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Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.     8593 OF 2003

M/s Colgate Palmolive (India) Ltd.    ...Appellant(s)                                      Versus

Commissioner of Customs, Patna    ...Respondent(s)

WITH

CIVIL APPEAL NO.                  OF 2016 (@ SLP (C) NO. 11487 OF 2006)

J U D G M E N T

Dipak Misra, J.

Leave granted in S.L.P. (Civil) No. 11487 of 2006.

2. Keeping  in  view  the  need  to  fortify  the  traditional

connection and strengthen the economic cooperation for the

purpose  of  development  and  mutual  benefit,  the

Government of  India had signed the Treaty of Trade with

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His Majesty’s Government of Nepal in July, 1996.  Articles

III, IV and V of the said Treaty read as follows:-

“Article III

Both  the  contracting  parties  shall  accord unconditionally to each other treatment no less favourable  than  that  accorded  to  any  third country with respect  to (a)  customs duties and charges of any kind imposed on or in connection with importation and exportation and (b) import regulations including quantitative restrictions.

Article IV

The  contracting  parties  agree,  on  a  reciprocal basis, to exempt from basic customs duty as well as  from  quantitative  restrictions  the  import  of such  primary  products  as  may  be  mutually agreed upon, from each other.

Article V

Notwithstanding the provisions of Article III and subject to such exceptions as may be made after consultation  with  His  Majesty’s  Government  of Nepal, the government of India agree to promote the industrial development of Nepal through the grant on the basis of non-reciprocity of specially favourable  treatment  to  imports  into  India  of industrial  products  manufactured  in  Nepal  in respect  of  customs  duty  and  quantitative restrictions normally applicable to them”.

3. The protocol to the Treaty with reference to Article V

stipulated  many  clauses.   With  reference  to  Article  V

clauses which are relevant are reproduced below:-

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“1. The Government of India will provide access to the Indian market free of customs duties and the quantitative  restrictions  for  all  articles manufactured in Nepal.

xxxx xxxx xxxx

3. On the basis of a Certificate issued, for each consignment  of  products  manufactured  in  the small  scale  units  in  Nepal,  by  His  Majesty’s Government of Nepal, or by an agency designated by  His  Majesty’s  government  of  Nepal  that  the relevant  conditions  applicable  to  the  products manufactured  in  similar  small  scale  industrial units in India for relief in the levy of applicable Excise Duty rates are fulfilled for such a parity, Government of India will extend parity in the levy of  Additional  duty  on  such  Nepalese  products equal  to  the  treatment  provided  in  the  levy  of effective Excise Duty on similar Indian products under  the  Indian  customs  and  Central  Excise Tariff.

4. The  “Additional  Duty”  rates  equal  to  the effective  Indian  Excise  duty  rates  applicable  to similar  Indian  Products  under  the  Indian Customs & Central Excise Tariff will continue to be levied on the imports into India of  products manufactured  in  the  medium  and  large  scale units in Nepal.

4(i) In  regard  to  “additional  duty”  collected by the  Government  of  India  in  respect  of manufactured  articles  other  than  those manufactured  in  “small”  units:  Wherever  it  is established  that  the  cost  of  production  of  an articles  is  higher  in  Nepal  than  the  cost  of production  in  a  corresponding  unit  in  India,  a sum representing such difference in the cost of production, but not exceeding 25 percent of the “additional duty” collected by the Government of

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India, will be paid of His Majesty’s Government of Nepal  provided.   His  Majesty’s  Government  of Nepal have given assistance to the same extent to the (manufacturers) exporters”.

