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PETITIONER: COLLECTOR OF CUSTOMS, BANGALORE

       Vs.

RESPONDENT: WESTERN INDIA PLYWOOD MFG. CO. LTD. AND ANR.

DATE OF JUDGMENT26/10/1989

BENCH: RANGNATHAN, S. BENCH: RANGNATHAN, S. KULDIP SINGH (J)

CITATION:  1990 AIR  755            JT 1989 (4)   389  1989 SCALE  (2)927  CITATOR INFO :  F          1990 SC 759  (1,2,4,5)

ACT:     Customs Tariff Act, 1975: Schedule Heading No. 44.01 and Notification  No. 126 of 1984--Timber imported from  country specified in Notifications under Section 25 of Customs  Act, 1962  exempted from effective basic duty--Rate of  auxiliary duty--Determination of.

HEADNOTE:     Under  Heading  No.  44.01 of Schedule  to  the  Customs Tariff  Act,  1975, timber was chargeable  to  customs  duty (basic effective duty) at 60%. However, under a Notification issued by the Government under Section 25(1) of the  Customs Act,  1962, timber imported from certain countries  was  ex- empted, but an additional duty (auxiliary duty) was  payable on  Such  imports  in terms of Notification  No.  265  dated 1.12.1982 and its successor Notifications No. 53 of 1983 and 126 of 1984.     The  assessee imported logs of timber from  an  exempted country, and as it was not liable to pay the basic duty,  it cleared the goods by paying the auxiliary duty at 40%,  with reference to the effective basic duty at 60%, as  prescribed under  Notification No. 126 of 1984. Subsequently,  however, the assessee felt that it should have paid an auxiliary duty of  only 30%, and not 40% since no basic effective duty  was payable on the goods imported. It, therefore, applied to the respondent  for refund of the excess duty paid by  it.  This claim  was rejected by the Assistant Collector.  On  appeal, the  Collector of Customs (Appeals) held that  the  assessee was entitled to the refund claimed. This order was confirmed by the Customs Excise and Gold (Control) Appellate  Tribunal (CEGAT),  on the view that the explanation would  come  into operation  only  if  there was more  than  one  notification granting concession or exemption, in respect of basic  duty, providing for different rates in respect of articles import- ed  from  different  countries. Hence, the  appeals  by  the Department. Allowing the appeals, this Court,     HELD: 1. The Tribunal has erred in its interpretation of the  Notification  No. 126 of 1984. The assessee’s  case  is clearly covered by

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780 the explanation in the notification. The auxiliary duty paid by the assssee was perfectly in order and its refund  appli- cations are not maintainable. [783D, 785E]    2.1  The notification and the explanation make  it  clear that  the  auxiliary duty has to be paid with  reference  to each article based on the effective basic duty applicable to such  article in terms of the First Schedule read  with  any relevant notification under Section 25. [785D]     2.2  No doubt, the main part of Notification No. 126  of 1984 provides for auxiliary duty at 40% where rate of effec- tive basic duty is 60% or above i.e. rates set out in  First Schedule  read  with any relevant notification  and  at  30% where such effective rate is nil or less than 60%.  However, the explanation to the notification has made an inroad  into this simple rule by providing that where two or more  effec- tive  basic rates are applicable in respect of any  article, and the differentiation in rates is referable to the country of  origin,  then  the auxiliary duty payable  will  be  the higher of the two, or highest of the rates. [783E-G]     2.3  In the instant case, when timber is  imported  from the countries specified in the notification or notifications under  Section 25(1), the rate of basic duty is nil, but  if the  goods are imported from other countries, the  notifica- tion  does not apply and a basic duty of 60% would be  levi- able  under the entry in the First Schedule. Thus, when  the rates  specified in the First Schedule are read  along  with the  relevant notifications, it is found that the  effective basic duty is leviable on it at two rates and this differen- tiation in rates is attributable to the country of origin in regard to the import. Hence, the explanation squarely  comes into  operation and the auxiliary duty will have to be  paid by reference to the higher of the two rates of the effective basic duty, namely, 60%. [783G-H; 784A]     2.4  The differentiation referred to in the  explanation need not arise on account of the existence of more than  one notification, altering the basic duty set out in the  Sched- ule. It does not matter whether the difference in the  rates is because the First Schedule applies in certain cases and a concession  notification  in  other cases. If  there  is  no notification the rate specified in the First Schedule has to be  taken  into account for purpose of the  notification  in question. [784D-E]     2.5  A  person will have to pay an auxiliary  duty  even though  the effective basic duty is nil. That is  the  clear intention  of the statutory instrument and  the  explanation is-based on good reason. It is equitable 781 that  all  importers should pay the additional duty  at  the same  rate and that they should have no advantage or  disad- vantage  inter  se. A grant of concession in the  matter  of auxiliary  duty  as well would result in widening  the  gulf between one importer and another and also that between  such an importer and the local trader. [784F; 785A]

