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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.7189 OF 2005

M/S. JASWAL NECO LTD. … APPELLANT

VERSUS

COMMISSIONER OF CUSTOMS,  VISAKHAPATNAM        ...RESPONDENT

J U D G M E N T  

R.F. Nariman, J.

1. The appellant is engaged in the manufacture of pig iron.

The  appellant  imported  Low  Ash  Metallurgical  (LAM)  Coke

under  seven  Bills  of  Entry,  against  four  advance  licenses

without  payment  of  basic  customs  duty  (BCD)  levied  under

Section  12  of  the  Customs Act,  1962,  special  customs  duty

(SCD) levied under Section 68 of the Finance Act, 1996, special

additional duty (SAD) levied under Section 3A of Customs Tariff

Act,  1975 and Anti-dumping duty (ADD) levied under Section

9A of the Customs Tariff Act, 1975 during the period June 1998

to  August  1998,  which  were  exempt  from  duty  vide  (i)

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Notifications  No.  30/97  Cus  dated  1.4.1997,  (ii)  Sr.  No.4  of

Notification  No.12/97  Cus  dated  1.3.97,  (iii)  Sr.  No.3  of  the

Notification No.34/98-Cus dated 13.6.1998, and (iv) Notification

No.41/97-Cus dated 30.4.97 respectively.  

2. At  the  time  of  import,  the  appellant  furnished  a  bond

containing  an  undertaking  to  pay  duty  on  imported  goods

cleared under Notification No.30/97 and 41/97 in the event of

failure to fulfill its export obligation.  

3. It is an admitted position that the appellant failed to fulfill

its export obligation in the terms of the exemption notifications.

The  entire  LAM so  imported  has  instead  been  used  by  the

appellant in its factory for the manufacture of pig iron.  

4. Demand  of  duty  of  Rs.7.21  crores  was  sought  to  be

raised.  The break up of demand of Rs.7.21 crores is as under:

1. Basic Customs Duty Rs.1.01 crores 2. Antidumping Duty Rs.5.00 crores 3. Special Customs Duty Rs.0.50 crore 4. Special Additional Duty Rs.0.66 crore 5. Cess Rs.0.02 crore

Total Rs.7.21 crores.

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5. Pending final adjudication of the show cause notice by the

Commissioner, the appellant duly paid the entire duty payable

towards BCD, SAD and SCD after considering partial exports

already  made.   The  appellant  did  not  make  any  payment

towards ADD.  

6. The  Commissioner  of  Customs  vide  Order  dated

4.11.2004 confirmed the duty demand of  Rs.3.37 crores and

imposed a penalty of Rupees Twenty lakhs. According to the

learned Commissioner, since the appellant after issuance of the

show cause notice paid duty of Rs.1,66,18,563/-, the differential

duty to be paid amounted to Rs.1,70,98,510/-.  Further, interest

on the said amount at 24% was also held to be payable.  

7. The appellant appealed to CESTAT.  Vide  the impugned

judgment dated 18.8.2005, CESTAT partly allowed the appeal

by remanding the matter to the original authority to calculate

duty,  interest,  and  penalty  in  accordance  with  the  findings

contained  in  its  judgment.   The  basic  difference  between

CESTAT’s  judgment  and  that  of  the  Commissioner  is  that

interest was reduced from 24% to 15%, but the Anti-dumping

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duty was increased by applying the higher rates specified by

the final Notification No.69 of 2000.   

8. Shri Lakshmikumaran, learned advocate for the appellant

did not dispute before us that the appellant failed in its export

obligations and was, therefore, not liable to be exempted so far

as customs duty is concerned.  He, therefore, conceded that

basic customs duty and the special  customs duty as well  as

special additional duty was payable by the appellant.  However,

he disputed that Anti-dumping duty was payable at all stating

that the appellant was exempt under Notification No.69 of 2000.

He further argued that no interest is chargeable on any of the

four  duties  inasmuch  as  the  bond  that  was  furnished  under

Notification No.30 of 1997 did not stipulate that in the event of

default, interest would become payable.  Further, according to

him, it is clear that the assessment in the present case is only

provisional and that being the case, even if the provisions of the

Customs Act are made applicable insofar as Anti-dumping duty

is  concerned,  under  the  Customs  Act  itself  there  was  no

provision for collection of interest for the period in dispute as

Section  18  was  amended  to  include  such  a  provision  only

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prospectively with effect from 2006.  He further argued, that in

any case Anti-dumping duty could not be added for purposes of

computing  customs  duty,  special  customs  duty  and  special

additional  duty.   Also  no  penalty  is  imposable  inasmuch  as

nothing  contumacious  was  done  by  the  appellant  and  the

export obligation could not be fulfilled only because of bonafide

commercial impossibility.  It is contended that nothing has been

diverted to the domestic tariff area and sold in that area, and

the  entire  imports  made  have  been  used  by  the  appellant

captively  in  its  factory  for  the  manufacture  of  pig  iron.   He

further argued that he could not be worse off in an appeal filed

only  by  the  appellant  herein  to  CESTAT  and  that  on  the

assumption that the appellant was liable to pay Anti-dumping

duty,  they  should  only  pay  the  said  duty  at  the  lower  rate

prescribed by the Commissioner as Revenue had not appealed

to the Tribunal against the Commissioner’s order.   

