IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.951 OF 2004

COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI. APPELLANT VERSUS

M/S.KONKAN SYNTHETIC FIBRES              RESPONDENT

O R D E R

1.This  Civil  Appeal  is  directed  against  the  judgment  and  order  passed  by  the  Customs,  Excise and Service Tax Appellate Tribunal (for  short 'CESTAT'), Mumbai in Appeal No.C/43/02- Mumbai,  dated  04.09.2003.  By  the  impugned  judgment  and  order,  the  CESTAT  has  granted  relief  to  the  assessee  by  giving  a  liberal  interpretation to the beneficial Notification  No.17/01-Cus  dated  1.3.2001,  as  amended  by  Notification No.44/01-Cus, dated 26.4.2001.  

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2. The assessee is an importer. It has imported  one unit of equipment which was declared as  “Kari Mayer High Speed Draw Warping Machine  with 1536 ends along with essential spares”.  On such importation, it had presented the Bill  of Entry No.207814 dated 25.9.2001 before the  Customs  authorities,  inter  alia,  seeking  clearance of the same by extending the benefit  of  the  Notification  No.17/01-Cus  dated  1.3.2001, as amended by Notification No.44/01- Cus, dated 26.04.2001. The Customs authorities  had  refused  to  accept  the  request  of  the  assessee  and  accordingly,  had  directed  the  assessee to pay the duty under the provisions  of  the  Customs  Act,  1962  (“the  Act”  for  short).  Therefore,  the  assessee  was  constrained to pay the duty in order to clear  the goods.  The said payment was made under  protest  so  that  it  could  carry  the  matter  further in appeal before the First Appellate  

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Authority.

3.In  the  appeal  filed,  the  First  Appellate  Authority  has  confirmed  the  view  of  the  Customs  authority.   Dissatisfied  with  the  order so passed, the assessee had carried the  matter  in  appeal  before  the  CESTAT  and  the  CESTAT has granted relief to the assessee.

4.The Revenue, being aggrieved by the same is,  before us in this appeal.

5.We have heard Shri. V.Shekhar, learned senior  counsel assisted by Smt. B.Sunita Rao for the  Revenue and Shri. S.K.Bagaria, learned senior  counsel for the assessee.

6.Shri. Shekhar, learned senior counsel for the  Revenue,  after  bringing  to  our  notice  the  Notification  under  which  the  assessee  had  claimed benefit for the imported goods, would  

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submit,  that,  what  was  imported  by  the  assessee  was  not  in  consonance  with  the  exemption  notification  and,  therefore,  the  authorities under the Act were justified in  denying  the  benefit  available  under  the  notification  to  the  assessee.  The  learned  senior  counsel  further  submits,  what  is  imported by the assessee is High Speed Draw  Warping Machine with yard tensioning without  the  pneumatic  suction  device  but  with  a  drawing  machine.  The  learned  counsel  would  submit,  since  what  was  imported  is  not  in  accordance with Entry 8 of the table appended  to  the  Notification,  the  assessee  is  not  entitled  to  the  benefit  of  the  exemption  notification.   

7. Per  contra,  Shri  Bagaria,  learned  senior  counsel  would  submit  that  the  beneficial  notification  should  be  given  a  liberal  construction and if it is done, then,  what is  

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imported  by  the  assessee  would  fall  within  Entry 8 of the table appended to the exemption  notification.

8. The  Central  Government,  in  exercise  of  its  power  under  Section  25(1)  of  the  Act,  has  issued  an  exemption  notification  in  public  interest, exempting certain articles notified  under the table appended to the notification  from  payment  of  the  duty  under  the  Act.  Several items are enumerated under the table.  Entry  130  of  the  table  speaks  of  drawing  machine.  Entry 8 of the notification speaks  of the High Speed Warping Machine with yarn  tensioning,  pneumatic  suction  devices  and  accessories.   A  reading  of  the  said  entry  would  indicate  that  the  said  machine  is  a  composite  machine.  The  pneumatic  suction  devices are machines used for the purpose of  sucking of vapour/gas, while the High speed  warping machine is activated or warped. There  

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is no dispute that the assessee has imported  High  speed  warping  machine  but  without  pneumatic  suction  device,  but  with  drawing  unit. The textile commissioner, who is well  conversant  with  these  machines,  has  stated  vide his letter dated 27.9.2001 that the goods  imported  by  the  assessee  are  covered  under  Entry-8  of  the  Table  appended  to  the  notification.  He  further  stated  vide  his  letter dated 24.10.2001 that drawing unit is  just an essential accessory to the machines  imported  by  assessee  and,  therefore,  is  covered  under  said  Entry.  The  opinion  so  furnished  is  taken  note  of  by  the  Tribunal  while granting relief to the assessee.  

9. It is a settled proposition in a fiscal or  taxation law that while ascertaining the scope  or expressions used in a particular entry, the  opinion of the expert in the field of trade,  who  deals  in  those  goods,  should  not  be  

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ignored,  rather  it  should  be  given  due  importance. In Collector of Customs v. Swastic  Woollens  (P)  Ltd.,  1988  Supp  SCC  796,  this  Court has observed thus:  

”4. We are of the opinion that when no  statutory  definition  is  provided  in  respect of an item in the Customs Act or  the  Central  Excises  Act,  the  trade  understanding,  meaning  thereby  the  understanding in the opinion of those who  deal  with  the  goods  in  question  is  the  safest guide. See Union of India v. Delhi  Cloth & General Mills.  South Bihar Sugar  Mills Ltd. v. Union of India, Dunlop India  Ltd. v.  Union  of  India,  In  re  Colgate  Palmolive (India) Pvt. Ltd.,  CST v.  S.N.  Bros.,  Kanpur,  and  also  the  famous  observations  of  Justice  Cameron  in  His  Majesty  The  King v.  Planters  Nut  and  Chocolate Co. Ltd. ”