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Civil Appeals No. 26A42648 of 1987:     From  the Judgment and Order dated 7.5. 1987  passed  by the  Customs, Excise and Gold (Control) Appellate  Tribunal, New  Delhi,  Order  No. 377 to  381/1987-D  in  Appeal  Nos. CD/SA/A Nos. 2451, 1989 to 1991 & 1992/86-D.     V.C. Mahajan R.P. Srivastava and P. Parmeswaran for  the

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Appellant.     T.A.   Ramachandran  and Mrs. J.  Ramachandran  for  the Respondents. The Judgment of the Court was delivered by     RANGANATHAN, J. These are four appeals by the  Collector of  Customs in the cases of M/s. Western India Plywood  Mfg. Co. Ltd. and Kanara Wood & Plywood Industries Ltd.  (herein- after  referred to as ’the assessee’). A very  short  common point is involved in these appeals.     The  assessee imported logs of timber from Burma.  Under the  Customs Tariff Act, 1975, timber is chargeable to  cus- toms  duty  at 60%. (This we shall call  the  basic  customs duty.)  The  relevant entry in the Schedule to  the  Customs Tariff  Act is under heading No. 44.01 which includes  "wood and timber".     The Government had, however, issued a notification under section  25(1) of the Customs Act exempting timber  imported from certain countries of which Burma is one. The result was that  the  basic  customs duty payable by  the  assessee  in respect  of  its imports--we shall call this  the  effective basic  duty--was nil. The assessee, however, was  liable  to pay an additional duty of customs in respect of its imports. This  additional  duty may be referred to as  the  auxiliary duty  of customs. The levy of this duty is governed  by  the terms  of notification No. 265 dated 8.12.1982 and its  suc- cessor notifications Nos. 59 of 1983 and 126 of 1984. 782 The last of these reads as follows: TABLE S. No.  Description of goods               Rate      (1)            (2)                 (3) 1    Goods in respect of which          Forty * per cent      the rate of duty of customs        of the value of      specified in the said First        the goods as      Schedule, read with any            determined in      relevant notification of the       accordance with      Government of India for the        the provisions      time being in force is 60 per      of Section 14      cent ad valorem or more.           of the Customs                                         Act, 1962                                         (52 of 1962). 2. Goods in respect of which the         Thirty * per cent       rate of duty of customs               of the value of       specified in the said First           goods as deter-       Schedule, read with any relevant      mined in accord-       notification of the Government        ance with the       of India for .the time being in       provisions of       force is nil or less than 60 per      Section 14 of       cent ad valorem.                      the Customs Act,                                             1962.                                             (52 of 1962)               *  These  percentage are 30% and  20%  in  the               notification  of 1982 and 35% and 25%  in  the               notification of 1983. The terms of the notifi-               cations are otherwise identical.               Explanation: For the purpose of S1. Nos. 1 and               2 in the above Table, the expression "the rate               of duty of customs specified in the said First               Schedule, read with any relevant  notification               of the Government of India for the time  being               in  force", in relation to any article  liable               to  two  or more different rates  of  duty  by               reason of the country of origin of that  arti-               cle,  means  that rate of duty  which  is  the               highest of those rates."

