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Issues Involved:
1. Proper construction of Exemption Notification No. 82-Cus., dated August 6, 1960. 2. Whether "countervailing duty" forms part of the customs duty. Issue-wise Detailed Analysis: 1. Proper construction of Exemption Notification No. 82-Cus., dated August 6, 1960: The petitioners, manufacturers of diesel engines, imported components liable to customs duty under the Customs Act and the Indian Tariff Act at 50% ad valorem. The duty for complete diesel engines was 27.5% ad valorem plus 5.5% countervailing duty under Section 2A of the Indian Tariff Act. The Government of India issued an exemption Notification on August 6, 1960, exempting component parts of machinery from customs duty in excess of the rate applicable to the machinery when imported complete. The Customs authorities interpreted "Customs Duty" in the Notification to include countervailing duty, assessing the petitioners at 33% ad valorem. The petitioners sought a refund, which was denied by the Assistant Collector of Customs, upheld by the Appellate Collector, and the Central Government. The petitioners challenged these orders under Article 226 of the Constitution of India. 2. Whether "countervailing duty" forms part of the customs duty: The petitioners argued that countervailing duty under Section 2A of the Indian Tariff Act is not part of customs duty, citing different purposes and computation methods. They contended that customs duty is levied on import, while countervailing duty requires certain conditions. The respondents argued that the Notification was issued before Section 2A's insertion and that countervailing duty is part of customs duty, both being closely connected under the Indian Tariff Act. The court examined the Sea Customs Act, 1878, and the Indian Tariff Act, 1934. Section 20 of the Sea Customs Act and Section 2 of the Indian Tariff Act provided for customs duties, including countervailing duty. Section 2A, inserted in 1963, levied countervailing duty equal to excise duty on like articles produced in India, in addition to any other duty. The Customs Act, 1962, consolidated customs laws, with Section 12(1) specifying duties under the Indian Tariff Act. The court concluded that customs duty includes countervailing duty, both being branches of import taxation. The court rejected the petitioners' claim that countervailing duty is distinct from customs duty, noting that both are levied on import and are indirect taxes. The Supreme Court's observations in AIR 1963 Supreme Court 1760 supported this view. The court found that countervailing duty is part of customs duty, aimed at balancing competition between imported and domestically produced goods. The court dismissed the petitioners' reliance on Madras High Court decisions, finding them inapplicable or contrary to their argument. The court upheld the Customs authorities' interpretation of the exemption Notification, finding no serious infirmities in their orders. The petition was dismissed, and the rule was discharged with costs.
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