9. Shri Radhakrishnan, learned senior counsel appearing on

behalf of the revenue countered the aforesaid submissions and

submitted  that  the  exemption  contained  in  the  Anti-dumping

duty Notification 69 of 2000 was only prospective and, hence

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Anti-dumping duty had to be paid for the relevant period. He

further  submitted  that  interest  in  any  case  was  payable  as

Notification  No.30  of  1997  independently  levied  a  charge  of

interest.  Further, he also supported the Commissioner’s order

and the  Tribunal  so far  as  the  various  other  aspects  of  this

appeal are concerned.  

10. We have heard learned counsel for the parties. In order to

appreciate  the  first  submission  of  Shri  Lakshmikumaran,

namely, that Anti-dumping duty in the present case ought to be

nil, we set out the relevant Notifications –  

“Notification: 22/98-Cus. Dated 06-May-1998

Metallurgical coke originating in or exported  from China PR – Anti-dumping duty

In exercise of the powers conferred by sub-section (2) of section 9A of the Customs Tariff Act, 1975 (51 of  1975),  read with  rule  13 of  the Customs Tariff (Identification,  Assessment  and  Collection  of Anti-dumping  Duty  on  Dumped  Articles  and  for Determination  of  Injury)  Rules,  1995,  the  Central Government on the basis of the preliminary findings of the designated authority, published in the Gazette of India, Extraordinary, Part I, Section 1, dated the 20th March, 1998 that there is dumping in respect of the  Metallurgical  coke  falling  under  Heading  No. 27.04  of  the  First  Schedule  to  the  said  Act,  and originating  in  or  exported  from China PR,  hereby imposes on the said Metallurgical coke originating in

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or exported from China PR, and imported into India, an anti-dumping duty at the rate of  one thousand eight hundred rupees per metric tonne.  

This notification shall have effect upto and inclusive of the 5th day of November, 1998.”  

“Notification: 82/98/Cus. Dated 27-Oct-1998

Metallurgical coke originating in, or exported  from, China PR – Anti-dumping duty –  Notification No. 22/98-Cus. Rescinded

In exercise of the powers conferred by sub-section (2) of section 9A of the Customs Tariff Act, 1975 (51 of  1975),  read with  rule  13 of  the Customs Tariff (Identification,  Assessment  and  Collection  of Anti-dumping  Duty  on  Dumped  Articles  and  for Determination  of  Injury)  Rules,  1995,  the  Central Government hereby rescinds the notification of the Government  of  India  in  the  Ministry  of  Finance (Department  of  Revenue),  No.  22/98-Customs, dated the 6th May, 1998, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide G.S.R. 243 (E), dated the 6th May, 1998.”  

Notification: 81/98-Cus. Dated 27-Oct-1998

Metallurgical  coke  (Metcoke)  originating  in,  or exported from, China PR – Anti-dumping duty

“Now, therefore, in exercise of the powers conferred by sub-section (1) of section 9A of the said Customs Tariff Act, read with rules 18 and 20 of the Customs Tariff  (Identification,  Assessment  and Collection of Anti-dumping  Duty  on  Dumped  Articles  and  for Determination  of  Injury)  Rules,  1995,  the  Central Government,  after  considering  the  aforesaid findings  of  the  Designated  Authority,  hereby imposes  on  Metcoke  falling  under  heading  No. 27.04  of  the  First  Schedule  to  the  said  Customs Tariff Act, originating in or exported from China PR

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and  imported  into  India,  an  anti-dumping  duty calculated at a rate as equivalent to the difference between Rs. 4673 and the landed value of Metcoke, per metric tonne;

2. The  anti-dumping  duty  imposed  under  this notification shall be levied with effect from the date of  imposition  of  provisional  duty  i.e.  6th of  May, 1998.”

11. The final Notification dated 27.10.1998 was challenged by

the  Pig  Iron  Manufacturers  Association.   By  its  judgment

reported  in  Pig  Iron  Manufacturers  Association v.

Designated  Authority,  Ministry  of  Commerce,  2000  (116)

ELT 67 (Tribunal), the Tribunal passed the following order:-

“12. In  the  light  of  the  above  discussions  and findings based on the data available on record, we pass the following orders:-

  1. All  imports  of  metcoke  exported  from  or originating  in  the  People’s  Republic  of  China  to India  be  subjected  to  anti-dumping  duties  at  the following rates as indicated against each exporter:- 1. China  National Coal Industry :  18.35US$

Import/Export (Group) Corporation.          

2.  China National Mineral Import and    :            24.51US$          Export Corporation.

3.  Shanxi Coal Import Export Group :           19.22US$         Corporation. (Minmetal Group).                  

4. Ningxia Xiacheng Import & Export : 24.95 US$        Corporation.                                              5. China North Industries Corporation. : 22.69 US$

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6. Shanghai Pacific Chemicals (Group) : 19.22 US$         Corporation Ltd.

