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PETITIONER: M/S. GOODYEAR INDIA LTD.

       Vs.

RESPONDENT: COLLECTOR OF CUSTOMS, BOMBAY

DATE OF JUDGMENT:       27/01/1997

BENCH: CJI, S.P. BHARUCHA

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T BHARUCHA, J.      The appeal  arises upon  a judgment  delivered  by  the Customs, Excise  and Gold  (Control) Appellate Tribunal. The appellants imported  bulked nylon  fabric. The bill of entry described the  imported goods  as being  Nylon Woven  Dipped Diffusion Resistance  Fabric,  Goodyear  Code  EO2  NN.  The imported  goods   were  cleared  upon  payment  of  duty  as demanded.  The   appellants  then   claimed  refund  of  the additional duty paid by them as now stated. The claim having been refused  by the  authorities below,  the  Tribunal  was moved.      The Customs  Tariff Act,  1975, prescribes in Section 3 for the  levy of  additional duty equal to excise duty. Sub- section (1),  its Explanation and sub-section (3) of Section 3 are relevant, and they read thus:      "3. Levy  of Additional  duty equal      to excise  duty. -  (1) 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   in    leviable   at   any      percentage  of   its   value,   the      additional  duty   to   which   the      imported article shall be so liable      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 or manufactured      in India" means the excise duty for      the time being in force which would      be leviable  on a  like article  if

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    produced or  manufactured in  India      or,  if   a  like  article  is  not      produced  or   manufactured,  which      would be  leviable on  the class or      description of  articles  to  which      the imported  article belongs,  and      where such duty at different rates,      the highest duty.      (3) If  the Central  Government  is      satisfied that  it is  necessary in      the public  interest to levy on any      imported article  [whether on  such      article duty is leviable under sub-      section (1) or not] such additional      duty as  would counter  balance the      excise duty  leviable  on  any  raw      materials,   components    and   in      gradients of the same nature as, or      similar  to   those,  used  in  the      production or  manufacture of  such      article, it may, by notification in      the Official  Gazette, direct  that      such  imported  article  shall,  in      addition,   be    liable   to    an      additional duty  representing  such      portion of the excise duty leviable      on such  raw materials,  components      and ingredients as, in either case,      may be  determined by rules made by      the  Central   Government  in  this      behalf."      Under the  provisions of  Section 3(3)  of the  Customs Tariff Act,  the Additional  Duty  Rules,  1976,  have  been framed. Rule  2 states that for the purposes of Section 3(3) "the  additional  duty  leviable  on  any  imported  article specified in column (2) of the Table annexed hereto shall be equal to  the excise duty for the time being leviable on the material specified  in the corresponding entry in column (3) of the said Table to the extent that material is used in the manufacture of the imported article". The Table reads thus: "                        TABLE ------------------------------------------------------------ S.No.          Name of article         Name of material ------------------------------------------------------------ (1)              (2)                            (3) ------------------------------------------------------------ 1. Fabrics containing more than 10                Synthetic    per cent by weight of synthetic                fibre and    fibre or yarn.                                 yarn. 2.................................               ........." ------------------------------------------------------------      In exercise  of the  powers conferred  by Rule 3 of the Central  Excise  Rules,  194,  the  Central  Government,  by Notification No.  55/78 dated  1st March, 1978, (hereinafter called "the  said notification")  exempted textured  yarn of the description specified in column (2) of the Table thereto falling under sub-item II (i)(b) of Item No. 18 of the First Schedule to  the Central Excises and Salt Act, 1944, from so much of the excise duty leviable thereon as was in excess of the duty  specified in the corresponding entry in column (3) of that Table. The Table read thus: "                        THE TABLE ------------------------------------------------------------ S.No.              Description                 Rate of duty ------------------------------------------------------------

