Commissioner of Customs vs Shri Ram Rayons

Dinesh Maheshwari, J.—The Commissioner of Customs, Jodhpur, headquarters at Jaipur seeks to maintain this appeal u/s 130(1) of the Customs Act, 1962 ("the Act"), against the order dated October 7, 2008, passed by the Customs, Excise and Service Tax Appellate Tribunal, Principal Bench, New Delhi ("the Tribunal") in Customs Appeal No. 716/2007 whereby, the Tribunal has, after upholding the order dated July 31, 2007 passed by the Commissioner (Appeals I), Customs and Central Excise, Jaipur to the effect that Notification No. 29/2004-Customs, dated January 28, 2004 was retrospectively applicable in respect of the obligations of the respondent under the EPCG licence dated July 31, 1995, has remitted the question for consideration of the original authority as to whether the requisite export obligation under the new policy has been fulfilled. The appellant submits that the following substantial questions of law are involved in this case:

(a) Whether the amendment to Notification No. 28/1997 dated April 1, 1997, vide Notification No. 29/2004, dated January 28, 2004 can be given retrospective effect for the purpose of fulfillment of the export obligation as required under original Notification No. 28/1997 which was required to be fulfilled up to July 30, 2000 as per the Exim Policy 1992-97?

(b) Whether the Tribunal is correct in holding that since the amendment in the original Notification No. 28/1997 has been made by way of "substitution" through Notification No. 29/2004, dated January 20, 2004 hence it has retrospective effect, when the said amendment was carried out to give effect to the amendments made in the Exim Policy 2002-07, vide policy Notification No. 28(RE-2003)2002-07 dated January 28, 2004 issued by the DGFT, Ministry of Commerce, Government of India?

However, the learned counsel appearing for the respondent has, at the outset, raised the preliminary objection on the maintainability of this appeal in this court in view of the exclusion provided in sub-section (1) of section 130 of the Act. We have heard the learned counsel for the parties on the objection so raised and have examined the record with reference to the law applicable.

The relevant facts and background aspects could be taken into comprehension as follows: The respondent, M/s. Shri Ram Rayons (A unit of D.C.M. Shri Ram Industries Ltd.), Kota is engaged in the manufacture of rayon tyre cord and rayon tyre cord fabrics. An export promotion capital goods ("EPCG") scheme license No. 2134468 was issued to the respondent by the Director General of Foreign Trade ("DGFT") on July 31, 1995 for import of complete plant for viscose rayon yarn spinning (second hand) with an obligation to export rayon tyre yarn worth US $ 1,53,96,513 on FOB basis within a period of five year from the date of issue of licence.

The respondent imported capital goods/plant under bills of entry Nos. 1 and 2, dated November 2, 1998, No. 3, dated February 1, 1999, No. 4, dated February 23, 1999 and No. 1, dated June 28, 1999 and paid the duty at the concessional rate under Notification No. 28/1997-Customs dated April 1, 1997 at Rs. 36,64,459 as against normal duty payable at Rs. 1,38,97,422. Thus, the duty foregone on the import of such capital goods had been to the tune of Rs. 1,02,32,963.

However, the Deputy Commissioner of Customs ICD, Kota issued a show-cause notice for recovery of the aforesaid foregone duty amount of Rs. 1,02,32,963 along with interest on the allegations that the respondent failed to fulfill condition Nos. 2, 3, 4 of the said Notification No. 28/1997-Customs dated April 1, 1997. The Deputy Commissioner adjudicated on the show-cause notice by Order-in-Original No. 1/2000, dated May 4, 2000 and confirmed the demand essentially with the finding that the party had not fulfilled its export obligation by exporting the goods manufactured by use of the imported capital goods; and did not submit any documentary evidence to prove that it had exported the goods manufactured by use of the said imported capital goods, as required under paragraph 6.5 (i) of the Exim Policy and Explanation (iv) to the said Notification No. 28/1997-Customs dated April 1, 1997.