7. All other exporters. :                    24.95 US$

2. Subject  to  these  modifications,  the  final findings  dated  27th August,  1998  of  the  D.A.  are confirmed.  The Corrigendum dated 2nd September, 1998 is set aside.”  

12. Pursuant  to  the  Tribunal’s  judgment,  the  Central

Government issued a Notification dated 26.5.2000 as follows:-

“Now, therefore, in exercise of the powers conferred by  sub-section  (1)  of  Section  9A  read  with sub-section  (6) of Section 3 of the said Customs Tariff Act and sub-section (1) of Section 25 of the Customs  Act,  1962  (52  of  1962),  and  in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue)  No.  81/98-  Customs,  dated  the  27th October,  1998  [  G.S.R.  644  (E),  dated  the  27 th October, 1998], except as respects things done or omitted to be done before such supersession, the Central  Government  hereby  imposes  on  Metcoke falling  under  heading  No.  27.04  of  the  First Schedule to the said Customs Tariff Act, originating in,  or  exported from, China PR and imported into India, by the exporters mentioned in column (2) of the Table hereto annexed, an anti-dumping duty of an  amount  equivalent  to  the  rate  indicated  in column (3) of the said Table, converted into Indian currency with reference to the rate of exchange as in  force  on  the  date  on  which  a  bill  of  entry  is presented  under  section  46  of  the  said  Customs Act, 1962 (52 of 1962).”

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S. No.      Name of the Exporter        Rate  per metric tone

(1)                     (2)                                        (3)

1.         China  National Coal Industry          US$ 18.35  Import/Export (Group) Corporation

2.         China National Mineral Import and   US$ 24.51                          Export Corporation.

3.         Shanxi Coal Import Export Group    US$ 19.22              Corporation. (Minmetal Group)

4.         Ningxia Xiacheng Import & Export   US$ 24.95              Corporation

5.         China North Industries Corporation   US$ 22.69  

6.         Shanghai Pacific Chemicals (Group) US$ 19.22              Corporation Ltd.

7.         All other exporters.                US$ 24.95  

Nothing contained in this notification shall apply to imports of Metcoke by a manufacturer of pig iron or steel  using  a  blast  furnace  if  he  follows  the procedure set out in the Customs (Import of Goods at  Concessional  Rate  of  Duty  for  Manufacture  of Excisable Goods) Rules, 1996.”

13. The bone of contention in the present appeal is the last

paragraph of this Notification.  

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14. It is clear that under Rule 20(2)(a) of the Customs Tariff

(Identification, Assessment And Collection of Antidumping Duty

on  Dumped  Articles  and  For  Determination  of  Injury)  Rules,

1995, where a provisional duty has been levied and where the

designated authority  has recorded a final  finding of  injury  or

threat of injury and the further finding that the effect of imports

in the absence of provisional duty would have led to injury, the

Anti-dumping duty may be levied from the date of imposition of

provisional  duty.   In  the  present  case,  therefore,  it  will  be

noticed that  the final  Notification dated 27.10.1998 is said to

come into  force  from the  date  of  the  first  Notification  dated

6.5.1998 imposing provisional duty in the present case.  It  is

clear that as the final Notification dated 27.10.1998 has been

superseded by the Notification dated 19.5.2000, the appellant

would have had to pay Anti-dumping duty at the rate of US$

24.95 per metric tonne as indisputably it falls within Item No.7

of the said Notification.  

15. It  will  be  noticed  that  the  exception  carved  out  in  the

Notification  dated  19.5.2000  was  pursuant  to  a  minutes  of

meeting  dated  25.11.1999  by  the  Secretary  (Steel)  and

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representatives of Mini Blast Furnace producers of Metallurgical

Coke.  These minutes of meeting state as follows:-

“The  Representatives  of  IMCOM  (Indian Metallurgical Coke Manufacturers Association) said that IMCOM represents both the petitioners i.e. M/s. BLA  Industries  and  Industries  and  Commerce Association in the anti dumping duty petition against import  of  metcoke  of  Chinese  origin.   They explained  that  while  anti  dumping  duty  was essential  for  the  survival  of  the  domestic  coke producers, the blast furnaces have never been their principal customers and it was not their intention to harm the blast furnaces industry.  

5. After  detailed  deliberations  it  was  agreed between  Indian  Metallurgical  Coke  Manufacturers Association (IMCOM) and Association of Indian Mini Blast  Furnaces  (AIM)  that  the  blast  furnace  units were not the principal market that the domestic coke producers  cater  to.   The  market  to  which  the domestic  coke  producers  cater  to  companies ferrous  and  non-ferrous  foundries,  ferro  alloys producers, soda ash producers, zinc usmelting units some other chemical units and various SSI units.