4. Pursuant to the aforesaid Treaty, the Government of

India issued a Notification No. 37 of 1996 dated 23.7.1996,

in exercise of powers under Section 25 of the Customs Act,

1962 (for short, “the Customs Act”) whereby specified goods

in  the  notification  when  imported  into  India  from  Nepal

were  exempted  “from  the  whole”  of  the  customs  duty

leviable under the First Schedule to the Customs Tariff Act,

1975 (for brevity, “the Tariff Act”) subject to the conditions,

if any, specified in the corresponding entry in column (3) of

the Table to the notification. There is no dispute that the

appellant  who  was  importing  various  dental  hygiene

products from Nepal was entitled to avail exemption under

the notification.  As the factual matrix would unveil, it was

availing the exemption from the customs duty under  the

notification.  

5. In the year 1998, Section 3A was introduced in the

Tariff Act.  To appreciate the scheme of the Tariff Act, it is

desirable to refer to Section 2 of the Tariff Act, which reads

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as follows:-

“Section 2 :  Duties specified in the Schedules to  be  levied.   The  “rates  at  which  duties  of customs shall be levied under the Customs Act, 1962 (52 of 1962), are specified in the First and Second Schedules.”

Schedule I to the Tariff Act incorporates the duties on

the imports and Schedule II on the exports.  

6. Section 3 of the Tariff Act specifies about the levy of

additional duty equal to excise duty.  It is as follows:-

“Section 3: Levy of  additional  duty equal  to excise duty. – (1) Any article which is imported into India shall,  in addition, be liable to a duty (hereafter  in  this  section  referred  to  as  the Additional duty) equal to the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article  shall  be  so  liable  shall  be  calculated  at that  percentage  of  the  value  of  the  imported article.

Provided that in case of any alcoholic liquor for human consumption imported into India, the Central  Government may,  by notification in the Official  Gazette,  specify  the  rate  of  additional duty having regard to the excise duty for the time being leviable on a like alcoholic liquor produced or manufactured in different States, or, if a like alcoholic liquor is not produced or manufactured in any State,  then,  having regard to  the excise duty which would be leviable for the time being in different  States  on  the  class  or  description  of alcoholic liquor to which such imported alcoholic

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liquor belongs.”  

7. Section  3A  which  has  been  introduced  in  1998

provides  for  imposition  of  special  additional  duty.   The

relevant portion of the said Section reads as follows:-

“3A. 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 percent of the value of the article imported into India.”  

8. After  the said provision came into force,  Notification

No. 18/2000-Customs was issued on 1st March, 2000. By

the said notification the Central Government prescribed the

rates of  special duty.  Relevant part of  the notification is

reproduced below:-

“Notification No.18/2000-Customs

In  exercise  of  the  powers  conferred  by sub-section  (1)  of  section  3A  of  the  Customs Tariff Act, 1975 (51 of 1975) (hereinafter referred

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to  as  the  Customs  Tariff  Act),  the  Central Government,  having  regard  to  the  maximum sales tax, local tax or any other charges for the time being leviable in the like goods on their sale of purchase in India, hereby specifies the rates of special  additional  duty  as  indicated  in  column (4) of the Table below in respect of goods, when imported  into  India,  specified  in  corresponding entry in column (3) of the said Table and falling within the Chapter, Heading No. or Sub-Heading No. of the First Schedule to the Customs Tariff Act as are specified in the corresponding entry in column (2) of the said table:

Provided  that  in  respect  of  the  goods  specified against S. Nos. 24, 25, 26, 31 and 32 of the said Table,  “Nil”  rate  shall  be  subject  to  the conditions, if any, subject to which the goods are exempt either partially or wholly from the duty of customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act.”

9. After  the  rates  were  prescribed,  the  appellant  was

asked  to  pay  Special  Additional  Duty  (SAD)  and  it  paid

under  protest.   Thereafter,  Notification  No.

124/2000-Customs  was  issued  on  29.09.2000  amending

the Notification No. 37/96-Customs dated 23rd July, 1996.

