NESTLE INDIA LTD Vs. CC

JUDGEMENT

(1.) THE issue for determination in this appeal which arises out of the order of the Collector of Customs (Appeals), Bombay is the eligibility or otherwise of "Double Drum Roller Dryer" imported by the appellants herein, who are manufacturers of Lactogen infant food and cereal products, to the benefit of concessional rate of auxiliary duty of 25% under Serial No. 11(xii) of Notification 189/86 -Cus. dated 1.3.1986 which covers "goods falling under Heading 84.19 excluding machinery and equipment for food, other than milk.." The catalogue of the machine showed that the use thereof was not limited to the mere evaporation of water or solvents from given products but also in the case of certain nutritious substances, a ready cooking effect by which instant properties were obtained. The classification of the goods was confirmed by the lower authorities under Chapter Heading 8419.81 which is applicable to 'machinery, plant and equipment for making hot drinks or for cooking or for heating food'. The appellants came up in appeal before the Tribunal which vide final order No. 392/88 -B2 dated 16.8.1988 held by a majority that the imported machine was classifiable under Heading No. 8419.39 as Dryer and the majority held that the machine was a versatile machine, capable of being used in a variety of industries and can be used for drying not only food products but also products like glue, paints, etc. The appellant's claim for consequential refund was granted in respect of basic customs duty; however, as regards refund of differential auxiliary duty in terms of Notification 189/86 [at Serial No. 11(xii)] of the table annexed thereto it was rejected for the reason that the machine was for use in food industry. Hence this appeal.

(2.) THE first contention of the learned Counsel is that since the assessee's appeal on classification under Chapter Heading 8419.39 attracting duty @ 50% + 25% : 15% (25% is the rate at which auxiliary duty is payable in terms of Notification 189/86) was allowed by the Tribunal vide its final order No. 392/88 -B2 dated 16.8.1988, the Revenue was bound to sanction refund of the excess auxiliary duty paid by the appellants for clearance of the goods (auxiliary duty was paid @ 40% being the statutory rate) and the Department could not go into the merits of the eligibility of the imported goods to the benefit of the exemption under the Notification. In support of his contention he cites the judgment of the Apex Court in the case of Commissioner of Income Tax, Delhi, Rajasthan and New Delhi v. Rao Thakur Narayan Singh in which it has been held that the Income Tax Department cannot initiate reassessment proceedings again under Section 34 of the Income Tax Act, 1922 on the same subject matter covered by an order of the Appellant Tribunal even as a result of mistake, if such mistake was not rectified by the Department by pursuing proper remedy under Section 35. We are unable to accept this contention of the learned Counsel. In the case of the appellants the only dispute before the CEGAT in appeal No. C/358/87 -B2 (which was disposed of by the earlier order dated 16.8.1988) was the correct classification of the Double Drum Roller Dryer imported by the appellants. The finding of the majority is that the machine is classifiable rightly under Heading 84.39 and not under Heading 8419.81 as decided by the lower authorities. This is clearly brought out from the operative portion of the order proposed by the Member (T) Shri I.J. Rao and which has been concurred with by the 3rd Member, Shri K. Prakash Anand, learned Member (T). The Tribunal was not called upon to go into the question of applicability of Notification No. 189/86 to the imported goods as this was never disputed by the importers before the Tribunal and the only prayer in their appeal memorandum was that the goods fall for classification under Heading 8419.39 which was ultimately accepted by the Tribunal. Therefore, when the Tribunal allowed the appeal with consequential relief, it is to be understood that the classification claimed by the importers was accepted and cannot be understood to mean that their claim for concessional rate of auxiliary duty under Notification No. 189/86 was also accepted, particularly when the importers did not claim the benefit thereof either in the Bill of Entry or before the Assistant Collector or the Collector of Customs (Appeals) or the Tribunal which, therefore, had no occasion to go into this question. It is well settled that an exemption Notification benefit has to be claimed by an assessee/importer, and since the appellants herein had not claimed the benefit of Notification No. 189/86 at any earlier stage, the order dated 16.8.1988 of the Tribunal cannot be interpreted to hold that such benefit had also been extended by virtue of the appeal being allowed. The judgment of the Apex Court cited by the learned Counsel is distinguishable in that case, the Income Tax Officers assessed the assessee who was a holder of an impartible estate in 1942 -1943. In April, 1945, a notice under Section 34 of the Income Tax Act of 1922 was issued to him on two items of income -forest income and interest income were not included in the original assessment. The assessee contested only the inclusion of forest income; however, the ITO made a revised assessment including both the incomes and the Income Tax Appellate Tribunal held that the ITO had no jurisdiction to initiate proceedings under Section 34 in respect of forest income on the ground that the ITO had knowledge that the assessee had such income when he made the original assessment. Although the Tribunal only dealt with the question of forest income, by mistake or inadvertence, it set aside the order of reassessment of July, 1945 made by the ITO and restored the original order passed by him. No steps were taken by the Income Tax Department to rectify this mistake under Section 35 of the Income Tax Act or to get the matter referred to the High Court. In January 1950, the ITO initiated proceedings under Section 34 with respect to interest income and a revised assessment order was passed including interest income, which was confirmed by the Appellate Assistant Commissioner. On further appeal, the ITAT held that since the assessee had failed to disclose his interest income in the return filed by him in connection with the original assessment, the said income had escaped assessment and, therefore, provisions of Section 34(l)(a) were attracted. The High Court on reference concluded that the Tribunal was in error in setting aside the assessment of tax on interest income but without going into the correctness of the imposition of tax thereon, but that order had become final; the order did not invalidate the entire proceedings taken under Section 34 and, therefore, the ITO could not initiate proceedings afresh under Section 34. In the result, the High Court held that the provisions of Section 34(1) were not applicable in respect of assessment year 1942 -1943 on 19.1.1950 when the notice under that provision was issued for the purpose of assessing the escaped interest income. The High Court answered the questions referred to under Section 68(1) in the negative. The Revenue went up in appeal to the Supreme Court which upheld the order of the High Court. The relevant paragraphs of the judgment of the Apex Court are reproduced herein:

(3.) IN para 10 set out above, the Apex Court has held that it could not have been the intention of the legislature by amending Section 34 to enable the ITO to reopen final decisions made against the Revenue in respect of questions that directly arose for decision in earlier proceedings. In the appeal before us, earlier decision of the Tribunal was in respect of classification of the imported goods and the question of eligibility to the benefit of Notification 189/86 never directly arose for decision in the endorsed proceedings. The consequential relief to which the appellants were entitled as a result of the Tribunal's final order dated 16.8.1988 was refund of excess 20% of basic duty paid i.e. duty was paid @ 70% in accordance with assessment by the Department under Chapter Heading 8419.81 while the rate of duty payable in accordance with the assessment under 8419.39 (which was upheld by the Tribunal) was 50%. The consequential relief granted by the Tribunal did not extend to refund of 15% auxiliary duty allegedly paid in excess of the rate prescribed in Notification 189/86 for goods falling under Heading 84.19. Learned DR is correct in pointing out that there is a difference between assessment under the Income Tax Act where all the assessments are done under the provisions of one enactment and the Customs law wherein it is the basic duty of customs that is prescribed in the Customs Act, while auxiliary duty is prescribed under the Finance Act (even though, there is only one order of assessment by the Customs authorities). Therefore, we hold that the appellants were not automatically entitled to refund of auxiliary duty stated to have been paid by them in excess.