Mechano Paper Machines Pvt. Ltd. Vs. Collr. of Customs - Court Judgment

Excerpt:
1. this appeal is directed against the order-in-appeal no. cal.cus-1263/89, dated 23-8-1989. the appellants imported certain components for paper making machinery.the components, it was claimed, ware classifiable under sub-heading 8439.99. there is no dispute in regard to classification. the appellants, however, claimed partial exemption from basic customs duty under notification no. 155/86 and from cvd under notification no. 59/87. they also claimed exemption from auxiliary duty under notification no. 207/87 on the ground that they were eligible to exemption under notification no. 156/86. the appellants were denied exemption from auxiliary duty on the ground that this notification does not specify notification nos. 155/86 and 59/87 in the table annexed to that notification and hence no exemption was available.2. arguing for the appellants, the ld. advocate submits that they opted for exemption notification no. 155/86 as it granted them more benefit compared to notification no. 156/86. they were legally entitled to claim exemption under notification no. 156/86, but chose not to do so because other notification available to them gave them greater benefit.this notification no. 156/86 is specified in the table annexed to notification no. 207/87, and therefore, since exemption is to class of goods and this notification is specified as one of the notifications under notification no. 207/87 they are eligible to exemption from auxiliary duty. they submitted'that this issue is now fully covered in view of the judgment rendered by the hon'ble apex court in the case of collector of customs, bombay v. bharat heavy electricals ltd. - 1992 (61) e.l.t. 332 (sc).3. ld. d.r. reiterates the department's argument but conceeds that the case is covered against them by the hon'ble apex court judgement in the case of bharat heavy electricals ltd. (supra).4. we have heard both sides. notification no. 207/87 which grants exemption from auxiliary duty exempts goods which are partially or wholly exempted from duty of customs specified in the first schedule of the customs tariff act, 1975, by virtue of the notification of the government of india specified in the schedule annexed to that notification from the whole of auxiliary duty of customs leviable on such goods ufider sub-section (1) of section 53 of the said finance act. in other words, the notification exempts such goods from auxiliary'duty as are exempted either wholly or partially from the customs duty under any of the notifications mentioned in the table annexed to notification no. 207/87. admittedly, notification no. 155/86 under which the appellants claimed benefit is not mentioned as one of the notifications in the table annexed to notification no. 207/87. this table, however, against serial no. 229, mentions notification no.156/86, dated 1st march, 1986. notification no. 156/86, placed at page 12-13 of the supplementary paper book presented in the court, exempts paper making machinery and component parts classifiable tinder 84.39 from customs duty. there are no conditions attached to this notification. there being no dispute in regard to classification as such, it is clear that appellants could have claimed benefit of this notification legally. they, however, chose to opt for notification no.155/86 because of the reason that under this notification they were required to pay only 30 per cent duty whereas under notification no.156/86, the duty payable was 40 per cent. the fact, however, remains that they were eligible to partial exemption from customs duty under either of the two notifications. in other words, in law they were eligible to claim benefit under notification 156/86, specified as one of the notifications in the table annexed to notification no. 207/87.all that notification no. 207/87 requires is that a particular class of goods should be exempted under any notification specified in the table annexed to notification no. 207/87. notification no. 156/86 is specified as one such notification and, in law, the appellants are eligible to claim benefit under this notification also. since this notification does not prescribe any conditions, proviso to notification no. 207/87 would also not come in the way by dis-entitling them to such an exemption. what is relevant is not whether they actually claimed exemption under one of the notifications specified under notification no. 207/87, but whether they are eligible to exemption, if they chose to do so, under any of the notifications specified in the table annexed to notification no. 207/87. in fact, this position has now been clarified by the hon'ble apex court in case of collector of customs, bombay v. bharat heavy electrical ltd., new delhi - 1992 (61) e.l.t.332 (sc) as under : "9. there is, however, another way of reading the notifications before us and it is this which appeals to us as the more reasonable one. on this interpretation, relief under notification no. 41/80 will not depend upon the actual operation or application of notification no. 35/79 in the case of a particular item of goods. it is intended for a class of goods. the 1979 notification grants an exemption or concession in respect of the basic duty payable on certain classes of goods viz., parts of articles which fall under one of the specified headings and required for certain purposes. the purport and intention of the 1980 notification is to exempt the class of goods falling under the purview of the 1979 notification from auxiliary duty as well. the exemption under the 1980 notification does not depend, in this view, on the practical effect of the application of the 1979 notification in a particular case. its applicability should not be confined to items of goods in respect of which a reduction in duty is actually enjoyed under one of the notifications included in the schedule to the 1980 notification. there appears to be no logic in saying that the exemption from auxiliary duty in respect of the same part will be available only where the duty chargeable on the part is more than, but becomes equal to, that on the whole article by applying the 1979 notification but nowhere the duty on the part is the same as that of the whole even otherwise. equally, it seems absurd to say that when the part suffers a basic duty of 40 per cent and the whole a duty of 40 per cent, there will be a countervailing duty but that there will be no such duty where the basic duty on the part is 41 per cent or more but reduced to 40 per cent because of the 1979 notification. the correct position appears to be that the purpose and purport of the 1979 notification is to ensure that, in respect of the articles listed therein, the part should not suffer a higher duty than the whole. the 1980 notification likewise exempts this category of articles, which enjoy the benefit of the same or less duty on the part than that on the whole, from auxiliary duty. 10. we think that this interpretation not only does not do any violence to the language of the notifications but, on the other hand, gives effect to its true intent and purpose. we, therefore, uphold the view taken by the tribunal somewhat hesitantly, that the assessee was entitled to exemption from auxiliary duty in respect of the goods in question." 5. for the reasons mentioned hereinbefore, we set aside the impugned order and allow the appeal.