6. Since the imposition of the anti dumping duty the blast furnace units had to resort to import from expensive sources like Russia, Japan etc.  In view of this it  was suggested by the AIM that the blast furnace units could be exempted from paying ADD on import  of  metallurgical  coke of  Chinese origin, provided this import is for actual  use by the blast furnace units.  The list of blast furnace units which will be covered by this exemption is also enclosed.  

7. Considering  the  financial  difficulty  of  the members of AIM, IMCOM agreed that they have no objection  if  the  government  exempts  the  blast

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furnace  industry  from  the  purview  of  the anti-dumping duty.  Metcoke will be imported under OGL with Actual user Conditions for blast furnace industry without ADD.  IMCOM reiterated that while the continuation of the ADD on metcoke of Chinese origin is vital for the survival of the indigenous coke manufacturers they also agreed that the exemption of  the blast  furnace units  from ADD was vital  for their survival.”  

16. On  reading  these  minutes  it  becomes  clear  that

Anti-dumping  duties  that  had  been  imposed  upon  the  Blast

Furnace Industry had an adverse impact upon the industry and

that the intention of levying an Anti-dumping duty was not to

harm their interests.  Paragraphs 6 and 7 of the said minutes in

particular  seem  to  suggest  that  the  exemption  that  was

contemplated by the minutes of such Blast Furnace units was

something that could take place only in the future.  

17. Quite apart  from this,  it  is  clear  that  no exception was

carved  out  before  19.5.2000  in  favour  of  Blast  Furnace

Manufacturers  either  when the  provisional  Anti-dumping  duty

was  first  imposed  or  when  the  final  Notification  dated

27.10.1998 was issued.   It  is  clear  that  the  last  part  of  the

Notification dated 19.5.2000 creating an exception in favour of

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persons  like  the  appellant  has  no  reference  to  the  earlier

proceedings in the case and is obviously intended to apply only

prospectively.  This is also clear from the language used in the

said clause – ‘nothing contained in the Notification “shall apply

to  imports”  ….  Using  a  Blast  Furnace  “if  he  follows”  the

procedure  set  out  in  the  Customs  “import  of  goods  at

concessional rate of duty for manufacture of excisable goods”

Rules,  1996’.   The language of  the aforesaid  clause applies

only in futuro and we are afraid that Shri Lakshmikumaran’s first

argument must, therefore, fail.  

18. However, Shri Lakshmikumaran is on firmer ground when

he submitted before us that the Commissioner has held that the

appellant  is  liable  to  pay  Anti-dumping  duty  only  under  the

Notification dated 27.10.1998. The rate prescribed in the said

Notification is lesser than the rate that would apply under the

Notification dated 19.5.2000.  As there was no appeal by the

revenue against this finding of the Commissioner, the Tribunal

could not have enhanced the rate at which the appellant would

have to pay Anti-dumping duty in the appellant’s own appeal.

The appellant cannot be worse off by reason of filing an appeal.

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To this limited extent, the appellant succeeds and the Tribunal’s

order is set aside.  The appellant will have to pay Anti-dumping

duty calculated at  the rates specified only in  Notification No.

81/98 dated 27.10.1998.  

19. It was argued by Shri Lakshmikumaran that the appellant

was not liable to pay interest on any of the customs duties for

which  it  was  held  liable  by  the  Commissioner’s  order.   He

referred us to Notification No.30 of 1997, the relevant part of

which reads as follows:

“In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962) the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts  materials  imported into  India,  against  an Advance  Licence  with  Actual  User  Condition  in terms  of  para  7.4  of  the  Export  &  Import  Policy 1997-2002 notified by the Government  of  India in the  Ministry  of  Commerce  vide  Notification No.1/1997-2002  dated  the  31st March,  1997 (hereinafter referred to as the said licence), from the whole of the duty of customs leviable thereon which is  specified in  the First  Schedule  to  the Customs Tariff Act, 1975 (51 of 1975) and from the whole of the additional duty leviable thereon under Section 3 of  the  said  Customs  Tariff  Act,  subject  to  the following conditions namely:-

(i) xxx xxx

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(ii) That the importer at the time of clearance of the imported materials executes a bond with such surety or security and in such form and for  such  sum  as  may  be  specified  by  the Assistant  Commissioner  of  Customs binding himself to pay on demand an amount equal to the duty leviable, but for the exemption, on the imported  materials  in  respect  of  which  the conditions  specified  in  this  notification  have not been complied with, together with interest at the rate of twenty-four percent per annum from  the  date  of  clearance  of  the  said materials.”

20. A reading of this Notification makes it clear that interest at

the rate of 24% per annum is only liable to be paid if at the time

of clearance of the imported materials the importer executes a

bond in which such interest is stated to be payable.  We have

been shown the bond executed in the present case.  It  says

nothing about any interest that is payable in case the conditions

of the Notification No.30 of 1997 are not met.  On this short

ground alone, it is clear that no interest is payable on any of the

customs duties that are due from the appellant.  

