Full Judgment
During the pendency of the review proceedings, the proceedings came to be transferred to this Tribunal for disposal according to law as if it is an appeal.
2. On the ground that High Courts and Benches of the Tribunal have expressed conflicting views on the question arising for consideration this appeal, as also certain other appeals have been referred to a larger Bench. This Bench duly constituted has heard the appeal.
3. The relevant part of Section 3 of the Customs Tariff Act, 1975 reads thus:- "3.(1) Any article which is imported into India shall, in addition, be liable to duty (hereinafter 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 land 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 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 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 when such duty is leviable at different rates, the highest duty." (a) Any imported article shall be liable for additional duty, besides customs duty levied under Section 12 of the Customs Act, 1962.
(b) The additional duty shall be equal to the excise duty leviable at the relevant time on a like article if produced in India.
(c) If a like article is not so produced in India, the additional duty leviable shall be the excise duty which would be leviable on the class or description of the articles to which the imported article belongs. If such duty is leviable at different rates, the highest duty shall be the duty leviable.
(d) If such excise duty on a like article is leviable at any percentage of its value, the additional duty shall be calculated at that percentage of the value of the imported article.
4. Prior to the enactment of the Finance Act, 1981, the Schedule to the C.E.S. Act, 1944 did not specifically refer to Waste or Scrap. Waste and Scrap were specifically included in the Excise tariff by the amendments introduced by the Finance Act, 1981, thereby setting at rest the pre-existing controversy as to whether Excise duty was leviable on Waste or Scrap. The Finance Act, 1981 came into effect on 28-2-1981.
Thus, Waste and Scrap clearly became leviable under the C.E.S. Act, 1944 with effect from 28-2-1981. The particulars of the relevant Chapters of Tariff were as follows:Chapter 26A - Copper and Copper Alloys - item (1b) Waste and ScrapChapter 26B - Zinc - item (1a) Waste and ScrapChapter 27 - Aluminium - item (aa) Waste and ScrapChapter 27A - Lead - item (2) Waste and Scrap 5. As the Excise Tariff stood at the relevant time, Excise duty was leviable on Brass Scrap (Chapter 26A) and tariff prescribed specific rate of duty for Brass Scrap. The additional duty on import of Brass Scrap will be payable and the amount payable would be equal to the Excise duty leviable on a like article produced in India or the Excise duty which would be leviable on a like article if produced, There can be no doubt that Brass Scrap was and is being "produced" in India.
Thus, without anything more, it follows that additional duty would be payable on imported Brass Scrap. The question is whether this position is, in any way, entered as a consequence of the Notification No. 33/81, dated 1-3-1981 issued under Rule 8(1) of the Central Excise Rules, 1944.
"...the Central Government hereby exempts Waste and Scrap of Copper, Zinc, aluminium and lead, falling under Item Numbers 26A, 26B, 27 and 27B, respectively, of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), from the whole of the [additional] duty of excise leviable thereon subject to the condition that: (a) Such Waste and Scrap are manufactured from Copper, Zinc, aluminium or lead falling under the Item Numbers 26A, 26B, 27, 27A, respectively, of the said First Schedule on which appropriate amount of duty of excise, or as the case may be, the additional duty leviable under Section 3 of the Customs Act 1975 (51 of 1975), has already been paid; or (b) such Waste and Scrap arise from products falling under any Item Number of the said First Schedule other than Item Numbers 26A, 26B, 27 and 27A manufactured from the said Copper, Zinc Aluminium or Lead." The Notification was amended by Notification 181/81-C.E., dated 4-11-1981 substituting item (b) by the following : "(b) such Waste and Scrap arise from products manufactured or produced in India and falling under any Item Number, other than Item Numbers 26A, 26B, 27 and 27A, of the said First Schedule." 7. An analysis of items (a) and (b) of the Notification No. 33/81 and the substituted item (b) shows the following:-------------------------------------------------------------------------------- Clause (a) Original clause (b) Substituted clause (b)--------------------------------------------------------------------------------(1) Exemption relates to (Common provision) (Common Provision) Waste and Scrap of(2) Waste and Scrap must (2) Waste and Scrap (2) Waste and Scrap be manufactured from must arise from must arise from Copper, Zinc, products falling under products manufactured Aluminium and Lead any item other than or produced in India and falling under Items item Numbers 26A, falling under any item 26A, 26B, 27 and 27B.26B, 27 and 27A other than item Numbers 26, 26B, 27,(3) On Copper, Zinc, (3) Such products (deleted) Aluminium and Lead must have been The case at hand relates to import of Brass Scrap at a time when Notification No. 33/81 was in force and before the amending Notification No. 181/81 came into force.
