarn and if such use is only in the factory of production, then manufacture of such polyamide chips is exempted from the payment of excise duty. It is clear that the polyamide chips are totally exempted from the duty of excise leviable thereon by the notification. Shri Taraporewala, therefore, is right in his submission that as the polyamide chips are exempted from the levy of the excise duty, it is not permissible to levy countervailing duty with reference to Section 3 of the Customs Tariff Act, 1975".
46. In 1986 (26) E.L.T. 688 (M/s. Garware Nylons Ltd.) follows the earlier decision. We must also mention that in 1986 (25) E.L.T. 508 (M/s. Pan Asia Commercial), before the Bombay High Court, the Union of India did not dispute the decision of the Division Bench but submitted that the exemption notification on which reliance was placed, was a conditional one. Shri Lakshrni Kumaran also pointed out that in 1987 (27) E.L.T. 617, Bombay High Court, in the case of Raman Kanti Lal Bhandari, considered the identical question and has referred to the decision of the Supreme Court in the case of M/s. Khandelwal Metal & Engg. Works. The Court has observed that it was not necessary to examine the question because even assuming that the additional duty of customs could be levied, the question which arose in that case was whether such a duty had been prescribed under TI 68(a). As already pointed out Khandel-wal's case was not in respect of any exemption notification but was in regard to the liability of duty on imported brass scrap. Hence, there is considerable force in the contentions of Shri Lakshmi Kumaran that the decision of the Supreme Court would not amount to over-ruling the observations of the Bombay High Court in the case of Century Enka.
47. In view of the above analysis, we hold that the benefit of the Central Excise notification could be availed of with reference to the liability for payment of additional duty of Customs under Section 3(1) of the Customs Tariff Act.
48. In the result, we hold that the goods in question should be classified as "fabrics". We also hold that the benefit of notification 24/65-CE would be applicable to the import. In view of the above contentions a consideration of the applicability of notification 89/82-Cus., dated 24.3.1984 does not arise.
50. [Order per : Shri S.D. Jha, Vice-President (Judicial)]. - I have carefully gone through the order proposed by brother M. Santhanam, Member (Judicial). I agree with him on the point that the goods in question should be classified as fabrics. I am however, in disagreement with him on extending to the import benefit of notification No.24/65-C.E. and would record my reasons for this dissent.In Gupta Trading Co. v. Collector of Customs, Bombay [1987 (27) E.L.T. 510 (Tribunal)], the Bench declined to grant refund of additional duty of customs on the strength of a notification issued under Rule 8(1) of Central Excise Rules, 1944 relying on (1) Khandelwal Metal & Engineering Works v. Union of India [1985 (20) E.L.T. 2221 which holds that additional duty under Section 3 of the Customs Tariff Act, 1975 partakes character of customs duty and is not countervailing duty (2) Union of India and Ors. v. Modi Rubber Ltd. and Ors. [1986 (25) E.L.T. 849 (SC)] holding that a notification granting exemption from duty of excise issued by Central Government in exercise of the power under Rule 8(1) simplicitor without anything more should be read as granting exemption only in respect of duty of excise payable under the Central Excises and Salt Act, 1944 (additional duty of customs is not a duty of excise payable under the Act) and primarily, relying on B.S. Karnath and Ors. v. Union of India and Ors. [1986 (24) E.L.T. 456 Karnataka) a Division Bench decision of Karnataka High Court which holds the exemptions granted under the excise duty either in whole or in part, are for the purpose of that Act only and they cannot on any principle be the basis for claiming exemptions under the Customs Act".
52. It may be mentioned that this Division Bench High Court decision had noticed the Bombay High Court decision in Century Enka's Ltd. and Ors. v. Union of India & two others (1982 ELT 64) (paras 22 and 26 of the decision). The Karnataka High Court relying on the Supreme Court decision in Khandelwal's case had observed that the Bombay High Court decision in Century Enka's case was opposed to enunciation made by the Supreme Court in Khandelwal's case. In para 27, the High Court also observed that in their considered opinion, the decision in Century Enka's case runs counter to the provisions of the Customs and Tariff Acts and legal principles underlying the levy of duties or taxes on imports and excise duty on manufactured goods in the country. With these observations and for the reasons stated in the decision, their Lordship of Karnataka High Court expressed their inability to subscribe to the view of the Hon'ble Bombay High Court. The Karnataka High Court decision was followed by the Tribunal when it took decision in Gupta Trading Co.'s case (supra). The decision was also followed by the Tribunal in a number of other decisions.
