1988 (1) TMI 53 - AT - Customs

Summary

Issues Involved:
1. Classification of imported goods.
2. Applicability of Central Excise Notification 24/65-C.E. to the import.
3. Interpretation of Section 3(1) of the Customs Tariff Act, 1975.
4. Relevance of exemption notifications under Central Excise Rule 8(1) for additional duty of customs.

Issue-wise Detailed Analysis:

1. Classification of Imported Goods:
The Assistant Collector classified the goods as silk bolting cloth under Heading 56.07-C.T.A., subject to C.V. duty under Item Nos. 18 to 22 of the C.E.T. The Appellate Collector, however, classified the goods under Heading 59.16/17-C.T.A., holding that non-metallic machine clothes cut to size should be assessed as component parts of machinery, not as fabrics, and thus no C.V. duty was payable. The Central Government accepted the classification under Heading 59.16/17-C.T.A. but maintained that the goods were fabrics liable for C.V. duty under Item Nos. 18 to 22-C.E.T.

2. Applicability of Central Excise Notification 24/65-C.E. to the Import:
The real controversy centered on whether the benefit of exemption under Notification 24/65-C.E. was applicable. The department argued that the exemption applied only to Central Excise duty payable under the C.E.T. if the goods were manufactured in India and not to the additional duty of customs under Section 3(1) of the Customs Tariff Act. The Tribunal noted conflicting decisions from various courts, including the Karnataka High Court's view that exemptions under the Central Excise Act should not influence the additional duty of customs, and the Bombay High Court's view that such exemptions should be considered.

3. Interpretation of Section 3(1) of the Customs Tariff Act, 1975:
Section 3(1) states that any imported article is liable to an additional duty equal to the excise duty for the time being leviable on a like article if produced or manufactured in India. The explanation clarifies that "excise duty for the time being leviable" includes the highest duty where different rates apply. The department contended that this additional duty is a customs duty and should not be influenced by exemptions under the Central Excise Act. The respondents argued that the measure of additional duty should consider exemptions under Rule 8(1) of the Central Excises and Salt Act, 1944.

4. Relevance of Exemption Notifications under Central Excise Rule 8(1) for Additional Duty of Customs:
The Tribunal discussed various judicial decisions on whether exemptions under Rule 8(1) should apply to additional duty of customs. The Bombay High Court in Century Enka Ltd. held that such exemptions should be considered, while the Karnataka High Court in B.S. Kamath & Others held the opposite view. The Tribunal also noted the Supreme Court's decision in Khandelwal Metal & Engg. Co., which supported the Karnataka High Court's view that additional duty under Section 3(1) of the C.T.A. is not countervailing duty but an additional duty of customs.

Judgment Analysis:
The Tribunal ultimately held that the goods should be classified as fabrics and that the benefit of Notification 24/65-C.E. would be applicable to the import. This decision was based on the interpretation that the expression "excise duty for the time being leviable" includes exemptions granted under the Central Excise Act, thus supporting the view that such exemptions should influence the calculation of additional duty of customs.

Separate Judgments:
- Order by S.D. Jha, Vice-President (Judicial): Disagreed with the majority on extending the benefit of Notification 24/65-C.E. to the import, citing the Karnataka High Court's decision in B.S. Kamath & Others.
- Order by I.J. Rao, Member (T): Agreed with S.D. Jha on both classification and exemption issues.
- Order by G. Sankaran, Sr. Vice-President: Agreed with M. Santhanam, supporting the view that exemptions under Central Excise Rule 8(1) should be considered for additional duty of customs.

Conclusion:
The Tribunal's majority decision was to classify the goods as fabrics and apply the benefit of Notification 24/65-C.E. to the import, considering the exemptions under Central Excise Rule 8(1) for calculating additional duty of customs.