8. Clause (a) of Notification 33/81 is clearly inapplicable since it requires that Copper (major part of Brass contains Copper and hence 'Copper Alloy' includes Brass) from which the scrap was manufactured should be duty paid, that is, paid excise duty or additional customs duty and in the case at hand, since the scrap was of foreign origin, no such duty had been paid. Clause (b) in its original form should be attracted if it is shown that - (a) the scrap arose from products not falling under items 26A, 26B, 27 or 27A: and (b) such products were manufactured from copper falling under item number 26A.What led the Assistant Collector to hold against the respondent is not known since he did not prepare a reasoned order. The appellant Collector who held in favour of the Respondent did not advert to the above two conditions required to be proved by the Respondent in order to be entitled to the benefit of Notification No. 33/81. The Brass Scrap imported by the Respondent attracted the description "Scrap" in Tariff item 26A (Ib). If the above two conditions, namely, the scrap arose not from products of the nature falling under item 26A (i.e.
crude form, ingots, bars, blocks, slabs, billets, shots, pellets, wire bars, wire rods, castings, plates, sheets, circles, strips, forts, pipes, tubes etc.) and such products were manufactured from copper alloy falling under item 26A, are satisfied, the notification would apply and there would be total exemption from excise duty. If that be so, the amount of excise duty leviable on like article would be nil and consequently additional duty leviable would be nil.
9. This position underwent a fundamental change with the substitution of item (b) of Notification 33/81 by Notification No. 151/81, dated 4-11-1981. The substituted item (b) requires that the scrap must have arisen from products manufactured in India and falling under items other than items 26A, 26B, 27 and 27A. Brass Scrap imported being Brass Scrap which arose 'outside India' cannot ordinarily be said to have arisen from products manufactured in India, unless of course, the importer is able to show that such products had actually been manufactured in and exported from India. According to Shri K.K. Jha, SDR, the substituted item (b) is clarificatory in nature and therefore the clarification re: "the requirement of the product having been manufactured in India" must be deemed to be implied in the original item (b).
10. We will now advert to the decisions of the High Courts and the Tribunal alleged to project conflicting views. The earliest decision is that of the High Court of Bombay in Century Enka Limited v. Union of India, 1982 (10) E.L.T. 64. The imported articles, namely, Polyamide Chips were exempt from payment of excise duty on condition that they were used in the manufacture of Nylon Yarn at no place other than in the factory of production and the importer asserted that the imported articles were to be used in their factory for manufacture of Nylon Yarn and this assertion was not controverted by the Department. Accordingly it was held that the condition in the exemption notification was satisfied. The High Court observed: "Section 3 (of the Customs Tariff Act, 1975) enables the department to levy countervailing duty provided the excise duty is leviable on article if manufactured in India. The plain reading of section 3 makes it clear that countervailing duty under section 3 cannot be levied on an article imported into India if such article manufactured in India is exempted from the payment of excise duty.