21. It was also argued by Shri Lakshmikumaran that Section

101 of the Finance Act, 2009 has been given a retrospective

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application with effect from 1.1.1995.  Section 9A sub-section

(8) as substituted with effect from 1.1.1995 reads as follows:-

“(8) The provisions of the Customs Act, 1962 (52 of  1962)  and  the  rules  and  regulations  made thereunder,  including  those  relating  to  date  of determination of rate of duty, assessment, non-levy, short levy, refunds, interest, appeals, offences and penalties shall, as far as maybe, apply to the duty chargeable  under  this  section  as  they  apply  in relation to duties leviable under that Act.”

22. Even though the Customs Act would necessarily become

attracted  to  Section  9A of  the  Customs Tariff  Act  insofar  as

Anti-dumping  duty  is  concerned,  learned  counsel  further

submitted that the Customs Act itself contained no provision for

levy of interest until 13.7.2006.  Section 18(3) was added only

with effect from 13.7.2006 and reads as follows:-

“(3) The importer or exporter shall be liable to pay interest,  on  any  amount  payable  to  the  Central Government,  consequent  to  the  final  assessment order under sub-section (2), at the rate fixed by the Central Government under Section 28AB from the first  day  of  the  month  in  which  the  duty  is provisionally  assessed  till  the  date  of  payment thereof.”

23. It  is  clear  that  on  the  facts  of  the  present  case  the

provisional assessment had been made in 1998 and the final

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assessment  only  on  4.11.2004  by  the  Commissioner.   Both

these dates being prior to 13.7.2006, Shri Lakshmikumaran is

right  and  no  interest  is  chargeable  under  Section  18  of  the

Customs Act, for the period in question.  

24. In  Commissioner  of  Customs  (Preventive) v.  Goyal

Traders, (2014) 302 ELT 529, the Gujarat High Court has held

as under:-

“17.  In  the  present  case,  we  find  that  prior  to introduction of sub-section (3) of Section 18 of the Act in the present form, there was no liability to pay interest on difference between finally assessed duty and provisionally  assessed duty upon payment  of which the assessee may have cleared the goods.  It was  only  with  effect  from  13.7.2006  that  such charging  provision  was  introduced  in  the  statute. Upon  introduction  therefor  such  provision  created interest liability for the first time w.e.f. 13.7.2006.  In absence of any indication in the statute itself either specifically  or  by  necessary  implication  giving retrospective effect to such a statutory provision, we are of the opinion that the same cannot be applied to  cases  of  provisional  assessment  which  took place prior  to  the said date.  Any such application would in our view amount to retrospective operation of the law.”

We respectfully agree with the aforesaid view.  In addition,

it is clear that this Court has held that the levying of interest can

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only be by a substantive provision (See: J.K. Synthetics Ltd. v.

Commercial  Taxes Officer, (1994) 4 SCC 276 at paragraph

16),  thereby  making  it  clear  that  such  levy  can  only  be

prospective.

25. Further, in India Carbon Ltd. v. State of Assam, (1997)

6 SCC 479, this Court held:-

“11.  Section  9(2-A)  makes  applicable  to  the assessment,  re-assessment,  collection  and enforcement  of  Central  sales  tax  the  provisions relating to offences and penalties contained in the State Acts as if the Central sales tax was a State sales tax. But Section 9(2-A) makes no reference to interest.

12. There  is  no  substantive  provision  in  the Central  Act requiring  the  payment  of  interest  on Central  sales  tax.  There  is,  therefore,  no substantive  provision  in  the  Central  Act    which obliges  the  assessee  to  pay  interest  on  delayed payments of Central sales tax.

13. Now,  the  words  "charging  or  payment  of interest" in Section 9(2) occur in what may be called the latter  part  thereof.  Section 9(2) authorises the sales tax authorities of a State to assess, reassess, collect and enforce payment of the Central sales tax payable by a dealer as if it was payable under the State Act; this is the first part of Section 9(2). By the second  part  thereof,  these  authorities  are empowered to exercise the powers they have under the State Act and the provisions of  the State Act, including  provisions  relating  to  charging  and payment  of  interest,  apply  accordingly.  Having

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regard to what has been said in the case of Khemka & Co., it must be held that the substantive law that the States'  sales tax authorities must apply is the Central  Act.  In  such  application,  for  procedural purposes alone, the provisions of the State Act are available.  The  provision  relating  to  interest  in  the latter part of Section 9(2) can be employed by the States'  sales  tax  authorities  only  if  the  Central Act makes a substantive provision for the levy and charge of interest on Central sales tax and only to that extent. There being no substantive provision in the Central Act requiring the payment of interest on Central  sales tax  the States'  sales tax  authorities cannot, for the purpose of collecting and enforcing payment  of  Central  sales  tax,  charge  interest thereon.

14. The requirement of the 1st respondent's sales tax  authorities  that  the  appellants  should  pay interest at the rate of 24% p.a. on delayed payment of Central sales tax under the provisions of Section 35(A) of the State Act must, therefore, be held to be bad in law.”

26. Given  the  aforesaid,  it  is  clear  that  no  interest  is

chargeable on any of the customs duties that are payable on

the facts of the present case.  