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(1)                (2)                          (3) ------------------------------------------------------------ 1.Textured yarn  produced out               The duty for the of Base yarn                             time being leviable                                          on the Base yarn if                                          not already paid                                          plus five rupees                                           per kilogram. 2. Other textured yarn -            (Rs. per kilogram)   (a) Polyamide (nylon)       Textured yarn -   (i) below 38.5 deniers                   63.80  (ii) 38.5 deniers and above               56.80       but below 88 deniers   (iii) 88 deniers and above but           49.80         below 121 deniers   (iv) 121 deniers and above but           42.80        below 165 deniers   (v) 165 deniers and above                24.60 xxx                      xxx                           xxx ------------------------------------------------------------ Explanation I. - "base yarn" means yarn falling under sub- item II(i)(a) of Item No. 18 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), from which textured yarn has been produced; ............................................................ .............."      The Tribunal  noted the  contention on  behalf  of  the appellant that  the yarn  in question  fell under  S. No.  1 aforementioned and  not under  S. No. 2(a)(v), and the basis for  the  contention,  namely,  that  the  supplier  of  the imported goods  had bought base yarn and subjected it to the process of air-bulking to produce the textured yarn that was imported. The  Tribunal stated,  counsel "contends  that the description of  the article  relevant to the present case is textured yarn  produced out  of  base  yarn  and  not  other textured yarn in notification 55/78. This contention has, in our opinion,  substance". The  Tribunal went on to add, "The description of  the article  in the  First Schedule  to  the Central Excises  and Salt  Act is  Textured yarn.  ‘Textured yarn produced  out of  base yarn’  is merely  descriptive of process of  manufacture. For duty purposes, notification No. 55/78 describes  and fixes  a different confessional rate of duty for  textured yarn produced out of base yarn separately from other  textured yarn.  This itself  shows that textured yarn is  liable to excise duty at different rates, depending on the  process  of  manufacture.  The  excise  leviable  on textured polyamide yarn of above 750 deniers would depend on the process of manufacture. It is Rs. 6.50 (Sl.No. 3 (b)(vi) of notification  No.28/75 CE)  plus Rs.5/-  per kg.  (Col. 3 against S1.No. 1 of notification 55/78 CE), if such textured yarn is  produced out  of  base  yarn.  If  it  is  produced otherwise, the  rate of  duty is  Rs. 24.60  per kg. (S1.No. 2(a)(v) of  notification 55/78).  In such  a situation,  the yarn content  of the  imported fabrics would attract duty at the higher rate viz., Rs. 24.60 per kg. (plus special excise duty as may be applicable)."      Learned counsel  for the appellants submitted that once the Tribunal  had come  to the  conclusion that the imported goods were  textured yarn  produced out  of base  yarn, only that amount  of additional  duty was  payable thereon as was specified against the description "textured yarn produced ut op base  yarn" in  the Table of the said notification. There was no  question then  of requiring  the appellants  to  pay additional duty  at a rate specified in the notification for