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The  assessee cleared the goods by paying an auxiliary  duty at 783 40%. Subsequently, however, the assessee seems to have  felt that its case falls under S. No. 2 of the above notification and  that it should have paid an auxiliary duty of only  30% and not 40%. It, therefore, applied to the respondent for  a refund  of the excess duty allegedly paid by it. This  claim was rejected by the Assistant Collector. However, on appeal, the  Collector of Customs (Appeals) held that  the  assessee was  entitled to the refund claimed and this order has  also been  confirmed  by  the Customs, Excise  and  Gold  Control (Appellate)  Tribunal (CEGAT). The Collector of Customs  has preferred these appeals.     The  order of the Tribunal in the appeals  preferred  by the  present respondent was a very short order in which  the Tribunal  followed its earlier decision in the case of  M/s. Indian  Plywood Company Limited, Bombay. We have been  taken through the decision of the Tribunal in the said case  which is  reported in (1987) 29 ELT page 559. We have,  therefore, had  the benefit of the full reasoning of the  Tribunal  for reaching its conclusion.     We  are  of opinion that the Tribunal has erred  in  its interpretation  of the notification set out above  and  that the assessee’s case is clearly covered by the explanation in the  notification.  It  is true that the main  part  of  the notification provides for an auxiliary duty at 40% in  cases where  the effective rate of basic duty (i.e. the rates  set out  in the First Schedule read with any relevant  notifica- tion) is 60% or above and an auxiliary duty at 30% in  cases where such effective basic rate is nil or less than 60%.  If the  notification had stopped here, the assessee would  have been perfectly within its rights to claim that the auxiliary duty  payable by it would only be 30% because the  effective basic rate in its case is nil.     However,  the explanation has made an inroad  into  this simple  rule. It has provided that where there are  two  (or more)  effective  basic rates applicable in respect  of  any article and the differentiation in rates is attributable  to the country of origin of the goods imported, then the auxil- iary  duty  payable will be the higher of the  two  (or  the highest  of the) rates. In the present case, when timber  is imported from Burma and the other countries specified in the notification or notifications under section 25(1), the  rate of  basic  duty is nil but if the goods  are  imported  from other countries, the notification does not apply and a basic duty  of 60% would be leviable under the entry in the  First Schedule.  The result, therefore, is that when we  read  the rates  specified in the First Schedule along with the  rele- vant  notifications  in  respect of  a  particular  article, namely, timber, we find that the effec- 784 tive  basic  duty is leviable on it at two  rates  and  this differentiation  in rates is attributable to the country  of origin  in  regard  to the  import.  Hence  the  explanation squarely comes into operation and the assessee will have  to pay  auxiliary  duty by reference to the higher of  the  two rates of the effective basic duty, namely, 60%.     The contention on behalf of the respondent--and this  is also the view taken by the Tribunal--appears to be that  the explanation comes into operation only if there is more  than one notification granting concession or exemption in respect of  basic duty providing for different rates in  respect  of articles imported from different countries. We are unable to see  any warrant for reading any such restriction  into  the

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terms  of  the explanation. As we see it, the terms  of  the explanation  are  perfectly clear. It is this: that  if,  in respect  of  any article, there are :two or  more  effective basic duties in operation and the difference is referable to the  country  from which the article is imported,  then  the highest  of  the  effective rates will govern  the  levy  of auxiliary duty. It does not matter whether the difference in the  rates is because the First Schedule applies in  certain cases and a concession notification applies in other  cases. Clearly, the use of the words "rate  .....  specified in the First  Schedule, read with any relevant  notification"  does not necessarily require that there should be such a  notifi- cation; they mean: "the rates specified in the First  sched- ule  read with the relevant notification, if any". If  there is no notification the rate specified in the First  Schedule has  obviously to be taken into account for purpose  of  the notification  we are now concerned with. It  is.  therefore, not  necessary that the differentiation referred to  in  the explanation should arise on account of the existence of more than one notification altering the basic duty set out in the Schedule.     Sri Ramachandran contended that the construction  sought to be placed by us would lead to this anomaly that a  person will have to pay an auxiliary duty even though the effective basic  duty is nil. This argument is without force  for  two reasons. In the first place that is the direct result of the explanation  and, therefore, if that is the clear  intention of  the statutory instrument, the anomaly cannot be  helped. The second and perhaps more appropriate answer to Sri  Rama- chandran’s  contention is that the explanation is  based  on good reason. It will be seen that in a case of this type  as well  as  in cases governed by more than  one  notification, which  make a distinction in the rate of duty based  on  the country of origin, there will be different importers import- ing  goods  but paying basic duty at  different  rates.  The intention  of the statute could well be that while for  pur- poses of basic duty a 785 differentiation in rates may be justified depending upon the country of origin that consideration would be totally irrel- evant  in the context of auxiliary duty. In the  context  of auxiliary  duty, it is .equitable that all importers  should pay  the  additional  duty at the same rate  and  that  they should  have no advantage or disadvantage inter se. A  grant of concession in the matter of auxiliary duty as well  would result in widening the gulf between one importer and another and also that between such an importer and the local trader. The  provision, therefore, seems to have  been  deliberately enacted to achieve this result which is not really an anoma- ly as described by Sri Ramachandran.     Sri Ramachandran sought to make same point on the use of the word ’article’ in the notification. We do not,  however, see  any significance in the use of this word which has  any relevance to the point at issue. The word ’article’ is  used because  though a number of articles may be included in  one item  in the First Schedule, the relevant  notification  may not govern all of them and it may be restricted.only to some out  of  the many articles mentioned in  the  Schedule.  The notification  and the explanation, therefore, make it  clear that the auxiliary duty has to be calculated with  reference to  each article based on the effective basic rates of  duty applicable  to such article in terms of the  First  Schedule read with any relevant notification under section 25.     For the reasons mentioned above, we are of opinion  that the  auxiliary  duty paid by the assessee was  perfectly  in

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order and that its refund applications are not maintainable. We,  therefore, set aside the order of the Tribunal and  the Collector  (Appeals) and restore the order of the  Assistant Collector refusing refund to the assessee. The appeals  are, therefore,  allowed.  In the circumstances of the  case,  we make no order as to costs. N.P.V.                                               Appeals allowed. 786