ENFIELD INDIA LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) THESE Writ Petitions coming on for hearing on this day, upon perusing the petitions and the respective affidavits filed in support thereof the order of the High Court, dated 4-6-1981 and made herein and the records relating to the prayers aforesaid dated 14-5-1981 on the file of the first respondent in all the petitions comprised in the return of said respondents to the writ made by the High Court and upon hearing the arguments of Mr. T.K. Seshadri, Advocate for the petitioner in all the petitions and of Mr. P. Narasimhan, Additional Central Government Standing Counsel on behalf of the respondents in all the petitions, the court made the following Order: The main point that is stressed, on behalf of the petitioner, by Mr. T.K. Seshadri, is that the relevant provisions of the Customs Tariff Act, 1975 and the Central Excises and Salt Act, 1944; Act 51 of 1975 and Act 1 of 1944 respectively, have not been property understood by the Revisional Authority, while passing the impugned order. In this regard, he refers to the provisions of Section 3(1) of the Customs Tariff Act, 1975, which deals with the additional duty. The concept of this additional duty is dealt with by the Supreme Court inKhandelwal Meta land Engineering Works and Another, etc.v.Union of India and Others1985 AIR(SC) 1211, 1985 CrLR(SC) 462, 1985 ECR 2571, 1985 (1) Scale 1073, 1985 (3) SCC 620, 1985 (S1) SCR 750, 1985 CRLR 462, 1985 (20) ELT 222, 1985 TaxLR 2556, 1985 SCC(Tax) 466 (S.C.)], paragraphs 3, 4, 5 and 7 of which read as follows:- "Section 2(15) of the Customs Act, 1962 defines'duty'to mean a duty of customs leviable under the Act. Chapter V of the Act contains provisions for the levy of, and exemption from, customs duties. By Section 12(1) of the Act,'Except as otherwise provided in the Actor in any other law for the time being in force', duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 or under any other law for the time being in force, on goods imported into or exported from India. Section 25 of the Customs Act, which deals with the power of the Central Government to grant exemption from the payment of customs duty, provides by sub-section (1) that, if the Central Government is satisfied that it is necessary in the public interest so to do, it may, by a notification in the Official Gazette, exempt generally, either absolutely or subject to such conditions as may be specified, goods of any specified description from the whole or any part of the duty of customs leviable thereon. 4.Section 2 of the Customs Tariff Act, 1975 says that the rates at which duties of Customs shall be levied under the Customs Act, 1962 are specified in the First and Second Schedules of the Tariff Act. Section 3 of the Tariff Act deals with the levy of'additional duty equal to excise duty'. Sub-section (1) of Section 3 of the Explanation to that section, which are relevant for our purpose, read thus : 'Levy of Additional duty equal to excise duty':- (1) Any articles 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 is 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 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 article to which the imported article belongs, and where such duty is leviable at different rates, the highest duty'. The question which we must first examine is as to what is the true nature of the duty mentioned in Section 3(1) of the Tariff Act. It has to be appreciated at the threshold that the charging section is Section 12 of the Customs Act and not Section 3(1) of the Tariff Act. Section 12, Customs Act, incorporates the different ingredients embodied in the concept of a fiscal imposition. It levies a charge, it indicates the taxable event (the import or export of goods) and it indicates the rate of the levy. The rates are such'as may be specified under the Customs Tariff Act, 1975'. The last ingredient takes us to Section 2, Tariff Act, which lays down that'the rates at which the duties of customs shall be levied under the Customs Act are specified in the First or Second Schedule'. Nothing more would be ordinarily required to complete the scope of Section 12, Customs Act. The scheme incorporated in that section read with Section 2 of the Tariff Act is analogous to the scheme embodied in Section 4, Income-tax Act read with the relevant provisions of the Finance Act. The levy specified in Section 3(1) of the Tariff Act is supplementary levy, in enhancement of the levy charged by Section 12 of the Customs Act and with a different base constituting the measure of the import. In other words, the scheme embodied in Section 12 is amplified by what is provided in Section 3(1). The customs duty charged under Section 12 is extended by an additional duty confined to imported articles in the measure set forth in Section 3(1). Thus, the additional duty which is mentioned in Section 3(1) of the Tariff Act is not in the nature of countervailing duty. InAshok Service Centrev.State of Orissa 1983 AIR(SC) 