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TMI Blog1985 (9) TMI 189X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The Assistant Collector s order is neither a proper speaking order nor an intelligible one, but apparently rejects the contention of the respondents. The Collector (Appeals) has, however, passed a very detailed order in which he has upheld the contention of the respondents. This order has now been challenged before us. 3. In order to appreciate the issue involved, some reference to the background would be helpful. Cloves fell under Item 9(3)(a) of the First Schedule to the Indian Tariff Act, 1934, which was in force prior to the enactment of the Customs Tariff Act, 1975. In the Indian Tariff Act, the nature of duty on cloves was described as Preferential Revenue . The standard rate of duty was specified as Rs. 18 per kilogram , and the Preferential rate of duty if the article was the produce or manufacture of a British Colony was specified as Rs. 18 per kilogram less 7 per cent ad valorem . This was obviously due to the fact that a preferential margin of 7 per cent ad valorem had been granted on cloves imported into India from a British Colony, as part of the old scheme of Imperial Preferences. 4. With the coming into force of the Customs Tariff Act, 1975, clove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03.02 Dried Fish 60% 50% 2. 08.01 Dessicated coconut 100% 75% 3. Ex.15.07 Coconut oil (refined) 60% 40% 4. 17.03 Molasses 60% Nil 5. Ex. 18.01 Cocoa beans 60% 25% 6. 25.04 Natural graphite 60% 40% 7. 25.31 Fluorspar and fluorite 60% 48% 8. 33.01 Cinnamon leaf oil 100% 70% 9. Ex. 40.11 Tyres and tubes 100%/60% 80%/40% 10. Ex. 68.10 Gypsum board, plaster 100% 85% 11. 73.02 Ferro-silicon 30% 20% 12. Ex. 73.18 GI/MS Pipes (Seamless tubes) 60% 50% 13. 09.04/10 Cloves Rupees 60/- kg. less 7 Rupees 20/- kg.less 7 14. 09.04/10 Nutmegs and mace 92 % 83% 15. 15.08/13 Glycerine 60% 55% 16. 40.01/04 Natural rubber 40% 30% 6. In order to implement their commitment to grant tar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereof . 8. As we have already observed, the Assistant Collector s order is not a speaking order and does not show application of mind. Even his conclusion that the goods be assessed at the rate of Rs. 20/per kg. less 7 %+30% A.V. only begs the question, since it does not say whether the 7% refers to the value or to Rs. 20/-. (The reference to 30% A.V. may be ignored, as it apparently refers to the auxiliary duty, which is not in issue here). The Assistant Collector s order is therefore of no assistance in dealing with the matter. 9. The Collector (Appeals), after referring to the basis for the conclusion of the Assistant Collector (which however has not been explicitly stated in the Assistant Collector s order) and the arguments put forth by the respondents in their appeal before him, had held in their favour on the following grounds:- (a) In view of the General Explanatory Note to the Schedules to the Customs Tariff Act, the abbreviation % can only mean so much per cent ad valorem. Thus, when the preferential rate of duty for cloves in the First Schedule is given as Rs. 60/- per kilogram less 7 % it can only mean Rs. 60/- per kilogram less 7% of the assessable v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in notification No 431-Cus., dated 1-11-1976, the preferential rate of duty against all items other than cloves was shown as 50% Ad. Val, , etc. Only in the case of cloves, the words Ad. Val. did not appear after 7 % . This would show that the figure of 7 % was not meant to refer to a percentage of the value of the goods, but was to be taken as a percentage of Rs. 20/- per kg. 13. It was put by the Bench to Shri Ohri that if the interpretation canvassed by him was the correct one, the preferential rate of duty could have been straight way expressed as Rs. 18.50 per kg. . There appeared to be no reason why an arithmetical calculation should be performed in order to arrive at a pre-determined figure. Shri Ohri replied that the formula might have been adopted in order to show clearly that a preferential element was involved. 14 . It was also put to Shri Ohri that the General Explanatory Note made it very clear that the % sign in the Schedule to the Customs Tariff Act referred to an ad valorem percentage. The notification being subordinate and cognate legislation, the same rule in regard to the use of the % sign should be applicable to the notification. In this con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt s view are based on (a) omission of the words Ad. Val. after 71/2% in the notification ; and (b) the anomaly" of a negative duty if the value of cloves exceeds Rs. 267/- per kg. 21. As regards the first point, we have already referred to the origin of the margin of 71/2%, namely the erstwhile Imperial Preferences. The preferential margin, as seen from the Indian Tariff Act, 1934, was 71/2% ad valorem. That margin has been retained in the Customs Tariff Act. The General-Explanatory Note to the Act makes it clear beyond any possibility of doubt that a reference to 71/2% in the Schedule means71/2% ad valorem. The interpretation of 71/2% in the notification as 71/2%, ad valorem would be consistent with the position under the Customs Tariff Act, the Indian Tariff Act and the scheme of Imperial Preferences. On the other hand, the interpretation of 71/2% , as 71/2%, of Rs. 20/- per kg. would have no apparent historical or economic basis. 22. Further, the National List of Concessions of India annexed to the Bangkok Agreement (vide para 5 above), lists 16 items and against each of them it shows the present rate of duty and tariff rate offered . Against every entry percen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to a case where the 7 % was with reference to an unknown quantity, namely the assessable value. 25. Again, as pointed out to Shri Ohri at the hearing, the interpretation adopted by the Collector (Appeals) would lead to harmonious construction of the Customs Tariff Act and the exemption notification (issued under the Customs Act, which is a cognate legislation). 26. As regards the possible anomaly, to which Shri Ohri had referred, we have noted Shri Kunhikrishnan s submission that the preferential duty would become zero only if the value of cloves increased to Rs. 267/- per kg., and that at the material time it was far below this, being about Rs. 120/- per kg. We agree with Shri Kunhikrishnan s submission that a mere hypothetical and unlikely situation should not lead to the rejection of what on all grounds appears to be the correct interpretation. Apart from this, we would point out that the situation of a negative duty can never arise as a result of an exemption notification, because the notification only exempts the goods from that portion of the duty of customs............ as is in excess of the rate specified in the corresponding entry......... . 27. It is true that if ..... X X X X Extracts X X X X X X X X Extracts X X X X
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