For proper appreciation of the controversy, it is appropriate

to reproduce the contents of the said notification:-

“Notification No. 124/2000-Customs

In exercise of powers conferred sub-section (4) of Section 3A of the Customs Tariff Act, 1975 (51 of

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1975) read with 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 makes the following further amendment in the notification of the  Government  of  India  in  the  Ministry  of Finance  (Department  of  Revenue),  No. 37/96-Customs,  dated  the  23rd July,1996, namely:-

In the said notification, for the words and figures  “from  the  whole  of  duty  of  customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975”, the words, figure and letter  “from  the  whole  of  the  duty  of  customs leviable thereon under the First Schedule to the said  Customs Tariff  Act,  and special  additional duty  leviable  under  section  3A  of  the  said Customs Tariff Act” shall be substituted.”  

10. After  the  said  notification was issued,  the  appellant

filed  an  application  on  15.01.2001  for  refund  of  Special

Additional Duty (SAD) paid in respect of the imports made

from Nepal  during  the  period  01.03.2000  to  29.09.2000.

The  authority  concerned  rejected  the  said  application

preferred by the appellant.  Eventually, the matter came up

in appeal being Appeal No.C-216/02 before the Customs,

Excise  &  Gold  (Control)  Appellate  Tribunal,  Kolkata  (for

short, “tribunal”).

11. The stand of the appellant before the tribunal was that

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Notification  No.  124/2000  which  amended  the  earlier

Notification No. 37/96 and enlarged the scope of exemption

from  basic  customs  duty  by  including  SAD,  should  be

considered  as  retrospective  in  view  of  the  language

employed  in  the  Treaty  entered  into  between  the  two

countries.  It  was  urged  that  all  goods  manufactured  in

Nepal  and  imported  into  India  would  be  exempted  from

customs  duty  and  equal  to  the  excise  duty  for  the  time

being leviable  on similar  products manufactured in India

and as per the said Treaty, no SAD was leviable and hence,

the  notification  dated  29.09.2000  was  clarificatory  in

nature.  It was further contended that levy of SAD after the

rates were fixed was contrary to the terms of the Treaty and,

therefore,  it  was  rectified  by  issuing  the  Notification  No.

124/2000  and,  therefore,  the  appellant  was  entitled  to

refund of the amount which was paid towards SAD.  It was

further  argued  that  on  the  basis  of  the  representations

made by the appellant and others seeking clarification on

the leviability of SAD Notification No. 124/2000 was issued

and hence, it was retrospective in nature.

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12. On behalf of the revenue, resisting the stand put forth

by the assessee, it was submitted that prior to 29.09.2000

SAD was correctly levied in respect of the imports and there

is no justification in treating the notification in question as

retrospective,  more  so,  when  the  notification  has  clearly

stated about scope of its applicability.  

13. The  Member  (Judicial)  analysing  the  terms  of  the

Treaty  and  the  need  for  issuance  of  notification  opined

that:-

“… If the terms of the Treaty by themselves were to be treated as law, then there was no need for the  Government  of  India  to  even  issue  the notification  exempting  imports  from  the  Basic Customs Duty. As rightly observed by the original adjudicating  authority  that  undoubtedly,  the Treaty  provides  the  framework  for  the  bilateral trade between the two countries; but the actual import  and export  is  governed by the  Customs and Central Excise Statutes and the provisions of the Treaty do not, ipso facto, translate into import and  export  procedures  within  India  until  a corresponding notification in Customs is issued to bring the same into effect.  We are of the view that  it  may  be  lapse  on  the  part  of  the Government of India not to issue the notification exempting  the  imports  from  SAD  prior  to 29.09.2000, but that lacuna cannot be filled by the judiciary and it is not our job to discuss as to what notifications the Government should have issued or not to further the cause of the Treaty between the two countries.”