The provisions of Section 3 has to be read with the provisions of Central Excise Act and the liability to levy the countervailing duty would depend upon the fact as to whether such an article is liable to pay excise duty. In these circumstances, it is futile to urge that the exemption notification can have no bearing to determine liability to pay countervailing duty under the Customs Tariff Act." 11. The High Court of Delhi in Khandelzval Metal and Engg. v. Union of India, 1983 (12) E.L.T. 292 held that Brass scrap is an excisable article brought into existence by a process of manufacture that exemption Notification 34/81 granted exemption for scrap if it is used in the manufacture within the factory of production and such a conditional exemption Notification has no relevance for the purpose of payment of additional duty of customs under the Customs Tariff Act, 1975. It was pointed out that the Notification does not as such exempt the Copper Scrap from payment of Excise duty. The condition in the Notification was imposed to avoid paying twice over the Excise duty, once on the Copper Scrap and again on the manufactured product obtained from use of Copper Scrap. It was further observed as follows : "This avoidance of paying duty twice over also explains another notification No. 33 dated 1-1-1981 by which the Central Government has exempted waste and scrap of Copper from the payment of whole of the duty of excise leviable subject to the condition that such waste and scrap are manufactured from Copper falling under Item 26A on which appropriate duty of excise ... has already been paid. The purpose of the Notification is different and the petitioners cannot take the advantage of it." It has to be noticed that the High Court of Delhi was referring to item (a) of Notification 33/81 and did not advert to item (b) of the Notification which did not stipulate any condition of payment of Excise duty or additional duty on the Copper from which the Scrap was manufactured. It can, of course, be argued that the original item (b) and the substituted item (b) also indirectly took care of the same purpose. However, the High Court did not consider the need to read Section 3 of the Customs Tariff Act, 1975 with the provision of the C.E.S. Act, 1944. The importer took the matter to the Supreme Court which dismissed the appeal by judgment reported in 1985 (20) E.L.T. 222 (S.C.). The Court explained the scope of the words "equal to the excise duty" appearing in Section 3(1) of the Customs Tariff Act, 1978 by observing that the words have been used only to provide a measure of additional duty. The Court did not consider pronounce upon the effect the Notification No. 33/81 on the levy of additional duty on the import of Scrap.
12. There is another decision of the High Court of Bombay in Indian Lead Private Ltd. v. Union of India, 1988 (38) E.L.T 23. The appellant imported lead scrap during the period covered by the Notification 33/81 and before the issue of Notification No. 186/81. The Court noticed the difference between .the conditions stipulated in items (a) and (b) of the original notification and that item (b) did not provide for payment of excise duty or additional duty on lead from which scrap is manufactured. Lead scrap fell under item 31 of the First Schedule and hence item (b) and not item (a) of the Notification was attracted. It was held that Notification No. 33/81 (before amendment) would attract article manufactured in India like the imported scrap and since it enjoyed exemption under Notification 33/81, no additional duty would be payable on the imported lead scrap.
13. We may refer to the following observations of the High Court of Rajasthan in Prem Cables Pvt. Ltd. v. Assistant Collector, 1981 (8) E.L.T. 440 :- "If the excise duty was not payable on the goods at the relevant time under relevant provisions of the Central Excises Act, the Customs authorities were not entitled to recover the countervailing duty on those goods under Section 2A of the Indian Tariff Act".
These observations were followed by a three Member Bench of the Tribunal in Modella Textile Industries v. Collector of Customs, 1983 (13) E.L.T. 1020 (Tribunal).