Judgment:
1. This appeal is directed against the Order-in-Appeal No. CAL.

CUS-1263/89, dated 23-8-1989. The appellants imported certain components for paper making machinery.The components, it was claimed, ware classifiable under sub-heading 8439.99. There is no dispute in regard to classification. The Appellants, however, claimed partial exemption from basic Customs Duty under Notification No. 155/86 and from CVD under Notification No. 59/87. They also claimed exemption from Auxiliary duty under Notification No. 207/87 on the ground that they were eligible to exemption under Notification No. 156/86. The appellants were denied exemption from auxiliary duty on the ground that this notification does not specify Notification Nos. 155/86 and 59/87 in the Table annexed to that Notification and hence no exemption was available.

2. Arguing for the appellants, the ld. Advocate submits that they opted for exemption Notification No. 155/86 as it granted them more benefit compared to Notification No. 156/86. They were legally entitled to claim exemption under Notification No. 156/86, but chose not to do so because other Notification available to them gave them greater benefit.

This Notification No. 156/86 is specified in the Table annexed to Notification No. 207/87, and therefore, since exemption is to class of goods and this Notification is specified as one of the Notifications under Notification No. 207/87 they are eligible to exemption from auxiliary duty. They submitted'that this issue is now fully covered in view of the judgment rendered by the hon'ble Apex Court in the case of Collector of Customs, Bombay v. Bharat Heavy Electricals Ltd. - 1992 (61) E.L.T. 332 (SC).

3. Ld. D.R. reiterates the department's argument but conceeds that the case is covered against them by the Hon'ble Apex Court judgement in the case of Bharat Heavy Electricals Ltd. (supra).

