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1. DGFT cannot amend the
Foreign Trade Policy by way of issuing a Circular
Facts
The appellant imported a
second hand photo-copier machine. The ITC (HS) permitted its free import. As
per the provisions of para 2.17 of the Foreign Trade Policy, all second hand
goods, except capital goods, were restricted for import. DGFT issued Circulars
classifying used photo-copier machines as second-hand goods and placed
restrictions on their import. It was an undisputed fact that a photo-copier
machine is a capital good.
Held
The Supreme Court held that
by virtue of section 5 of the Foreign Trade (Development and Regulation Act),
1992 the power to amend the FTP vests only with the Central Government and the
said power cannot be usurped by the DGFT, in the guise of laying down policy
guidelines. The DGFT is empowered only to interpret the FTP and issue
clarification with regard to the interpretation of any provision in the FTP or
in the matter of classification of any item in the ITC (HS) or in the
Handbook, which shall be final and binding. The act of re-categorization of an
item from free to restricted category by the DGFT amounts to amending the
Policy, which power vests only with the Central Government.
[Atul Commodities Pvt. Ltd.
vs. Commissioner of Customs, Kochi (235) ELT 385 (SC)]
2. Penalty under section
11AC of the Excise Act, 1944 depends upon the conditions specified therein
Facts
In this case, the assessee
contented that since the differential duty liability has been paid before the
issue of a show cause notice, penalty under section 11AC could not be levied.
On the other hand, the department’s contention was that penalty under section
11AC is imposable in each and every case of short-payment of duty/non-payment
of duty.
Held
The Supreme Court, negating
both the aforesaid contentions, held that the provisions of section 11AC could
not be invoked in every case of non payment or short payment of duty and that
the said provisions could be invoked only if the non payment of duty was on
account of fraud, wilful suppression etc. with an intent to evade payment of
duty. It further held that once section 11AC is invoked, no discretion lies
with the concerned authority in quantifying the amount of penalty. It was
further held that payment of duty prior to the issue of show cause notice was
not relevant in deciding whether or not section 11AC was invokable.
[UOI vs. Rajasthan Spinning &
Weaving Mills 2009 (238) ELT3 (SC)]
3. Though levy of penalty is
mandatory, the validity of the rule imposing penalty can be challenged
Facts
The assessee challenged the
validity of levy of penalty under Rule 96ZQ(5)(ii) of the Central Excise
Rules, 1944 before the Gujarat High Court, which read down the rule holding
that the rule was not mandatory and that the assessing authority had the
discretion to levy lesser amount of penalty depending on the facts and
circumstances of each case.
Held
The Supreme Court observed
that though penalty was held to be mandatory in the case of Dharmendra Textile
Processors, the vires of the Rule 96ZQ of the Central Excise Rules, 1944 could
still be challenged and thus remitted the entire batch of civil appeals to the
respective High
Courts for deciding the
question of vires of Rule 96ZQ(5)(ii) of the Central Excise Rules, 1944.
[Union of India vs. Krishna
Processors (237 ELT 641(SC)]
4. Change in classification
without a change in nature or use of a product is not justified
Facts
The issue which arose for
consideration was whether the product DML manufactured by an assessee in
accordance with the formulae given in Ayurved Sar Sangraha (an authoritative
text on the Ayurved system of medicine) was a medicament or a
cosmetic/toiletry preparation/tooth powder. The Supreme Court had earlier
held in the assessee’s own case that DML was not a medicament. However, the
tariff entries were amended subsequently to specify medicaments used in
Ayurvedic systems manufactured exclusively in accordance with the formulae
prescribed in authoritative text books specified in the First Schedule to
Drugs and Cosmetics Act, 1940 (includes Ayurved Sar Sangraha). In view of
this, the assessee claimed classification of DML as a medicament under the
amended tariff entry.
Held
The Apex Court observed as
under:
• Merely because there was
some difference in tariff entries, the product would not change its character
and something more was required for changing the classification especially
when the product remained the same.
• Change in classification
without a change in nature or change in the use of the product was not
justified, unless the Tariff Act itself provided a statutory definition, in
which case, the product had to be classified as per the definition.
• The definition under the
Drugs and Cosmetics Act, 1940, was not necessary to be imported in the Central
Excise Tariff Act, 1985. The definition in one statute having a different
object, purpose and scheme could not be mechanically applied to another
statute.
• Common parlance test
continued to be one of the determinative tests for classification of a
product.
[CCE, Nagpur vs. Shree
Baidyanath Ayurved Bhawan Ltd. (237) ELT 225(SC]
5. Penalty under section
11AC is imposable even if duty is paid before issue of show cause notice as duty
is determinable even in such a circumstance.
Facts
An argument was advanced that
once duty is paid before the issue of show cause notice, there remains no
question of “determination of duty liability” by the assessing officer, which
is one of the essential conditions for invocation of section 11AC of the
Central Excise Act, 1944 and therefore no penalty under the said section is
imposable, if duty has been paid prior to the issue of Notice.