394, 1983 (53) STC 1, 1983 (1) Scale 123, 1983 (2) SCC 82, 1983 (2) SCR 363, 1983 UJ 265, 1983 TaxLR 2861, 1983 (55) CLT 509, 1983 SCC(Tax) 90, which considered the nature of levy of additional Sales-tax under an Orissa Act, this Court observed.'This construction receives support from the use of the word'additonal'in Section 3(1) which involves the idea of joining or uniting one thing to another so as thereby to form one aggregate. The gross turnover referred to therein should therefore be understood as that part of the gross turnover which is taxable under the principal Act'Counsel for the appellants rely strongly on the'Objects and Reasons'of Section 3 of the Tariff Act in support of their contention that the said section is a charging section and imposes a countervailing duty. The statement of objects and reasons says: 'Clause 3 provides for the levy of additional duty on an imported article to counter balance the excise duty leviable on the like article made indigenously, or on the indigenous raw materials, components or ingredients which go into the making of the like indigenous article. This provision corresponds to Section 2A of the Existing Act, and is necessary to safeguard the interests of the manufacturers in India'. This statement lendsprima faciesupport to the contention of the appellants but, in the absence of any ambiguity in the wording of Section 3(1), we cannot treat the additional duty referred to therein as countervailing duty. Nor, indeed, can we regard that provision as a charging section merely because the statement says that Section 3'provides for the levy'. The statement of Objects and Reasons errs in being common to sub-sections (1) and (3) of Section 3. It is more apposite to sub-section (3) though, even there, it may not be correct to say that it is a charging provision. Sub-section (3) confers powers on the Central Government, in public interest, to levy on any imported article,'such additional duty as would counterbalance the excise duty leviable on any raw materials, components and ingredients of the same nature as, or similar to those, used in the production or manufacture of such article', whether on such article, duty is leviable under sub-section (1) or not. Since we are not concerned directly with sub-section (3), we will not pronounce upon its meaning and implications. 6.That leads to the inquiry as to the reasons or purpose behind the argument that Section 3(1) of the Tariff Act is an independent, charging section. It shall have been noticed that Section 3(1) provides that any article which is imported into India shall, in addition, (that is, in addition to the duty of customs for which rates are specified in Section 2) be liable to an additional duty equal to the excise duty for the time being leviable on a like article produced or manufactured in India'. The contention of Mr. Sorabjee, who appears on behalf of the appellants, is that the brass scrap imported by them is not produced or manufactured in India because the damaged articles of brass which constitute brass scrap, are not only incapable of being manufactured but are in fact not manufactured. Learned Counsel contends that if the change in the condition of an article is the result of an accidental event, that is to say, an event not intended, or if the changes is the result of ordinary wear and tear, the change thus produced cannot be termed as manufacture. It is urged that the article imported by the appellants are what they are because, they had suffered damage or had been subjected to ordinary wear and tear in the natural course. If such goods cannot be produced or manufactured in India, for the reason that they cannot be and are. In fact, hot produced or manufactured in India, or for the matter of that anywhere, no additional duty can be levied upon them under Section 3(1). According to the learned Counsel, the basis postulate underlying the levy of duty under Section 3(1) of the Tariff Act is that indigenous goods belonging to the class of goods which are imported are. chargeable to excise duty. The illustrations given are the import of live animals, live trees, burnt-up cables, broken glass or fused bulbs. The argument is that there is and can be no levy of additional duty on these goods if imported because they cannot be and are not manufactured for the simple reason that they are not the result of treatment labour and manipulation, nor are they the result of one or more processes through which the original commodity is made to pass. Putting it in one sentence, the original is that of indigenous goods, similar to those which are imported, do not suffer excise duty for the reason that they are not manufactured, the charge leviable under Section 3(1) of the Tariff Act is not attracted. 