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"other textured yarn".      The learned Additional Solicitor General, appearing for the Revenue, placed reliance upon the Explanation to Section 3(1). In  his submission,  the imported  goods were textured yarn in  respect of  which the  said notification prescribed different rates of duty; therefore, under the Explanation to Section 3(1),  the highest  duty thereon  was that which was payable by the appellants.      Section 3  requires that an article imported into India shall be  liable to additional duty equal to the excise duty for the time being leviable on a like article if produced or manufactured in  India. The  expression "the excise duty for the time  being leviable  on a  like article  if produced or manufactured in  India" has  been defined by the Explanation to Section 3(1). It means the excise duty for the time being in force  which would be leviable on a like article produced or manufactured  in India. If a like article is not produced or manufactured  in India,  the expression  means the excise duty which  would be leviable on the class or description of articles to  which the  imported article  belongs; and where such excise duty is at different rates, the expression means the highest  rate of  duty. Section 3(3) enables the Central Government, in  the public  interest, to levy on an imported article such  additional duty  as would  counterbalance  the excise  duty  leviable  on  raw  materials,  components  and ingredients  of   the  same   nature  as  are  used  in  the manufacture of  such article  or are  similar  thereto.  The Central Government  may, by  notification  in  the  Official Gazette, direct that an imported article shall bear addition duty representing  such portion  of the excise duty leviable on such  raw materials, components and ingredients as it may by rules determine. It is in exercise of the power conferred by Section  3(3) that  the Additional Duty Rules, 1976, have been framed  and they  specify that additional duty shall be imposed on  fabrics containing  more than  10  per  cent  by weight of  synthetic fibre or yarn which shall be equivalent to the excise duty devisable on the synthetic fibre and yarn used therein.      Insofar as the imported goods are concerned, they fall, as the Tribunal has found, in the category of "textured yarn produced out  of base  yarn". In  respect of  "textured yarn produced out  of base yarn" the excise duty that is leviable is that  specified against  that description in the Table of the said  notification. The Explanation to Section 3(1) says of an article which is not produced or manufactured in India that the expression "excise duty for the time being leviable on a  like article  if produced  or manufactured" means that duty which  would be leviable on the class or description of articles to  which  the  imported  article  belongs.  Since, admittedly, th  imported goods  fall within  the description "textured yarn  produced out  of base  yarn", the additional duty that  is payable thereon is that specified against that description in  the Table  of the said notification and they cannot be  made  liable  to  additional  duty  at  the  rate specified for  "other textured  yarn", that  is to  say, for textured yarn that does not fulfill the description of being produced out of base yarn.      We are  fortified in  the view  that  we  take  by  the decision of this Court in Thermax Private Ltd. vs. Collector of Customs  (Bombay) New Customs House, (1992) 4 S.C.C. 440. The relevant paragraph is reproduced:      "Shri A.K.  Ganguly, on  behalf  of      the Revenue,  raises  a  contention      that, even  assuming that the goods      fulfil  the   conditions   of   the

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    notification referred  to  earlier,      the CVD rate applicable would be 80      per   cent   by   virtue   of   the      Explanation to  Section 3(1) of the      C.T. Act. He submits that the goods      imported by  the assessee as "parts      of    refrigerating     and    air-      conditioning equipment".  They  are      chargeable at  different  rates  of      duty accordingly as they fall under      item with  serial  No.  4  (80  per      cent) or  that with  serial  No.  5      (nil) or that with serial No. 6 (20      per cent)  or that with serial Nos.      7 and  8 (25  per cent).  In such a      situation, he  says, the provisions      of the  Explanation to Section 3(1)      are   attracted   and   hence   the      assessee will  be liable to duty at      the highest rate of 80 per cent. We      are both  to permit  the department      to raise  at  this  stage  a  fresh      contention  not  taken  before  the      Tribunal or earlier. That apart, we      do not think it is well founded. It      is not doubt true that Item 29-A of      the Schedule  to the  C.E.  Act  is      very  wide   and   covers   various      articles.  The   notification  also      deals with  various  categories  of      articles falling  under that  item.      But there  has been  no dispute  at      any stage  that the  goods  we  are      concerned with fall under item with      serial    No.     8(3)    of    the      notification.   So   far   as   the      category  of  goods  is  concerned,      there is  only  one  rate  of  duty      mentioned in  the notification. The      fact that  certain other  parts  of      refrigerating and  air-conditioning      appliances and  machinery may  fall      under item  with serial No. 4(3) or      elsewhere cannot attract the higher      duty on  the goods  presently under      consideration. The  Explanation  to      the notification (sic Section 3(1)]      is applicable  only where  goods of      exactly   the    same   description      attract different  rates  of  duty.      See,  in   this   connection,   the      decisions on analogous provision in      Collector  of  Customs  v.  Western      India  Plywood   Manufacturing  Co.      Ltd., 1989 Supp. (2) S.C.C. 515 and      Collector  of  Customs  vs.  Hansur      Plywood  Works,   1989  Supp.   (2)      S.C.C. 520.  We, therefore,  reject      this     contention.      (Emphasis      supplied.)<slc>      We are, therefore, of the view that the Tribunal was in error and  that the  judgment and order under appeal must be set aside.      The appeal  is allowed.  The judgment  and order  under appeal is set aside.

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    No order as to costs.