53. As against the Karnataka High Court decision in B.S. Kamath's case which notices the Bombay High Court decision in Century Enka's case and does not agree with the same, it is seen that the Bombay High Court decisions referred to in para 47 of brother Santhanam's order - Garware Nylon Ltd. [1986 (26) E.L.T. 688] case merely follows the Century Enka's Ltd.'s case. The same is true of the Pan Asia Commercial Enterprises & Another v. Union of India and Another [1986 (2.5) ELT 508 (Bom.)]. The two decisions do not refer to the Karnataka High Court decision in B.S. Kamath's case. As for reference to the Bombay High Court decision in Raman Kantilal Bhandari v. Union of India and Ors.
[1987 (27) ELT 617 (Bom.)], the decision naturally does not refer to Karnataka High Court decision in B.S. Kamath's case. The question involved in the case was different. It related to alcohol which is outside the purview of Central Excise law. It was not a case relating to any -notification. From para 7 of the decision, it is seen that Supreme Court decision in Khandelwal's case was cited before the High Court but their Lordships did not consider it necessary to examine the question of additional duty, as alcohol all sorts, is excluded from payment of Central Excise duty.
54. Now the question to be seen is whether the Tribunal should revise its views and bring it in line with the decision of Bombay High Court in Century Enka's case which has been followed by the High Court in later decisions. As already observed above, the Division Bench decision in Karnataka High Court notices the leading Bombay High Court decision in Century Enka's case which has been subsequently followed by the Bombay High Court in its later decisions. As against this, Karnataka High Court has not been noticed by the Bombay High Court in any of its decisions.
55. Shri Lakshmi Kumaran, learned Counsel for the respondents, during arguments, questioned by the Bench, agreed that Karnataka High Court decision squarely covers the issue against respondent-importer. He however, sought re-consideration of the decisions on the arguments urged which have been reproduced in extenso by brother Santhanam in his order. In my view, having foilowed the Karnataka High Court decision which had disagreed with the leading Bombay High Court decision in Century Enka's case foliowed by the High Court in its later decision without noticing or distinguishing the Karnataka High Court, no case justifying revision or modification of our decision is made out. Both the High Courts are entitled to greatest and equal respect from us but in the very nature of things, we cannot simultaneously follow the two opposing decisions.In Shyamaraju Hegde v. U. Venkatesha Bhat and Ors. (AIR 1987 SC 2323), (a decision not available to us when arguments were heard in the present matter but available to me when I am completing this order and as I am in a minority, I do not suggest reopening of the matter only to put this decision to the parties), the Supreme Court inter alia held - "In the facts and circumstances of the case, the High Court should not have taken on to itself, the responsibility of saying that its earlier Full Bench judgment based upon a decision of this Court in the circumstances indicated above had lost its binding authority in view of two other judgments rendered in different situations and setting. We are really not in a position to appreciate the manner in which a coordinate Bench of the High Court has chosen to overrule an earlier judgment of that Court".
The Karnataka High Court decision in B.S. Kamath's case was based on the Supreme Court decision in Khandelwal case. Bearing the above principles in mind and having followed the decision for the reasons and circumstances stated aforesaid, we should leave it to the parties to agitate before the Appellate forum rather than revise our views and veer round to the views of Hon'ble Bombay High Court in Century Enka's case.
57. I would, therefore, hold that no case justifying revision or modification of our views in Gupta Trading Company's case is called for.
58. [Order per : 1.J. Rao, Member (T)]. - I have gone through the orders of my brothers S/Shri M. Santhanam and S.D. Jha. I am in agreement with the order of the brother Jha both on the question of classification and exemption.