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14. After  stating  so,  the  learned  Member  (Judicial)

explaining the stand pertaining to clarificatory aspect of the

notification observed that the exemption notification could

not be considered to be having retrospective effect and any

exemption  provision  which  enlarges  the  scope  of  earlier

notification cannot be considered to be clarificatory.   The

learned  Member  (Judicial)  further  opined  that  earlier

notification did not even remotely suggest that exemption

from basic customs duty also included the exemption from

SAD.  That  apart,  it  was  held  by  the  learned  Member

(Judicial) that the earlier notification exempted from basic

custom duty  and the  latter  from the  SAD.  Being  of  this

view, the learned Member (Judicial) dismissed the appeal.

15. The  Member  (Technical)  expressed  his  dissent  and

opined that once a Treaty had been entered by the Central

Government, the issue of notification under the provisions

of the Customs Act, 1962 is a ministerial act.  According to

the  learned  Member  (Technical),  the  notification  dated

29.09.2000 was a belated response to effectuate the terms

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of  the  Treaty.   Elaborating  further,  the  learned  Member

(Technical) observed that if it was a simplicitor amendment

to exempt or reduce the rates on certain specified imports,

then an amendment would have been required to be made

to the Notification No. 18/2000-CUS dated 01.03.2000 and

not  to  Notification  No.  37/96  and  that  having  been  not

done, it can be safely concluded that there was a belated

reference and the real intention was to give retrospectivity

to the notification.

16. It  is  apt to reproduce the observations made by the

learned Member (Technical):-

“… A Treaty entered into with a Sovereign State cannot be reneged, merely for want of an act of ministerial lapse or delay, the Treaties have to be given  effect  to.  When  such  lapses  are  cured, subsequently by amendments, such amendment notifications  have  to  be  retrospective  in operation. …”

17. To come to such a conclusion, he placed reliance on

UOI v. Yokasawa Blue Smart1 and  Nestle India Ltd. v.

State of Punjab2.

1 2001 (129) ELT 598 (KAR)  2 1999 (13) PHT 132  (P&H)

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18. After  so  stating,  the  learned  Member  (Technical)

opined that the matter should be referred to a larger Bench

for a decision whether amendment in such cases could be

read  retrospectively  or  not.  As  there  was  difference  of

opinion,  the  matter  was  placed  before  the  third  Member

who was a Member (Technical). He referred to the point of

difference which is to the following effect:-

“Whether the appeal is required to be rejected as held by Member (Judicial) or the matter needs to be  referred  to  the  Larger  Bench  as  held  by Member (Technical).”

19. The third Member referred to the views of the Member

(Judicial)  and  Member  (Technical)  in  extenso;  noted  the

submissions  advanced  by  the  learned  counsel  for  the

parties; scanned the various clauses of the Treaty; analysed

the language employed in the notification dated 29.09.2000;

distinguished  the  authorities  relied  upon by  the  Member

(Technical); declined to accept the submission pertaining to

doctrine of promissory estoppel that was canvassed before

him and eventually, came to hold that both the notifications

are independent and both would be applicable from the date

they had been issued and they do not remotely suggest any

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retrospectivity.  He  further  opined  that  there  was  no

ambiguity in the earlier notification or in the subsequent

Notification No.124/2000 and both the notifications operate

in  special   fields  –  one  granted  exemption  from  basic

customs duty and the other SAD of customs.  Being of this

view, he agreed with the Member (Judicial) and ultimately,

the appeal stood dismissed.

20. We have heard Shri S. Ganesh, learned senior counsel

for the appellant in Civil Appeal No. 8593 of 2003 and Shri

A.K.  Panda,  learned  senior  counsel  appearing  for  the

respondents.  

21. To appreciate the controversy in proper perspective, it

is appropriate to understand the nature of the Treaty, the

protocol  appended  thereto,  the  benefits  extended

thereunder,  the  impact  of  the  two  notifications  and  the

nature of duty that was exempted.  

22. Article  3  states  that  the  contracting  parties  shall

accord  unconditionally  to  each  other  treatment  not  less

favourable than what was accorded to a third country in

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respect of the customs duties and other charges relating to

import  and  export  including  quantitative  restrictions.

