UNION OF INDIA Vs. MADDI VENKATARATNAM AND COMPANY PRIVATE LIMITED AND INDIAN LEAF TOBACCO DEVELOPMENT COMPANY LIMITED

JUDGEMENT

(1.) All these four writ appeals can be dealt with under a common judgment. The facts in Writ Appeal Nos. 3 and 4 of 1984 will be sufficient for our purpose which are set out below: We will throughout refer to the parties as appellant and respondent as arrayed in the writ appeals. The respondent exported 3677 cases of Flue Cured Virginia tobacco to U.K. on 31.8.1970. However, what happened was that the foreign importer rejected 1210 cases, and they had to be reimported by the respondent into India on 31.7.1972. On re-import of the cases, customs duty equivalent to excise duty is payable under Section 20 of the Customs Act, hereinafter referred to as the Act. On 18.8.72 Customs authorities permitted clearance of the 1210 cases from Transit shed to the respondent's excise bonded warehouse. Thereafter, the tobacco forming the consignment of 1210 cases was used for manufacture of cigarettes by the respondent-company itself. On the basis of the manufacture excise duty was paid at the rate of Rs. 5/- per kilogram as provided for in item 4-1(1) of the Excise Tariff which was the relevant rule applicable to cigarettes. The Inspector of Central Excise who had the necessary jurisdiction certified that the said tobacco was used in the cigarettes only and it is on that basis the said excise duty was paid.

(2.) While the matter stood thus, on 1.10.1972 a show cause notice was issued to the respondent by the Assistant Collector of Customs demanding a sum of Rs. 1,03,24,723.50 as duty short-levied on the tobacco on the basis of Tariff Item 4-1(2) as though it was for the manufacture of smoking mixtures. The respondent furnished his reply to the show cause notice on 18.10.1972 and contended that the proper excise duty had been paid on the quantity of tobacco in question, whereupon by order dated 7.5.1975 the Assistant Collector determined the duty payable at Rs. 90,76,680/-. Against this order unsuccessfully an appeal was preferred by the respondent. Since the appeal was dismissed on 29.4.1976, a further revision was preferred to the Government of India. That was also dismissed. Having exhausted all these sources, an application was preferred for grant of exemption of customs duty in terms of Section 25(2) of the Customs Act. The Government of India granted the necessary exemption by an order dated 19.3.1977. Therefore, that order came to be given effect to by the Assistant Collector on 12.4.1977, who by the said order withdrew the demand made on 7.5.1975 which was raised against the respondent for a sum of Rs. 90,76,680/- as we stated above. Thus the claim for exemption had become final,

(3.) Strangely, after more than a year, on 29.6.1978 the respondent received a show cause notice (undated) from the Collector of Customs making the same demand for Rs. 90,76,680/- on the ground that the withdrawal of the demand of the Assistant Collector dated 7.5.1975 was not in order and, therefore, he proposed to exercise his power under Section 130(1) of the Act as delegated to him by Notification No. 101 dated 1.7.1964 and review the case. It was this show cause notice which came up for challenge in writ petition Nos. 3025 and 3026 of 1978. Our learned brother, Padmanabhan, J. heard the matter in great length and he was of the view that (i) the order of exemption was just and equitable on the facts and circumstances of this case, (ii) it was not open to the authorities to attack the order of exemption, (iii) Customs authorities were bound by the order of the Government of India and (iv) the Collector cannot review the order dated 12.4.1977 since it is merely consequential to the exemption order dated 19.3.1977.