59. [Order per : G. Sankaran, Sr. Vice-President]. - I have carefully read the orders proposed by brothers Shri Santhanam and Shri Jha. I am in agreement with the conclusion of Shri M. Santhanam but I would like to set out briefly my reasons therefor.
60. In paras 8 to 19 of the order dated 2.6.1987 of the original bench comprising brother Shri Raghavachari and myself, the reasons in support of the view that an exemption notification issued under Central Excise Rule 8(1) would be applicable in the matter of computation of additional duty of custom's on like imp6rted articles in terms of Section 3(1) of the Customs Tariff Act, 1975, have been set out "at length. In my view, the arguments advanced before the five-Member Bench against such a view do not detract from the position set out in the order of the original bench. Briefly stated, the correct position, in my view, is that if the provisions of Section 3(1) of the Customs Tariff Act, 1975, read with the explanation thereto, is to be given full effect to, the duty of excise for the time being leviable on a like article if produced or manufactured in India will be not only and merely the duty of excise specified in the First Schedule to the Central Excises and Salt Act, 1944 but that worked out after taking into account the rate of duty specified in the said First Schedule and any exemption notification issued under Central Excise Rule 8(1) which has the effect of reducing the duty leviable in terms of the said First Schedule. Any other view which ignores the notifications, if any, issued under Central Excise Rule 8(1), would lead to assessment of goods to additional duty of customs which would not be equal to the duty of excise for the time, being leviable on like goods produced or manufactured in India. As brought out in the order proposed by Shri Santhanam and Shri Jha, the Bombay and Karnataka High Courts have held contrary views in this matter. In such a situation, it is permissible for this Tribunal to adopt one out of the two views which appears to it to be more appropriate having regard to the arguments placed before it.
This is in accordance with the views held by a five-Member Bench of this Tribunal in the case of Atma Steels Pvt. Ltd. and Ors. v.Collector of Central Excise, Chandigarh and Ors. reported in 1984 (17) ELT 331 (Tribunal).
61. In this connection it is relevant to note that in a very recent decision, the Madras High Court in the case of M.R.F. Ltd. v. Union of India and Ors. reported in 1987 (32) ELT 465, after referring to and discussing the Supreme Court's judgment in Khandelwal Metal & Engg.
Works v. Union of India, "If no excise duty is in force and could be levied on the goods, then there is no question of the levy of additional duty under Section 3(1) of the Act (CTA). When there is no excise duty in force and leviable on the goods, by virtue of the exemption notifications, it is not possible to bring in a fiction that the goods is amenable and liable for levy of excise duty and the exemption notification have only suspended such levy and on that basis there could be levy of additional duty under Section 3(1) of the Act. When the very measure for the additional duty is not available, it would be doing violence to the express language and implications of Section 3(1) and the explanation thereto, as construed by the Supreme Court, to work out the additional levy on the fictional basis. Hence, I have to eschew the submission of the learned Senior Central Government Standing Counsel that even if the levy could not be made under Excise Law on account of the exemption notification, yet the levy must be stated to be attracted and by that fiction the additional duty should be levied under the Act," This judgment re-enforces the views set out in the order of the original Bench which heard the present appeal.
62. It may also be noted that the Bombay High Court in one of its recent judgments in the case of Ashok Traders v. Union of India and Ors. reported in 1988 (14) ECR 12, has again dealt with the question of applicability of exemption notifications under Central Excise Rule 8(1) to the levy of additional duty of customs on like imported goods and reiterated the view taken by the High Court in its earlier judgment in Century Enka Ltd. v. Union of India, 1982 ELT 64, to the effect that additional duty of customs under Section 3 of the Customs Tariff Act cannot be levied on an imported article if such article manufactured in India is exempted from payment of excise duty. It is seen from the judgment that the Counsel appearing on behalf of the respondents did not dispute the principle laid down by the decision of the Division Bench of the Court in the case of Century Enka (supra). It is somewhat puzzling that the department has chosen to take a contrary stand before this five-Member Bench though it did not dispute the principle laid down in the Century Enka case before the Bombay High Court Division Bench which heard the Ashok Traders case.
63. In the above view of the matter, I agree with the conclusions of brother Santhanam as set out in paragraphs 48 and 49 of the order proposed by him.