2022 (8) TMI 1490 - HC - Customs

Interpretation of statute - N/N. 148/1994 - Refund claim - cancellation of benefit of exemption - Was not the Tribunal wrong in holding that the Grant received by the importer from the European Union would come within the preview of the term gift or donation under Notification No.148/1994 to get exemption from duty? - liberal interpretation to Notification No.148/1994 without following the principal of law that an exemption notification has to be interpreted strictly. Maintainability of the appeal under Section 130C of Customs Act - HELD THAT - The principal consideration is whether the goods or plant imported by the respondent would satisfy the requirement of exemption notification or not. Once exemption notification is attracted the obligation to pay customs duty does not attract. Therefore the issue is whether the respondent s exemption claim on the import of plant is tenable or not. It has nothing to do with the rate or the value of the goods imported by the respondent. Therefore the appeal is rightly filed before this Court under Section 130C of the Act and is maintainable. Re-examination of issues - whether a finding of fact is correctly recorded and binding on this Court? - HELD THAT - The CESTAT has not appreciated the sequence of circumstances culminate in the import of plant and whether a future obligation is fastened on the respondent for repayment of the cost incurred for the purchase of the plant or not. Therefore the finding is recorded by not considering the circumstances and documents which have a bearing on the issue. For the above reasons the findings of fact recorded are perverse and unavailable and therefore not binding on this Court. Hence the second objection raised is also without merit accordingly rejected. Whether exemption notification is attracted to the circumstances of the case and that the appeal at the instance of the Revenue must fail? - HELD THAT - The findings recorded in para 5 of the order under appeal are certainly unsustainable for it has been recorded by the CESTAT as a general application of the exemption notification. The relevant circumstances should have been placed before the CESTAT before inviting the findings in this behalf. It is believed that the CESTAT ought to be called upon to decide the merits of the appeal filed by the respondent herein and decide the core issue. The matter is remitted to CESTAT for consideration and disposal afresh as per law within four months from the date of receipt of copy of the judgment - appeal allowed by way of remand.

Summary

Issues Involved:
1. Whether the grant received by the importer from the European Union qualifies as a 'gift' or 'donation' under Notification No.148/1994 for duty exemption.
2. Whether the Tribunal's interpretation of Notification No.148/1994 was justified and in accordance with the principle that exemption notifications should be interpreted strictly.
3. Maintainability of the appeal under Section 130C of the Customs Act, 1962.

Detailed Analysis:

Issue 1: Qualification of Grant as 'Gift' or 'Donation'
The primary contention revolves around whether the plant imported by the respondent qualifies for duty exemption under Notification No.148/1994, which exempts goods "gifted free of cost under a bilateral agreement between the Government of India and a Foreign Government." The appellant argued that the goods were not gifted free of cost since the European Union provided the funds as a long-term loan to be repaid by the respondent. The CESTAT, however, relied on a certificate from the European Union stating that the plant and machinery were supplied free of cost under a bilateral agreement, thereby granting the exemption. The High Court found that the CESTAT did not adequately consider whether the import was genuinely free of cost, given the long-term repayment obligation.

Issue 2: Interpretation of Exemption Notification
The appellant contended that the CESTAT's interpretation of the exemption notification was overly liberal and not in line with the principle that exemption notifications should be interpreted strictly. The High Court noted that the CESTAT's findings were superficial and did not thoroughly examine the primary documents and the financial arrangements underlying the import. The High Court emphasized that the exemption should only apply if the goods were genuinely imported free of cost, without any future financial liability on the respondent.

Issue 3: Maintainability of the Appeal under Section 130C
The respondent objected to the maintainability of the appeal, arguing that the issue at hand was related to the rate of duty, which falls outside the purview of Section 130C. The High Court rejected this objection, clarifying that the core issue was whether the imported goods qualified for an exemption, not the rate of duty itself. The Court held that the appeal was rightly filed under Section 130C and was maintainable.

Conclusion and Remand
The High Court concluded that the CESTAT's findings were perverse and not binding, as they did not adequately consider the financial obligations associated with the import. The Court set aside the CESTAT's order and remanded the matter for fresh consideration, directing the CESTAT to re-examine the case and decide based on a thorough evaluation of all relevant documents and circumstances. The appeal was allowed, and the case was remanded to the CESTAT for disposal within four months. No order as to costs was made.