Article 4 relates to reciprocal arrangement between the two

contracting  parties  to  exempt  basic  customs  duty  and

quantitative  restrictions  on  import  as  would  be  mutually

agreed.  Having referred to Articles 3 and 4, it is necessary

to  focus  on  Article  5.   The  said  Article  begins  with

non-obstante expression and would apply notwithstanding

to Article 3.  It is non-reciprocal.  This Article states that the

Government  of  India  had  agreed  to  promote  industrial

development of  Nepal  and further agreed to grant special

favourable  treatment  to  imports  into  India  of  industrial

products manufactured in Nepal in respect of customs duty

and quantitative  restrictions normally applicable to them.

The  words  used  in  Article  5  are  “customs  duties”.   The

non-reciprocal grant would be subject to exceptions as may

be made after consultation with the Government of Nepal.

As is evident, the Treaty was to be operative for a period of

five years from 5th December, 2001.

23. We have already reproduced certain paragraphs from

the Protocol.  To have the correct perspective it is required

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to be quoted in entirety.  It reads as follows:-

“1. The Government of India will provide access to the Indian market free of customs duties and the  quantitative  restrictions  for  all  articles manufactured in Nepal.

2. (i) Import of articles in accordance with the para “I”  above shall  be allowed by the Indian customs authorities on the basis of a certificate of Origin to be issued by the agency designated by His  Majesty’s  Government  of  Nepal  in  the format  prescribed  at  Annexure  ‘B’  for  each consignment of articles exported from Nepal to India.   However,  this  facility  shall  not  be available for the articles listed at Annexure ‘C’.

(ii) In the event of the above facility leading to a surge in the import generally or in the import of any  particular  article,  the  two  Governments shall  enter  into  consultation  with  a  view  to taking appropriate measure.

(iii) In the case of other articles made in Nepal which do not fulfill the conditions required by the Certificate of Origin prescribed at Annexure ‘B’ including those Articles listed at Annexure ‘C’ for the purpose of Preferential treatment into India,  the  Government  of  India  will  provide normal access to the Indian market consistent with its MFN treatment.

3. On the basis of a Certificate issued, for each consignment of products manufactured in the small  scale  units  in  Nepal,  by  His  Majesty’s Government  of  Nepal,  or  by  an  agency designated  by  His  Majesty’s  Government  of Nepal that the relevant conditions applicable to the  products  manufactured  in  similar  small scale industrial units in India for relief in the levy of applicable Excise Duty rates are fulfilled

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for  such  a  parity,  Government  of  India  will extend parity in the levy of Additional duty on such Nepalese products equal to the treatment provided in the levy of effective Excise Duty on similar  Indian  products  under  the  Indian customs and Central Excise Tariff.

4.  The  “Additional  Duty”  rates  equal  to  the effective Indian Excise duty rates applicable to similar  Indian  Products  under  the  Indian Customs & Central Excise Tariff  will  continue to be levied on the imports into India of product manufactured in the  medium and large scale units in Nepal.

4(i)  In regard to “additional duty” collected by the  Government  of  India  in  respect  of manufactured  articles  other  than  those manufactured in “small”  units:  Wherever it  is established  that  the  cost  of  production of  an articles  is  higher  in  Nepal  than  the  cost  of production in a corresponding unit in India, a sum representing such difference in the cost of production, but not exceeding 25 percent of the “additional duty” collected by the Government of  India,  will  be  paid  of  His  Majesty’s Government of  Nepal  provided.  His Majesty’s Government of Nepal have given assistance to the  same  extent  to  the  (manufacturers) exporters.

5.  Export  of  consignments  from  Nepal accompanied  by  the  Certificate  of  Origin  will normally  not  be  subjected  to  any detention/delays at the Indian Customs border, border  check posts and other  places enroute. In  case  any  need  for  clarification  arises,  this will  be  obtained  expeditiously,  by  the  Indian border customs authorities from the Indian and Nepalese authorities, as the case may be.

