Case Note & Summary
The matter concerned a civil appeal and a connected writ petition arising from a dispute over the levy of countervailing duty on imported partially oriented yarn (POY). The appellants, an importer, had claimed the benefit of an exemption notification dated 28-02-1982 issued under Rule 8(1) of the Central Excise Rules, which exempted man-made fibres and yarns from excise duty as specified. The controversy was whether the imported POY fell within item (iv) under the head Polyester Yarn, relating to POY of 75 deniers and above but below 100 deniers, or within item (iii), relating to POY of 100 deniers and above but not above 750 deniers. The appellants contended that their POY was of 100 deniers and above but not above 750 deniers, entitling them to a lower rate of countervailing duty under clause (iv). The authorities, relying on a circular dated 24-09-1980 issued by the Central Board of Excise and Customs, treated the POY as falling within the 75-100 denier slot. That circular instructed that POY was assessable to countervailing duty and excise duty at the final denierage stage, i.e., after the POY had been texturised. The Delhi High Court had summarily rejected the appellants' writ petition on the ground of lack of jurisdiction. On appeal to the Supreme Court, the appellants argued that there was no warrant for levying countervailing duty on imported goods at a stage they would reach after undergoing a process subsequent to import; the duty must be imposed on the goods in the state in which they were at the time of import. They relied on a judgment of a single judge of the Bombay High Court in Krislon Texturiser Pvt. Ltd. v. Union of India, (1989) 44 ELT 488, and a Division Bench of the Gujarat High Court in Special Civil Application No. 1165 of 1903, Vareli Exports Pvt. Ltd. v. Union of India. The respondents' counsel fairly conceded that the view taken in those judgments was unassailable. The Supreme Court held that countervailing duty must be levied on goods in the state in which they are when they are imported, as Section 3 of the Customs Tariff Act so mandates. Consequently, the circular issued by the Central Board of Excise and Customs was invalid for assessing duty at a post-import texturised stage. The Court found that the POY imported by the appellants fell within the slot of 100 deniers and above but not above 750 deniers, thus attracting the rate of countervailing duty provided in clause (iv) of the exemption notification. The Court further noted that since the circular was issued in Delhi, the Delhi High Court had jurisdiction to entertain the writ petition, and the High Court's rejection on jurisdictional grounds was erroneous. Accordingly, the civil appeal was allowed, the order of the Delhi High Court was set aside, and the writ petition filed before the Delhi High Court was allowed. The bank guarantee furnished by the appellants pursuant to the Supreme Court's order dated 02-05-1983 was ordered to stand discharged. No separate order was required on the writ petition filed in the Supreme Court, which was disposed of accordingly. No order as to costs was made.
Headnote
A) Customs and Excise - Countervailing Duty on Imported Goods - Stage of Levy - Customs Tariff Act, Section 3; Central Excise Rules, Rule 8(1); Exemption Notification dated 28-02-1982 - Imported partially oriented yarn (POY) must be assessed to countervailing duty in the condition in which it is imported and not at a subsequent stage after undergoing texturising. The court held that countervailing duty must be levied on goods in the state in which they are when they are imported, as mandated by Section 3 of the Customs Tariff Act. A circular dated 24-09-1980 directing assessment at the final denierage stage was impermissible (Paras Not mentioned). B) Customs and Excise - Classification under Exemption Notification - Denierage Classification - Exemption Notification dated 28-02-1982 under Rule 8(1) of Central Excise Rules - POY imported by the appellants was of 100 deniers and above but not above 750 deniers, falling within item (iv) of the exemption notification, not item (iii) for 75-100 deniers. Authorities had erroneously treated the goods as 75-100 deniers based on a circular that relied on post-import texturising. Held that appellants' POY was liable to the lower rate of countervailing duty as per clause (iv) (Paras Not mentioned). C) Writ Jurisdiction - Territorial Jurisdiction - Situs of Cause of Action - Not mentioned - The circular upon which the duty was levied had been issued in Delhi. Therefore, the Delhi High Court had jurisdiction to entertain and try the appellants' writ petition. The High Court had erred in summarily rejecting the writ petition on the ground of lack of jurisdiction. Held that the Delhi High Court had territorial jurisdiction (Paras Not mentioned).
Issue of Consideration
Whether countervailing duty on imported partially oriented yarn (POY) is to be levied on the goods in the state in which they are at the time of import, or at a later stage after texturising; whether imported POY of 100 deniers and above but not above 750 deniers falls within item (iv) or item (iii) of the exemption notification dated 28-02-1982; whether Delhi High Court had territorial jurisdiction to entertain the writ petition when the circular on which the levy was based was issued in Delhi.
Final Decision
Civil Appeal allowed; order of Delhi High Court set aside; writ petition filed by appellants before Delhi High Court allowed; bank guarantee furnished pursuant to Supreme Court order dated 02-05-1983 discharged; no order required on Writ Petition (C) No. 3881 of 1983, disposed of accordingly; no order as to costs.
Law Points
- Countervailing duty must be levied on goods in the state in which they are when imported
- Section 3 of Customs Tariff Act mandates assessment at import stage
- Imported POY classification based on denierage at import not post-texturising
- Exemption notification interpretation based on actual imported goods
- Territorial jurisdiction of High Court lies where the offending circular is issued
- No duty can be levied based on a process occurring after import
