T. Chandrasekhara Menon, J.
1. On 1st November, 1980 by notification of the same date the Government of India, in exercise of the powers conferred by Sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), exempted Viscose staple fibre and Viscose tow, falling within Chapter 56 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), when , imported into India from so much of the duty of customs leviable thereon under the said First Schedule as is in excess of 10% ad valorem. By subsequent notifications of 26-8-1982, 13-12-1982 and 1-3-1983 the figures and words 10% ad valorem was substituted by 20% ad valorem, 30% ad valorem and 40% ad valorem respectively. There is exemption of customs duty on the same lines in respect of dealings in Polyaosic Fibre. In the first instance it was complete exemption but subsequent on 1-3-1983 the exemption was limited to duty in excess of 40% ad valorem.
2. The question that arises for consideration is whether such exemption will also apply to levy of additional duty which is equal to excise duty leviable on the like article when produced or manufactured in India, such levy coming under Section 3 of the Customs Tariff Act, 1975. Mr. K.A. Nair, learned Counsel for the petitioners urged before me that Customs duty is a duty on the act of import and all the duty imposed on the act of import, whatever name by which they are called, is a customs duty. In other words auxiliary duty, additional duty or countervailing duty are all forming part of the Customs duty. Customs duty is a duty levied under the Customs Act. That Act is an enactment coming under Entry 83, List I of the Seventh Schedule of the Constitution of India which reads :
'Duties of Customs including export duties'. It has been held by the Supreme Court of India that duty of Customs is a tax on the act of importation or exportation. It is contended that duty of customs shall be levied under Section 12 of the Customs Act, at such rates as may be specified and/or the Customs Tariff Act or any other law for the time being in force on goods imported into India. Under Chapter 56 of the First Schedule to the Customs Tariff Act, viscose staple fibre is chargeable at the rate of 140% ad valorem. But Section 25 of the Customs Act, gives power to the Government of India for exempting from the whole or any part of the duty of Customs leviable. In exercise of such power Central Government issued notifications exempting viscose staple fibre falling within Chapter 56 of the First Schedule of the Customs Tariff Act when imported into India from so much of the duty of customs leviable thereon under the said First Schedule as is in excess of the notification 10% in the first instance, then 20%, 30% and 40%. Mr. Nair contended that the respondents have no competence to levy duty on the act of importation of the goods by the petitioner, in excess of what is limited by the notifications, issued under Section 25 of the Customs Act, by calling the duty any other name whether it be additional duty or countervailing duty. The learned Counsel by giving stress to what is provided under Section 3(6) of the Customs Tariff Act would also argue that even if the additional levy under Section 3 of the said Act is an independent levy, once there is an exemption given under Section 25 of the Customs Act in respect of Customs duty that exemption would also exempt the additional levy. In support of these contentions he relies on rulings of the Bombay and Delhi High Courts reported in 1980 Cencus 21D and 1982 ECR 6460 respectively. The scope and ambit of these decisions I will refer to in due course.
3. Mr. Chacko and Mr. Abdul Aziz learned counsels appearing for the respondents would state that the petitioners have been importing through Cochin Port various types of man-made staple fibre, the chief variety being viscose fibre and polynosic fibre. These items included when imported into India is excisable to Customs duty at the rate of 140% ad valorem in terms of Section 2 of Customs Tariff Act, 1975 read with First Schedule thereof. In addition to this levy of duty an additional duty equivalent to duty of Excise prescribed under the First Schedule to Central Excises and Salt Act, 1944 is also leviable in terms of Section 3(1) of the Customs Tariff Act. Apart from prescribing rates of duty, the Customs Tariff Act as per Section 3 of the Act also levies an additional duty which is over and above and distinct and separate from the basic customs duty chargeable under Section 12 of the Customs Act read with Section 2 of the Customs Tariff Act. The learned counsel for the respondents would also point out that while Section 3 of the Tariff Act declares the levy . of additional duty on import items, to know which imports are dutiable and by how much reference is to be made to Central Excise Act. This Section adopts, as the rates of additional duty, the very rates of Central Excise leviable like goods locally manufactured. The counsel would state that intention obviously is to afford a degree of protection to the local manufacturers by loading the imported variety with an additional import duty. Therefore it is argued that the additional import duty is levied independently under the Tariff Act at the rates and on the types of goods mentioned in the Central Excise Act, distinct from the basic customs duty which is leviable under the Customs Act on such goods and at such rates as are set out in the 1st and 2nd Schedules of the Customs Tariff Act. Section 25 of the Customs Tariff Act confers power on the Central Government to grant exemption of duty by notification. The exercise of this power may be selective as to goods, as to duties, and selective as to quantum of exemption. In respect of additional duty which is levied under Customs Tariff Act the power of exemption is specified under Section 3(6) of the Customs Tariff Act. No doubt that provisions would indicate that the provisions in the Customs Act, 1962 (52 of 1962) and the Rules and Regulations made thereunder, including those relating to drawbacks, refunds and exemption from duties, shall, so far as may be, apply to the duty chargeable; under Section 3 of the Customs Tariff Act as they apply in relation to the duties leviable under the Customs Act. The contention of the learned counsel for the respondents is that Exts. PI and P2 notifications which had been produced