It appears that in the meanwhile, the respondent had obtained a certificate from the DGFT to the effect that the export obligation imposed by the EPCG licence had been fulfilled. Then, against the aforesaid Order-in-Original No. 1/2000, dated May 4, 2000, the respondent filed an appeal to the Commissioner (Appeals) who, by Order-in-Appeal No. 28(KDT)Cus./JPR/2000, dated August 4, 2000, remanded the matter to the Deputy Commissioner for de novo consideration, in the light of certificate issued by the DGFT. However, even after de novo consideration, the Deputy Commissioner, by Order-in-Original No. 2/2000, dated November 27, 2000, confirmed the duty demand of Rs. 1,02,32,963 while holding the respondent liable to pay whole of the duty of customs leviable on the goods imported on the grounds that it had not fulfilled the export obligation in the proportion prescribed under condition No. 2 of the said Notification No. 28/1997; had also failed to produce any evidence regarding fulfillment of export obligation within the time period prescribed under condition No. 3 of the said notification; and had also failed to discharge a minimum of 25 per cent of the export obligation prescribed for any particular year for three consecutive years. The respondent, again, preferred an appeal against the above referred order-in-original to the Commissioner (Appeals I) who rejected the same by Order-in-Appeal No. 31(SN)Cus./JPR-I/2004, dated July 15, 2004.

The respondent challenged the aforesaid order of the Commissioner (Appeals I) before the Tribunal who, by Final Order No. 88/2007-Customs, dated March 16, 2007, set aside the order impugned and remanded the case with the observations that the notification under which the demand was made had been amended by Notification No. 29/2004-Customs dated January 28, 2004; and that the impugned order had been passed without taking into account the relevant notifications, which were in force at the time of granting of the referred EPCG licence and the period for fulfilling the export obligation.

After such remand, the Commissioner (Appeal I), Central Excise and Customs, Jaipur, by Order-in-Appeal No. 15(GRM)Cus./JPR-I/2007, dated July 26, 2007 allowed the appeal of the respondent by giving retrospective effect to the said Notification No. 29/2004-Customs dated January 28, 2004 read with the Ministry of Commerce Notification No. 28(RE)2003/2002-07, : dated January 28, 2004 and while relying on the decisions of the hon''ble apex court in Government of India and Others Vs. Indian Tobacco Association, and Zile Singh Vs. State of Haryana and Others, . Aggrieved by the order so passed by the Commissioner (Appeals I), the Department filed an appeal (No. 716/2007) before the Tribunal that has been decided by the impugned Final Order No. C/369/2008, dated October 7, 2008.

As noticed, though the Department seeks to maintain this appeal against the aforesaid order dated October 7, 2008 on the suggested questions of law, but the respondent has questioned its maintainability per sub-section (1) of section 130 of the Act. The learned counsel for the respondent has contended that in view of the clear exception carved out of the appellate jurisdiction of this court in sub-section (1) of section 130 of the Act in relation to the questions having relation to the rate of duty for the purposes of assessment; and, for the subject-matter of the order impugned being directly related with the question of rate of duty of customs, an appeal against the same could only be maintained before the hon''ble Supreme Court per section 130E of the Act. The learned counsel has referred, inter alia, to the decisions in Navin Chemicals Mfg. and Trading Co. Ltd. Vs. Collector of Customs, , Laxmi Udyog Vs. Commissioner of Central Excise, , The Commissioner of Central Excise Vs. Mangalore Refineries and Petrochemicals Ltd., , The Commissioner of Customs Vs. Motorola India Limited, , Commr. of Cus. and C. Ex. Vs. Primella Sanitary Products (P) Ltd., and CCE v. A.S.T. Paper Mills Ltd. [2008] 227 ELT 189 (P & H).

Per contra, it is submitted on behalf of the appellant that on the facts and in the circumstances of the case, the essential question arising for consideration is as to whether the amendment to Notification No. 28/1997-Customs dated April 1, 1997 by Notification No. 29/2004-Customs dated January 28, 2004 could be given retrospective effect for the purpose of fulfillment of export obligation as was required under original Notification No. 28/1997; and for such a question, the appeal cannot be held not maintainable in this court.

