2006 (8) TMI 192 - SC - Customs

Whether relief under Notification No. 41/80 will not depend upon the actual operation or application of Notification No. 35/79 in the case of a particular item of goods? Held that - The 1979 notification grants an exemption or concession in respect of the basic duty payable on certain classes of goods viz parts of articles which fall under one of the specified headings and required for certain purposes. The purport and intention of the 1980 notification is to exempt the class of goods falling under the purview of the 1979 notification from auxiliary duty as well. The exemption under the 1980 notification does not depend in this view on the practical effect of the application of the 1979 notification in a particular case. Its applicability should not be confined to items of goods in respect of which a reduction in duty is actually enjoyed under one of the notifications included in the Schedule to the 1980 notification. There appears to be no logic in saying that the exemption from auxiliary duty in respect of the same part will be available only where the duty chargeable on the part is more than but becomes equal to that on the whole article by applying the 1979 notification but not where the duty on the part is the same as that of the whole even otherwise. Equally it seems absurd to say that when the part suffers a basic duty of 40% and the whole a duty of 40% there will be a countervailing duty but that there will be no such duty where the basic duty on the part is 41% or more but reduced to 40% because of the 1977 notification. The correct position appears to be that the purpose and purport of the 1979 notification is to ensure that in respect of the articles listed therein the part should not suffer a higher duty than the whole. The 1980 notification likewise exempts this category of articles which enjoy the benefit of the same or less duty on the part than that on the whole from auxiliary duty. Appeal allowed & hold that the appellant is entitled to refund of the sum of Rs. 1, 31, 255/- but without any interest.

Summary

Issues Involved:
1. Entitlement to refund of excess customs duty paid.
2. Applicability of exemption notifications (No. 173/92 and No. 192/92).
3. Interpretation of Section 25 of the Customs Act, 1962.
4. Application of precedent from Bharat Heavy Electricals Ltd. case.

Detailed Analysis:

1. Entitlement to Refund of Excess Customs Duty Paid:
The appellant imported filter cartridges and paid customs duty at 55% under Notification No. 173/92. Later, they claimed a refund of Rs. 1,31,255/- arguing that the basic duty under the First Schedule of the Tariff Act was 40%, and thus, they paid 15% excess duty. The Assistant Collector of Customs rejected this claim, stating that once the appellant opted to pay the tariff rate of customs basic duty, Notification No. 192/92 (which provides a concessional auxiliary duty rate of 5%) would not apply. The Tribunal upheld this rejection.

2. Applicability of Exemption Notifications (No. 173/92 and No. 192/92):
Notification No. 173/92 exempts certain goods from customs duty in excess of 55%. The appellant's goods fell under this notification. Notification No. 192/92 provides partial exemption from auxiliary duty in excess of 5% for goods partially or wholly exempted under other specified notifications, including No. 173/92. The court concluded that since the appellant was entitled to exemption under Notification No. 173/92 but could not avail it due to the basic duty being 40%, they were eligible for partial exemption under Notification No. 192/92.

3. Interpretation of Section 25 of the Customs Act, 1962:
Section 25 allows the Central Government to exempt goods from customs duty if it is in the public interest. The court held that the appellant could not be asked to pay customs duty exceeding the basic duty specified in the First Schedule to the Tariff Act. The appellant paid excess duty under a misunderstanding of law and was thus entitled to a refund.

4. Application of Precedent from Bharat Heavy Electricals Ltd. Case:
The court referred to the Bharat Heavy Electricals Ltd. case, where it was held that exemption notifications should be applied based on the entitlement rather than the actual availing of the exemption. The principle established was that exemption from auxiliary duty should not depend on the practical effect of another notification but on the entitlement to such exemption. The court found this principle applicable to the present case, supporting the appellant's claim for a refund.

Conclusion:
The court accepted the appeal, set aside the orders of the Tribunal, Commissioner (Appeals), and the adjudicating authority, and held that the appellant was entitled to a refund of Rs. 1,31,255/- without interest. Each party was to bear its own costs.