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6. Where  for  social  and  economic  reasons, the  import  of  an item into  India  is  permitted only  through public  sector  agencies  or  where the import of an item is prohibited under the Indian  Trade  control  regulations,  the Government of India will consider any request of  His  Majesty’s  Government  of  Nepal  for relaxation and will permit the import of such an item from Nepal in such a manner as may be found to be suitable.

7.  For  the  purpose  of  calculation  of  import duties  customs  valuation  procedures,  as prescribed  under  the  prevailing  custom  law, will be followed.”

24. No doubt paragraph 1 states that the Government of

India  would  provide  access  to  Indian  market  free  from

customs duties and quantitative restrictions of all  articles

manufactured in Nepal, but this would be subject to other

paragraphs, for paragraph 2 would indicate that the access

to  Indian market  free  from customs duty  was  subject  to

conditionalities  and  also  restrictions.   Paragraph  2

stipulates,  the  requirement  of  certificate  of  origin  which

should be as per the proforma prescribed by Annexure B

and would not be applicable to Articles listed in Annexure –

C for which normal access consistent with most favourable

nations’  Treaty  would  be  provided.   Clause  3  deals  with

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products  manufactured  by  small-scale  units  in  Nepal  for

which  certificate  would  be  issued  by  the  Government  of

Nepal or agency designated by them.  For the said imported

products,  “reliefs”  in the levy of  excise duty applicable to

products  manufactured  by  similar  small-scale  industrial

units in India,  while fulfilled by the Nepalese small  scale

manufacture would apply.  This clause, as we notice, gave

parity  and  equal  treatment  to  goods/products

manufactured by small  scale industrial  units in Nepal as

was applicable to small-scale industrial units in India, who

had been granted relief in relation to applicable to Indian

customs and Central Excise Tariff.   

25. It is pertinent to note here that the relief agreed related

to  duty  chargeable  under  the  head  of  “additional  duty”.

Clause 4 dealt with “additional duty applicable” on products

manufactured by medium or large-scale units in Nepal in

which case they were liable to pay additional duty equal to

the effective Indian excise duty rates applicable to similar

Indian products.  A reading of paragraphs 1, 3 and 4 would

indicate  that  a  distinction  was  made  between  the  “basic

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customs  duty”  and  “additional  duty”  leviable  under  the

Customs Act and Excise Act on import.  “Additional duty”

had reference to excise duty payable on the said products

when manufactured in India.

26. The aforesaid  clauses  oblige  us  to  read the  relevant

portion of  the first  exemption Notification No. 37/96-COS

dated 23rd July, 1996.  It is as under:-

“Notification No. 37/96-Customs

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 goods specified in column (2) of the  Table  below  and  falling  within  the  First Schedule to the Customs Tariff Act, 1975 (51 of 1975), when imported into India from Nepal, from the whole of the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act,  1975,  subject  to  the  conditions,  if  any, specified in the corresponding entry in column (3) of the said Table”.  

The  table  contains  description  of  goods  and

enumerates certain conditions. What we are concerned with

is  the  nature  of  exemption.  As  is  noticeable,  what  was

exempted under the notification were the goods specified in

column 2 in the First Schedule to the Tariff Act from the

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customs duty leviable thereon under the First Schedule to

the Tariff Act.  It was also subject to the conditions specified

therein.

27. It is apt to note here that Section 3A of  the  Tariff  Act

was enacted in the year 1998.  This was a new provision

and had stipulated that in addition to the customs duty and

additional  customs duty,  special  additional  customs duty

would be payable on the goods imported into India, having

regard to the maximum sales-tax, local tax or other charges

for the time being leviable on the like article on the  sale and

purchase in India.  The proviso stipulated that until  such

rates  were  specified  by  the  Central  Government,  special

additional duty shall be leviable and collected @ 8% on the

imported product.  In terms of said proviso, the Notification

No.18/2000-Customs was issued on 1st March, 2000 and

the same has been quoted above.

