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PETITIONER: COLLECTOR OF CUSTOMS, BANGALORE & ANR.

       Vs.

RESPONDENT: HANSUR PLYWOOD WORKS AND ANR.

DATE OF JUDGMENT26/10/1989

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

CITATION:  1989 SCR  Supl. (1) 775  1989 SCC  Supl.  (2) 520  JT 1989 (4)   393

ACT:     Customs Tariff Act, 1975: Schedule Heading No. 44.01 and Notifications  No. 265 of 1982, No. 59 o.f 1983 and No.  126 of  1984-Timber from Burma exempted from customs  duty--Levy of auxiliary duty--Determination of.

HEADNOTE:     Import of timber is charged to effective basic  .customs duty at 60 per cent under the Customs Tariff Act, 1975.  The Government of India had, however, issued notification  under s.  25 of the Customs Act, 1962 absolutely exempting  timber imported  from  Burma. But the importers are liable  to  pay auxiliary duty in terms of Notification No. 265 dated Decem- ber  8, 1982 and its successor Notification Nos. 59 of  1983 and  126 of 1984, which prescribed two rates with  reference to  the  rate of duty of customs.  The  explanation  thereto provides  that  where there are two  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 auxiliary duty payable will be  the higher of the two rates.     The  respondents  had imported certain  consignments  of timber  from Burma which were assessed to auxiliary duty  at the higher rate as per notification. The Appellate  Tribunal held in favour of the assessee respondents.     In these appeals by the Revenue under s. 130E(b) of  the Customs  Act,  it  was contended for  the  respondents  that exemptions Or concessions in respect of goods imported  from certain  countries  were generally granted in  pursuance  of trade agreements entered into with those countries under  s. 5 of the Tariff Act, that the expression "country of origin" in the notification had a special meaning and its determina- tion  governed by special provisions, and  that,  therefore, the  explanation to the notification in question had  to  be confined  in  its application only to a  comparison  of  the rates applicable under notification of concession and  basic auxiliary duty determined accordingly. Allowing the appeals, 776     HELD:  The auxiliary duty, in a case where imports  from different  countries attract different degrees of  exemption under  different  notifications in pursuance  of  agreements

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under s. 5 of the Customs Tariff Act should be  determinable separately by reference to the effective basic duty notified in respect of each such country. But, if there are different rates  of  effective duty notified for goods  imported  from different  countries  of origin, then,  notwithstanding  the agreement  with each of these countries, the auxiliary  duty under such a notification will not be determined, in respect of  the import from each of such countries, by reference  to the  effective basic duty leviable in respect  thereof,  but will  be  determined with reference to the  highest  of  the effective  rates  of  duty applicable to  all  the  imports. [778A-C]     in  the instant case, there is no material to show  that the notification was issued in pursuance of an agreement. It is a case where the imports come from two sets of  countries the imports from which attract two different effective basic rates of duty. The differentiation arises because in respect of one set of countries there is no notification of  conces- sion  while  in relation to the other there  is  a  complete exemption granted under a notification. There is nothing  in the  language of the explanation that excludes such  a  case from  its purview. The auxiliary duty is, therefore,  to  be determined with reference to the higher of the two effective rates of duty. [777H, 778C-D, F]     Collector  of Customs v. Western India Plywood  Manufac- turing Co. Ltd., [1989] Supp. 1 SCR 779, applied.