7.There is no substance in the argument. In the first place, as we have indicated earlier, Sections 2 and 3(1) of the Tariff Act are not charging sections. The charging section is Section 12 of the Customs Act under which, duty is leviable on the taxable event of export of goods from India or the import of goods into India, which is retatable to Entry No, 83 in List I of the Seventh Schedule to the Constitution;'Duties of Customs including export duties'. The taxable event is not the manufacture of the goods. Under Section 3(1) of the Tariff Act,'the excise duty for the time being leviable on a like article if produced or manufactured in India'is only the measure of the duty leviable on the imported article. Section 3(1) does not require that the imported article should be such as to be capable of being produced or manufactured in India. The assumption has to be that an article imported into India can be produced or manufactured in India and upon that basis, the duty has to be determined under Section 3(1)'. The explanation to Section 3(1) is brought to the notice of this court by Mr. T.K. Seshadri and also the ratio inKhandelwal Metal and Engineering Works and Another etc.v.Union of India 1985 AIR(SC) 1211, 1985 CrLR(SC) 462, 1985 ECR 2571, 1985 (1) Scale 1073, 1985 (3) SCC 620, 1985 (S1) SCR 750, 1985 CRLR 462, 1985 (20) ELT 222, 1985 TaxLR 2556, 1985 SCC(Tax) 466 (S.C.)], for the purpose of showing that the revisional authority, in the instant case, has not properly understood the nature of the manufacture of the connecting rod. Further the learned Counsel submits that the revisional authority has not classified it in accordance with the classifications, contemplated under the provisions of the Customs Tariff Act.

(2.) MR. P. Narasimhan, Learned Senior Central Government Standing Counsel, submits that it is the law that was in existence on the date of the imposition of this customs duty that has to be taken into consideration. The Customs duty and excise duty are different and they could be levied in different spheres and as such the appreciation of the matters that were placed before the initial authority and the appellate authority as well as the conclusion arrived at by the revisional authority are correct, and in confirmity in law. In this regard, he refers to the decision inLucas T.V.S. Ltd.v.Government of India (Mad.)], paragraph 7 of which reacts as follows:" As per Section 2A countervailing duty is leviable for any article which is imported into India in addition to customs duty. The goods in question imported by the appellant were treated as one coming under Item 70(1) of the First Schedule to the Tariff Act, since they contained less than 97 per cent aluminium, Item 27 of the First Schedule to the Excise Act will definitely cover goods imported by the appellant, as per the language couched therein. The distinction between Item 6(1) and Item 70(i) of the First Schedule to the Tariff Act has no relevancy at all for the purpose of countervailing duty, the question is as to whether the goods in question would attract excise duty under the Excise Act. It cannot be stated that the goods similar to the one imported by the appellant would not attract excise duty, if produced or manufactured in India, and if so, Item 27 of the First Schedule would be attracted, in view of the fact that it is couched in general terms. Customs duty and excise duty are different and they come to be levied in different spheres and under different statutes, each of which is self-contained. Only for the purpose of levying countervailing duty under the Tariff Act, reference is made to the Excise Act and definitely not on the ground that goods as such are liable to excise duty. For that, the Schedule to the Excise Act alone will govern, and there is no need to refer to and rely on the ratio in the Schedule to the Tariff Act. For the purpose of the Tariff Act, the goods imported by the appellant attract Item 70(i) of the First Schedule thereto, and definitely not item 66(1) there under. For the purpose of excise duty under the Excise Act, which is notionally invoked for levying countervailing duty, under the Tariff Act, Item 27 of the First Schedule to the Excise Act will govern. The learned single Judge of this Court has correctly held that the distinction between Section 2 and Section 2A loses its relevance because what is to be seen is whether the article imported is liable to duty under the Excise Act and for that purpose, reference will have to be made to the provisions of the Excise Act alone. The learned single Judge has further held that if an article comes under the description of an item chargeable under the Excise Act, it will be liable to countervailing duty which shall be equal to the excise duty payable for it. We are in complete agreement with the reasoning given by the learned single Judge. The goods imported, will definitely fall within the definition of aluminium'in Item 27 of the Excise Act and that would suffice for ascertainment of countervailing duty as contemplated under Section 2A of the Tariff Act. The Central Government in its order in Review No. 4025 of 1972, has correctly applied the principles and has upheld the levy of countervailing duty on the goods imported by the appellant herein.'