2024 (11) TMI 21 - HC - Customs

Scope of Notification 188/93-Cus in relation to goods imported for use in an integrated aquaculture farm and export of farm products by 100% EOUs - effect of various amended customs notifications on the exemption status - Notification 183/93-Cus issued on 27.12.1993 amended - invoking bank guarantees by the Customs Department during the period of alleged exemption interruption - continuance of the exemption throughout the intervening period - Notification 183/93-Cus was issued amending various notifications extending general exemptions, including Notification 13 dated 09.02.1981 as provided for the insertion of a clause after (2) in Notification 13 of Cus /81 dated 09.02.1981, as clause (3) that stated that 'nothing contained in this notification shall apply to goods imported by an aquaculture unit.' HELD THAT - It is only at the stage of writ petition that the parties appear to have come alive to the existence of Notification 188/93-Cus dated 27.12.1993. That notification extends an exemption to 100% EOUs for the import of specified goods for use in an integrated aquaculture farm and export of farm products. Inter alia, the list of specified goods is set out in a Table. Though the description of the goods in the Table do not include raw materials, the body of the notification, in clause (3), identified raw materials specifically and extended exemption thereto. The counter filed by the Customs Department before the Writ Court defended the invocation of bank guarantees based upon their concurrent reading of notifications 13/1981, 189/1993 and 196/1994. It is thus clear that the authorities have blissfully lost sight of Notification 188/1993. After hearing the parties, the Writ Court has allowed the writ petitions by order dated 30.06.2008 noticing, and rightly, that Notification No. 188/1993 had maintained the grant of exemption during the entirety of the interregnum to prawn feed and raw materials. Notification No.196/1994 itself facilitates the continuance of the exemption throughout the intervening period between 27.12.1993 and 08.12.1994. Sub-clause (i) of clause (9) of the aforesaid notification not only rescinds Notification 188/93-Cus dated 27.12.1993 which withdrew the exemption, but sub-clause (ii) of clause (9) states that notwithstanding such rescission, anything done or action taken under the notification so rescinded shall be deemed to have been done or taken under the corresponding provisions of this notification. Thus, the impact of sub-clauses (i) and (ii) of Clause (9) is a seamless continuance of the exemption granted under Notification No.13/1981 dated 21.12.1993, all the way till 08.12.1994 including the 342 days when there was the impression created of an interruption to the grant of exemption. In reality, the simultaneous issuance of Notification 188/93-Cus dated 27.12.1993 ensured that there was no interruption. Thus, and in addition to the reasoning of the writ court, we also find support in sub-clauses (i) and (ii) of clause (9) of Notification No. 196/1994 to the availability/continuance of the exemption. Applicability of Section 159A of the Customs Act, 1962 regarding amendments to notifications - Section 159A states that amendments to rules, regulations, notifications or orders would come into effect, only in situations where there is no contra intention available. In the present case, clause (9) of Notification No. 196/1994 clearly reveals such different intention by stating expressly that the benefit of earlier notifications will continue for the interim period. Thus, Section 159A has no application to the facts of the present case.

Issues Involved:

1. Applicability of exemption notifications to 100% Export Oriented Units (EOUs) importing goods for aquaculture purposes.
2. Interpretation of the sequence and effect of various customs notifications on the exemption status.
3. Legality of invoking bank guarantees by the Customs Department during the period of alleged exemption interruption.
4. Application of Section 159A of the Customs Act, 1962 regarding amendments to notifications.

Issue-wise Detailed Analysis:

1. Applicability of Exemption Notifications:

The central issue revolves around the applicability of customs exemption notifications to 100% EOUs engaged in aquaculture. Specifically, Notification 13/1981 provided a broad exemption from import duty for EOUs, which included raw materials, capital goods, and components. However, Notification 183/93-Cus issued on 27.12.1993 amended this by excluding goods imported by aquaculture units from the exemption. This exclusion created a period of uncertainty regarding the applicability of exemptions to aquaculture units.

2. Interpretation of Notifications:

The judgment delves into the interpretation of the sequence of notifications and their impact on the exemption status. Notification 188/93-Cus, issued on the same date as Notification 183/93-Cus, specifically extended exemptions to goods imported for integrated aquaculture farms, including raw materials. Despite the perceived interruption caused by Notification 183/93-Cus, Notification 188/93-Cus maintained the exemption for aquaculture units. This was further clarified by Notification 196/94-Cus dated 08.12.1994, which rescinded Notification 188/93-Cus but included a clause ensuring that actions taken under the rescinded notification were deemed valid under the new notification, effectively maintaining the exemption continuity.

3. Legality of Invoking Bank Guarantees:

The Customs Department's invocation of bank guarantees furnished by the writ petitioner during the period of alleged exemption interruption was challenged. The writ court found that the petitioner was entitled to the exemption throughout the period, as Notification 188/93-Cus had maintained the exemption for aquaculture units. The writ court concluded that the invocation of bank guarantees was unjustified, as the exemption was applicable during the entire period in question.

4. Application of Section 159A of the Customs Act, 1962:

The appellant argued that Section 159A of the Customs Act, 1962, which addresses the effect of amendments to rules, regulations, notifications, or orders, should apply. However, the court found that clause (9) of Notification 196/94-Cus explicitly expressed a different intention by stating that the benefit of earlier notifications would continue for the interim period. Therefore, Section 159A was deemed inapplicable to the case, as the intention to maintain the exemption was clear.

Conclusion:

The court confirmed the writ court's decision, emphasizing that the exemption for aquaculture units was uninterrupted due to the provisions of Notification 188/93-Cus and the clarifications in Notification 196/94-Cus. The Customs Department's actions to invoke bank guarantees were found to be unjustified, and the writ appeals were dismissed. The judgment underscores the importance of a harmonious reading of notifications to ascertain the true legislative intent and maintain the continuity of exemptions for EOUs.

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