2025 (4) TMI 1247 - AT - Customs

Entitlement for BCD exemption under the notification dated 01.03.2005 as amended by the notification dated 17.03.2012 whereby an Explanation was added - import of digital still image video cameras - interpretation of the scope of Explanation - HELD THAT - The issue as to whether digital still image video cameras would be entitled to basic customs duty exemption under Notification dated 01.03.2005 as amended by Notification No. 15/2012 dated 17.03.2012 is the issue that was involved in Customs Appeal No. 52218 of 2019 2024 (6) TMI 1422 - CESTAT NEW DELHI LB and is also the issue involved in the present four Customs Appeals. Such being the position the order dated 09.09.2024 passed in Customs Appeal No. 52218 of 2019 following the answer to the reference by the Larger Bench of the Tribunal on 14.06.2024 would govern the issue involved in all the four Customs Appeals. The digital still image video cameras involved in the present Customs Appeals would therefore be entitled to exemption from basic customs duty in terms of the Notification dated 01.03.2005 as amended on 17.03.2012. Conclusion - The digital still image video cameras imported by the appellants are entitled to BCD exemption under Notification No. 25/2005-Cus dated 01.03.2005 as amended by Notification No. 15/2012 dated 17.03.2012. The order dated 28.10.2016 impugned in all the present four Customs Appeals deserves to be set aside and is set aside - Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in these appeals are:

(i) Whether the 'digital still image video cameras' imported by the appellants are entitled to Basic Customs Duty (BCD) exemption under Notification No. 25/2005-Cus dated 01.03.2005, as amended by Notification No. 15/2012 dated 17.03.2012, including the 'Explanation' added thereto;

(ii) Whether the earlier Tribunal decision dated 19.12.2017 correctly interpreted the scope of the 'Explanation' added to the exemption notification;

(iii) Whether the demand for customs duty confirmed for the normal period of limitation under section 28(1) of the Customs Act, 1962, was justified, given that the extended period under section 28(4) was held by the Supreme Court not to be invocable;

(iv) The applicability and interpretation of the limitation period for adjudication of exemption claims under the Customs Act;

(v) The correctness of the Tribunal's reliance on the principles of statutory interpretation regarding exemption notifications, particularly the treatment of ambiguity in charging provisions versus exemption notifications.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i) & (ii): Entitlement of 'digital still image video cameras' to BCD exemption under Notification No. 25/2005-Cus and interpretation of the 'Explanation'

Relevant legal framework and precedents: The exemption notification dated 01.03.2005, as amended on 17.03.2012, grants BCD exemption subject to certain conditions clarified by an added 'Explanation'. The statutory provisions under the Customs Act, 1962, particularly section 28(1) regarding limitation, are also relevant. The Tribunal referred to constitutional bench precedents establishing that ambiguity in charging provisions must be resolved in favour of the assessee, whereas ambiguity in exemption notifications is generally construed in favour of the Revenue. The earlier decision in Sun Export Corporation was overruled to clarify this principle.

Court's interpretation and reasoning: The Larger Bench of the Tribunal analyzed the 'Explanation' added to the exemption notification and concluded that a literal and cumulative reading of the three parameters/functions of the digital camera is required. If all parameters exceed the specified threshold, the exemption does not apply; if any one parameter falls below the threshold (e.g., recording time less than 30 minutes in a single sequence), the exemption applies. The Tribunal found no ambiguity in the notification's wording, thus the exemption should be liberally interpreted in favour of the claimant, provided the claimant establishes eligibility.

Key evidence and findings: The appellants adduced evidence demonstrating that their digital still image video cameras met the criteria for exemption under the notification. The Revenue did not contend any ambiguity in the notification's language but argued for a literal interpretation, which the Tribunal accepted as supporting exemption.

Application of law to facts: Applying the legal principles and interpreting the exemption notification literally and cumulatively, the Tribunal concluded that the digital still image video cameras imported by the appellants fall within the parameters of the exemption notification and are thus entitled to BCD exemption.

Treatment of competing arguments: The Tribunal considered the Revenue's argument that the earlier decision denying exemption was correct but found that decision to be based on an incorrect interpretation of the 'Explanation'. The Tribunal also noted the absence of any claim of ambiguity by the Revenue, strengthening the literal interpretation approach.

Conclusions: The Tribunal held that the digital still image video cameras are entitled to BCD exemption under the said notification, overruling the earlier Tribunal decision of 19.12.2017.