Held
The Bombay High Court held
that the above argument is fallacious inasmuch as duty is determined under
Section 11AC irrespective of the stage of payment of duty and any such amount
paid is to be adjusted towards the duty, so determined. Once the assessing
officer passes an order under section 11A, duty is determined. Accordingly,
penalty under Section 11AC is imposable even if duty is paid before issuance
of show cause notice.
[Commissioner of C.Ex. &
Customs vs. M/s Shri Ram Aluminium P. Ltd. dated 30th June, 2009 (Bombay)]
6. Rebate eligible on export
of exempted goods.
Facts
The assessee was engaged in
manufacture of excisable goods which were exported outside India. Though the
goods were exempt from payment of duty under an exemption notification, the
assessee paid duty on such goods and claimed rebate under Rule 12 of Central
Excise Rules, 1944 on export of the said goods. The adjudicating and appellate
authorities rejected the claim on the ground that the assessee had no option
to pay duty, when the goods are fully exempt from payment of duty. The
Government of India however, allowed the rebate claim on revision, against
which a writ petition was filed by the Revenue in the Gujarat High Court.
Held
The Gujarat High Court
observed that rejection of rebate claim on the ground that the goods were
exempt was not tenable, since there was no such conditions prescribed in Rule
12 of Central Excise Rules, 1944 or the Notification issued there under. The
Court held that once the conditions stipulated in the notification granting
rebate are fulfilled, unless and until an overriding provision appears in the
statute, the claim cannot be denied. The court further held that it is open to
an assessee to either pay duty at the tariff rate or as per an exemption
notification and that he was not bound to claim exemption, unless the statute
so provides.
[CCE & Cus. Vadodara-II vs.
Jayant Oil Mills (235) ELT 223 (Gujarat)]
7. Limitation for claim of
refund within six months is procedural
Facts
The assessee availed Modvat
credit on duty paid on inputs used in the manufacture of goods exported. It
filed and application under Rule 57F for claiming refund of modvat credit
which was rejected as time barred since it was not filed before the expiry of
6 months from the relevant date as specified under section 11B of Central
Excise Act, 1944.
Held
The High Court observed that
the strict law of limitation provided in Section 11B would not apply to a
claim of refund made in pursuance of a notification issued under Rule 57F and
that once the assessee is able to satisfy the requirement prescribed under the
notification to the satisfaction of the authority concerned, they were
entitled to the refund claim. The Court further held that the said requirement
of limitation was only procedural and not mandatory and also observed that a
claim under rule 57F do not strictly fall within the four corners of section
11B as those were governed by the provisions of a notification issued under
Rule 57F.
[STI India Ltd. vs.
Commissioner of Cus. & CE, Indore (236) ELT 248 (M.P.)]
8. Goods cleared by using
DEPB scrips are duty paid goods.
Facts
The assessee imported goods
which were warehoused and subsequently cleared by utilizing DEPB scrips. The
Revenue demanded interest on clearances made beyond the interest free
warehousing period. The assessee contested the levy of interest on the ground
that goods cleared by utilising DEPB scrips were ‘exempted goods’ and
consequently, no interest could be levied, as there was no duty with reference
to which interest could be calculated.
Held
The High Court observed that
use of DEPB scrip for clearance of imported goods is a manner of payment of
duty by way of a debit in the scrip. The Court further held that the goods
cleared under the DEPB Scheme should be treated as duty-paid goods and
consequently, interest is payable.
[Tanface Industries Ltd vs.
Assistant CC (2009) TIOL 291 (Madras)]
9. Unjust enrichment
provision not attracted for refund on finalization of assessment in terms of
section 18 of the Customs Act, 1962, for period prior to 13-7-2006
Facts
In the present case, refund
claims were filed consequent upon finalization of the provisional assessments
ordered prior to 13-7-2006 on which date, section 18 of the Customs Act, 1962,
was amended to provide that the bar of unjust enrichment could apply even to
refunds arising upon finalization of assessment.
Held
The Larger Bench of the
CESTAT relied upon the decision of the Gujarat High Court in the case of
Hindalco Industries wherein, the Court had observed that the amendment to
section 18 w.e.f. 13-7-2006 was not clarificatory in nature and therefore the
requirement of unjust enrichment in section 27 of the Customs Act, 1962 could
not be read into Section 18 ibid, prior to the amendment. The CESTAT further
held that though Section 27 contains provisions for unjust enrichment in
respect of refund claims in general, the said provision is not applicable to a
situation where refund becomes due consequent upon finalisation of provisional
assessment prior to 13-7-2006. The Larger Bench further held that for such
refund, assessee was not even required to submit a claim for refund as it had
to be allowed suo motu.
[Commissioner of Customs,
Kandla vs. Hindustan Zinc Ltd. (235) ELT 629 (LB-Ahd.)]
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