14. The earliest decision of Tribunal this question is that of a three-Member Bench in Collector of Customs v. Travancore Chemical & Manufacturing Co. Ltd. 1985 (20) E.L.T. 413 (Tribunal). Copper Scrap covered by Item 26A (Ib) was imported, apparently after 4-11-1981, the date of Notification No. 181/81 according to item (b) of which the product should have been manufactured in India. Since the imported scrap did not arise from products manufactured in India, it was held that the benefit of the amended notification was not available and additional duty was leviable. The Bench found the facts of the case to be similar to the case decided by the High Court of Delhi in the case of Khandelwal Metal & Engineering, 1983 (12) E.L.T. 292 and dissimilar to the facts of the case decided by the High Court of Bombay in Century Enka titd., 1982 (10) E.L.T. 64. However, the Bench held that exemption would have been available under Notification No. 35/81 and as such additional duty was not leviable. Thus, it can be seen that the Bench held that if the like article is wholly exempt from levy of excise duty, additional duty would not be leviable. The Bench did not and was not required to consider the applicability of item (b) of the Notification 33/81 in its unamended form.In Eagle Smelting Co. v. Collector of Customs, 1989 (40) E.L.T. 369 (Tribunal), non-leviability of additional duty was canvassed on the ground of applicability of item (b) of Notification No. 33/81 in its original form, prior to the amendment by Notification No. 186/81. It was held that - "So we see that the importers must provide evidence of the products from which the waste and scrap arose, and they must also provide evidence that those products were manufactured from "the said copper, zinc, aluminium and lead". They have not done this and I see no means by which they can do this, seeing that the scraps were imported from a foreign country, and their origin will have been already destroyed." The decision is, with respect, not correct to the extent it assumes that evidence cannot be adduced since the scrap was imported from a foreign country and this will have been already destroyed. That the "origin will have been destroyed" was an assumption, pure and simple.
To say that there may be practical difficulty in adducing evidence of the origin of the imported scrap is one thing: to say as a matter of law that evidence is not possible as the origin of the imported Scrap will have been destroyed is quite a different thing. The latter, as a matter of law, is not correct. The original of the scrap will certainly be non-existent as it has turned into scrap and other articles. But there may be evidence available to show the nature of the original article, though, of course, it may be difficult to marshal such evidence.
16. In Order No. 371-377/88, dated 27-7-1988, a three-Member Bench of Tribunal held that the assessee was not entitled to benefit of Notification No. 33/81 since he had not established satisfaction of the conditions prescribed therein.
17. There is no doubt that the article like the one imported by the Respondent, namely, Brass Scrap is produced in India. If excise duty was leviable at the relevant time on such article produced in India, an amount equal to such excise duty shall be levied as additional duty on the imported article. If no excise duty was leviable at the relevant time on such article produced in India, the additional duty leviable on the imported article shall be Nil. This is the clear position emerging from a proper understanding of Section 3(1) of the Customs Tariff Act, 1975. At the time this provision was enacted, old T.I. 68 was in the Schedule to Central Excises & Salt Act, 1944. If the Tariff indicated nil rate of duty for like article or if like article was exempt from levy of excise duty fully, it would be a case where no excise duty would be leviable on such like article or the excise duty leviable would be Nil. That being so, no additional duty would be leviable under section 3(1) of the Customs Tariff Act, 1975. This was the view taken by the High Court of Bombay in Century Enka Ltd., 1982 (10) E.L.T. 64 and Indian Lead Private Limited, 1988 (38) E.L.T. 23 as also the High Court of Rajasthan in Prem Cables Limited, 1981 E.L.T. 440. The High Court of Delhi in Khandelwal Metal & Engg., 1983 (12) E.L.T. 292 was specifically urged to consider the question with reference to Notification No. 34/81 and not Notification No. 33/81. Exemption under Notification No. 34/81 was conditional on the article being used in the manufacture within the factory of production and the High Court held that exemption with such a condition had no relevance in the matter of payment of additional duty of customs. The reported judgment does not show that the importer raised the contention that by virtue of item (b) of the exemption notification No. 33/81 no excise duty was payable on article like the Brass Scrap deported in this case and therefore that no additional duty was leviable on the imported Brass Scrap. There was only a casual reference to item (a) of the Notification No. 33/81 and requirement of payment of excise duty on the copper from which like article was manufactured. There is no such requirement in item (b) of the Notification. There was no reference made to item (b) of the notification which is sought to be relied on before us. When the matter reached the Supreme Court, there was no contention urged on the basis of the Exemption Notification No. 33/81 and the Court made no reference to it. Therefore the decision in the Delhi case is of no assistance to us. The decision of the three Member Bench of the Tribunal in M/s.