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.  3820-24 of 1988.     From the Order dated 2.6.1988 of the Customs, Excise and Gold  (Control) Appellate Tribunal, New Delhi in  Order  No. 410-414/88-D,   Appeal   Nos.   CD/SB./659/86-D;C/1526/84-D, CD/SB/1522/86-D;C/1565/84-D and C/422/86--D. V.C. Mahajan, and P. Parmeshwaran for the Appellants.     V.  Sridharan, A.R. Madhav Rao and V.  Balachandran  for the Respondents. The Judgment of the Court was delivered by 777     RANGANATHAN, J. These are appeals under section  130E(b) of  the  Customs Act from an order passed  by  the  Customs, Excise  and Gold Appellate Tribunal dismissing  the  appeals preferred  by the Collector of Customs in the cases of  M/s. Hunsur Plywood Pvt. Ltd. and M/s. Veneer Mills. The question raised  involves  the interpretation  of  Notification  Nos. 59/83 and 126/84. These notifications are identically worded in all material respects with notification no.265/Cus. dated 8.12.  1982 and the question before us is directly  governed by our judgment of even date in Civil Appeal Nos. 2644-48 of 1987 (Collector of Customs v. Western India Plywood Manufac- turing Co. Ltd., [1989] Supp. 1 S.C.R. 779. For the  reasons set out in detail in the said judgment these appeals have to be allowed and the orders of the Assistant Collector reject- ing the claims filed by the respondents have to be upheld.     When  these  matters were taken up, Shri  V.  Sridharan, appearing  on behalf of the assessee-respondents,  drew  our attention  to section 5 of the Customs Tariff Act.  He  con- tended  that exemptions or concessions in respect  of  goods imported  from  certain countries are generally  granted  in pursuance  of agreements entered into with those  countries, that the expression "country of origin" has a special  mean- ing and its determination governed by special provisions and that,  in view of this, the explanation to the  notification

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in question has to be confined in its application only to  a comparison  of the rates applicable under  notifications  of concession  to  goods imported from  certain  "countries  of origin".  In  this  case, though there  are  four  different notifications, one each in respect of Burma, Nepal,  Bangla- desh  and  Bhutan, they are all  notifications  of  complete exemption and the rate of auxiliary duty by reference to any one  of them will according to the assessee, be the  smaller rate mentioned in the relevant notification under considera- tion.  The rate of basic duty in respect of other  countries is  60% as there is no notification of exemption or  conces- sion  in relation thereto. The argument is that the last  of these should be ignored and the basic auxiliary duty  deter- mined only by reference to the rates prescribed in the  four notifications  of exemption. For the reasons set out in  the judgment in the case of Western India Plywood  Manufacturing Co. Ltd. we are unable to accept this contention.      We  are unable to agree with the learned  counsel  that the interpretation given by us will be inconsistent with the agreement  for  concessional treatment that  may  have  been entered  into between the Government of India and the  coun- tries from which the goods in question are imported. In  the first  place, there is no material in the case before us  to show that the notification under section 25 was issued in 778 pursuance  of  an agreement under section 5 of  the  Customs Tariff  Act.  That apart, if this argument were  sound,  the auxiliary  duty,  in  a case where  imports  from  different countries  attract  different  degrees  of  exemption  under different  notifications, should be determinable  separately by reference to the effective basic duty notified in respect of each such country. But admittedly, if there are different rates  of  effective duty notified for goods  imported  from different  countries  of origin, then,  notwithstanding  the agreement  with each of these countries, the auxiliary  duty under  the notification now under consideration will not  be determined,  in  respect  of the import from  each  of  such countries, by reference to the effective basic duty leviable in respect thereof, but will be determined with reference to the highest of the effective rates of duty applicable to all the  imports.  If  that be so, there is no  reason  why  the position cannot be the same in a case like the present where the imports come from two sets of countries the imports from which  attract two different effective basic rates of  duty, although the difference arises because in respect of one set of counties there is no notification of concession while  in relation to the other there is a complete exemption  granted under  a  notification.  As we have pointed  out,  there  is nothing  in  the language of the explanation  that  excludes such a case from its purview.     Considering the language of the notification before  us, as  we have explained in the case of Western  India  Plywood Manufacturing  Co.  Ltd.  the result of  reading  the  First Schedule  along  with  the relevant  notifications  is  that imports of timber into India from most countries is  charged to  effective  basic customs duty as per the tariff  in  the Schedule  whereas in respect of imports from  Burma,  Nepal, Bhutan  and Bangladesh, the rate of effective basic duty  is nil.  The position, therefore, is that the article in  ques- tion  is liable to two or more different rates of  effective basic  duty based on the country of origin for  the  import. It,  therefore,  follows that the auxiliary duty  is  to  be determined with reference to the higher of the two effective rates of duty.     We,  therefore, see no reason to reach a different  con-

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clusion  in the present case from that arrived at by  us  in the case of Western India Plywood Manufacturing Co. Ltd. We, therefore,  allow the appeals and restore the orders of  the Assistant Collector rejecting the claims of refund filed  by the  assesses. The appeals are allowed but there will be  no order as to costs. P.S.S.                                               Appeals allowed. 779