in O.P. 583 of 1983 do not at all indicate that they are issued by virtue of the power under Section 3(6) of the Customs Tariff Act. Emphasis is on an expression in the notification, so much of the duty of customs leviable under 1st Schedule to the Customs Tariff Act, which is also an indication that the notification does not cover an additional duty of customs. Mr. Chacko would again point out that in drawing up the notifications for exemption it has been a usual practice of Central Government to take care to particularise, what precisely is the kind of duty with reference to which the exemption is being granted. The sum and substance of the contentions that is advanced on behalf of the respondents was that none of the notifications on which the petitioners rely would entitle them to exemption of additional duty which is leviable under Section 3(1) of the Customs Tariff Act. Strong reliance is placed by the learned Counsel for the respondents on the decision of the Madras High Court in Sree Ayyanar Spinning and Weaving Mills Limited, 1983 ECR 199D (Madras). Reliance is also made to the decision of the Delhi High Court in Zenith Steel Pipes (P) Limited v. Union of India and Ors.,-ELT passed by a Division Bench-an order passed in certain petition for stay. A copy of the order was produced before me.
4. Before considering the decision that is cited, I would refer to the relevant statutory provisions in the matter. List I in 7th Schedule of the Constitution of India enumerates the subjects on which the Parliament can legislate. Item 83 therein relates to customs duties-import and export duties. Section 12 of the Customs Act provides that levy of, and exemption from, Customs duties; except as otherwise provided in this Act, or any other law for the time being in force, duties of Customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975, or any other law for the time being in force, on goods imported into, or exported from, India. Section 25 of the Customs Act provides power to grant exemption from duty. 'If the Central Government is satisfied that it is necessary in the public interest so to do it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after clearance), as may be specified in the notification goods of any specified description from the whole or any part of the customs leviable thereon'. The Customs Tariff Act under Section 2 of the Act as enjoined under Section 12 of the Customs Act deals with the rates at which duties of customs shall be levied ; that is specified in the First and Second Schedules of the Customs Tariff Act. As noted earlier customs duty can be levied apart from under Section 12 of the Customs Act, under any other law for the time being in force. I find that Section 3(1) of the Customs Tariff Act making such a levy. It provides that :
'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 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 liable shall be calculated at the percentage of the value of the imported article.'
Sub-section (5) of the same section states that 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. Sub-section (6) states that the provisions of the Customs Act and the rules and regulations made thereunder, including those relating to drawbacks, refunds and exemption from duties, shall, so far as may be, apply to the duty chargeable under Section 3 as they apply in relation to the duties leviable under the Customs Act. It might be noted that the power of exemption under Sub-section (6) of Section 3 of the Customs Tariff Act is independent and distinct from the power of exemption granted under Section 25 of the Customs Act, though such independent power is imported into the Customs Tariff Act by making the provisions of the Customs Act applicable to duty chargeable under Section 3 of the Customs Tariff Act.
5. I will now look into the notifications. Reference need be made only to one of them as the wordings are similar. I will extract from Ext. PI.
'Customs Notification
In exercise of the powers conferred by Sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962) the Central Government being satisfied that it is necessary in the public interest so to do hereby exempts viscose staple fibre and viscose tow, falling within Chapter 56 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), when imported into India, from so much of the duty of customs leviable thereon under the said First Schedule as is in excess of 10% ad valorem :
Provided that nothing contained in this notification shall apply to :
(i) High performance viscose staple fibre and high performance viscose tow;
(ii) High tenacity viscose staple fibre and high tenacity viscose tow;
(iii) High wet modulus viscose staple fibre and high wet modulus viscose tow; and
(iv) Polynosic staplic fibre and polynosic tow.'
It is to be noticed here that what is exempted is a particular goods falling under Chapter 56 of the First Schedule to the Customs Tariff Act, 1975, when imported into India, from so much of the duty of customs leviable thereon under the said First Schedule as in excess of.... Therefore exemption can well be said to be given only in respect of duty of customs leviable under the First Schedule of the Customs Tariff Act. If the levy under Section 3 of the Customs Tariff Act namely additional duty is something distinct from the basic customs duty leviable as per Section 12 of the Customs Act, the rate being specified under First Schedule of the Customs Tariff Act, it cannot be said that the exemption given under Section 25 and specified under the notification would exempt additional levy also. The wording is clear and exemption is given only in respect of duty of customs leviable under the First Schedule. It is certainly true that levying customs duty the power of the legislature the Parliament can only be traced to Item 83 of List I of the Seventh Schedule. But the Customs Act itself would indicate that a customs levy need not fall under the Customs Act; it can come under another enactment of the Parliament. When the Customs Tariff Act empowers a separate levy that will be an independent levy distinct from the basic customs levy made per the provisions of the Customs Tariff Act. There cannot be any controversy in regard to the principles stated in the decision of Bombay High Court in Kirloskar Cummins Limited v. The Union of India, 1980 Cencus 21D).
