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2017 (3) TMI 1276 - HC - CustomsLevy of ADE - Apparel Export Promotion Council - export performance certificate - the goods which were imported by the appellant were diverted to the domestic market and thereby, ended up violating the conditions of import - appellant s case is that the Settlement Commission could not have imposed ADE upon it - N/N. 21/2002, dated 01.03.2002 - Held that - the said notification which is issued u/s 25 of the Act, exempts, so much of additional duty which is leviable under sub-section (1) of Section 3 of the CTA, which is in excess of the rate specified in the corresponding entry in column 5 of the table appended to the said notification. Section 3 (1) of the CTA speaks about excise duty. The entry 410 in Column 5 of the table appended to Notification No.21/2002, dated 01.03.2002, restricts the duty to 16% - ADE, which is in the nature of excise duty is the additional duty, which, if imposed will take it beyond the consolidated rate of 16% in terms of N/N. 21/2002, dated 01.03.2002, as CVD, at the rate of 16% is already imposed. Which of the two duties is to be levied, i.e., ADE or SAD? - Held that - Since, ADE is exempted, quite clearly, the respondents were entitled to levy SAD, as was indicated, initially. ADE could be sourced to Section 3(5) of CTA, in our view, is also erroneous for the following reasons First, ADE is in the nature of excise duty leviable under the 1957 of the Act. Its an imposition in the form of additional duty on articles imported into India and is traceable to Section 3(1) of CTA, and not, to Section 3(5) of CTA. A plain reading of Section 3(5) of CTA would show that additional duty on the imported articles, is levied to counter-balance Sales Tax, Value Added Tax, Local Tax, or other charges for the time being levied on a like article upon on its sale, purchase, or transportation in India which cannot be imposed at the rate exceeding 4%. Clearly, therefore, the justification provided for levy of ADE at the rate of 8% under Section 3(5) of CTA, cannot be sustained. Appeal allowed - decided in favor of appellant-assessee.
Issues Involved:
1. Tenability of the appeal against the main judgment of the learned Single Judge. 2. Violation of import conditions by the appellant. 3. Issuance of a show cause notice (SCN) and subsequent proceedings before the Settlement Commission. 4. Levy of various duties including Basic Customs Duty (BCD), Counter Vailing Duty (CVD), Special Additional Duty (SAD), and Additional Duty of Excise (ADE). 5. Authority of the Settlement Commission to impose ADE. 6. Applicability of Notification No.21/2002, dated 01.03.2002. 7. Authority of the Settlement Commission to go beyond the SCN. 8. Validity of the learned Single Judge's reasoning for dismissing the writ petition. Detailed Analysis: 1. Tenability of the Appeal: The appeal is directed against the main judgment of the learned Single Judge dated 12.09.2016, which dismissed the writ petition filed by the appellant. The review petition against this judgment was also dismissed. Both counsels agreed that addressing the main judgment would impact the order passed in the review petition. 2. Violation of Import Conditions: The appellant, a manufacturer and exporter of textile garments, imported polyester lining fabric under an import certificate issued by AEPC. The import was subject to the condition that the goods would be used in manufacturing textile garments and not sold in the domestic market. The appellant violated these conditions by diverting the imported goods to the domestic market. 3. Issuance of Show Cause Notice and Settlement Proceedings: Upon discovering the violation, customs authorities issued an SCN dated 28.05.2003. The appellant did not reply to the SCN but filed an application before the Customs and Central Excise Settlement Commission on 15.09.2003. The Settlement Commission allowed the application and directed the appellant to pay the balance admitted duty amount of ?4,88,768/- within 30 days. 4. Levy of Various Duties: The Settlement Commission's final order dated 19.11.2004 directed the appellant to pay BCD, CVD at 16%, and ADE at 8%. The appellant was given immunity from interest exceeding 10%, penalty, fine, and prosecution under the Act. The appellant disputed the levy of ADE at 8%, arguing that only one of the two duties (ADE or SAD) could be levied, not both. 5. Authority of the Settlement Commission to Impose ADE: The appellant contended that the Settlement Commission could not impose ADE, as it was not mentioned in the SCN. The Settlement Commission, while giving relief from SAD, imposed ADE, which was beyond the SCN's scope. 6. Applicability of Notification No.21/2002, dated 01.03.2002: The appellant argued that Notification No.21/2002, dated 01.03.2002, restricted the additional duty to a consolidated rate of 16% for textile fabrics. Since CVD at 16% was already imposed, ADE could not be levied. The court agreed that ADE, being in the nature of excise duty, could not exceed the consolidated rate of 16%. 7. Authority of the Settlement Commission to Go Beyond the SCN: The court held that the Settlement Commission could not impose a duty not mentioned in the SCN. The SCN only referred to BCD, CVD, and SAD. Imposing ADE, which was not part of the SCN, was beyond the Settlement Commission's authority. 8. Validity of the Learned Single Judge's Reasoning: The learned Single Judge dismissed the writ petition on the grounds that the appellant had conceded to the imposition of ADE at 8% and that ADE could be levied under Section 3(5) of the CTA. The court disagreed, stating that the appellant's concession on a point of law could not bind it and that ADE could not be levied under Section 3(5) of the CTA. The court concluded that the Settlement Commission's imposition of ADE was erroneous. Conclusion: The appeal was allowed, setting aside the learned Single Judge's order dated 12.09.2016. Consequently, the order passed in the review application was rendered inefficacious. The appellant was directed to pay the balance amount along with interest within four weeks from the date of receipt of the order. The connected miscellaneous petition was closed with no order as to costs.
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