2019 (9) TMI 229 - SC - Customs

Maintainability of appeal before HC or SC - appropriate forum or not - whether an appeal from the order of CESTAT, involving an issue regarding violation of conditions contained in customs exemption notification, would lie before the High Court under the provisions of Section 130 of the Customs Act, 1962 or to this Court under the provisions of Section 130E of the Customs Act? HELD THAT - An appeal shall lie to the High Court against every order passed in appeal by the Appellate Tribunal, if the High Court is satisfied that the case involves a substantial question of law. The only exception carved out is that an appeal shall lie before this Court and shall not lie before the High Court against the order relating, amongst other things, to the determination of any question having relation to the rate of duty of customs or to the value of goods for the purposes of assessment. Only if any question having relation to the rate of duty is involved in an appeal or if it relates to value of goods for the purpose of assessment, the appeal would lie to this Court and in all other cases it would lie before the High Court. The issue is no more res integra - In a catena of the judgments, right from the judgment of this Court in the case of Navin Chemicals Manufacturing Trading Company Ltd. vs. Collector of Customs, 1993 (9) TMI 107 - SUPREME COURT , the position has been clarified - it has been held that appeal dismissed on the ground that the appellants were in error in contending that their appeal before CEGAT ought to have been heard by a Special Bench and could not have been heard and decided by a member of CEGAT, sitting singly. This Court, while considering the provisions of Section 130 and Section 130E of the Customs Act, has held that where an appeal involves determination of any question that has relation to customs duty for the purpose of assessment or where an appeal involves determination of any question that has relation to the value of goods for the purposes of assessment, such cases will have to be treated separately and have to be given special treatment. The only question that is involved is whether the assessee had violated the conditions of the exemption notification by not utilizing the imported materials for manufacturing of the declared final product and was, therefore, liable for payment of duty, interest and penalty. Neither any question with regard to determination of rate of duty arises nor a question relating to valuation of goods for the purposes of assessment arises in the present case. The appeals also do not involve determination of any question relating to the classification of goods, nor do they involve the question as to whether they are covered by the exemption notification or not - Undisputedly, the goods are covered by the said notification. The only question is as to whether the assessee has breached the conditions which are imposed by the notification for getting exemption from payment of the customs duty or not. The appeals do not involve any question of law of general public importance which would be applicable to a class or category of assessees as a whole - The question is purely inter-se between the parties and is required to be adjudicated upon the facts available. The High Court was not justified in holding that the appeals are not maintainable under Section 130 of the Customs Act but are tenable before this Court under Section 130E of the Customs Act - appeal allowed.

Summary

Issues Involved:
1. Jurisdiction of appeal from CESTAT order under Section 130 versus Section 130E of the Customs Act, 1962.
2. Compliance with conditions of customs exemption notification.
3. Liability for customs duty, interest, and penalty.

Issue-wise Detailed Analysis:

1. Jurisdiction of Appeal from CESTAT Order:

The primary issue is whether an appeal from a CESTAT order involving a violation of customs exemption notification conditions should be filed before the High Court under Section 130 of the Customs Act, 1962, or directly to the Supreme Court under Section 130E. The court referred to the statutory provisions:

- Section 130 allows appeals to the High Court from CESTAT orders involving substantial questions of law, excluding those related to the rate of duty or value of goods for assessment.
- Section 130E provides for direct appeals to the Supreme Court for matters involving the rate of duty, value of goods for assessment, classification under the tariff, and exemption notifications.

The court reiterated that appeals involving the determination of the rate of duty or the value of goods for assessment should go directly to the Supreme Court, as established in previous judgments (Navin Chemicals Manufacturing & Trading Company Ltd. vs. Collector of Customs and Steel Authority of India Ltd. vs. Designated Authority, Directorate General of Anti-Dumping & Allied Duties).

2. Compliance with Conditions of Customs Exemption Notification:

The case facts reveal that the assessee, a pager manufacturer, availed of customs duty exemption under Notification No. 30/1997-Customs. The exemption was contingent upon the imported materials being used for manufacturing the declared final product, pagers. The Director of Revenue Intelligence (DRI) found that the assessee had ceased manufacturing pagers and had written off unutilized materials in their books, prompting further investigation.

The Commissioner of Customs issued a show-cause notice to the assessee, demanding customs duty, interest, and penalty for non-compliance with the exemption notification conditions. The CESTAT allowed the assessee's appeal, but the Commissioner of Customs appealed to the Karnataka High Court.

3. Liability for Customs Duty, Interest, and Penalty:

The High Court needed to decide whether the assessee had complied with the exemption notification conditions and whether the levy of duty, interest, and penalty was justified. The High Court initially held that the appeal involved determining the rate of duty and thus should be heard by the Supreme Court under Section 130E.

However, the Supreme Court clarified that the issue did not involve determining the rate of duty or the value of goods for assessment. Instead, it was about whether the assessee violated the conditions of the exemption notification, which is a factual determination rather than a legal question of general public importance.

Conclusion:

The Supreme Court concluded that the High Court erred in holding that the appeal was not maintainable under Section 130 of the Customs Act. The appeals were remitted back to the High Court for de novo consideration on their merits, emphasizing that the matter was inter-se between the parties and did not involve broader legal questions warranting direct Supreme Court intervention under Section 130E. The appeals were allowed, and the High Court's orders were set aside.