The Bombay High Court there pointed out that the countervailing duty of customs is really a part of limb of the customs duty itself and not a duty which is distinct or different from the Customs duty. Reliance was placed to a decision of the Supreme Court in In re : Sea Customs Act (1878), Section 20(2) (AIR 1963 Supreme Court 1760) where it was stated that :
'In the case of duties of customs including export duties though they are levied with reference to goods, the taxable event is either the import of goods within the Customs barriers or their export outside the customs barriers. They are also indirect taxes like excise and cannot be equated with direct taxes on goods themselves.'
An additional levy under Section 3 is certainly a tax on the import of goods and part of the customs duty; but that does not mean that it is not an independent levy of customs. The nature of the levy is one on import and in that aspect an additional levy is also a part of the customs duty. The question that has to be considered here is that whether the notification concerned exempts additional duty also. The Delhi High Court decision that is referred to by Mr. K.A. Nair, Counsel for the petitioners in Modi Rubber Ltd. v. The Union of India, 1983 ELT 24) deals with the notification which is in the following terms :
'In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts tyres for motor vehicles falling under sub-item (1) of Item No. 16 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) from so much of the duty of excise leviable thereon as is in excess for fifty five per cent ad valorem.'
The contention raised therein was this exemption has reference not only to be basic duty of excise leviable under Central Excises and Salt Act, but also the special duty (additional duty/auxiliary duty) of excise which has been levied in respect of the said goods under the Finance Act, 1978. It is contended therein that the relief in excise duty under the notifications is intended to recover in its scope both the basic duty of excise and the special duty (auxiliary duty/ additional duty) of excise. Stress was laid therein to the exemption notifications issued by the Government from time to time and the language employed to effectuate the purpose of exemption. One set of notifications mentions the exemption as from the whole of the duty of excise leviable thereon under a specified sub-item of a particular item of the First Schedule to the Act. A second category of the exemption notifications grant exemption from so much of the special/additional/auxiliary duty leviable thereon under stated Sub-section of stated section of the Finance Act or special Act as is in excess of the specified percentage of the duty of excise chargeable under that statutory provisions read with any notification. Here again the exemption is restricted and confined. The third category of notifications grant exemptions from the duty of excise leviable thereon by mentioning both under the Act and under the special Act or Finance Act. These sets of notifications, therefore, restrict the exemption by the plain language of the notification itself. The fourth class of the notifications is like the notification which is the subject-matter of the petitions before the Delhi High Court which exempt 'from so much of the duty of excise leviable thereon as is in excess . . . .' The plea raised by the petitioners therein was that those notifications be construed by giving to the words used their ordinary and natural meaning to spell out the legislative intent and to effectuate the same. The emphasis there was on the words 'duty of excise leviable thereon'. The court considered what is meant by duty of excise. A refernce was made to the Supreme Court decision in Chotabhai v. Union of India, AIR 1962 Supreme Court 1006, which has observed that :
'there is no doubt that excise duties have been referred to by the economists and in the judgments of the Privy Council as well as in the Australian decisions as an instance of an 'indirect tax', but in construing the expression 'duty of excise' as it occurs in entry 84 we are not concerned so much with whether the tax is 'direct' or 'indirect' as upon the transaction or activity on which it is imposed.... A duty of excise is a tax-levy on home-produced goods of a specified class or description, the duty being calculated according to the quantity or value of the goods and which is levied because of the mere fact of the goods having been produced or manufactured and unrelated to and not dependent on any commercial transaction in them.'
The taxable event, that is pointed out in Delhi case, is the manufacture or production of the goods which are subjected to the excise duty. On the basis of the wordings in the notification it was stated that expression 'auxiliary' is-common parlance is understood as for augmenting a basic power, potential or ability. Auxiliary is one that functions or serves in a supplementary, often subordinate, position'. Here the exemption is limited specifically to the duty of customs leviable on the article concerned under the First Schedule of the Customs Tariff Act. So I do not think that the Delhi High Court case referred to by the petitioner would be of much help in solving the case.
