By TIOL News Service

NEW DELHI, AUG 05, 2015: THE appellant is engaged in the manufacture of pig iron. The appellant imported Low Ash Metallurgical (LAM) Coke under seven Bills of Entry, against four advance licenses without payment of basic customs duty (BCD), special customs duty (SCD), special additional duty (SAD) and Anti-dumping duty (ADD) during the period June 1998 to August 1998, which were exempt from duty vide (i) Notifications No. 30/97 Cus dated 1.4.1997, (ii) Sr. No.4 of Notification No.12/97 Cus dated 1.3.97, (iii) Sr. No.3 of the Notification No.34/98-Cus dated 13.6.1998, and (iv) Notification No.41/97-Cus dated 30.4.97 respectively.

At the time of import, the appellant furnished a bond containing an undertaking to pay duty on imported goods cleared under Notification No.30/97 and 41/97 in the event of failure to fulfill its export obligation.

It is an admitted position that the appellant failed to fulfill its export obligation in the terms of the exemption notifications. The entire LAM so imported has instead been used by the appellant in its factory for the manufacture of pig iron.

The Commissioner of Customs vide Order dated 4.11.2004 confirmed the duty demand, imposed a penalty of Rupees Twenty lakhs and demanded interest at 24%.

The appellant appealed to CESTAT. Vide the impugned judgment dated 18.8.2005, CESTAT partly allowed the appeal by remanding the matter to the original authority to calculate duty, interest, and penalty in accordance with the findings contained in its judgment. The basic difference between CESTAT's judgment and that of the Commissioner is that interest was reduced from 24% to 15%, but the Anti-dumping duty was increased by applying the higher rates specified by the final Notification No.69 of 2000.

The Assessee is before the Supreme Court:

Appellant's plea :

1. The advocate for the appellant did not dispute before us that the appellant failed in its export obligations and was, therefore, not liable to be exempted so far as customs duty is concerned. He, therefore, conceded that basic customs duty and the special customs duty as well as special additional duty was payable by the appellant.

2. However, he disputed that Anti-dumping duty was payable at all stating that the appellant was exempt under Notification No.69 of 2000.

3. He further argued that no interest is chargeable on any of the four duties inasmuch as the bond that was furnished under Notification No.30 of 1997 did not stipulate that in the event of default, interest would become payable.

4. Further, according to him, it is clear that the assessment in the present case is only provisional and that being the case, even if the provisions of the Customs Act are made applicable insofar as Anti-dumping duty is concerned, under the Customs Act itself there was no provision for collection of interest for the period in dispute as Section 18 was amended to include such a provision only prospectively with effect from 2006.

5. He further argued, that in any case Anti-dumping duty could not be added for purposes of computing customs duty, special customs duty and special additional duty. Also no penalty is imposable inasmuch as nothing contumacious was done by the appellant and the export obligation could not be fulfilled only because of bonafide commercial impossibility. It is contended that nothing has been diverted to the domestic tariff area and sold in that area, and the entire imports made have been used by the appellant captively in its factory for the manufacture of pig iron.

6. He further argued that he could not be worse off in an appeal filed only by the appellant herein to CESTAT and that on the assumption that the appellant was liable to pay Anti-dumping duty, they should only pay the said duty at the lower rate prescribed by the Commissioner as Revenue had not appealed to the Tribunal against the Commissioner's order.

Revenue Plea:

1. The senior counsel appearing on behalf of the revenue countered the aforesaid submissions and submitted that the exemption contained in the Anti-dumping duty Notification 69 of 2000 was only prospective and, hence Anti-dumping duty had to be paid for the relevant period.

2. He further submitted that interest in any case was payable as Notification No.30 of 1997 independently levied a charge of interest.

3. Further, he also supported the Commissioner's order and the Tribunal so far as the various other aspects of this appeal are concerned.

Supreme Court Findings:

1. No retrospective effect for exemption: The exemption from Anti Dumping Duty was given only by Notification dated 19.5.2000 which has no reference to the earlier proceedings in the case and is obviously intended to apply only prospectively. This is also clear from the language used in the said clause - 'nothing contained in the Notification "shall apply to imports " …. Using a Blast Furnace "if he follows" the procedure set out in the Customs "import of goods at concessional rate of duty for manufacture of excisable goods" Rules, 1996'. The language of the aforesaid clause applies only in futuro and the appellant's first argument must, therefore, fail.

2. Appellant cannot be worse off by reason of filing an appeal:. However, the appellant is on firmer ground when he submitted that the Commissioner has held that the appellant is liable to pay Anti-dumping duty only under the Notification dated 27.10.1998. The rate prescribed in the said Notification is lesser than the rate that would apply under the Notification dated 19.5.2000. As there was no appeal by the revenue against this finding of the Commissioner, the Tribunal could not have enhanced the rate at which the appellant would have to pay Anti-dumping duty in the appellant's own appeal. The appellant cannot be worse off by reason of filing an appeal. To this limited extent, the appellant succeeds and the Tribunal's order is set aside. The appellant will have to pay Anti-dumping duty calculated at the rates specified only in Notification No. 81/98 dated 27.10.1998.

3. Interest : No condition of interest in the Bond - No interest payable. A reading of this Notification makes it clear that interest at the rate of 24% per annum is only liable to be paid if at the time of clearance of the imported materials the importer executes a bond in which such interest is stated to be payable. The bond says nothing about any interest that is payable in case the conditions of the Notification No.30 of 1997 are not met. On this short ground alone, it is clear that no interest is payable on any of the customs duties that are due from the appellant.

4. It is clear that on the facts of the present case the provisional assessment had been made in 1998 and the final assessment only on 4.11.2004 by the Commissioner. Both these dates being prior to 13.7.2006, appellant is right and no interest is chargeable under Section 18 of the Customs Act, for the period in question.It is clear that no interest is chargeable on any of the customs duties that are payable on the facts of the present case.

5. Whether Anti-dumping duty can be included in calculating special customs duty and special additional duty. It will be noticed that additional duty and special additional duty would include "any sum chargeable on that article under any law for the time being in force as an addition to, and in the same manner as, a duty of customs". What has been contended is that these words would refer only to a surcharge provision and not to a provision which levies an independent duty, as the relevant words are "an addition" and not "in addition". This argument has considerable force. It is clear, therefore, that what is referred to in Section 3(2) and 3A(2) is only a surcharge or an additional duty of customs. The words "in the same manner" also point to the same conclusion. It is clear on a reading of the Customs Tariff (Identification, Assessment And Collection of Antidumping Duty on Dumped Articles and For Determination of Injury) Rules, 1995, that Anti-dumping duty apart from being a separate levy from a levy of customs duty is also levied in a completely different manner from that of customs duty.

6. Penalty: As far as penalty is concerned, the appellant has not diverted goods meant for export to the domestic tariff area. The market considerations made it difficult, if not impossible, for the appellant to fulfill its export obligations and therefore, the penalty imposed in the present case ought to be set aside.

The appeal is, accordingly, allowed in the aforesaid terms and the judgment of CESTAT is set aside.

(See 2015-TIOL-173-SC-CUS)