27. It now remains to consider whether Anti-dumping duty can

be  included  in  calculating  special  customs  duty  and  special

additional duty.  

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28. Special  customs duty is levied under Section 68 of  the

Finance Act No.2 of 1996, which reads as follows:-

“68. Special duties of customs. – (1) In the case of  goods  mentioned  in  the  First  Schedule  to  the Customs Tariff Act, or in that Schedule, as amended from   time  to  time,  there  shall  be  levied  and collected as a special duty of customs, an amount equal to two per cent of the value of the goods as determined  in  accordance  with  the  provisions  of section 14 of the Customs Act.

(2) Sub-section  (1)  shall  cease  to  have  effect after the 31st day of March, 1999, and upon such cesser, section 6 of the General Clauses Act, 1897) shall  apply  as  if  the  said  sub-section  had  been repealed by the Central Act.  

(3) The special  duties of  customs referred to in sub-section (12) shall be in addition to any duties of customs  chargeable  on  such  goods  under  the Customs Act or any other law for the time being in force.

(4) The  provisions  of  the  Customs Act  and  the rules  and  regulations  made  thereunder,  including those  relating  to  refunds  and  exemptions  from duties shall, as far as may be, apply in relation to the  levy  and  collection  of  the  special  duties  of customs leviable under this section in respect of any gods  as  they  apply  in  relation  to  the  levy  and collection of the duties of customs on such goods under that Act or those rules and regulations, as the case may be.”  

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29. Similarly, special additional duty is levied under Section

3A of  the Customs Tariff  Act  inserted by  the Finance Act  of

1998.  Section 3A reads as under:-

“Special additional duty.- (1) Any  article  which  is imported into India shall  in addition be liable to a duty (hereinafter  referred to in this section as the special additional duty), which shall be levied at a rate to be specified by the Central Government, by notification in the Official Gazette, having regard to the  maximum  sales  tax,  local  tax  or  any  other charges for the time being leviable on a like article on its sale or purchase in India:

Provided that  until  such rate  is  specified by the Central Government, the special additional duty shall be levied and collected at the rate of eight per cent of the value of the article imported into India.

Explanation.- In  this  sub-section,  the expression  “maximum sales  tax,  local  tax  or  any other charges for the time being leviable on a like article on its sale or purchase in India” means the maximum sales-tax, local tax, other charges for the time being in force, which shall be leviable on a like article,  if  sold  or  purchased  in  India,  or  if  a  like article is not so sold or purchased which shall  be leviable  on  the  class  or  description  of  articles  to which the imported article belongs.  

(2) For  the  purpose  of  calculating  under  this section the special additional duty on any imported article,  the  value  of  the  imported  article  shall, notwithstanding anything contained in section 14 of the Customs Act, 1962 or section 3 of this Act, be the aggregate of –  

(i) the value of  the imported article  determined under sub-section (1) of section 14 of the Customs

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Act,  1962 (52 of  1962) or  the tariff  value of  such article fixed under sub-section (2) of that section, as the case may be;

(ii) any duty of customs chargeable on that article under  section 12 of  the Customs Act,  1962),  and any sum chargeable on that article under any law for the time being in force as an addition to, and in the same manner  as,  a duty of  customs,  but  not including the special  additional  duty referred to in sub-section (1); and  

(iii)  the additional  duty  of  customs chargeable  on that article under section 3 of this Act.  

(3) The duty chargeable under this section shall be in addition to any other duty imposed under this Act  or  under  any other  law for  the  time being  in force.  

(4) The provisions of the Customs Act, 1962 (52 of 1962),  and  the  rules  and  regulations  made thereunder, including those relating to refunds and exemptions  from duties  shall,  so  far  as  may  be, apply to the duty chargeable under this section as they apply in  relation to the duties leviable under that Act.  

(5) Nothing contained in this section shall apply to any article, which is chargeable to additional duties levied  under  sub-section  (1)  of  section  3  of  the Additional  Duties  of  Excise  (Goods  of  Special Importance) Act, 1957 (58 of 1957).”

30. Section 3(2) of the Customs Tariff Act as it stood at the

relevant time reads as under:

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“(2) For  the  purpose  of  calculating  under  this section, the additional duty on any imported article, where such duty is leviable at any percentage of its value,  the  value  of  the  imported  article  shall, notwithstanding anything contained in Section 14 of the  Customs  Act,  1962  (52  of  1962),  be  the aggregate of-

(i) The value of the imported article determined under sub-section (1) of the said Section 14 or the  tariff  value  of  such  article  fixed  under sub-section  (2)  of  that  section,  as  the  case may be; and

(ii) Any duty of customs chargeable on that article under  Section 12 of  the Customs Act,  1962 (52 of 1962), and any sum chargeable on that article  under  any  law  for  the  time  being  in force  as  an  addition  to,  and  in  the  same manner as, a duty of customs”  

31. Similarly,  Section  3A(2)  dealing  with  special  additional

duty as it stood at the relevant time reads as under:-

“(2) For  the  purpose  of  calculating  under  this section the special additional duty on any imported article,  the  value  of  the  imported  article  shall, notwithstanding anything contained in section 14 of the Customs Act, 1962 or section 3 of this Act, be the aggregate of –

(i) The value of the imported article determined under  sub-section  (1)  of  section  14  of  the Customs Act,  1962 (52 of 1962) or the tariff value of such article fixed under sub-section (2) of that section, as the case may be;

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(ii) Any duty of customs chargeable on that article under section 12 of the Customs Act, 1962 (52 of  1962),  and  any  sum  chargeable  on  that article  under  any  law  for  the  time  being  in force  as  an  addition  to,  and  in  the  same manner as, a duty of customs; and  

(iii) The additional duty of customs chargeable on  that article under section 3 of this Act.”