Travancore Chemical & Manufacturing Co. Ltd., 1985 (20) E.L.T. 413 (Tribunal) is in accordance with the view we have taken. We have already indicated our partial dissent from the view taken by a two Member Bench of the Tribunal in Eagle Smelting Co., 1989 (40) E.L.T.18. We have adverted to the unamended provision in item (b) of the Notification No. 33/81 as it was at the time of the import in the case at hand. In order to be entitled to the benefit of item (b) of the Notification, the importer must show that the imported Brass Scrap arose from products not falling under Item No. 26A of the Schedule 1 to CESA, 1944 and that the product was manufactured from Copper falling under Item No. 26A. The Collector (Appeals) did not examine these aspects but assumed that the imported Brass Scrap, being 'Night' grade as per NARI specifications at the relevant time, satisfied the two conditions. He has not indicated the basis for such assumption. This aspect has to be examined and the importer must establish satisfaction of these conditions, only then it can be found that no excise duty was leviable on like article and no additional duty would be leviable on the imported article.
19. The substituted item (b) of the Notification No. 33/81 requires that the Brass Scrap must be from products produced in India and not falling under item 26A of the Schedule to CESA, 1944. We have indicated that it cannot ordinarily be that the imported Brass Scrap would have been manufactured from product produced in India falling within the above description (though it is open to the importer to attempt such proof which of course is not ordinarily practicable). But the substitution was made by Notification No. 181/81, dated 4-11-1981 and can have only prospective effect; that being so, it cannot be invoked in the case at hand. To get over this difficulty, Shri K.K. Jha, SDR contended that the later notification was clarificatory in nature and therefore item (b) of the earlier notification must be taken to have the amplitude and content found in the substituted item (b). We have already compared the original and the substituted provision (para 7).
The requirement that the product from which scrap arose must have been produced in India was introduced by the later Notification. No such condition was present in the earlier notification, nor can such a condition be implied from the language of the original item (b). The condition in the original item (b) was that the product should not fall under Item 26A and must have been manufactured from Copper falling under Item 26A. The words "...products falling under any item ." is indicative only of the description and classification of the products.
A product manufactured outside India may also answer to the description in any item in the Tariff. The condition in item (a) to the effect that excise duty must have been paid on Copper makes it clear that such Copper must have been manufactured in India; however, the condition in item (a) to the effect that excise duty must have been paid on Copper makes it clear that copper could have been imported. In other words, item (a) contemplates both contingencies to ensure that copper must have been duty paid, either excise duty on indigenous copper or additional duty on imported copper. There is nothing in the original item (b) to spell out a condition that the product must have been manufactured in India. The two conditions in the original item (b) neither expressly nor impliedly suggest any such condition. As indicated the condition is geared to the classification in the Schedule to the CESA, 1944. But in the substituted item (b), the requirement of the product being manufactured in India was specifically incorporated.
The language used in the original item (b) is clear, specific and incapable of suggesting the requirement of the product having been manufactured in India. Such a requirement is quite foreign to the language of the original item (b). Such a wholly new condition was introduced only by the Notification No. 186/81 and this notification cannot be regarded as xlarificatory in nature. Hence it cannot have any impact on imports made prior to 4-11-1981.
20. We will now deal with the objection raised by the Respondent against the maintainability of the appeal. Section 131 as it stood before the Finance Act No. 2 of 1980 conferred power of revision on the Central Government. Sub-section (1) enabled the Government to modify or annul any order passed under Section 128 or any order passed under section 130 etc. On the application of any person aggrieved by such order. Sub-section (4) of Section 131 conferred power on the Central Government to annul or modify, suo motu, any order under section 128 or section 130. The then existing section 131 has been retained as Section 129DD by the 1980 amendment which also introduced Section 131B. By section 131B(2) every proceeding pending immediately before 11-10-1982 (the date of coming into force of the amendments) before the Central Government under the erstwhile Section 131 shall stand transferred on that day to the Tribunal which shall deal with the same as an appeal filed before it. The present appeal was one resulting from statutory transfer of a suo moto revision proceeding initiated prior to 11-10-1982 by and pending before the Central Government on 11-10-1982.