6. A direct decision on the point was referred to by Mr. Chacko, counsel for the respondents, to the decision of Madras High Court in Sree Ayyanar Spinning and Weaving Mills Limited v. Union of India, 1983 ECR 1990 Madras. There the notification concerned is the same as one referred to here. Madras High Court disposed of the matter stating that :
'In our country we now have various duties of customs, called basic , duty, additional duty, auxiliary duty and surcharge. The first two alone are in point for the present discussion. The Customs Act, 1962 deals with customs duty proper, which people refer to as the basic duty. The Customs Act is a permanent code for the Customs. It establishes the administrative hierarchy for the management of duties of customs; it lays down the assessment procedure; it contains enforcement provision, such as penalties and privations, and confiscation of contraband; it also provides for exemptions, etc. And, perhaps most important of all, the Act also lays down or declares the charge of customs duty. Section 12 of Act is the charging section. Somewhat in the manner of the Income-tax Act, which relegates the actual rates of income tax to the annual Finance Acts, Section 12 of the Customs Act too relegates the enumeration of dutiable goods and the prescription of rates of duty to a different enactment called the Customs Tariff Act, 1975. This Tariff Act, as its name indicates, and its statutory function undoubtedly is, carries a tariff, that is to say, a list, or rather, two lists. One is the First Schedule, which lists out the dutiable import items and the corresponding rate of import duty against each item. The other is the Second Schedule, which gives a list of dutiable export items and the corresponding rate of export duty on each item. But it is a mistake to suppose that the Customs Tariff Act only carries the tariff and nothing else. It goes farther and levies, in proprio vigore, or on its own force as it were an additional duty, which is over and above, and distinct and separate from, the basic customs duty leviable under Section 12 of the Customs Act. This additional duty, statutorily so-called, is also known in the trade as the countervailing import duty. The implication of this additional levy is clear from the charging section, Section 3 of this Act. While the section declares the levy of this additional duty on import items, to know which imports are dutiable and by how much, we are asked to refer to the Central Excise Manual. For this section adopts, as the rates of additional duty, the very rates of central excise leviable on like goods locally manufactured. The intention obviously is to afford a degree of protection to the local manufacturer by loading the imported variety with an 'additional' import duty. With the charge to additional duty laid down in this . fashion, the Customs Tariff Act proceeds to adopt the whole gamut of the provisions in the Customs Act for effectuating that charge. See Section 3(6) of the Customs Tariff Act.'
Then after referring to the basic customs duties Madras High Court stressed the question of exemptions from duties. There it is pointed out that :
'Under Section 25 of the Customs Act, 1962 the Central Government is given the power of exemption, by notification. The exercise of this power to exempt may be selective as to goods, selective as to duties, and selective as to the quantum of exemption. A similar power of exemption exists in the Central Government as respects countervailing import duties as well-see Section 3(6) of the Tariff Act read with Section 25 of the Customs Act.'
Madras High Court pointed out that an additional duty is a different duty from the basic duty. The court, in the nature of the wordings in the notification holds that the notification does not cover the additional duty (countervailing duty) leviable under the Customs Tariff Act and that this duty has got to be paid by the petitioners. Reference was also made by the learned counsels for the respondents to the order of Dalal High Court in certain interlocutory applications referred to earlier. There the question that came up for consideration was the import of the notification dated 9-8-1978 and it is as follows:
'157/78-Cus. dt. 9-8-1978
G.S.R. 402(E).-In exercise of the powers conferred by Sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do hereby exempts wood pulp falling within Chapter 47 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), when imported into India for the manufacture of paper, from so much of that portion of the duty of customs leviable thereon which is specified in the said First Schedule, as is in excess of five per cent ad valorem'.
The Delhi High Court prima facie held that this notification obviously limits the exemption only to the duty of customs which is leviable under Section 2 of the Customs Tariff Act and which is specified in the First Schedule. The auxiliary duty of customs which has been imposed by Section 44 of the Finance Act, 1982, cannot be covered even within the terms of this notification. Madras High Court has stated that the additional duty is independent, distinct and separate from the basic duty. That does not mean that it is not customs duty as such. Additional duty is also chargeable on importation of goods like the basic customs duty. While both the duties may be customs duties chargeable on the import of goods, the levy is made under two separate statutes and distinct and independent of each other.
7. The question now arises whether in view of the exemption being granted to basic customs duty under Section 25 of the Customs Act in view of the provisions under Section 3(6) of the Customs Tariff Act, additional duty under Section 3 is also exempted. The wording of the notification and the scheme of the provisions under Section 3 of the Customs Tariff Act, holds against such a contention. In the circumstances I am of the view that the respondents are right in imposing additional duty as per Section 3 in spite of the notifications concerned.
8. It was requested on behalf of the petitioners that time may be granted to them for payment of arrears of additional duty which has to be paid by them in view of the decision taken by the court. I think interest of justice will be served if the petitioners shall pay 50% of the amount within a month from today and the balance amount one month thereafter.
The original petitions are disposed of as above. There will be no order as to costs.