32. It will be noticed that additional duty and special additional

duty would include “any sum chargeable on that article under

any law for the time being in force as an addition to, and in the

same  manner  as,  a  duty  of  customs”.   What  has  been

contended before us is that these words would refer only to a

surcharge  provision  and  not  to  a  provision  which  levies  an

independent duty, as the relevant words are “an addition” and

not “in addition”.  This argument has considerable force.  For

example, the Finance Act of 1963 made a distinction between a

surcharge  on  duties  of  customs  and  a  regulatory  duty  of

customs.   Sections  23  and  24  of  the  said  Act  are  set  out

hereinbelow:-

“23. Surcharge on duties of customs.  

(1)In the case of goods chargeable with a duty of customs which is specified in the First Schedule

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to the Tariff Act as amended by this Act or any subsequent  Act  of  Parliament,  or  in  that Schedule read with any notification of the Central Government  for  the  time  being  in  force,  there shall  be levied and collected  as an addition to, and in the same manner as, the total amount so chargeable, a sum equal to 10 per cent of such amount:

Provided that  in  computing the total  amount so  chargeable,  any  duty  chargeable  under Section 2A of the Tariff  Act or Section 24 of this Act shall not be included.  

(2) Sub-section(1) shall  cease to have effect after the 31st day of March, 1964 except as respects things done or omitted to be done before such cesser;  and  Section  6  of  the  General  Clauses Act, 1897 shall apply upon such cesser as if the said  sub-section had then been repealed by a Central Act.  

24. Regulatory duty of customs.  

(1) There shall be levied and collected, with effect from such date as may be specified in this behalf by the Central Government by notification in the Official Gazette,  on  all  goods  mentioned  in  the  First Schedule to the Tariff Act as amended by this Act or any subsequent Act of Parliament, a regulatory duty of customs which shall be –  

(a) twenty-five per cent of the rate, if any, specified in the said First Schedule read with any notification issued  under  Section  3A  or  sub-section  (1)  of Section 4 of the Tariff Act; or  

(b)  ten  per  cent  of  the  value  of  the  goods  as determined  in  accordance  with  the  provisions  of Section 14 of the Customs Act, 1962 whichever   is higher:

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Provided that  different  dates may be specified by the Central Government for different kinds of goods.

(2) Sub-section  (1)  shall  cease  to  have  effect after  the  31st day  of  March,  1964  except  as respects  things  done  or  omitted  to  be  done before such cesser; and Section 6 of the General Clauses Act, 1897 shall apply upon such cesser as if the said sub-section had then been repealed by a Central Act.  

(3)  The  duty  of  customs  leviable  under  this section  in  respect  of  any  goods  referred  to  in sub-section (1) shall be  in addition to any other duty of customs chargeable on such goods under the Customs Act, 1962.  

(4) The provisions of the Customs Act, 1962 and the  rules  and  regulations  made  thereunder, including  those  relating  to  refunds  and exemptions from duties, shall, as far as may be, apply in relation to the levy and collection of the regulatory  duty  of  customs  leviable  under  this section in respect of any goods as they apply in relation to the levy and collection of the duties of customs on such goods under that Act or those rules and regulations.  

(5)  Every  notification  issued  under  sub-section (1) shall, as soon as may be after it is issued, be placed before each House of Parliament.”  

33. It will be noticed that the very words “as an addition to,

and in the same manner as” used in Section 3(2) and 3A(2) of

the Customs Tariff  Act  have been used in  Section 23 of  the

Finance Act of 1963 when what was sought to be levied was

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only a surcharge.  By way of contrast, Section 24(3) when it

levies a different duty – a regulatory duty of customs – uses the

expression  “in  addition”.  It  is  clear,  therefore,  that  what  is

referred to in Section 3(2) and 3A(2) is only a surcharge or an

additional duty of customs.  The words “in the same manner”

also point to the same conclusion.  It is clear on a reading of the

Customs  Tariff  (Identification,  Assessment  And  Collection  of

Antidumping Duty on Dumped Articles and For Determination of

Injury) Rules, 1995, that Anti-dumping duty apart from being a

separate levy from a levy of customs duty is also levied in a

completely different manner from that of customs duty.  

