2001 (2) TMI 133 - SC - Customs

Whether or not the respondent has been rightly given benefit of Notification No. 16/83-C.E. dated 11-2-1983 issued by the Central Government under Rule 8(1) of the Central Excise Rules 1944 in regard to the payment of additional Customs duty under Section 3(1) of the Customs Tariff Act 1975 on the waste and scrap of imported Cellulose Acetate sheets? Held that - Since it is found that the respondent did not pay the additional duty as leviable under sub-section (1) of Section 3 of the Customs Tariff Act 1975 it failed to comply with the condition as contained in Clause (b) to the proviso to the proviso to the Notification No. 16/83-C.E. dated 11-2-1983. The onus of proof of fulfilment of condition subject to which an exemption may be admissible lies on the assessee or upon a party claiming benefit under the Notification as also held in the case of Motiram Tolaram and Another 1999 (8) TMI 68 - SUPREME COURT OF INDIA . So far the question of construing an exemption Notification is concerned such Notifications are to be strictly construed. Where a condition precedent is not fulfilled before claiming any exemption such benefit would not be admissible.

Issues Involved:
1. Entitlement to benefit under Notification No. 16/83-C.E.
2. Levy of additional Customs duty under Section 3(1) of the Customs Tariff Act, 1975.
3. Compliance with conditions under Notification No. 16/83-C.E.
4. Applicability of Section 3(1) and Section 3(3) of the Customs Tariff Act, 1975.
5. Onus of proof for exemption claims.

Issue-wise Detailed Analysis:

1. Entitlement to Benefit under Notification No. 16/83-C.E.:
The respondent, an industrial unit in Kandla Free Zone, claimed exemption from excise duty on waste and scrap of imported Cellulose Acetate sheets under Notification No. 16/83-C.E., dated 11-2-1983. The Assistant Collector (Customs) initially found that the benefit was wrongly given, leading to short payment of duty. However, the Collector (Appeals) and CEGAT upheld the respondent's entitlement to the exemption. The Supreme Court ultimately found that the respondent did not meet the necessary conditions for the exemption, particularly the non-payment of additional duty under Section 3(1) of the Customs Tariff Act, 1975.

2. Levy of Additional Customs Duty under Section 3(1) of the Customs Tariff Act, 1975:
Section 3(1) of the Customs Tariff Act mandates an additional duty equal to the excise duty for the time being leviable on a like article produced in India. The Supreme Court highlighted that this additional duty is in addition to the customs duty levied under the Customs Act, 1962. The respondent failed to pay this additional duty, thus not fulfilling the conditions for exemption under Notification No. 16/83-C.E.

3. Compliance with Conditions under Notification No. 16/83-C.E.:
The Notification exempts scrap or waste material from excise duty provided certain conditions are met, including payment of "duties of customs leviable thereon under any law for the time being in force." The respondent argued that payment of basic customs duty sufficed, but the Supreme Court clarified that "duties" include additional duty under Section 3(1) of the Customs Tariff Act. Since the respondent did not pay this additional duty, they did not comply with the conditions of the Notification.

4. Applicability of Section 3(1) and Section 3(3) of the Customs Tariff Act, 1975:
The Supreme Court discussed the charging provision under Section 3(1) for additional duty and its quantification equal to excise duty. It also referred to Section 3(3), which allows for additional duty to counter-balance excise duty on raw materials, independent of Section 3(1). The Court emphasized that the additional duty under Section 3(1) must be paid for the exemption under Notification No. 16/83-C.E. to apply.

5. Onus of Proof for Exemption Claims:
The Court reiterated that the onus of proving compliance with the conditions for exemption lies with the assessee. The respondent failed to prove that they met all conditions, particularly the payment of additional duty under Section 3(1). The Supreme Court cited previous judgments, including Motiram Tolaram, to support the principle that exemption notifications must be strictly construed, and conditions precedent must be fulfilled.

Conclusion:
The Supreme Court allowed the appeals, setting aside the orders of the Collector of Customs (Appeals) and CEGAT, and restored the orders of the Assistant Collector of Customs. The respondent was found not entitled to the benefit of exemption under Notification No. 16/83-C.E. due to non-payment of additional duty under Section 3(1) of the Customs Tariff Act, 1975.

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