4. We have heard both sides. Notification No. 207/87 which grants exemption from auxiliary duty exempts goods which are partially or wholly exempted from duty of customs specified in the first Schedule of the Customs Tariff Act, 1975, by virtue of the Notification of the Government of India specified in the Schedule annexed to that Notification from the whole of auxiliary duty of customs leviable on such goods ufider Sub-section (1) of Section 53 of the said Finance Act. In other words, the Notification exempts such goods from auxiliary'duty as are exempted either wholly or partially from the Customs Duty under any of the Notifications mentioned in the Table annexed to Notification No. 207/87. Admittedly, Notification No. 155/86 under which the appellants claimed benefit is not mentioned as one of the Notifications in the Table annexed to Notification No. 207/87. This Table, however, against Serial No. 229, mentions Notification No.156/86, dated 1st March, 1986. Notification No. 156/86, placed at page 12-13 of the Supplementary Paper Book presented in the court, exempts paper making machinery and component parts classifiable tinder 84.39 from Customs Duty. There are no conditions attached to this Notification. There being no dispute in regard to classification as such, it is clear that appellants could have claimed benefit of this Notification legally. They, however, chose to opt for Notification No.155/86 because of the reason that under this Notification they were required to pay only 30 per cent duty whereas under Notification No.156/86, the duty payable was 40 per cent. The fact, however, remains that they were eligible to partial exemption from Customs Duty under either of the two Notifications. In other words, in law they were eligible to claim benefit under Notification 156/86, specified as one of the Notifications in the Table annexed to Notification No. 207/87.

All that Notification No. 207/87 requires is that a particular class of goods should be exempted under any Notification specified in the Table annexed to Notification No. 207/87. Notification No. 156/86 is specified as one such Notification and, in law, the appellants are eligible to claim benefit under this Notification also. Since this Notification does not prescribe any conditions, proviso to Notification No. 207/87 would also not come in the way by dis-entitling them to such an exemption. What is relevant is not whether they actually claimed exemption under one of the Notifications specified under Notification No. 207/87, but whether they are eligible to exemption, if they chose to do so, under any of the Notifications specified in the Table annexed to Notification No. 207/87. In fact, this position has now been clarified by the Hon'ble Apex Court in case of Collector of Customs, Bombay v. Bharat Heavy Electrical Ltd., New Delhi - 1992 (61) E.L.T.332 (SC) as under : "9. There is, however, another way of reading the notifications before us and it is this which appeals to us as the more reasonable one. On this interpretation, relief under Notification No. 41/80 will not depend upon the actual operation or application of Notification No. 35/79 in the case of a particular item of goods. It is intended for a class of goods. The 1979 Notification grants an exemption or concession in respect of the basic duty payable on certain classes of goods viz., parts of articles which fall under one of the specified headings and required for certain purposes. The purport and intention of the 1980 Notification is to exempt the class of goods falling under the purview of the 1979 Notification from auxiliary duty as well. The exemption under the 1980 Notification does not depend, in this view, on the practical effect of the application of the 1979 Notification in a particular case.

Its applicability should not be confined to items of goods in respect of which a reduction in duty is actually enjoyed under one of the Notifications included in the schedule to the 1980 Notification. There appears to be no logic in saying that the exemption from auxiliary duty in respect of the same part will be available only where the duty chargeable on the part is more than, but becomes equal to, that on the whole article by applying the 1979 Notification but nowhere the duty on the part is the same as that of the whole even otherwise. Equally, it seems absurd to say that when the part suffers a basic duty of 40 per cent and the whole a duty of 40 per cent, there will be a countervailing duty but that there will be no such duty where the basic duty on the part is 41 per cent or more but reduced to 40 per cent because of the 1979 Notification.

The correct position appears to be that the purpose and purport of the 1979 Notification is to ensure that, in respect of the articles listed therein, the part should not suffer a higher duty than the whole. The 1980 Notification likewise exempts this category of articles, which enjoy the benefit of the same or less duty on the part than that on the whole, from auxiliary duty.

10. We think that this interpretation not only does not do any violence to the language of the Notifications but, on the other hand, gives effect to its true intent and purpose. We, therefore, uphold the view taken by the Tribunal somewhat hesitantly, that the assessee was entitled to exemption from auxiliary duty in respect of the goods in question." 5. For the reasons mentioned hereinbefore, we set aside the impugned order and allow the appeal.