1989 (9) TMI 105 - SC - Customs

Refund of the excess duty paid rejected - Held that - Tribunal has erred in its interpretation of the notification No. 265, dated 8-12-1982 and that the assessee s case is clearly covered by the explanation in the notification. It is true that the main part of the notification provides for an auxiliary duty at 40% in cases where the effective rate of basic duty (i.e. the rates set out in the First Schedule read with any relevant notification) is 60% or above and an auxiliary duty at 30% in cases where such effective basic rate is nil or less than 60%. If the notification had stopped here, the assessee would have been perfectly within its rights to claim that the auxiliary duty payable by it would only be 30% because the effective basic rate in its case is nil. The auxiliary duty paid by the assessee was perfectly in order and that its refund applications are not maintainable. We therefore, set aside the order of the Tribunal and the Collector (Appeals) and restore the order of the Asstt. Collector refusing refund to the assessee. The appeals are, therefore, allowed.

Summary

Issues:
Interpretation of customs duty rates and auxiliary duty calculation based on country of origin for imported timber.

Analysis:
The case involved four appeals by the Collector of Customs regarding the payment of customs duty on imported timber from Burma by the assessee. The relevant Customs Tariff Act charged timber at 60% duty, but a government notification exempted timber from certain countries, including Burma, resulting in nil basic customs duty but an additional auxiliary duty. The dispute arose when the assessee claimed a refund, arguing they should have paid a lower auxiliary duty rate based on the country of origin.

The Tribunal initially ruled in favor of the assessee, following a previous decision. However, the Supreme Court disagreed with the Tribunal's interpretation of the notification. The Court emphasized the explanation in the notification, which stated that if there are multiple effective basic duty rates based on the country of origin, the higher rate applies for auxiliary duty calculation. In this case, timber imported from Burma attracted nil basic duty, but from other countries, it would be 60%, leading to the application of the higher rate for auxiliary duty.

The Court rejected the assessee's argument that the explanation only applied when multiple notifications altered basic duty rates. It clarified that the explanation's terms were clear and did not require multiple notifications for differentiation in rates. The Court highlighted that the purpose of the explanation was to ensure uniformity in auxiliary duty payment regardless of varying basic duty rates based on the country of origin.

Furthermore, the Court addressed the contention that the explanation led to anomalies in duty payment. It explained that the legislative intent was to prevent disparities among importers and maintain consistency in auxiliary duty payment. The Court also dismissed the significance of the term 'article' in the notification, stating that the calculation of auxiliary duty should be based on effective basic rates applicable to each specific article.

Ultimately, the Supreme Court held that the auxiliary duty paid by the assessee was correct, denying their refund claims. The Court set aside the Tribunal's decision and reinstated the Asstt. Collector's refusal of the refund, allowing the Collector of Customs' appeals. No costs were awarded in the case.