34. We may add,  that  after  2002,  Sections 3(2)  and 3A(2)

have  been  amended  with  effect  from  1.3.2002  so  as  to

expressly not include Anti-dumping duty.  The amended Section

3(2) reads as follows:-

“(2) For  the  purpose  of  calculating  under  this section, the additional duty on any imported article, where such duty is leviable at any percentage of its value,  the  value  of  the  imported  article  shall, notwithstanding anything contained in Section 14 of the  Customs  Act  1962  (52  of  1962),  be  the aggregate of –

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(i) The value of the imported article determined under sub-section (1) of the said Section 14 or the tariff  value of  such article  fixed under  sub-section (2) of that section, as the case may be; and

(ii) any duty of customs chargeable on that article under Section 12 of the Customs Act, 1962 (52 of 1962),  and  any  sum  chargeable  on  that  article under  any  law for  the  time  being  in  force  as  an addition to, and in the same manner as, a duty of customs, but does not include – (a) the special additional duty referred to in  

section 3A; (b) the safeguard duty referred to in sections 8B  

and 8C; (c) the countervailing duty referred to in section 9; (d) the anti-dumping duty referred to in section  

9A; and  (e) the duty referred to in sub-section (1)”

The amended Section 3A(2) reads as follows:-

“(2) For  the  purpose  of  calculating  under  this section  the  special  additional  duty  on  any imported  article,  the  value  of  the  imported article  shall,  notwithstanding  anything contained in section 14 of  the Customs Act, 1962 or section 3 of this Act, be the aggregate of –

(i) The value of the imported article determined under  sub-section  (1)  of  section  14  of  the Customs Act,  1962 (52 of 1962) or the tariff value of such article fixed under sub-section (2) of that section, as the case may be;  

(ii) Any duty of customs chargeable on that article under section 12 of the Customs Act, 1962 (52 of  1962),  and  any  sum  chargeable  on  that article  under  any  law  for  the  time  being  in force  as  an  addition  to,  and  in  the  same

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manner as, a duty of customs, but does not include-

(a) the safeguard duty referred to in sections 8B  and 8C;

(b) the countervailing duty referred to in section 9; (c) the anti-dumping duty referred to in section  

9A; (d) the special additional duty referred to in  

sub-section (1); and (iii) the additional duty of customs chargeable on  

that article under section 3 of this Act.”

35. The relevant budget circulars of the Finance Bill 2002 and

2003 respectively read as follows:-

“Miscellaneous

1. Doubts  have  been  expressed  about  the method  of  computing  the  additional  duty  of customs  (CVD)  under  section  3  of  the Customs Tariff Act, 1975. The doubt raised is on the point that whether anti-dumping duty, safeguard duty and other duties etc. should be taken into account while computing the CVD.  

In this regard, it is clarified that for computing the CVD, only the value of the imported article as  determined  under  section  14  of  the Customs  Act,  1962,  including  the  landing charges,  if  any and the basic  customs duty chargeable at the rates specified in the First Schedule to the said Customs Tariff Act (read with any notification for the time being in force in respect of the basic customs duty) needs to be taken into account. Other duties such as anti-dumping duty, safeguard duty, etc. should not be taken into account.”

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“In  the  explanatory  notes for  the last  year’s budget it was clarified that for computing the CVD,  only  the  value  of  imported  article  as determined under section 14 of the Customs Act,  1962,  including  the  landing  charges,  if any and the basic customs duty chargeable at the rates specified in the First Schedule to the Customs Tariff Act (read with any notification for  the time being in force in respect of  the basic  customs duty)  needs to  be taken into account.  Other  duties  such  as  anti-dumping duty, safeguard duty, etc. should not be taken into account. A view has been expressed that section 3A of the Customs Tariff Act does not permit such interpretation. To place the matter beyond doubt, it is proposed to amend section 3 and section 3A of the Customs Tariff Act so as to make it very clear that for computation of additional duty of customs, only the c.i.f. price, landing charges and basic customs duty will be included. Similarly for determining special additional  duty  of  customs  (SAD),  only  the c.i.f.  price,  landing  charges,  basic  customs duty and the additional duty of customs will be included. Other  duties such as anti-dumping duty safeguard duty, etc.  shall  not  be taken into account.  This amendment will have effect from 1.3.2002.”  

36. Though it is stated that the object of the amendment is to

clarify  and  set  at  rest  doubts,  it  is  not  necessary  to  decide

whether  this  amendment  is  clarificatory  and,  therefore,

retrospective  in  view  of  what  has  already  been  held  by  us

above.  

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37. As far as penalty is concerned, we feel that the appellant

before  us  has  not  diverted  goods  meant  for  export  to  the

domestic  tariff  area.   We  are  satisfied  that  market

considerations  made  it  difficult,  if  not  impossible,  for  the

appellant to fulfill its export obligations and are, therefore, of the

view that the penalty imposed in the present case ought to be

set aside.  

38. The appeal is, accordingly, allowed in the aforesaid terms

and the judgment of CESTAT is set aside.   

……………………J. (A.K. Sikri)

……………………J. (R.F. Nariman)

New Delhi; August 4, 2015.  

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