Issue (iii) & (iv): Justification of confirming demand for customs duty within the normal limitation period under section 28(1) of the Customs Act

Relevant legal framework and precedents: Section 28(1) of the Customs Act stipulates a one-year limitation period for adjudication of demands. The extended limitation period under section 28(4) was earlier invoked by the department but subsequently held by the Supreme Court not to be applicable in this context.

Court's interpretation and reasoning: The Supreme Court remanded the four appeals to the Tribunal for adjudication strictly within the normal limitation period under section 28(1). The Tribunal was tasked with determining whether the demand confirmed for the normal limitation period was justified.

Key evidence and findings: The show cause notices challenged in the appeals were issued within the requisite limitation period. The Tribunal noted that the issue of eligibility for exemption must be decided on merits within this period.

Application of law to facts: The Tribunal applied the limitation provisions strictly and remanded the matter for merits adjudication within the normal limitation period, rejecting any invocation of extended limitation.

Treatment of competing arguments: Both parties agreed to the remand and limitation framework. The Tribunal's role was to ensure adherence to limitation rules while deciding the exemption eligibility.

Conclusions: The demand for customs duty must be adjudicated on merits within the one-year limitation period under section 28(1), and extended limitation cannot be invoked.

Issue (v): Principles of statutory interpretation applicable to exemption notifications

Relevant legal framework and precedents: The Tribunal referred to constitutional bench rulings clarifying that ambiguity in charging provisions benefits the assessee, while ambiguity in exemption notifications benefits the Revenue. However, where there is no ambiguity, exemption notifications should be liberally construed in favour of the claimant.

Court's interpretation and reasoning: The Tribunal emphasized the necessity of establishing eligibility by the claimant and that the burden lies on the claimant to prove that the case falls within the exemption notification parameters. The Tribunal found no ambiguity in the notification and thus applied a literal interpretation.

Key evidence and findings: The Revenue conceded the absence of ambiguity. The appellants provided evidence supporting their claim within the notification's parameters.

Application of law to facts: The Tribunal applied the interpretative principles to conclude that the exemption notification should be liberally construed in favour of the appellants, given the absence of ambiguity and the fulfillment of notification criteria.

Treatment of competing arguments: The Tribunal rejected the earlier restrictive interpretation denying exemption as incorrect and accepted the literal, cumulative reading of the notification.

Conclusions: The Tribunal established that exemption notifications, when unambiguous, warrant liberal interpretation favouring the claimant, provided the claimant meets the notification's conditions.

3. SIGNIFICANT HOLDINGS

"The ratio laid down in the aforesaid judgment reveals that in case of ambiguity in a charging provision, the benefit must be given to the assessee and in case of an exemption Notification, the benefit of ambiguity is strictly interpreted in favour of the Revenue. This ratio has been laid down by the Constitutional Bench while overruling the earlier decision in Sun Export Corporation v. Collector case. To apply the said ratio to the facts of a case, presence of ambiguity in the subject for interpretation is a sine qua non. If there is no ambiguity in the interpretation of the exemption Notification, the same should be liberally interpreted adopting the tools of interpretation applicable to a Notification granting exemption from payment of duty."

"A literal interpretation of the said Explanation, as discussed above, reveals that all the three parameters/functions of a digital camera should be cumulatively read so as to ascertain whether all the characteristics are above the threshold limit; in that event, the digital camera would not be eligible to the exemption from BCD under the said Notification. In the event any one of the parameter/characteristic is below the threshold limit e.g. recording time is less than 30 minutes in a single sequence using the maximum storage (including expanded) capacity, then the cameras would be eligible to the benefit of the said Notification."

"The appellant in the present case also fairly established that their case falls within the four corners of the said Notification by adducing evidence discussed above."

"The impugned order dated 06.06.2019 passed by the Commissioner of Customs (Appeals) is, accordingly, set aside and the appeal is allowed with consequential relief."

Final determinations on each issue:

- The 'digital still image video cameras' imported by the appellants are entitled to BCD exemption under Notification No. 25/2005-Cus dated 01.03.2005, as amended by Notification No. 15/2012 dated 17.03.2012.

- The earlier Tribunal decision denying exemption based on an incorrect interpretation of the 'Explanation' is overruled.

- The demand for customs duty must be adjudicated within the normal limitation period under section 28(1) of the Customs Act; extended limitation under section 28(4) is not applicable.

- The exemption notification is to be interpreted literally and liberally in favour of the claimant where no ambiguity exists.

- The orders confirming demand and denying exemption are set aside, and the appeals are allowed with consequential relief.