28. It is vivid that the protocol to the Treaty of Trade had

made a distinction between the “basic customs duty” and

“additional  customs duty”.   The  basic  customs duty  was

granted exemption. However, in respect of “additional duty”

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provisions of paragraph 3 or 4 were applicable.  But, it is

significant that the said protocol did not deal with special

additional duty.  Thus, per se and ex facie it is not possible

to  accept  the  position  that  “special  additional  duty”  was

itself exempted under the protocol.  Paragraph 1 would not

cover the “special additional duty”, which was specific and

limited as was clear from the exemption notification dated

23rd July, 1996.  It was restricted to the goods specified in

column  2  of  the  First  Schedule  from  the  customs  duty

leviable under the First Schedule to the Tariff Act.  In fact,

special additional duty was not leviable and enforced when

the  Treaty  of  Trade  was  signed  and  the  protocol  was

executed.  Under these circumstances, it is not possible to

accept  the  position  that  Clause  1  of  the  protocol  had

included and had embraced the “special  additional  duty”,

which was introduced in the form of Section 3A enacted in

1998.

29. The exemption which was granted by notification dated

29th September,  2000  was,  therefore,  in  the  nature  of

specific  and  new  exemption  from  payment  of  special

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additional duty, which was otherwise payable in view of the

introduction of Section 3A to the Tariff Act.  It is difficult to

appreciate  that  the  exemption  granted  vide  notification

dated 20th September, 2000 to special additional duty was

clarificatory or to give effect  to the existing protocol.   We

think so as protocol appended to the Treaty could not have

conceived of future levy by way of proposition.  In any case,

factually  it  does  not.  Therefore,  the  notification  of  20th

September,  2000  conferred  a  new benefit  which  was  not

earlier stipulated or the subject matter of protocol.

30. We would now refer to the decision of the High Court of

Patna in Kaur Sain Traders v. Union of India3.  The said

decision  rightly  observes  and  highlights  the  distinction

between the basic customs duty i.e.  the import duty, the

additional  duty  equal  to  the  excise  duty,  and  special

additional duty which has reference to sales-tax, local-tax

and  other  charges  leviable  on  the  articles  of  sale  and

purchase  in  India.   The  said  distinction  is  clear  from

Sections 2, 3 and 3A of the Tariff Act.  Section 12 of the

Customs Act, no doubt a charging Section, has to be read 3  2005 (2) PLJR 744

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along with the Tariff Act.  In fact, the Tariff Act also provides

for further duties in the form of safeguarding duty under

Section  8B,  countervailing  duty  under  Section  9  and

anti-dumping  duty  under  Section  9A.   Section  25  of  the

Customs Act stipulates that the Government may exempt

certain goods from all duties of customs under Section 12 of

the Customs Act or Sections 3 or 3A of the Tariff Act.  It was

observed that  incidence of  duty in the  two Acts,  i.e.,  the

Customs Act  and the  Tariff  Act  are  independent  to  each

other  and  one  duty  can  be  levied  without  the  other.

Decision  in  Associated  Cement  Companies  Limited  v.

Commissioner4, was distinguished.  The ratio and finding

in Associated Cement Companies Limited (supra) has to

be read in the context of the issue involved in the said case

as drawing, designs of those goods were not chargeable to

duty and were designated as free under the Tariff Act.  In

Hyderabad Industries  Limited  v.  Union  of  India5,  the

difference in import under the Customs Act and the Tariff

Act  was  noticed  with  reference  to  duty  of  customs

chargeable  under  Section  12  of  the  Customs  Act,  the

4 2001 (128) ELT 21 SC 5 1999 (108) ELT 321 SC

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additional duty chargeable under Section 3(1) of the Tariff

Act and additional levied on raw-materials, components and

ingredients  under  Section  3(3)  of  the  Tariff  Act.   It  was

elucidated that the two Acts are independent statutes and

merely because instance of tax under Section 3 of the Tariff

Act arises on import of articles in India, it does not mean

that the Tariff Act cannot provide for charging of duty which

was/is  independent  of  customs  duty  leviable  under  the

Customs  Act.   The  Patna  High  Court  has  appropriately

referred and relied on the view taken by the Bombay High

Court in Apas Private Limited v. Union of India6.