Having given a thoughtful consideration to the rival submissions and having examined the record with reference to the law applicable, we are clearly of the view that the preliminary objection deserves to be upheld; and this appeal deserves to be dismissed as not maintainable.

The referred provisions of sub-section (1) of section 130 of the Act could be noticed as under:

Appeal to High Court.--(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after 1st day of July, 2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of customs or to the value of goods for purposes of assessment), if the High Court is satisfied that the case involves a substantial question of law.

Section 130E of the Act reads as under:

130E. Appeal to Supreme Court.--An appeal shall lie to the Supreme Court from--

(a) any judgment of the High Court delivered--

(i) in an appeal made u/s 130; or

(ii) on a reference made u/s 130 by the Appellate Tribunal before 1st day of July, 2003;

(iii) on a reference made u/s 130A,

in any case which, on its own motion or on an oral application made by or on behalf of the party aggrieved, immediately after the passing of the judgment, the High Court certifies to be a fit one for appeal to the Supreme Court; or

(b) any order passed before the establishment of the National Tax Tribunal by the Appellate Tribunal relating, among other things, to the determination of any question having a relation to the rate of duty of customs or to the value of goods for purposes of assessment.

In the frame as it existed earlier, in section 129C of the Act, where the determination of any question having a relation to the rate of duty of customs or value of goods for the purpose of assessment was to be heard by a Special Bench, the hon''ble Supreme Court in the case of Navin Chemicals Mfg. and Trading Co. Ltd. Vs. Collector of Customs, laid down the test for the purpose of forum in the following:

This, then, is the test for the purposes of determining whether or not an appeal should be heard by a Special Bench of the CEGAT, whether or not a reference by the CEGAT lies to the High Court and whether or not an appeal lies directly to the Supreme Court from a decision of the CEGAT: does the question that requires determination have a direct and proximate relation, for the purposes of assessment, to the rate of duty applicable to the goods or to the value of the goods.

In the case of Motorola India [2012] 12 GSTR 44 (Karn.), the hon''ble Karnataka High Court, in a matter arising out of the Customs Act, 1962, proceeded to dilate on the phrase "determination of any question having a relation to the rate of duty" and observed that such expression would mean determination of the questions as to whether (i) any goods are dutiable; (ii) rate of customs duty on any goods is nil; (iii) the goods are covered under particular notification or order issued by the Central Government or the CBEC granting total or partial exemption from duty; and (iv) value of any goods for assessment be enhanced or reduced by matters specifically provided under the Act. In the said case, the issue as to whether the importer had complied with the terms and conditions of Notification No. 30/1997-Customs, was held to be related to the determination of rate of duty; and the appeal against the decision of the Tribunal was held maintainable before the Supreme Court and not before the High Court.

As regards the provisions of section 35G of the Central Excise Act, 1944 ("the Act of 1944"), which are in pari materia with the provisions with which we are concerned, this court, in the case of Laxmi Udyog Vs. Commissioner of Central Excise, considered the matter where the question was as to whether the parts of power-driven pump falling under Heading 84.13 were entitled to the benefit of exemption Notification No. 155/1986 read with note 2(a) of Section XVI to Chapter 84 of the Central Excise Tariff 1986-87 and found that such an order related to the determination of rates of excise duty payable and hence, could be directly challenged to the Supreme Court u/s 35L of the Act of 1944. This court said,--

The petitioner claimed that in view of the clause (2) of the column (3) he is liable to pay excise duty at the rate of ten per cent only and excise duty payable over the above said rate under the Tariff Act is exempted under the notification. This question obviously is related to determination of rate of excise duty to which accessories and parts of pump are to be subjected to. The controversy is limited to the issue whether in the absence of any provision one way or the other whether entries in the notification referred to the parts and accessories of such goods as envisaged in the heading of section 16 of Chapter 84 or for want of express provision to that effect the benefit of exemption of paying excise duty at the reduced rate is not extended in the case of manufacturing of parte and accessories of such goods. Undoubtedly such question is a question of law but since it relates to determination of rate of excise duty payable thereon, the conclusion is irresistible that the reference u/s 35G is not envisaged under the Act of 1944. Such an order is directly challenged to Supreme Court u/s 35L.

