Case Note & Summary
The appeal arose from the Customs, Excise and Gold (Control) Appellate Tribunal's order concerning refund of additional duty of customs paid on imported bulked nylon fabric. The appellant, an importer, had imported nylon woven dipped diffusion resistance fabric described in the bill of entry under Goodyear Code EO2 NN. The goods were cleared after payment of duty as demanded, but the appellant later claimed refund of the additional duty, contending it had been overpaid. The customs authorities refused the refund, and the Tribunal upheld the higher levy. The primary dispute centered on the correct rate of additional duty under Section 3 of the Customs Tariff Act, 1975, and the interpretation of exemption notification No.55/78-CE dated 1 March 1978. The material facts were that the appellant imported bulked nylon fabric, which the Tribunal found to be 'textured yarn produced out of base yarn' within the meaning of Serial No.1 of the Table to Notification No.55/78-CE. The notification prescribed a concessional rate of duty for such yarn: the duty for the time being leviable on base yarn if not already paid plus Rs.5 per kilogram. Separately, Serial No.2 dealt with 'other textured yarn', specifying various rates, including Rs.24.60 per kg for polyamide (nylon) textured yarn of 165 deniers and above under Serial No.2(a)(v). The Additional Duty Rules, 1976, framed under Section 3(3), levied additional duty on fabrics containing more than 10 per cent by weight of synthetic fibre or yarn equal to the excise duty on the synthetic fibre or yarn used. The Revenue sought to apply the Explanation to Section 3(1) to demand the highest duty because different rates existed for textured yarn depending on process of manufacture. The legal issue before the Supreme Court was whether the additional duty payable on the imported fabric should be the concessional rate specified for 'textured yarn produced out of base yarn' or the higher rate for 'other textured yarn' under the Explanation to Section 3(1). The appellant argued that once the Tribunal found the goods fell under Serial No.1, only that rate applied. The Revenue, represented by the Additional Solicitor General, relied on the Explanation to Section 3(1), claiming that since notification prescribed different rates for textured yarn, the highest duty should be levied. The Court analysed Section 3(1) and its Explanation, observing that the Explanation defines excise duty leviable on a like article if produced or manufactured in India; if a like article is not produced, it refers to the class or description of articles to which the imported article belongs, and where such duty is at different rates, the highest duty. The Court also considered Section 3(3) and the Additional Duty Rules, which counterbalance excise duty on raw materials. However, the Court held that the imported goods fell within the specific description 'textured yarn produced out of base yarn', and the excise duty leviable was that specified against that description. The Explanation could not be invoked to apply a higher rate meant for 'other textured yarn', because that was a different description. The Court relied on Thermax Private Ltd. v. Collector of Customs, (1992) 4 SCC 440, where it was held that the Explanation to Section 3(1) applies only where goods of exactly the same description attract different rates of duty. The Court also referred to Collector of Customs v. Western India Plywood Manufacturing Co. Ltd. and Collector of Customs v. Hansur Plywood Works. Consequently, the Supreme Court set aside the Tribunal's order, allowed the appeal, and directed refund of excess additional duty, with no order as to costs.
Headnote
A) Customs and Central Excise - Additional Duty (Countervailing Duty) - Levy of Additional Duty under Section 3(1), Customs Tariff Act, 1975 - Imported bulked nylon fabric was classifiable as 'textured yarn produced out of base yarn' under Notification No.55/78-CE dated 01.03.1978 - The duty specified against that description applied, not higher rate for 'other textured yarn' - Held that the Explanation to Section 3(1) is attracted only when goods of exactly the same description attract different rates, not when distinct descriptions carry different rates (Paras 7-9). B) Customs - Exemption Notification - Interpretation of Entry - Distinction between 'textured yarn produced out of base yarn' and 'other textured yarn' - Tribunal's factual finding that imported yarn was produced out of base yarn was conclusive; process of manufacture determined classification - Held that higher duty under Sl.No.2(a)(v) of Notification 55/78 could not be imposed once goods fell under Sl.No.1 (Paras 5-9). C) Precedent - Thermax Private Ltd. v. Collector of Customs - Principle that Explanation to Section 3(1) applies only when exactly same description attracts different rates - Followed and applied; appeal allowed and Tribunal order set aside (Paras 10-11).
Issue of Consideration
Whether the Explanation to Section 3(1) of the Customs Tariff Act, 1975 could be invoked to levy additional duty at the highest rate for 'other textured yarn' when the imported goods were found to be 'textured yarn produced out of base yarn' under Notification No.55/78-CE dated 1 March 1978.
Final Decision
Appeal allowed; judgment and order of Customs, Excise and Gold (Control) Appellate Tribunal set aside; no order as to costs.
Law Points
- Additional duty under Section 3(1) of Customs Tariff Act 1975 is equal to excise duty leviable on like article if produced or manufactured in India
- Explanation to Section 3(1) applies only when exactly same description attracts different rates
- Section 3(3) enables levy to counterbalance excise on raw materials
- classification under exemption notification determined by specific description
- higher duty for other description not applicable.