31. At this stage, we would also deal with the judgments

relied  by  the  respondents  and  the  circular

No.112/2003.COS.31/12/2003  dated  31.03.2003.   This

circular  was  issued  pursuant  to  tariff  conference  of  the

Chief Commissioners of Customs and the discussions held.

Divergence  of  practice  on  implementation  of  exemption

under  Central  Excise  Notification  No.  6/2002-CE  dated

01.03.2002 was  noticed.   Pertinently,  the  exemption  was

granted  to  a  manufacturer  of  copper  goods  from

6 1985 (22) ELT 644 Bombay

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raw-material,  other  than  the  copper-ore  or  copper

concentrate.  The exemption was restricted and applicable

upon  verification  that  the  manufacture  was  from

raw-material,  other  than  the  copper-ore  or  copper

concentrate.   The  doubt  had  arisen  whether  exemption

should be granted when the manufacturer was located in

Nepal.   In  the  said  context  the  Board  had  accepted  the

recommendations of the conference that in the light of the

Indo-Nepal Treaty, verification could be undertaken by the

Indian  customs  in  Nepal  and  accordingly  there  was  no

reason not to extend the benefit  in case of  imports made

from Nepal under Notification No.6/2002 dated 1st March,

2002.

32. Decisions  in  the  case  of  W.P.I.L.  Limited  v.

Commissioner,  Central  Excise7 and  Ralson  India

Limited  v.  Commissioner  of  Central  Excise,

Chandigarh8  do  not  assist  the  appellant.   In  the  said

authorities, the contention of the assessee was accepted on

the ground that both power driven pumps as well as parts

of  power  driven  pump  had  for  long  remained  exempt.

7 2005 (181) ELT 259 SC 8 2015 (319) ELT 234 SC

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However, when earlier notifications were rescinded in order

to consolidate and reduce the number of notifications and

then the new notification was issued on 1st March,  1994

then  by  mistake  and  erroneously  parts  of  power  driven

pump were  not  included,  whereas  manufacture  of  power

driven pumps was included.  In this context,  it  was held

that  the subsequent  notification including parts  of  power

driven pump was merely clarificatory and when clarificatory

notifications are issued, they have retrospective effect.  The

instant  case is  not  suggestive  of  any mistake or  error  or

even inadvertence. The plea that there was delay in issue of

notification,  exempting  special  additional  duty  is  not

acceptable. It is because, what was earlier exempted under

the  protocol  was  basic  customs duty  and also  additional

customs duty equal to the duty of excise in some cases and

on satisfying the conditions stipulated and it did not deal

and  relate  to  special  additional  duty  chargeable  under

Section 3A of the Tariff  Act, which had introduced a new

duty altogether. Therefore, we repel the submission that the

exemption notification issued on 29th September,  2000 is

clarificatory.   It  was intended to be applied prospectively.

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That apart, it cannot be also said the issue of notification

was  a  formal  ministerial  act  which  got  delayed  for

administrative  reasons.   It  was  a  conscious  act  and  a

deliberate  decision  which  came  into  existence  after  due

deliberation when it was decided to grant exemption under

Section 3A of the Tariff Act.  

33. In view of our foregoing analysis, we find no merit in

the  appeals  preferred  by  the  assessee   and  accordingly

dismiss them without any order as to costs.  

…………………………..J. [Dipak Misra]

……………………….…J. [Prafulla C. Pant]

 New Delhi August 24, 2016.