10.Before  we  discuss  the  issue  involved,  we  intend to notice how this Court has construed  beneficial notifications issued under the Act.  In  Commissioner  of  Customs  (Preventive),  

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Mumbai v. M. Ambalal and Company, (2011) 2 SCC  

74,  (in  which  one  us  was  the  party)  has  observed  that  the  beneficial  notification  providing the levy of duty at a concessional  rate should be given a liberal interpretation:

“16.  It  is  settled  law  that  the  notification has to be read as a whole. If  any  of  the  conditions  laid  down  in  the  notification is not fulfilled, the party  is  not  entitled  to  the  benefit  of  that  notification.  The  rule  regarding  exemptions  is  that  exemptions  should  generally  be  strictly  interpreted  but  beneficial exemptions having their purpose  as encouragement or promotion of certain  activities  should  be  liberally  interpreted.  This  composite  rule  is  not  stated  in  any  particular  judgment  in  so  many words. In fact, majority of judgments  emphasise  that  exemptions  are  to  be  strictly  interpreted  while  some  of  them  insist that exemptions in fiscal statutes  are to be liberally interpreted giving an  apparent  impression  that  they  are  contradictory to each other. But this is  

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only  apparent.  A  close  scrutiny  will  reveal that there is no real contradiction  amongst  the  judgments  at  all.  The  synthesis  of  the  views  is  quite  clearly  that  the  general  rule  is  strict  interpretation while special rule in the  case  of  beneficial  and  promotional  exemption  is  liberal  interpretation.  The  two go very well with each other because  they  relate  to  two  different  sets  of  circumstances.”

11.In Commissioner of Sales Tax v. Industrial  Coal Enterprises, (1999) 2 SCC 607, this Court  has observed:

“11. In CIT v. Straw Board Mfg. Co. Ltd.  this Court held that in taxing statutes,  provision  for  concessional  rate  of  tax  should be liberally construed. So also in  Bajaj Tempo Ltd. v. CIT it was held that  provision  granting  incentive  for  promoting economic growth and development  in  taxing  statutes  should  be  liberally  construed and restriction placed on it by  way of exception should be construed in a  

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reasonable and purposive manner so as to  advance the objective of the provision.”

12.In Commissioner of Central Excise, Shillong  v. North-Eastern Tobacco Co. Ltd., (2003) 1  SCC 161, this Court has held:

[  “10. The  other  important  principle  of  interpreting  an  exemption  notification  is  that  as  far  as  possible  liberal  interpretation  should  be  imparted  to  the  language  thereof,  provided  no  violence  is  done to the language employed.”

13.In Associated Cement Companies Ltd. v. State  of Bihar, (2004) 7 SCC 642, this Court while  explaining  the  nature  of  the  exemption  notification and also the manner in which it  should be interpreted has held:  

“12. Literally “exemption” is freedom from  liability,  tax  or  duty.  Fiscally  it  may  assume  varying  shapes,  specially,  in  a  growing  economy.  In  fact,  an  exemption  provision  is  like  an  exception  and  on  

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normal  principle  of  construction  or  interpretation of statutes it is construed  strictly  either  because  of  legislative  intention or on economic justification of  inequitable burden of progressive approach  of  fiscal  provisions  intended  to  augment  State  revenue.  But  once  exception  or  exemption  becomes  applicable  no  rule  or  principle  requires  it  to  be  construed  strictly.  Truly  speaking,  liberal  and  strict  construction  of  an  exemption  provision  is  to  be  invoked  at  different  stages  of  interpreting  it.  When  the  question is whether a subject falls in the  notification  or  in  the  exemption  clause  then it being in the nature of exception is  to  be  construed  strictly  and  against  the  subject but once ambiguity or doubt about  applicability  is  lifted  and  the  subject  falls  in  the  notification  then  full  play  should be given to it and it calls for a  wider and liberal construction. (See  Union  of India v. Wood Papers Ltd. and Mangalore  Chemicals  and  Fertilisers  Ltd. v.  Dy.  Commr.  of  Commercial  Taxes to  which  reference has been made earlier.)”

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14.In  G.P.  Ceramics  Private  Limited  v.  Commissioner, Trade Tax, Uttar Pradesh, (2009)  2 SCC 90,this Court has observed thus:  

“29. It  is  now  a  well-established  principle  of  law  that  whereas  eligibility  criteria  laid  down  in  an  exemption notification are required to  be construed strictly, once it is found  that the applicant satisfies the same,  the  exemption  notification  should  be  construed  liberally.  [See  CTT v.  DSM  Group  of  Industries (SCC  para  26);  TISCO v. State of Jharkhand (SCC paras  42  to  45);  State  Level  Committee v.  Morgardshammar  India  Ltd.;  Novopan  India Ltd. v. CCE & Customs; A.P. Steel  Re-Rolling Mill Ltd. v. State of Kerala  and  Reiz  Electrocontrols  (P)  Ltd. v.  CCE.]”

15.Since  the  Tribunal  has  taken  note  of  the  correct  principles  enunciated  by  this  Court  while  granting  relief  to  the  assessee,  we  cannot find fault with the impugned judgment.  

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Accordingly,  the  appeal  requires  to  be  rejected and it is rejected. No costs.   

Ordered accordingly.

...................J.   (H.L. DATTU)

...................J.  (ANIL R. DAVE)

NEW DELHI; FEBRUARY 29, 2012  

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