In The Commissioner of Central Excise Vs. Mangalore Refineries and Petrochemicals Ltd., , the question before the hon''ble Karnataka High Court was as to whether low sulphur heavy stock (LSHS), produced in the refinery, was not excisable and the assessee was entitled to the benefit of Notification No. 67/1995-CX for its captive consumption. The question arose in the circumstances that though LSHS was captively consumed for steam generation which, in turn, was utilised for production of electricity but then, the electricity so generated was allegedly diverted for the purposes other than the use in or in relation to the manufacture of petroleum products. The court held that the issue related to the rate of duty and the appeal against the order of the Appellate Tribunal lay to the Supreme Court and not to the High Court.

In the case of Commr. of Cus. and C. Ex. Vs. Primella Sanitary Products (P) Ltd., , in relation to the dispute as to whether the assessee was eligible to exemption notification upon fulfillment of conditions therein was held to be a dispute relating directly to the rate of duty applicable and reference to High Court u/s 35H of the Act of 1944 was held not maintainable by the hon''ble Bombay High Court. In A.S.T. Paper Mills Ltd. [2008] 227 ELT 189 (P & H), a similar view has been expressed by the hon''ble Punjab and Haryana High Court u/s 35G of the Act of 1944 while relying, inter alia, on the decision in Navin Chemicals Mfg. and Trading Co. Ltd. Vs. Collector of Customs, that the question as to whether the assessee is covered by an exemption notification or not, directly relates to the rate of duty of excise; and for determination thereof, the appeal has to be filed before the Supreme Court u/s 35L of the Act of 1944.

Coming to the facts of the present case, it could be noticed at once that even if the appellant has raised the question as to whether Notification No. 29/2004-Customs dated January 28, 2004 could be given retrospective effect for the purpose of fulfillment of export obligation under original Notification No. 28/1997-Customs dated April 1, 1997, in its essence, the question has a direct co-relation with the rate of duty of customs for the purpose of assessment.

As noticed, the respondent-assessee imported capital goods/plant under EPCG Licence No. 2134468 after making payment of duty of Rs. 36,64,459 at a concessional rate as against the normal duty payable, of Rs. 1,38,97,422. The duty foregone on the import of capital goods was Rs. 1,02,32,963. The allegation of the Department is that the aforesaid foregone duty is liable to be recovered on account of the respondent''s failure to fulfill the conditions of Notification No. 28/1997-Customs dated April 1, 1997. The respondent''s stand, as accepted by the appellate authority and then by the Tribunal, is that the obligation would be that as arising after giving retrospective effect to Notification No. 29/2004-Customs dated January 28, 2004.

Thus, the question of retrospective effect of Notification No. 29/2004 neither arises in vacuum nor is to be determined de hors the facts of the case or merely in theory. In other words, determination of this question shall be ultimately determinative of the rate of duty leviable and hence, it has direct co-relation with the rate of duty of customs leviable from the respondent. Thus, the impugned order as passed by the Tribunal relates specifically to the determination of the questions having a direct relation to the rate of duty of customs. At any rate, it has in severable relationship with the rate of duty chargeable on the import of capital goods by the respondent. The respondent, therefore, appears right in its submission that the issue in controversy relates to the rate of duty for the purpose of assessment and does not fall within the appellate jurisdiction of this court u/s 130(1) of the Act.

For what has been discussed and observed hereinabove, we are clearly of the view that when the order impugned as passed by the Tribunal relates, inter alia, to the determination of the questions having a relation to the rate of duty of customs, the appeal in this court is not maintainable and, if at all, the same could be maintained only before the hon''ble Supreme Court per clause (b) of section 130E of the Act.

Accordingly and in view of the above, the preliminary objection of the respondent is upheld; and this appeal stands dismissed. No costs.