It is pointed for the Respondent that the records merely show that the Government had decided to initiate suo moto revision against the order passed by the Collector (Appeals) and the Additional Secretary to the Government had signed the show cause notice on 16-3-1981 with the endorsement "copy forwarded to" the Respondent, the Collector of Customs and the Assistant Collector, Bombay. The appeal before the Collector (Appeals) had been filed not by the Respondent but by the Respondents' agent or representative and the appellant Collector's order did not contain the address of the Respondent; It is contended that the Government did not have the Respondents' address and could not have and did not transmit the notice directly to the Respondent or the agent, that the endorsement did not require the Collector of Customs to serve the notice on the Respondent or the agent and the notice was not issued and not served. On this basis it is contended that there was no proceeding before the Central Government on 11-10-1982 which could be transferred to the Tribunal and hence there is no vital proceeding before the Tribunal which could be disposed of as an appeal.
21. A Bench of two Members originally heard this and other similar appeals. The Judicial Member, Shri S.L. Peeran referred to the above contention but did not specifically express any opinion on the same and held that the issue on merits should be referred to a Larger Bench in view of the apparently conflicting decisions of the Courts and the Tribunal. The Technical Member, Shri P.C. Jain held that there was a valid proceeding pending before the Central Government on 11-10-1982 and the same stood validly transferred to the Tribunal. On the issue relating to the merits, he held that the matter should be remanded to the original authority. Both Members agreed to refer to a third Member the (question whether there was any proceeding before the Central Government on 11-10-1982. which stood validity transferred to the Tribunal or whether this and other points are required to be determined by Larger Bench.
22. According to the Respondent, the Central Government was required to serve show cause notice to the Respondent within the time limit prescribed by the erstwhile Section 131(5) of the CESA, 1944 and notice had not been served at all, much less within the time limit and, therefore, the proceeding initiated by the Central Government was invalid. On this question, the Judicial Member did not record a specific finding but the Technical Member held that Section 131(5) was not applicable to proceeding initiated under Section 131(4) and hence there was no invalidity in the proceeding before the Central Government. However, both the Members agreed to refer to a third Member the question regarding the applicability of erstwhile Section 131(5) in the case at hand or whether this and other points are required to be determined by Larger Bench.
23. The points of difference were referred to a third Member, Shri K.S.Venkataramani. The third Member agreed with the finding of the Technical Member that there was valid proceeding pending before the Central Government before 11-10-1982 which stood validly transferred to the Tribunal and that the erstwhile Section 131(5) requiring service of show cause notice on the Respondent within the prescribed time limit was not applicable to proceeding under erstwhile Section 131(4). Thus it is clear that the two contentions now urged before us had been urged earlier and referred to a third Member and had been overruled by the majority, namely, the Technical Member and the third Member. These two contentions are therefore no longer open before us and are concluded by the majority view referred to above.
24. Thus, there is only one question remaining for decision in the appeal and that is the question relating to the merits already dealt with by us. The Collector (Appeals) was in error in assuming that the imported Scrap 'Night' grade as per NARI specifications satisfied the conditions in item (b) of the Notification No. 33/81. We have held that it is a matter for evidence by the importer and he has to satisfy the adjudicating authority that the conditions are satisfied. Difficulty in adducing evidence will not absolve the importer from his duty to adduce evidence. If the conditions are satisfied, "like article" can be regarded as exempt from levy of excise duty and consequently additional duty leviable would be nil. Since these conditions were not adverted to by the lower authorities, in our opinion, an opportunity should be granted to the Respondent to produce such evidence to satisfy the adjudicating authority regarding the conditions and the applicability of item (b) of the Notification to the instant case. To enable the respondent to produce evidence and the dutiability to be adjudicated in accordance with law and the conclusions in this order, we set aside the impugned order of the Assistant Collector and Collector (Appeals) on the dutiability question and remand the case to the jurisdictional Assistant Commissioner for decision afresh. The appeal is accordingly allowed.